In a sign of economic uptick, sales for the typical electrical distributor increased more than 16 percent between 2011 and 2010, according to new data from the National Association of Electrical Distributors. The year-to-year change is double the increase that occurred between 2010 and 2009.
These numbers come as the association recently released the 2012 NAED Performance Analysis Report Highlights and the 2012 NAED Employee Compensation Report – two leading benchmarks used by the industry to gauge distributor sales and business performance, operational costs, and employee pay and benefits.
The typical distributor surveyed, based on median PAR figures, earned annual sales of $62.6 million, achieved a gross margin of 21.1 percent, and experienced an inventory-turnover ratio of 4.3 in 2011.
The PAR also showed electrical distributor profit margins increased to a median of 3 percent in 2011 from lows of 2.4 percent in 2010 and 1.1 percent in 2009. Among the top-performing 25 percent of “high profit” distributors, the 2011 profit margin was 6.4 percent, up nearly two percent from last year’s margin.
“Financial performance varied widely among the typical firm and high-profit firms in 2012,” wrote PAR author Al Bates of the Profit Planning Group. “Of greatest consequence, the typical firm had a 8.7 percent pre-tax return on assets (profit before taxes expressed as a percentage of total assets) while high-profit firms generated an ROA of 19.8 percent.”
High-profit distributors, as determined on pretax ROA, earned annual sales of $81.8 million in 2011, a 20.2 percent change from the year prior, the PAR revealed.
In addition, high-profit distributors experienced lower operating costs than typical distributors. The biggest divide between the two came in general and administrative expenses: Such costs consumed 24.3 percent of the typical distributor’s gross margin; by contrast, they took up 18.5 percent of a high-profit distributor’s margin.
Similarly, payroll expenses absorbed 11.5 percent of high-profit distributors sales, while they made up 13.1 percent of the typical distributor’s sales.
As sales and margins increased in 2011, distributors renewed investments in employee compensation and benefits. The Employee Compensation Report, which pulled data from distributors in a broad range of industries, showed compensation up for top management and outside sales forces at companies across the board. In fact, outside sales compensation increased 8 percent, the report showed.
An increasing number of typical NAED distributors also gave employees merit raises in 2011. Last year, 48 percent of these distributors gave employees merit raises – up 9 percent since the last report in 2010.
“In distribution, compensation and benefits results in 2011 could be characterized as going ”back to the future,” said the Profit Planning Group’s Bates, who also authored the 2012 NAED Employee Compensation Report. “In 2011, the economy was far from robust, but was a long way from moribund as well. As a result, overall compensation and benefit programs moved back towards where they were in 2007.”
As employee pay climbed in 2011, so too did health-insurance costs. For typical distributors, the cross-section survey results showed: Annual family premiums increased nearly 30 percent between 2007 and 2011; Employer-paid percentages fell to about 60 percent of total premiums, depending on the type of plan, from 75 percent in 2007; and the annual deductible more than doubled between 2007 and 2011, while co-pays rose more slowly.
Other benefits like educational assistance and flexible scheduling remained popular, especially with NAED’s electrical distributors. In fact, 58 percent of surveyed NAED distributors offered employees educational assistance, compared to 42 percent of cross-industry respondents.
The 2012 NAED PAR Highlights is based on 2011 operational data provided by 132 NAED distributors surveyed by the Profit Planning Group on behalf of NAED between January 2012 – April 2012. Participants received a free copy of the PAR Highlights, featuring statistical breakouts by sales volume, customer emphasis and warehouse sales.
Data from the biannual Employee Compensation Report came from 81 NAED members in cooperation with 1,125 distributors from 26 other trade associations. The survey results, compiled by the Profit Planning Group, are based on 2011 data gathered in early 2012.
To purchase these reports, contact NAED Member Services at (888) 791-2512. NAED will distribute next year’s PAR surveys in January 2013. At that time, participating NAED members may also opt for purchasing customized reports for their firms.
NAED is the trade association for the $70+ billion electrical distribution industry. Through networking, education, research, and benchmarking, NAED helps electrical distributors increase profitability and improve the channel. NAED’s membership operates in approximately 4,400 locations internationally.