Exclusive Baird Research Confirms Steep March Revenue Decline

A special COVID-19 research project for tED magazine confirms a steep decline in revenue for electrical distributors beginning the first week of March. But, a majority of electrical distributors expect to see a rebound in the second or third quarter of this year.

RJ Baird launched the special research project on March 27th and followed it up with questions for distributors during the week of March 30. A total of 127 people responded to the survey, which represent companies that report a combined $25 billion in yearly revenue.

As of March 1, 2020, electrical distributors reported increases in revenue of 1.7% on the electrical side and 2.6% in Datacomm when compared to the first week of March in 2019. But the numbers started dropping in the second week of March, and by the last week, revenue was down 4% in electrical and 5.1% in Datacomm when compared year to year with the last week of March in 2019.

For the first quarter of 2020, electrical distributors reported to Baird that revenue was up just 0.1% in electrical when compared to the first quarter of 2019, which breaks a streak of at least 2% revenue gains over the last 8 consecutive quarters. Datacomm revenue remained strong, up 2.6% for the first quarter of this year.

Baird reports revenue across the distribution industry was up 0.6% for the first quarter, which means electrical distributors lagged behind slightly.

Respondents did provide some quotes when asked the question, “How do you feel the fallout from COVID-19 will impact your business in the next year?”

  • “Negative impact on new housing starts and commercial construction being postponed and/or cancelled due to lack of available capital.”
  • “Depends on how long it takes to get out… many projects on hold now.”
  • “Lower amount of bids/jobs coming through now will slow sales down the road.”
    “Existing job will continue but I’m concerned that jobs on the books that are not quite yet out of the ground will get put on hold.”
  • “Slower backlog growth. Projects in pipeline still on track but 2021 will be a slowdown.”
  • “Starting to hear about project cancellations.”
  • “Definite slowdown with OEMs.”
  • “Very hard to be optimistic without knowing extent of shutdowns.”
  • “Stock business has already taken a big hit and will get worse.”
  • “Cash flow will be stretch as some customers are already unable to pay invoices.”
  • “Cash flow is biggest concern. Will customers pay and what kind of delays?”
  • “Contractors are already slow to pay. They are already out 180 days.”
  • “Our biggest concern is managing bad debt. We are focusing a lot of energy on collections.”
  • “Liquidity is the issue. Difficult fall having already put payables out, horrible time for a pandemic to shut the economy when contractors were already seasonally out to 180 days.”

But Baird did uncover some positive news when it comes to a recovery. 72% of the respondents believe a recovery will come within the 2nd or 3rd quarter of this year. 16% say recover will happen in 2021, and 8% believe a recovery will not come until 2022 at the earliest.

But that recovery will not be enough to save this year. In the 4th quarter of 2019, Baird asked distributors about their revenue expectations for 2020, and they responded with increases of 2.6% in electrical and 2.1% in Datacomm. Since the impact of COVID-19, distributors are now expecting a revenue loss of 8.2% in electrical (an expected loss of more than 11%) and a loss of 4.9% in Datacomm.

Some of the comments about the rest of the year from distributors include:

  • “1Q trends are matching expectations. It’s the next two quarters that will be iffy.”
  • “We are burning off backlog quickly.”
  • “What’s likely to happen in April and 2Q20 is just a real shame, given how positive the trends were for our products in the market just a few short months ago.”
  • “March 2020 was surprisingly better than March 2019 in terms of revenue. However, we are seeing a steady decline in the number of orders being shipped each day.”
  • “Necessary construction (hospitals, etc.) has continued without a hitch, but normal residential business has gone to virtually zero.”
  • “Seeing significant geographical differences.”
  • “When PA closed all construction sites branch counter trade dropped by 60%. Total bookings dropped 25% and billings by 37%.”
  • “We were having a record year and then the switch turned off literally this week.”
  • “Steep decline in shipments when businesses were ordered to close. We are an essential business, but many of our customers are not.”

Baird will provide tED magazine with 2Q research results, including an updated look at expectations for the rest of the year, in early July.


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