Electrical distributors in 2005 produced their highest profit margins in at least a decade, according to the National Association of Electrical Distributors (NAED), St. Louis, in its annual Performance Analysis Report (PAR) highlights.
The average net profit for electrical distributors in 2005 was 2.9 percent — up from 2.1 percent in 2004 and 1.3 percent in 2003 — the report said. The 2.9 percent average net profit represents the highest profit margin reported in the past 10 years. Among a select group of high-profit distributors, the 2005 profit margin was more than twice as high at 6 percent.
NAED conducts the PAR survey annually to provide industry financial benchmarks. The results from the 2006 survey are based on data from 179 NAED-member electrical distributors.
Survey respondents reported an average 2005 sales increase of 11.1 percent, a lower rate than the 16.5 percent sales-increase average in 2004. Gross margins, representing profit on the cost of goods sold, remained steady at 22.2 percent on average. NAED reported PAR respondents increased net profit by reducing their operating expenses to an average of 19.7 percent of sales, which was down from 20.4 percent from the previous year.