In a near repeat performance of 2004, the Top 200 finished 2005 with year-to-year sales up an average of 15.1 percent — 0.2 percentage points higher than 2004’s 14.9 percent gain.
After more than 35 years in the No. 1 spot, Graybar Electric Co., Clayton, Mo., fell to the No. 2 spot as WESCO Distribution, Pittsburgh, inched ahead with $4.4 billion in 2005 sales, an 18.2 percent upswing. WESCO attributed the increase to market-share growth and acquisitions. Although Graybar declined to disclose revenue in its Top 200 survey, employee-owned Graybar’s 2005 annual report lists sales of $4.3 billion, a 5.5 percent increase over the $4.1 billion in 2004 sales Graybar reported in last year’s Top 200 survey.
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Collectively, the Top 200 electrical distributors finished 2005 with year-to-year sales up an average of 15.1 percent. Once again, copper and steel commodity-price increases topped the list of reasons electrical distributors’ annual revenue jumped by double digits.
With this year’s skyrocketing zinc prices, the three metals make a trifecta of possibility no one can begin to predict. So much depends on commodities — product availability, lead times, pricing and profit margins.
In an industry where margins are paper-thin in good years, savvy distributors are gently ratcheting up the price of products on top of the cost increases from vendors. “If copper prices and other commodities continue to rise and companies do not react quickly enough to pass the cost increases on, they will be in big trouble in 2006 and beyond,” said Rich Galgano, owner of Windy City Wire, Cable and Technology Products, Hillside, Ill.
Minnesota Electric Supply Co., Willmar, Minn., is quoting commodity products at “price in effect at time of shipment” and suggests its electrician customers do the same. Although Minnesota Electric’s sales were flat in 2005, profit margins are up and will stay there, reports Steve Peterson, president and CEO.
Among the Top 200, 14 distributors reported flat or decreased revenue for 2005, but a decline in sales doesn’t necessarily equate to shrinking profit. “We had a slight decrease in sales, but our margins improved,” said Robert R. Tilson, president, Electric Fixture & Supply Co., Omaha, Neb.
Swift Electrical Supply Co., Teterboro, N.J., concentrated on higher-margin sales in 2005. As a result, revenue was down more than 6 percent, but gross profit increased by more than $1 million for this $35.2 million full-line distributor, reported Irwin Turk, chief financial officer.
CLIMBING THE CHART
Several full-line electrical distributors climbed the Top 200 ranking this year with incredible year-to-year revenue increases of more than 30 percent. Crawford Electric Supply Co. (CESCO), Dallas, jumped from No. 45 to No. 36; QED Inc., Denver, landed at No. 65 after last year’s No. 79; Crum Electric Supply Co. Inc., Casper, Wyo., leaped from No. 153 to No. 122; and Zeller Corp., Rochester, N.Y., shot from No. 191 to No. 156. Winlectric, Dayton, Ohio, saw the largest increase in sales — a whopping 63 percent — that largely can be attributed to last year’s acquisition of Noland Co., Newport News, Va. Winlectric also credits internal growth of same-store sales, price increases and new locations for the revenue boost, which moved the distributor from No. 36 to No. 28.
DROPPING FROM THE CHART
In addition to Noland Co., four other distributors said goodbye to their spots on the list as a result of 2005 acquisitions. Nunn Electric Supply, Amarillo, Texas, was purchased by Border States, Fargo, N.D.; Stuart C. Irby, Jackson, Miss., was acquired by Sonepar USA, Philadelphia; Cain Electrical Supply, Big Spring, Texas, joined Consolidated Electrical Distributors (CED), Westlake Village, Calif.; and TVESCO (Tennessee Valley Electric Supply Co.), Memphis, Tenn., was bought by Hughes Supply, Orlando, Fla. Subsequently, Home Depot, Atlanta, acquired Hughes Supply in 2006 for an unprecedented 11.8x EBITDA (earning before interest, taxes, depreciation and amortization).
