Tessco's profits exceed estimates 91% jump in sales sends earnings 63% higher, to 28 cents a share

July 10, 1996|By Timothy J. Mullaney | Timothy J. Mullaney,SUN STAFF

Helped by a booming market for cellular phones, Tessco Technologies Inc. of Sparks boosted its first-quarter earnings by 63 percent, comfortably exceeding estimates by securities analysts.

Tessco, a distributor of accessories and maintenance equipment related to the mobile phone business, said it earned $1.3 million, or 28 cents a share, during the three months that ended June 28. Last year, the company made $819,000, or 18 cents a share, during the period, which is the first three months of Tessco's fiscal year.

The three securities analysts who published estimates for Tessco had expected the company to earn 21 cents, 23 cents, LTC and 25 cents a share, respectively.

Tessco made more money the old-fashioned way: it sold a lot more stuff.

Sales jumped 91 percent to $36.7 million. The company's profits grew more slowly than sales because of a 98 percent increase in corporate overhead, or costs that are not directly related to producing sales.

"First of all, we increased our number of monthly buyers by 22 percent, and the average buyer bought 28 percent more," said Tessco Chairman Robert Barnhill Jr. "I think we're picking up share. The mobile and portable area [which sells parts like batteries and rechargers] picked up more than 160 percent. That particular segment of the market is growing 20 to 30 percent, depending upon the category you're looking at."

The company also announced that it has settled a lawsuit with one of its largest suppliers, Andrew Corp. of Orland Park, Ill. Tessco had sued Andrew in April, claiming that Andrew improperly cut off Tessco's supply of inventory in a dispute over whether Tessco's contract with the supplier required Tessco to stop distributing products made by Andrew's competitors.

When that dispute was announced, it caused Tessco stock to plunge more than $8 to about $21 before rebounding, based on worries about how Tessco would find new suppliers, since Andrew products accounted for 29 percent of Tessco's sales in fiscal 1996.

Tessco shares closed unchanged in trading yesterday at $36.25.

The settlement calls for Andrew to continue supplying Tessco through Dec. 31, and to cooperate in Tessco's transition efforts.

Pub Date: 7/10/96

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