Our annual ranking of the largest electrical distributors.
Electrical Wholesaling's ranking of the largest electrical distributors always proves to be a fascinating snapshot of the state of the electrical market. In years when acquisitions are raging, it's not unusual for up to 10 percent of the Top 200 distributors to be acquired. When a new progressive distributor takes the industry by storm, you can chart their progress as they bolt up the rankings each year.
This year is no different. In 2009, the electrical wholesaling industry was hammered by the worst recession in a generation, and the sales figures for this year's Top 200 distributors screamed out in pain. The average sales decline for the 140 companies that provided sales data for both 2008 and 2009 came out to a whopping 21 percent. To steer through the wreckage, companies had to make all of the painful decisions we have heard way too much about over the past two years: staff cuts, wage freezes, closing branches, eliminating 401(k) matches and cutting expenses. Several distributors had to lay off between 15 percent and 25 percent of their employees, and many others said they did everything they could to hang onto key employees until business improved.
However, the general tone of the Top 200 responses is that the worst is over. Despite the recession, some companies continued to make strategic investments in new markets or in personnel with desirable skill sets or market expertise (See “What's New?”). Generally speaking, respondents said commercial construction still hasn't recovered; industrial business was picking up; the residential market was waking up in certain regions; and that the hospital and green markets were two beacons of business in an otherwise still-dark market landscape. Said Harry Albert, Jr., CFO, Electrical Equipment Co., Raleigh, N.C., “We see signs of recovery in selected markets. Others are still suffering. The end of the recession does not mean we are at the same level of activity as before the recession. Although we are beginning to see some improvements, we are certainly at a lower level. The markets that are lagging include paper, wood, lumber and furniture. Steel, defense, and municipalities are holding their own or starting to increase business.”
In Texas, James Rudd, product manager, Elliott Electric Supply, Nacogdoches, Texas, says major metropolitan markets are “breathing” again, but that rural areas are still suffering. During the recession, Elliott Electric Supply focused on keeping inventory on the shelf and hiring people with good customer knowledge who had been down-sized from other distributors.
Burke Herring, president, Womack Electric Supply Co., Danville, Va., is seeing some light at the end of the tunnel, too. “The free fall has ceased and there are many positive signs, but the effects are still being felt,” he said. “Residential is showing some improvement and there are opportunities in the energy sector such as lighting retrofits and anything related to energy efficiency.”
He says Womack Electric Supply got through the downturn by strategically trimming expenses and inventory, only cutting personnel where performance was an issue, and by watching accounts receivable “like a hawk.” Herring is encouraged by the growth of green sales and said the company recently added a sales specialist for energy-efficient products and systems.
During the recession, many other Top 200 electrical distributors renewed their commitment to selling energy-efficient electrical products, and several electrical supply houses launched new energy divisions and/or added staff in this area. Kevin Schulte, vice president and CFO, E. Sam Jones Distributor, Atlanta, said although his company is forecasting two-percent growth at best, “Energy-related project business continues to sizzle and is one of the few segments showing growth.”
Indeed, he said that in 2009 E. Sam Jones saw its energy-retrofit business increase 20-30 percent. Schulte also sees some growth in federal work. “Government business driven by the American Recovery and Reinvestment Act (ARRA) is generating bid opportunities,” he said. “Local property management business is lagging but holding steady with last year's overall decline.”
On the West Coast, another big believer in the green market is Bob LaRue, president, Alameda Electrical Distributors, Inc., Hayward, Calif., where sales of green electrical products quadrupled in 2009. “Many contractor and building owners are paying close attention to opportunities,” he said in his Top 200 survey response.
With all the economic gloom and doom of recent months, it was refreshing to see that some respondents are expecting their 2010 sales to increase over last year at a double-digit rate. James Van Zandt, president and CEO, Tri State Supply Co. Inc., Washington, Pa., expects his company's sales to be up 15 percent over 2009, and said he saw a “strong increase” in business in March. “OEMs have finally started to release orders,” he said in his survey response.
While Brian Becker, V.P. of finance for Border States Industries Inc., Fargo, N.D., is expecting a 20 percent sales increase in 2010, the business outlook for his company's diverse mix of markets is mixed. “Some markets will see a nice rebound, while others will still be down,” he says. The company sees growth in the energy sector, flat to little growth in its industrial sector and a dip in its commercial sector.
Brent Spear, president, Electrical Distributors Inc., Charlotte, N.C., isn't expecting too much sales growth this year, and said in North Carolina the residential business is coming back modestly, but commercial construction is still in bad shape. One bright spot for the company has been green products, and Spear says his volume in this market niche has probably doubled over the past year.
James Clark, V.P. of strategy, marketing and corporate development for International Electric Sales Corp. (Rexel/Gexpro), Dallas, said the company expects its 2010 sales to be flat or at a slightly lower level. He said the main focus at Rexel/Gexpro this year will be on more detailed market segmentation; providing additional services for customers; process improvements; and more training for employees.
Strictly by the numbers. Estimated sales for the Top 200 distributors as a group dropped 11 percent to $47.5 billion from $53.5 billion, but these distributors picked up four points of market share in 2009 and now control 63 percent of the $75.2 billion in 2009 sales that Electrical Wholesaling estimates was sold through distributors of electrical supplies. Sales per employee for the 140 distributors that provided both 2009 sales and employee data was $633,596.