Phoenix-based distributor Avnet Inc. is planning US$40 million in cuts after reporting a sharp 41.6 per cent drop in GAAP net income for the third quarter of its 2013 fiscal year, ending March 30.
Avnet reported GAAP net income of US$86.2 million on the quarter, down from US$147.6 million the same quarter one year ago. Its GAAP operating income was US$167.6 million, down 22.7 per cent from the US$216.8 million reported one year ago. Sales for the quarter were described as “relatively flat” at US$6.3 billion, with a gross profit margin of 12.0 per cent.
In a statement, Avnet CEO Rich Hamada said both top and bottom line results met Avnet’s expectations and were generally in line with normal seasonal patterns, particularly during an ongoing uneven economic recovery. In the western regions though, he said Avnet experienced year-over-year organic revenue declines, causing adjusted operating income margin to decline 65 basis points year over year.
“As a result, we are continuing to drive actions for margin improvement including new annualized cost reductions of approximately US$40 million that are expected to be completed by the end of our fourth fiscal quarter. This will now bring our cumulative cost reductions in fiscal 2013 to approximately $140 million,” said Hamada.
The statement did not indicate where the cuts could occur, or what form they could take. Avnet has a subsidiary in Canada, and has found success in Canada as an early adoptee of solution selling and the value-added distribution model.
“We remain positioned to leverage future growth into higher margins and returns, and are committed to drive continued progress toward our long-term goals across our portfolio no matter what course the recovery takes,” said Hamada.