Electrical Distribution Industry March 2022

The most recent information available from the National Association of Electrical Distributors (“NAED”) indicates that, during the second quarter of 2022, labor and supply chain issues impacted the electrical distributors industry. Indeed, during the second quarter of 2022, NAED’s “Expected Sales Growth Index”—which gauges industry leaders’ revenue expectations for the next 12 months and asks about capital spending, technology investment, sales backlog, inventory backlog and more—fell to 3.64, down from 4.02 in the first quarter of 2022. NAED suggests that the current inflationary environment and other economic factors may be challenging leaders’ optimism for the coming year; second quarter 2022 results show that fewer respondents are confident that sales growth will be as strong as they had anticipated it would be during the first three months of the year. During the first quarter of 2022, 81.0% of respondents forecast at least moderate growth for the next 12 months, while just 61.0% made the same prediction during the second quarter. Still, despite labor and supply chain challenges, respondents anticipate that overall industry momentum will remain strong throughout the rest of 2022 with a projected increase in sales of more than 10.0%.

Meanwhile, a survey conducted by financial firm Robert W. Baird & Company in partnership with the Electrical Distributor (“tED”) magazine found that, during the second quarter of 2022 (latest available), electrical firms recorded year-over-year revenue growth averaging 13.5%, up from 12.6% growth in the first quarter and 13.2% in the fourth quarter of 2021. (tED notes that, of the electrical firms responding to the survey, the vast majority were electrical distributors, with about one-fourth electrical manufacturers.) However, looking to the third quarter of 2022, respondents expect revenue gains to slow to a 10.6% pace. Additionally, the survey found that product pricing for electrical firms continued to rise in the second quarter, up 11.9% versus an 11.3% climb in the first quarter and the sixth consecutive quarterly increase in this metric.

Similarly, Electrical Wholesaling (“EW”) reports that electrical distributors are facing significant product price increases. Like NAED, EW also notes that electrical distributors must deal with supply chain delays as well as labor shortages, both in the field and at their own companies. Nevertheless, many of the distributors on EW’s 2022 ranking of the top 150 electrical distributors in the U.S. are confident they will be able to overcome these challenges. Further, these 150 firms have what EW calls “tremendous clout in the market.”

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