Can Systemax Make Shinola from Circuit City? (SYX)

Systemax Inc. (NYSE: SYX) is a lesser-known company for many investors, but that may change after developments from yesterday.  Multiple reports showed that the company won the auction for the rights and property of Circuit City.  Systemax is a direct marketer of brand name and private label products in technology, software, and industrial segments.

Systemax also just posted earnings yesterday as well.  Its consolidated net sales grew 4% to $752.3 million in U.S. dollars. On a constant currency basis, sales would have grown 12%. Its North American technology product sales grew 21% to $502.4 million, and sales would have grown 24% on a constant currency basis.  The company’s gross profit was $107.6 million, and its gross margin was 14.3%.  Operating income was $15.0 million, while net income was $8.7 million or $0.23 EPS.

A spokesman for Brainerd Communicators was not able to confirm the exact terms nor the $14 million price tag for the Circuit City assets. By the number of reports and by the way the bankruptcy proceedings have gone, we’d expect a confirmation from the company by this afternoon.  Whether the price and full terms get disclosed, that is another matter.  We had also been told that several private equity firms were in the running.

This Circuit City buyout is not the first pony ride for Systemax.  A fresh article from BusinessWeek highlights how Systemax has actually turned the old and dead CompUSA around after its implosion.  Systemax paid some $30 million in early 2008 for 16 CompUSA stores, its name, its intellectual property, customer list, and Web site.

It was obvious as a heart attack that ex-CEO Philip Schoonover was not going to be able to do anything right here. That was why we announced that the company should fire him in 2007, yet his departure did not come until September 2008.  But Systemax has nothing to do with the past at Circuit City.  It is the new sheriff in town.  Based upon the data we have seen, it seems that the Circuit City brand (at least online) might have a life after death.

Four trading days ago this stock was at $16.00.  This morning it sits at $13.40, and its 52-week trading range is $8.36 to $20.96.

JON C. OGG