MRO Magazine

News

Electrical distributors report 2005 profit margins highest in 10 years

St. Louis, MO -- Electrical distributors in 2005 produced their highest profit margins in at least a decade, accord...


St. Louis, MO — Electrical distributors in 2005 produced their highest profit margins in at least a decade, according to the National Association of Electrical Distributors (NAED) in its annual Performance Analysis Report (PAR) Highlights.

The average net profit for electrical distributors in 2005 was 2.9%, up from 2.1% in 2004 and just 1.3% in 2003, the report said. The 2.9% figure represents the highest profit margin reported in the past 10 years that NAED has conducted the PAR survey. Among a select group of “high profit” distributors, the 2005 profit margin was more than twice as high at 6.0%.

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.

Accompanying the increase in profit were sales increases averaging 11.1%, a lower rate than the 16.5% sales increase average of 2004. Gross margins, representing profit on the cost of goods sold, remained steady at 22.2% on average. The increase in net profit came as distributors reduced their operating expenses to an average of 19.7% of sales, from 20.4% the year before.

The PAR Highlights contains a wealth of information to help distributors analyze the financial performance of their operations. Other measures covered in the report include inventory turnover, sales per employee, average collection period, return on assets and much more. Also included is a five-year trend analysis of key financial ratios.

Copies of the PAR Highlights report can be purchased by NAED members for $300 each (first copy) and $20 (additional copies). However, distributors who participate in the survey receive the PAR Highlights at no charge. For more information about PAR highlights, contact NAED Customer Service at (888) 791-2512 or customerservice@naed.org. Survey forms for the next Performance Analysis Report will be distributed in January 2007.

NAED is the trade association for the $70-billion electrical distribution channel. Through networking, education, research, and benchmarking, NAED helps distributors and manufacturers increase profitability and improve the channel. NAED’s membership represents approximately 4,100 locations internationally.