January 2008 - Modern Distribution Management

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January 2008

GDP Growth in 4Q 2007 Slows to 0.6%

News on Wednesday that the Fed would again cut rates, this time 0.5 percentage points to 3.0%, was preceded by news that the gross domestic product growth was slower than expected in the fourth quarter 2007, at 0.6%. The number is based on advance estimates and will be updated Feb. 28, 2008, using more complete data.
Real gross domestic product is the output of goods and services produced by labor and property
located in the U.S. In the third quarter, real GDP increased 4.9%.
The increase in real GDP in the fourth quarter primarily reflected positive contributions from personal consumption expenditures (PCE), nonresidential structures, state and local government spending, exports, and equipment and software that were largely offset by negative contributions ...

GDP Growth in 4Q 2007 Slows to 0.6% Read More »


Based on news reports on TV and in the paper, you'd think we were already in a recession. The reality is, we're not. You can't be in a recession when the economy is growing," Institute for Trend Research economist Alan Beaulieu told attendees at this week's National Association of Wholesaler-Distributors annual meeting in Washington D.C.
He expects the economy to grow at a "tepid pace" in 2008, but that it will indeed grow. The housing slump and credit turmoil have not yet been enough to tip the economy backwards, he says.
As Beaulieu has told many an association meeting, he believes recession is coming -but not until 2009 and 2010. So, instead of reacting to reports that a recession is upon us, he suggests getting proactive and preparing. Think back to the last ...

Recession? Read More »

3M Sales Up 7% to $24.5B in 2007

3M, St. Paul, MN, reported 2007 sales of $24.5 billion, up 7% from a year ago. Profit was $4.1 billion, up 6%.

Sales for the full year were driven by a 7.3% increase in local-currency sales, including acquisitions. Growth was led by Health Care and Safety, Security and Protection Services. Sales in the international operations grew 10% and now constitute 63% of the company's total.

The company announced fourth-quarter sales of $6.2 billion, an increase of 7%. Profit for the quarter was $851 ...

3M Sales Up 7% to $24.5B in 2007 Read More »

Airgas Reports Sales of $1B in 3Q

Airgas, Inc., distributor of industrial, medical, and specialty gases, and welding, safety, and related products, reported sales of $1 billion in the third quarter ended Dec. 31, 2007, an increase of 28% from the prior-year period. Profit for the quarter was $56.8 million, compared with $32.5 million in the prior year.
Acquisitions contributed 21% to sales growth. Total same-store sales increased 7%, with hardgoods up 6% and gas and rent up 8%. The company's strategic product categories, including bulk, medical and specialty gases, safety products, and carbon dioxide, posted 11% organic growth in the quarter. These product categories now account for 40% of total company revenues.
This was our second quarter with more than $1 billion in sales, demonstrating the ...

Airgas Reports Sales of $1B in 3Q Read More »

New Orders for Durable Goods Up 5.2% in December

New orders for manufactured durable goods in December increased $11.2 billion or 5.2 percent to $226.6 billion, according to the U.S. Census Bureau. This was the second consecutive monthly increase and followed a 0.5 percent November increase.
Excluding transportation, new orders increased 2.6 percent. Excluding defense, new orders increased 2.9 percent.

Full Release
Shipments of manufactured durable goods in December, down four of the last five months, decreased $0.1 billion or 0.1 percent to $212.6 billion. This followed a 0.2 percent November decrease.

Unfilled Orders

Unfilled orders for manufactured durable goods in December, up thirty-one of the last ...

New Orders for Durable Goods Up 5.2% in December Read More »

Anixter Sales at $5.85B in 2007

Anixter International Inc., Glenview, IL, distributor of communication products, electrical and electronic wire &cable and a distributor of fasteners and other small parts, reported fourth-quarter sales of $1.49 billion, up 15% including acquisitions. Profit was $70.5 million.
Annual sales for the period ended Dec. 28, 2007, were $5.85 billion, up 13% on an organic basis. Profit was $253.5 million.
North American sales grew by 13% in the fourth quarter -excluding foreign exchange effects, sales grew at an organic rate of 11%. In Europe, organic growth was flat -overall sales grew 16% due to acquisitions and exchange rate ...

