Acuity Rides the LED Sales Express

  Recently Acuity announced it’s Q4 results (they are on a fiscal year) and, as expected, the LED conversion continued to power performance.

Highlights from their earnings report included:

• Net sales increased almost 14% for quarter and year. Net sales volume was up about 17% (price mix accounted for the difference).
• Continuing to invest in “Digital Lighting solutions portfolio” and they expect to be a critical component of the “backbone for enabling the Internet of Things”.  Note, connected lighting (same thing, different terminology) was discussed at the AD meeting (see this post) and is being pursued by all of the major lighting companies. This is more than lighting and represents opportunity for selected distributors that take a value-added approach and train their people. There are opportunities for commissioning of systems, expansion into new markets and acquisition opportunities.
• It’s interesting that their operating profit margin achieved a quarterly record whereas there are other lighting companies that are “challenged” with expanding profitability in the LED market.
• The company has over $750M in cash which begs the question, who / what do they acquire next?
  • Perhaps something tied to data collection, enabling that as an additional revenue stream (which begs the question of how distributors can participate in an ongoing data monitoring / management revenue stream?)
• LEDs are now more than 50% of net sales. Distributors should consider determining what % of their overall fixture sales are LEDs (not just supplier specific.) This could be an internal benchmark for your sales organization as it is one of the few product segments with increasing sales.
  • And sales of LEDs grew almost 50% in the quarter!
• Acuity offers over 1.7 million SKUs (options) and introduced almost 100 new product “sets” in 2015! And distributors wonder if they need lighting specialists? The choice is “do you allow others to determine the sale and you leave your value-added to being fulfillment and credit or do you want to contribute to the sales effort (at least to some customers)?”
  • As energy savings have now become “accepted” as a synonym for “LED”, the next venue will be how LEDs add functionality to facilities and can provide learning and earning benefits (productivity, reading, health, education, enhanced revenue generation as facility improvements, etc)
• Making investments to support future growth, which few manufacturers are doing in the current market environment. Perhaps one of Acuity’s strengths is not being part of a “conglomerate” that much contribute to other divisions such as Eaton Lighting Solutions (with Eaton), Hubbell Lighting, Philips Lighting, Juno (with Schneider), Crouse Hinds with their expanding industrial lighting line and possible others. Does this make Acuity more focused? More nimble?
• Acuity made significant investments in people and training in 2015. This will be critical areas for distributors that want to succeed in this segment.
• Acuity spoke much about Distech and is excited about the growth opportunity that this acquisition represents. Distech appears to primarily go to market through system integrators.
• The company has 14 different channels to market.

2016 Outlook

• According to the earnings report, Acuity stated that the “consensus” estimate for the overall lighting market is mid to upper single-digits.  We’ve heard that Acuity has set sales forecasts at high teens / low 20’s.
• The expect LED components to continue to decline, which could mean LED fixtures continue to decline in price.  This has inventory and margin $ implications for distributors (inclusive of supplier rebate income.)  We’ve heard of LED lamp pricing being slashed significantly recently.
• Acuity expects to continue to build out its control and IoT strategy … which also helps strengthen an installed base.
• They believe that the “lighting” market, as defined by Acuity, could grow more than 50% over the next few years and that they will take more share. The question for distributors is, “what will it take to retain its share of the lighting market?”
• When you meet with Acuity at one of the NAEDs, an area of emphasis should be “what do I need to do to be a strong player in Tier 3 and 4 as Acuity defines its product offerings?” as Tier 1 and 2 are essentially solely traditional product sales.

What is your experience with Acuity?