Along with Hughes Supply, five more distributors appearing on this year’s Top 200 list have been acquired in 2006 and will subsequently drop from next year’s list. Richard Worthy, former CEO of Sonepar, is on a buying spree with his newly formed U.S. Electrical Services Inc. (USESI), Chester Springs, Pa. In May, USESI announced it would acquire Electrical Wholesalers Inc., Hartford, Conn.; and Monarch Electric Co., West Caldwell, N.J. U.S. Electrical Services is expected to announce more acquisitions this year.
The three other Top 200 distributors acquired so far this year were Calvert Wire & Cable Corp., Brook Park, Ohio, which was bought by Communications Supply Corp. (CSC), Carol Stream, Ill.; CLS, Hartford, Conn., acquired by Rexel Inc., Dallas; and Boggis-Johnson Electric Co., Milwaukee, which was purchased by Viking Electric Supply/Sonepar, Minneapolis.
One can only wonder how many more electrical wholesalers will be gobbled up by the end of the year. (See the acquisition chart on page 28 for more mergers in 2005 and 2006.)
Although industry leaders WESCO; Graybar; GE Supply, Shelton, Conn.; and Anixter International, Glenview, Ill., have been extending their reach beyond U.S. borders for years, few smaller distributors have made the venture. Argo International Corp. is a notable exception. The industrial motor and drive wholesaler headquartered in New York built itself into a global distributor with locations in China, Europe, India and Mexico. Today, 14 of its 22 locations are outside the United States, and more than half of its $46 million in annual sales is generated from outside U.S borders.
According to responses from questions on this year’s Top 200 survey about non-U.S. locations, revenue and employees, it appears a handful of the Top 200 are venturing beyond the borders. The Reynolds Co., headquartered in Fort Worth, Texas, has a service center in China; OneSource Distributors, Oceanside, Calif., reported more than $3 million in sales from a location in Mexico; and Schwing Electrical Supply Corp., Farmingdale, N.Y., noted 1 percent of its sales comes from exports.
Other distributors reporting revenue from beyond U.S. borders include Border States; Wholesale Electric Supply Co. of Houston; and wire and cable distributor A.E. Petsche Co., Arlington, Texas, which reports a sizable $27 million of its $142 million in annual sales coming from outside the United States. Two other electrical wholesalers each noted a non-U.S. location.
Interestingly, three electrical distributors built a serious presence in the United States over the last couple of decades by expanding into the country through acquisition. All three are subsidiaries of European distributors: Rexel at No. 6; Hagemeyer North America, Charleston, S.C., at No. 16; and Sonepar USA, Philadelphia, at No. 5.
Full-line electrical distributors, which cater only to the electrical industry, and full-line-plus distributors, which sell to other wholesale industries such as plumbing or HVAC in addition to the electrical industry, make up the bulk of the Top 200. Of the Top 200, there were 137 full-line distributors and 19 full-line-plus distributors. Collectively, they account for 83.5 percent of the Top 200’s sales.
Full-line national chains. Estimated sales of the electrical industry’s four full-line national chains — Graybar Electric, WESCO, Consolidated Electrical Distributors (CED) and GE Supply — were up from 2004’s estimated 12.1 billion to an estimated $13.9 billion. Collectively, their market share is approximately 18.6 percent of 2005’s estimated $74.3 billion electrical pie.
When adding Crescent Electric Supply Co., East Dubuque, Ill., which has locations in 25 states; Sonepar USA, with service centers in 26 states; Rexel, with branches in 29 states; and Winlectric/Noland with coverage now spanning 30 states, the four national chains and these large regional full-line distributors sell $19.6 billion in electrical products — 26 percent of total sales.Electrical Wholesaling’s complete in-depth 2006 Top 200 analysis, which includes individual companies' revenues, number of employees and locations, can be purchased on EW’s Resources Page.