Anixter Sales at $5.85B in 2007 Read More »

Black & Decker: Housing Slump to Go Through 2008

Black &Decker Corp., Towson, MD, reported sales for the fiscal year 2007 were up 2% to $6.6 billion. Profit for the year was $518.1 million, up from $486 million in the prior year.
For the fourth quarter 2007, sales were up 3% to $1.7 billion. Profit was $187.4 million, up from $95.7 million in the prior-year quarter.
Business conditions continued to deteriorate during the fourth quarter of 2007," said Nolan D. Archibald, CEO. "For the year, U.S. housing starts were down approximately 25% and we encountered severe commodity cost pressure, both significantly worse that we expected early in 2007.
"… While demand in our U.S. markets has been weak, we are pleased with the outstanding results in our international businesses and our sixth straight ...

Black & Decker: Housing Slump to Go Through 2008 Read More »

Carlisle Companies Buys Foodservice Supplier

Diversified global manufacturer Carlisle Companies Inc., Charlotte, NC,  has acquired Dinex International, Inc., a supplier of foodservice products to the healthcare and other institutional industries. With annual sales of $85 million, Dinex supplies traytop smallwares, dishware, disposable lids and packaging as well as heating and meal delivery systems.
The company has facilities in Glastonbury, Connecticut and Batavia, IL. The business will operate within Carlisle FoodService Products.
Dinex distributes its products through foodservice distributors serving the healthcare sector, including hospitals, nursing homes and other care and assisted living facilities.
This acquisition complements Carlisle's core foodservice product categories and ...

Carlisle Companies Buys Foodservice Supplier Read More »

Gexpro to Buy Beacon Electric

Gexpro has agreed to acquire Beacon Electric Supply, San Diego, CA. The acquisition is Gexpro's first since Rexel bought the company. Gexpro was GE Supply.
Beacon Electric has sales of more than $50 million. The company has branches in San Diego and San Marcos.
Beacon will continue to operate under the Beacon Electric Supply name.
Gexpro has more than 170 locations in the U.S. and ...

Gexpro to Buy Beacon Electric Read More »

SYSCO Sales Up 7.8% in 2Q

Food product distributor SYSCO Corp., Houston, TX, reported sales for the second quarter 2008 ended Dec. 29, 2007, were up 7.8% to $9.24 billion. Profit was up 7.1% to $264.1 million from the prior-year period.
Food cost inflation, as estimated by the change in SYSCO's cost of goods, was 5.9% for the quarter.
In the first half, sales increased 8.1% to $18.65 billion, and profit grew 11.4% to $531.1 million. Food cost inflation, as estimated by the change in SYSCO's cost of goods, was 5.9% for the first half of fiscal 2008.
For the fiscal year 2007 ended June 30, 2007, the company had more than $35 billion in ...

SYSCO Sales Up 7.8% in 2Q Read More »

Grainger Hits $6.4B in 2007

Grainger, Chicago, IL, reported sales of $6.4 billion in the year ended Dec. 31, 2007, up 9% from 2006. Profit was $420 million, up 10%.
Market expansion contributed $402 million in sales in 2007. The company added 90,000 products in 2006 and 2007 in plumbing, fastener, material handling and security product lines. Product line expansion contributed about 3 percentage points to the quarterly growth. Products added over the past two years have added $349 million in sales in 2007.
In the 2007 fourth quarter, sales of $1.6 billion were up 10% from the prior-year period. Daily sales increased 10% in October, 10% in November and 6% in December.
Lower sales to integrated supply customers reduced sales growth in the fourth quarter.
Profit for ...

Grainger Hits $6.4B in 2007 Read More »

Wholesale Prices Skyrocket in 2007

This is an overview of wholesale price inflation trends in the past year for commodities in industrial and construction channels. Overall, inflation was 6.3 percent in 2007, a significantly larger jump than in 2006.

Inflation by Commodity Group: 44 product groups - 4Q and Full Year 2007

Wholesale prices jumped 6.3 percent in 2007, due to a surge in fuel and food prices. Without fuel and food, core inflation saw a more moderate 2-percent increase, the Bureau of Labor Statistics reported.

The government attributed the faster overall rate of increase to the index of finished energy goods, which rose 18.4 percent in 2007 after a much shorter climb of 2 percent a year earlier. Finished ...

Wholesale Prices Skyrocket in 2007 Read More »

Inflation by Commodity Group: Fourth Quarter and Full Year 2007

These select product groups provide a snapshot of inflation trends. Fourth quarter 2006 is compared with fourth quarter 2007, and the third quarter 2007 with the fourth quarter 2007. Trend from 2006 to 2007 also presented. Graphs depict trends from January 2006. Download complete file below.
Adhesives &Sealants
Cutting Tools &Accessories
Hand &Edge Tools
Power-Driven Hand Tools
Ball &Roller Bearings
Mechanical Power Transmission Equipment

Electrical Machinery/Equipment
Industrial Material Handling Equipment
Industrial Gases
Welding Machinery/Equipment

Valves, Except Fluid Power
Pumps, Compressors &Equipment
Fluid Power Equipment
Plumbing Fixtures ...

