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2019 Top 200 Analysis

Top 200 electrical distributors talk about which markets are hot and which ones are not.

When you look at the many bullish 2019 sales forecasts of Top 200 distributors and the wide array of large construction projects they are now servicing, it would be easy to forget that just a few short months ago some economists were placing even-money bets that the U.S. economy would drift into recession in the next year or two.

That may still happen, but it will probably surprise the 38 (30% of all survey respondents) Top 200 distributors banking on double-digit growth in 2019, or the 53% of respondents (68 respondents) expecting 2019 growth in the 4% to 9% range. Supporting the double-digit growth forecasts in many cases were construction projects in some specific commercial or industrial niches — data centers, hospitals and LNG (liquid natural gas) plants, as well as projects in other areas of the oil & gas markets.

OIL & GAS MARKETS POWER SOME GROWTH

Several Top 200 distributors in Texas, Wyoming, North Dakota, Pennsylvania and Ohio reported on the growth of the oil and gas market. Jeff Hocken, CEO, Crum Electric Supply Co., Casper, WY, says his company is seeing growth in oil/gas development/processing/transportation; doing some data center work; and helped supply the billion-dollar expansion of Salt Lake City Airport.

Jeremy Welsand, CFO, Border States Industries, Fargo, ND, said the company is seeing double-digit growth in the oil & gas and OEM markets, but a slowdown in the utility market. Border States is supplying some Google and Facebook data centers, as well as several medical and institutional facilities. Welsand said the company, which is projecting a 7% increase in revenues for 2019, also consolidated three Missouri and Kansas branches into its Joplin, MO location; Clovis, NM into the Lubbock, TX location; Newton, KS into the Wichita, KS location; Deer Valley, AZ into the Phoenix location; Dunn, NC into the Raleigh, NC location; and the Liberty, MO, Lee’s Summit, MO and Leavenworth, KS, locations into its downtown Kansas City, MO location.

One niche within the oil & gas market mentioned by several respondents were cracker plants. Two distributors with branches in the Pittsburgh metro were supplying Shell’s $6 billion cracker plant north of Pittsburgh. And Kait Highland, executive assistant for Wholesale Electric Supply of Houston says the company is also seeing a strong oil & gas market in Texas and along the Gulf Coast and said that it’s generating sales from some multi-billion-dollar LNG and plastics facilities.

DATA CENTERS STILL A HOT SEGMENT OF CONSTRUCTION MARKET

Van Meter  Inc., Cedar Rapids, IA, enjoys a diverse mix of big project business, including data centers for Google, Apple and Facebook, according to Karmen Wilhelm, vice president of marketing. Although capital spending from industrial accounts has decreased and the agriculture market has softened, the company sees enough business in other niches to support a 6.4% increase in for 2019. “National contractor sales specific to datacenter construction remain steady,” she said. “Solar sales continue to grow in select markets with favorable renewable energy policy.”

Mike Pratt, CEO & president, American Electric Supply, Corona, CA, said a diverse mix of construction projects will support some nice sales growth in 2019, and he expects a revenue boost of between 9% and 11%. “Commercial construction showing very strong growth,” he said in his response. “The tenant improvement-commercial and multi-tenant market have been strong through the first quarter.  The green solutions market has been slow the first quarter in 2019, but appears to be picking up due to recently added programs from the state and utilities.”

Pratt is also seeing some large construction work in the Los Angeles market. “We are starting to see the beginning of projects related to the 2028 Olympics coming to Los Angeles. This will be a major thrust over the next eight years,” he said. “Also, the continuing upgrade to LAX Airport, and the continuing boom in logistics facilities to support the Ports of Long Beach and Los Angeles.”

