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Illustration_60886103 / Kheng To To / Dreamstime
Iillustration_60886103 / Kheng Ho To / Dreamstime
Illustration 60886103 / Kheng Ho To / Dreamstime

Early Returns from Top 200 Survey Show How Rough 2008 Was

May 8, 2009
Responses to the annual survey for Electrical Wholesaling’s Top 200 listing of the largest electrical distributors in the United States are still flowing in, but the early responses already show clear evidence that the economic turmoil took its toll on the electrical industry in 2008.

Distributors’ answers to questions about the reasons for their companys’ increased or decreased sales in 2008 and their expectations for 2009 show how widespread the pain has been. Some distributors are faring better than others, but the solid across-the-board sales gains of the past several years have clearly been interrupted. Most of the respondents expect the difficulties to continue for the next few quarters.

Changes in annual sales from 2007 to 2008 varied over a considerable range. A few companies reported double-digit growth, while several have seen sales drop by 30 percent or more. The bulk of the responses thus far fall into a range of flat to 15 percent declines year-over-year.

We asked distributors, “What will be the early indicators that a recovery is near?” The responses varied widely. Many are looking for a decline in the unemployment rate, the beginning of recovery in home sales or an increase in auto sales.

Others are waiting for shifts in specific parts of the market. One industrial-focused distributor said he’ll believe the recession is ending when “plant utilization realizes steady gain and exceeds 85 percent.”

A utility distributor in Oregon is watching for “a shift in purchases to transformers and cable from the maintenance type products we are currently seeing.”

A distributor in North Carolina with 80 percent of his company’s sales in the commercial market hopes for “signs that architects and specifiers are getting busier, increased quoting activity, (and the) sound of increased confidence from our customers and suppliers.”

In some markets, distributors said they are already seeing encouraging signs.

“We are already seeing it as quote activity has increased, major customers are beginning to explore some capital projects, and our OEMs are also seeing an uptick in quoting work,” said a distributor in the Cincinnati area.

“The indicators that we have seen starting in late March through April 2009 have been two-fold: 1) Public Work jobs are bidding and not only being awarded but the projects are starting off at a quick pace. 2) We are seeing an active market in the energy retrofit market even with the economy downturn on the private commercial level,” said a distributor in Southern California.

When asked when they expect the recession to end, there was nothing like a consensus. The predictions were scattered almost randomly over the next two years, though most expect it to continue at least into early 2010.

Based on the early pool of responses, some provisional conclusions are possible. First, expect a lot of shuffling in this year’s list. Given the range of increases and decreases, some companies will leapfrog over others that were roughly the same size in 2007.

Second, if the ranges seen in the early returns hold true for the survey as a whole, and if forecasts from economists such as Herm Isenstein of DISC Corp. are right and overall industry sales shrink by more than 20 percent, we’ll see the large distributors represented by the Top 200 take considerable market share from the smaller independents in the course of this recession.

The deadline for responding to Electrical Wholesaling’s Top 200 survey has been extended to Friday, May 15. To fill out a survey online, go to www.ewweb.com for the link.