Inflation by Commodity Group: Fourth Quarter and Full Year 2007 Read More »

Mind the Gap

Wholesaler-distributors in varied sectors have been seeing strong double-digit top-line revenue growth. While the economic expansion increased unit sales, recognize that unusually high commodity prices have made revenue growth easier to achieve in recent years. In Adam Fein's recent MDM Webcast, Wholesale Distribution Economic Outlook,"he addressed this issue.

Fein, president of Pembroke Consulting, presented as example the hardware, plumbing, heating and cooling distribution sector, which has seen flat growth year-over-year. But once adjusted for inflation, unit growth was negative.

"I call that the growth gap,"he says. In this case, the gap was 5.3 percent. "I can't predict commodity prices any better than anyone else can. But what it does say is there has been ...

Mind the Gap Read More »

Value Drivers in Distribution

As the M&A marketplace for wholesale distribution companies continues to be active, an increasing number of distribution company owners have begun to contemplate selling their business.

While the sale of a company is equal parts art and science, one thing is clear -owners and operators who properly prepare for a sale and take into consideration the main criteria buyers use in assessing an acquisition, consistently achieve more favorable outcomes.

Here is a synopsis of criteria buyers of businesses consider in an acquisition and what I focused on while executing acquisitions for HD Supply and Hughes Supply.
Preparing for a Sale
Once owners determine their desire to sell the company, it is necessary to follow a core set of steps to best position the ...

Value Drivers in Distribution Read More »

Monthly Wholesale Trade: Sales and Inventories for November 2007

Sales. November 2007 sales of merchant wholesalers, except manufacturers'sales branches and offices, were $380.4 billion, up 2.2 percent from the revised October level and were up 14 percent from November 2006. Sales of durable goods were up 0.9 percent from last month and up 6.1 percent from a year ago. Compared to last month, sales of computer and computer peripheral equipment and software were up 3.9 percent and sales of electrical and electronic goods, up 3.1 percent. Sales of nondurable goods were up 3.3 percent from last month and up 21.7 percent from last year. Sales of farm product raw materials were up 9.7 percent from last month and sales of petroleum and petroleum products were up 8.9 percent.
Inventories. Total inventories of merchant wholesalers ...

Monthly Wholesale Trade: Sales and Inventories for November 2007 Read More »

Commentary: Tougher Numbers in 2008

Home Depot bought Hughes Supply in January 2006 with an EBITDA valuation above 12X, a number still ringing in the ears of many distributors. A scant year later HD announced its intentions to focus on retail and explore alternatives for its $12-billion distribution unit. It sold the unit this past June.

As distributors ring in this year, the competitive landscape looks vastly different than even six months ago. While there is still a lot of private equity money searching for deals in distribution, debt markets have tightened.

As a result, valuations are dropping fast, and the level of deal-making activity dropped significantly in the last quarter of 2007. In 2008, we will likely see strategic buyers execute smaller add-ons, rather than the blockbuster deals spawned ...

Commentary: Tougher Numbers in 2008 Read More »

MDM News Digest 3802

Rexel, global distributor of electrical supplies, has made Chris Hartmann the CEO of IESC, the holding company of Rexel's U.S. activities, effective Jan. 21. He takes over from Dick Waterman, who is retiring but will stay on as an advisor to Rexel and will serve as chairman of the National Association of Electrical Distributors. More
WinWholesale, Dayton, OH, has opened Tampa Winnelson Company to provide plumbing and mechanical contractors in the Tampa Bay area. It is the first WinWholesale company in the Tampa Bay area and serves Hillsborough, Pasco, Pinellas and Polk counties. More
Employee-owned Windsor Factory ...

MDM News Digest 3802 Read More »

Canadian Economy Grows, But Shows Signs of Slowing

Wholesale trade in Canada was the fastest growing industry for the country in the fourth quarter 2007, according to a recent report from Statistics Canada. The sector saw 9% growth, reflecting an 11% gain in the volume of imports. Manufacturing grew 1.2%.
Overall, the Canadian economy performed well in the fourth quarter 2007, thanks in part to an exchange rate above parity with the U.S. dollar. Output growth was steady in October, while employment rose 0.8% despite a softening in December.

Still, according to the report, there are signs that the economy could slow at the beginning of 2008. The composite leading index decelerated in the last three months of 2007, mostly due to weak U.S. demand ...

Canadian Economy Grows, But Shows Signs of Slowing Read More »

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