Pricing Firms Up for Industrial Distributors in Q1

Results from our first-quarter Baird Industrial Distribution Survey
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After years of a stagnant pricing environment, the dollars appear to be getting unstuck. The first quarter of 2018 started out with a bang not seen in years for both revenue growth and pricing, according to our first-quarter Baird Industrial Distribution Survey, which MDM has been a partner on since 2010. Aggregate revenue growth (excluding acquisitions) for 1Q18 was up 5.7 percent year-to-year – the highest rate of growth seen in the survey since mid-2012.

Survey respondents upgraded their outlook for 2018 revenue growth. In addition to a 2Q18 revenue outlook of a five-percent increase year-to-year, the updated 2018 full-year revenue outlook moved to an increase of 5.1 percent, up from last quarter’s forecast of a 4.5-percent increase.

Overall pricing was much stronger in the first quarter (up 2.3 percent) versus the one-percent pricing increase seen throughout 2017. Stronger pricing was broad-based across both industrial and building products categories. As summarized by Baird: “Feedback from our contacts indicates demand remains strong, with momentum continuing though 2018. This is coupled with increased inflationary pressures in the channel, with customers largely accepting new year price increases and steel tariffs potentially adding additional inflationary pressures."

"As one customer put it, ‘customers are at a point now where they’re more concerned with keeping up with demand, so they’re too busy to worry about 2-3 percent price increases.’”

Adding to the overall industry input from the survey – MSC Industrial Supply Co., reporting its second-quarter results yesterday, noted strengthening market demand and a better pricing environment. MSC implemented what it called a “moderate” price increase in late January that boosted gross margins.

The Baird-MDM quarterly survey is the deepest financial performance benchmarking analysis, based on more than 500 survey responses across MDM’s audience, representing more than $100 billion in aggregate annual revenue across industrial, electrical, HVAC/plumbing, building products, gases/welding equipment and PVF product distribution sectors.

For deeper analysis of this first-quarter survey, see the April 25 issue of MDM Premium, where we also asked for input on the impact of steel and aluminum import tariffs on pricing and demand for industrial distributors.

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