Distributor sales down despite strong economy

Applied Industrial's Jack Dannemiller says the industrial economy appears to have bottomed out.

By Industrial Distribution Staff -- Industrial Distribution, 11/1/1999

NEWTON, MASS.--Despite the fact that the economy continues to expand, distributors are showing slower growth. When ID published its 1999 Top 100 in June, the consensus revenue growth predicted by Top 100 members for 1999 was 12.3 percent.

However, after a series of third quarter earnings reports, it appears many distributors won't meet that prediction. W.W. Grainger, Industrial Distribution Group, Applied Industrial Technologies, and JLK Distribution have all reported slow sales for the quarter ended Sept. 30.

Although its net income quadrupled in the quarter due to increased margins, Applied's fiscal first quarter sales rose just under one-half percent. IDG announced on Sept. 27 that it expects sales to be about five percent below last year's third quarter. Grainger's sales were up 5 percent, but the firm lost $9 million worth of business due to service disruptions caused by transitioning its business enterprise system. Sales were up just one percent at Grainger's branch based distribution business. For the first nine months of 1999, overall sales are up four percent.

And, JLK Direct Distribution Inc. reported sales dropped 10 percent for the first quarter ended Sept. 30, reflecting continued slowdown in industrial demand, although net income rose 12 percent.

Applied Industrial chairman Jack Dannemiller is confident that the U.S. industrial economy has bottomed out, noting that Applied has seen strengthening in the paper, high-tech and primary metals industries.

"Top-line revenues did not rise as quickly as we would have liked in the quarter because of continued sluggishness in several key sectors," he said. "We note, however, that the daily sales trend increased through August and September. We look forward to the remainder of fiscal 2000 with confidence. The industrial economy appears to have bottomed out, and is slowly trending upward again.

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