Ingram Micro's Q1 saw the effects of a poor start to the year. The global giant, whose sale to a Chinese conglomerate is on track to finalise in the second half of the year, shows signs of clearing the decks for the event, boosting margins and making investments.
"We saw stabilisation of global IT demand in March, which has continued into April, however, IT spending was muted in the first two months of the year, particularly for high volume categories including PCs, smartphones, servers and storage," said Alain Monié, Ingram Micro CEO.
"While we did not capture the full revenue and operating income opportunity available to us in the quarter, our focus on higher value business continues to show results as we delivered a 97 basis point increase in consolidated gross margin, buoyed by strong improvement across all regions.
"We have also increased the pace of some of our strategic investment as we focus on building and enhancing the global capabilities that will support our mid- and longer-term business objectives."
Worldwide 2016 first quarter sales decreased 12% in dollar terms to $9.3bn, with gross margin of 6.77%. This compares to sales of $10.6bn with gross margin of 5.80% in the 2015 first quarter.
The translation of foreign currencies versus last year had a negative impact of 3 percentage points on worldwide sales.
Approximately $200m, or 2%, of the reduction in 2016 first quarter worldwide sales was related to the company negotiating 'a favourable change in contract terms' with some customers in Europe, as highlighted last quarter, which leads to recognising these sales on a net basis versus a gross basis as the company did in the first quarter of last year.
Additionally, last year's first quarter benefited from approximately $100m, or 1%, in North American mobility distribution business that the company elected to exit this year due to profitability levels that did not meet the company's objectives.
The remaining sales decline of 6% was primarily related to soft demand for high volume product categories, particularly in consumer markets, which was consistent with the broader overall IT market demand in the quarter.
Significantly higher gross margin was the result of a focus on driving a better mix of higher value sales and solid returns on invested capital, as well as recent acquisitions, it says.