Electrical Distributors Report 2005 Profit Margins Highest in 10 Years

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.

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). Distributors who participate in the survey receive it for no charge. For more information, contact NAED Customer Service at 1-888-791-2512 or customerservice@naed.org. NAED is based in St. Louis, Mo., and its membership represents about 4,100 locations internationally.