Posted October 21, 2016

Lawson Products 3Q sales flat

Lawson Products reported net sales of $70.2 million for the third quarter, up sequentially 1.2% over the second quarter and equal to a year ago.

Net income of $1.8 million, or 20 cents per diluted share, compared to $2.4 million, or 27 cents, a year ago, reflecting the cost of the additional sales representatives.

“Our sales and profitability improved sequentially over the second quarter, but continued to be negatively affected by the ongoing slower industrial activity impacting the MRO marketplace and the decreased demand from the oil and gas industry,” said Michael DeCata, president and chief executive officer. “Despite the ongoing economic challenges, we improved performance in the third quarter while continuing to invest in the Company.

“Through the end of the third quarter, our sales force remains strong at 1,006 sales representatives, and we added 69 net new sales reps and successfully integrated two acquisitions. As expected, costs from increasing the number of sales reps over the past year has a short-term negative impact on our operating income as they build out their sales territories. Following the acceleration in the size of our sales force in the first two quarters of 2016, we purposely moderated the rate of hiring in the third quarter. As planned, the pace of sales rep growth will be slower in the near future as we increase our efforts on providing training and support for our expanded sales force to enhance their productivity.”

Average daily sales were flat at $1.097 million as compared to the previous year quarter; however, average daily sales increased from $1.084 million in the second quarter of 2016. Excluding the impact of oil and gas customers, sales increased 1.1% compared to a year ago quarter. Sales generated from the addition of new sales representatives year-over-year and continued growth in Lawson's Kent Automotive and Government businesses were offset by the continued slow-down in the MRO marketplace and weaker demand from customers operating in the oil and gas industry.