After revenue growth slowed to its worst rate in more than two years during 2023’s second quarter, industrial distributors performed slightly better during 3Q23, and the overall forecast for total-year growth also ticked upward. This is according to the 3Q 2023 Baird-MDM Industrial Distribution Survey, which showed that slight improvements but still leave companies relatively far away from the financials reported during the prior two years. (Read more in the latest MDM 3Q 2023 MarketPulse Report.)
The quarterly survey polled and collected commentary from approximately 400 respondents nationwide, the vast majority of which were distribution executives.
During the latest quarter, distributors posted -0.5% revenue growth, a small increase over the -0.8% growth seen during 2Q 2023 — but well below the 3.2% positive growth reported for the first three months of the year. The 3Q23 revenue figures also were approximately 140 basis points below expectations. The 2023 total-year sales forecast also improved year-over-year, from a 0.7% increase last quarter to a 1.6% increase in 3Q23.
Some distributors who responded to the survey said they’ve seen a return-to-normal for backlog levels, but still well above pre-pandemic revenue.
“We still have plenty of [customers] that are busy and haven’t gotten a lot of reports that these guys are falling off a cliff, but we’re just kind of in this normalizing environment,” one industrial distributor was quoted in the survey. “At the same time, if you compare this quarter to any historical quarter, we’re still way over what we’ve done in the past.”
Others said that pricing continues to moderate in their sector, while some margin erosion has been noted because of an uptick in competitive pressures and customer shopping.
“More customers are price shopping than in the past three years due to onsite vs. remote staffing, increased staff and rebalancing from the supply chain crisis’ elevated costs,” one distributor said.
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