Distributors Reap Highest Profits in 10 Years

Producing their highest profit margins in at least a decade, electrical distributors reported record profit margins in 2005, according to the National Association of Electrical Distributors (NAED), St. Louis, in its annual “Performance Analysis Report (PAR) Highlights.”

Based on 179 NAED member firms, the average net profit for electrical distributors last year was 2.9% — up from 2.1% in 2004 and just 1.3% in 2003. This increase represents the highest profit margin reported in the past 10 years since 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%.

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.