INDUSTRIAL MARKET MAY BE STARTING TO SLOW DOWN

While commercial construction is strong in many metros, some distributors that focus on the industrial or OEM markets are seeing things slow down a bit. Rick Slaugh, COO, Shingle & Gibb Automation, Moorestown, NJ, expects +11% growth in 2019, based in part on some additional business from the acquisition of KOM Automation, Buffalo, NY. He attributes some of the company’s increase in 2018 revenues to organic growth in existing marketplaces and adding more inside and outside sales personnel. 

Although 2019 started off strong in most market segments for Shingle & Gibb Automation, Slaugh says business started to cool off a bit in 2Q 2019, “especially in the OEM machine builder area.”

Branch expansion was a key revenue driver for some Top 200 distributors. Elliott Electric Supply, Nacogdoches, TX, cracked the $1 billion mark in revenues last year, due in part to the continuation of its aggressive branch expansion program. The company opened Pine Bluff, AR (Mar. 2018); Rome, GA (Mar. 2018); Edmond, OK (July 2018); Brownsville, TX (July 2018); Mesa, AZ (Dec. 2018); and Rockwall, TX (Feb. 2019). City Electric Supply, Dallas, TX also opened quite a few branches this year, and now operates at least 481 locations in the United States. It recently announced new locations in Castle Rock, CO: Needham, Wareham, and Gardner, MA; Bartlett, TN; Jacksonville, FL; and Murrieta, CA.

While survey respondents often pointed to acquisitions, new branches or a healthy construction market for their company’s growth, David Chapman, director of marketing, Summit Electric Supply, Albuquerque, NM, said Summit Electric focused on organic growth and fine-tuning its operations over the past year. “Summit did not add any new locations in 2018,” he says. “Instead, we decided to focus our efforts within the large markets where we currently operates. By focusing on organic growth, and ‘out-operating’ our competitors, Summit was able to grow market share by 7.1% in 2018.”

Internal investment was also a major driver for the +8.6% increase in Graybar Electric’s 2018 revenues. A company press release said the company also “achieved record net income of $143.3 million, a 100.1% percent increase compared to 2017.” Dennis Shaw, national planning analyst, said “Continued investments in people, technology and service innovation contributed significantly to our strong sales performance. Solid economic conditions, especially in the construction and industrial markets, were also a contributing factor.

METHODOLOGY

In April of this year EW’s editors sent out a survey to several hundred distributors of electrical supplies that have either been on the list or have at least $10 million in annual sales, according to our data sources. This year we got 2018 sales information on more than approximately 150 Top 200 distributors, either from our survey or from publicly available information on these companies. We also used the Mergent Intellect database to collect data on some companies and used that data in combination with past survey responses and other publicly available information to place these distributors in the Top 200. 

Many of these companies asked us to use their sales data confidentially and only for placement on the listing. In those situations where a distributor is large enough to make the listing but did not respond to our surveys, if we have reliable sales or employee data from the past two years, we will place them on the listing using a sales-per-employee average. However, if we haven’t heard from your company for a while there’s no guarantee it will be ranked again next year.

A change in next year’s ranking. As you have probably noticed, over the past few years quite a few Top 200 electrical distributors have been acquired. According to our records, 28 Top 200 have been acquired in the past five years, and dozens more over the past decade. While we have good data for 150 companies, it has gotten harder to develop estimates for many of the smaller companies that don’t regularly respond to our Top 200 surveys.  In 2020, we will just list the 150 largest companies.

With an estimated $58.5 billion in North American sales, EW estimates the Top 200 controlled approximately 51% of sales through electrical distributors in North America.

STRICTLY BY THE NUMBERS

With an estimated $58.5 billion in North American sales, EW estimates the Top 200 controlled approximately 51% of sales through electrical distributors in North America. According to EW estimates, these 200 companies run at least 9,000 North American branches. Take out branches run by  hybrid distributors W.W. Grainger, Lake Forest, IL, and Fastenal Inc., Winona, WI, and the Top 200 distributors in the Top 200 run more than 6,900 locations. From the 110 full-line distributors that provided both sales and employee data, we estimate that Top 200 full-line distributors averaged $693,580 in sales per employee.