Liq­uid­ity Ser­vices fos­ters growth

Looks at re­tail with STR buy

The Washington Times Daily - - Business - By Tom Ramstack THE WASH­ING­TON TIMES

In­dus­try an­a­lysts say on­line auc­tion­eer Liq­uid­ity Ser­vices’ re­cent in­vest­ments put it on course to steady growth from its busi­ness of sell­ing sur­plus goods for cor­po­ra­tions and gov­ern­ment agen­cies.

Liq­uid­ity Ser­vices is sched­uled to close next month on its $ 8.5 mil­lion ac­qui­si­tion of whole­sale sup­plier STR Inc., which will help it broaden be­yond its con­cen­tra­tion on De­fense De­part­ment sur­plus and more into the re­tail mar­ket.

The STR ac­qui­si­tion is the latest of sev­eral fast-paced in­vest­ments by the Dis­trict-based busi­ness-to-busi­ness com­pany.

In July, Liq­uid­ity Ser­vices an­nounced it was open­ing on­line auc­tions for Euro­pean cor­po­ra­tions and gov­ern­ment agen­cies to sell their sur­plus goods on the in­ter­na­tional mar­ket as Euro­pean leg­is­la­tures pres­sured their agen­cies to op­er­ate ef­fi­ciently.

STR re­sells over­stocked items and prod­ucts re­turned by cus­tomers to whole­sale buy­ers and dis­count re­tail stores, some of them For­tune 500 com­pa­nies. Typ­i­cally, the goods in­clude cloth­ing, con­sumer elec­tron­ics, re­tail mer­chan­dise, tech­nol­ogy hard­ware and sal­vage ve­hi­cles.

“We be­lieve that the ac­qui­si­tion of STR is a nat­u­ral com­ple­ment to our or­ga­ni­za­tion,” said Bill An­grick, Liq­uid­ity Ser­vices’ chief ex­ec­u­tive of­fi­cer. “In ad­di­tion, the ac­qui­si­tion will ex­pand [Liq­uid­ity Ser­vices’] pres­ence on the West Coast through the ad­di­tion of an ap­prox­i­mately 117,000-square-foot leased dis­tri­bu­tion cen­ter in South­ern Cal­i­for­nia.”

Stock re­search an­a­lyst Stephen Ju of fi­nan­cial firm RBC Cap­i­tal Mar­kets said the STR ac­qui­si­tion con­tin­ues Liq­uid­ity Ser­vices’ growth strat­egy, which dou­bled its net in­come in the sec­ond quar­ter of this year.

Wall Street re­search an­a­lyst Paul Ke­ung of CIBC World Mar­kets said, “ We be­lieve the strength in com­mer­cial busi­ness should en­able the com­pany to di­ver­sify its rev­enue sources away from the De­part­ment of De­fense busi­ness as well as grow rev­enues at high rates.”

He also said Liq­uid­ity Ser­vices “has pric­ing power and po­ten­tial scale ben­e­fits while growth of its re­verse sup­ply chain net­work may ac­cel­er­ate in the face of a slow­ing econ­omy.”

The com­pany re­ported in­come of $2.4 mil­lion, or 8 cents per di­luted share, on rev­enue of $38.7 mil­lion in the sec­ond quar­ter of 2006. The com­pany earned $1 mil­lion, or 4 cents per di­luted share, on rev­enue of $22.9 mil­lion one year ear­lier.

Its stock closed at $15.14 yes­ter­day on the Nas­daq Stock Mar­ket, down 5.1 per­cent or 81 cents com­pared with Fri­day’s close.

The com­pany was founded in 1999 and op­er­ates with about 350 em­ploy­ees.

It was one of the first to try to draw to­gether the highly frag­mented $40 bil­lion worth of cor­po­rate and gov­ern­ment sur­plus and sal­vage prod­ucts into a sin­gle on­line auc­tion mar­ket.

The com­pany has found that the more sur­plus, sal­vage and whole­sale items it sells, the more it can at­tract buy­ers.

“ We have at­tracted over 489,000 reg­is­tered pro­fes­sional buy­ers,” Mr. An­grick said.

They keep com­ing back be­cause the on­line sales al­low­cus­tomers to sell mer­chan­dise “at higher val­ues and with less costs” than sell­ing them by them­selves, he said.

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