Arrow ECS grows in Europe despite slowdown in remote working sales

CEO Michael Long says business has been lifted by demand for complex datacentre project, but says need for WFH-based offerings has slowed down

Arrow ECS enjoyed double-digit growth in Europe in Q2 thanks to the strong value of the euro vs the US dollar and demand for storage and networking as businesses return to offices.

Global sales for the Arrow ECS business grew by four per cent year on year to $1.95bn for the three months ending 3 July. Sales fell by one per cent on a non-GAAP basis, Arrow claims.

Arrow ECS' European operations performed far better than the group as a whole, with sales surging by 18.5 per cent, or by 7.7 per cent on a non-GAAP basis adjusted for the effect of currency exchange rates, to $784.51m.

The strength of the euro against the dollar - at $1.21 per euro compared to the usual rate of $1.18 - had a flattering impact on its financials and caused sales to be up by around $69m more than anticipated, explained CFO Christopher Stansbury.

The components side of Arrow's business performed significantly better and reached an all-time record in the history of the company.

Sales were up by 40 per cent globally on a GAAP basis, or 36 per cent on a non-GAAP basis, to $6.6bn. European component sales were up 33.3 per cent, or 21.7 per cent adjusted for currency changes, to $1.49bn.

The components business saw strong demand from industries including transportation as well as communications, industrial, consumer electronics and data networking, added CEO Michael Long.

The ECS business' more muted performance was due to an observed slowdown in spending on work from home offerings and a shift to more complex infrastructure projects as companies begin to return to offices, the CEO added.

Sales for the ECS business were "in line with expectations" despite supply chain issues hindering its ability to fulfil demand, said Long.

"Our customer base of a retreat from work to home and migration to more complex data center issues that we had prior to the downturn or prior to the pandemic, which clearly changed the trajectory of this business and every other IT business out there," said Long during an earnings call transcribed by Seeking Alpha.

"We do have some supply constraints that are very real, plus the change in how business are moving is happening at a pretty good clip, and it takes longer to close those more complex deals and longer to service those deals rather than just setting up work from home in somebody's home office. So that's the structural change we've seen."

Arrow is expecting to log sales of $8.18bn in its upcoming Q3 results, with its ECS business expected to fall between $1.8bn and $2.1bn. The distributor said it expects changes in foreign currencies to increase sales by $40m for the quarter.