The National Association of Electrical Distributors (NAED) released its annual Performance Analysis Report (PAR) Highlights, which compiles performance data from NAED electrical distributors to provide a benchmark for distributor operations in the industry.

Featuring statistical breakouts by sales volume, customer emphasis, and warehouse sales, the 2010 NAED PAR Highlights profiles the "typical" and "high profit" NAED distributor as well as provides in-depth reporting on investment, income statement, balance sheet, and financial and productivity ratios. 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.

The report shows that electrical distributor profit margins decreased to a median of 1.1% in 2009, compared to medians of 2.6% in 2008, 3.2% in 2007, 3.7% in 2006, and 2.9% in 2005. Among the top performing 25% of "high profit" distributors, the 2009 profit margin was more than four times as high at 4.7%. The report also showed 2009 median sales decreases of 22.4%.

The report's author, Dr. Al Bates of Profit Planning Group in Boulder, Colo., offered insight into this year's results. "In 2009 sales fell by more than 20% as the construction sector of the economy experienced one of its worst years in history. For most firms sales fell faster than expenses could be reduced, resulting in expenses as a percent of sales increasing rather significantly. However, firms were able to maintain their gross margin percentages despite heavy price pressure."

He continued, "The net result is that pre-tax profit margins fell from 2.6% for the typical firm to 1.1%. The fact that most firms were able to continue to operate at a profit in the face of a very negative economy is a tribute to management. It is important to note that despite economic conditions, the high-profit firms continued to produce strong results. Their pre-tax profit margin was 4.7%, more than four times the result produced by the typical firm."

Results from the 2010 survey are based on data from NAED-member electrical distributors. The typical distributor surveyed, based on median figures, had annual sales of $48.7 million and achieved a gross margin of 21.7% in 2009. Inventory turnover was 3.8; payroll expenses were 14.6% of sales.

PAR survey participants will receive their PAR Highlights shortly. The report is now available to NAED member non-participants for $300 (first copy) and $20 (additional copies), as well as non-members for $495 (each copy). 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 2011. At that time, participating NAED members may also opt for purchasing customized reports for their firms.

NAED is the trade association for the $70+ billion electrical distribution industry. Through networking, education, research, and benchmarking, NAED helps electrical distributors increase profitability and improve the channel. NAED's membership operates in approximately 4,400 locations internationally.