Hurricanes Hit 3Q Revenues but Shouldn't Derail 2017 - Modern Distribution Management

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Hurricanes Hit 3Q Revenues but Shouldn’t Derail 2017

Latest MDM-Baird survey shows 3.9 percent revenue growth in quarter.

Natural disasters took a toll on distributor revenues in the third quarter, but the industry remains poised to close the books on its best year since 2014, according to the most recent MDM-Baird Distribution Survey, Storms Stunt Distributor Growth.

Excluding acquisitions, distributors averaged 3.9 percent revenue growth in the third quarter, according to the survey. That was down slightly from second quarter but up significantly from the nearly flat performance of 3Q 2016. It also fell shy of the 4.5 percent revenue growth distributors projected for the quarter.

Blame hurricanes Harvey and Irma for the industry failing to meet expectations, as the storms affected supply chains in the distribution-heavy areas of Texas and Florida. But while weather might have slowed some of the momentum that distributors had built in the first half of 2017, the industry is on pace for 4 percent revenue growth for the year – up significantly from 2015 and 2016.

Revenue growth in the third quarter by geography mirrored previous quarters with consistent growth across regions, while pricing was up 0.9 percent, marking three straight quarters of approximately 1 percent improvement, though it continued its slight deceleration in the period.

Nearly two-thirds (65 percent) of survey respondents said business is better for their companies today than it was on Jan. 1. The primary reason for the solid revenue growth is that distributor customers’ businesses have improved, according to survey respondents.

And that trend should continue into 2018, until wholesale change comes to the economy, according to Alan Beaulieu of ITR Economics.

“Things are going to slow down,” he told last month’s joint NIBA/PTDA Industry Summit in Hollywood, FL. Look for U.S. industrial production index to peak in the second month of 2018, and then for things to taper off the rest of the year before turning more sharply downward in 2019.

Read more about the latest MDM-Baird Distribution Survey, including breakdowns of sector performances, in Storms Stunt Distributor Growth.

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