Pulse of Lighting Market Rebounds. Sustainable? Acuity Soars.

Last week there was much lighting news as

• Channel Marketing Group / ElectricalTrends released the William Blair sponsored Q2 Pulse of Lighting Report
• Linda Longo shared insights on the residential lighting market based upon her visit to Lightovation on US LightingTrends and we’ve expanded upon her insights on the multi-family opportunity, and
• Acuity reported their Q3 earnings last week.

2025 Q2 Pulse of Lighting Highlights

Overall, the market rebounded from Q1 with sales reportedly in the low single digits. The rebound, which was to be expected, reflects:

• Q1 being impacted by weather, so that business was recaptured.
• Delays in Q1 caused by tariff announcements

While the reciprocal tariffs were announced in the beginning of April, they were quickly paused. Even though most, if not all, manufacturers announced price increases, they were not scheduled to go into effect until mid-May, at the earliest.

With the pause, and subsequent news about country-specific agreements, some companies are withholding price increases, others have shared that they expect some “negotiated” pullbacks and some have no idea.

The pause, however, stimulated business in the sense that there was some orders released / projects placed sooner to beat price increases.

Some other feedback from the 200+ survey respondents included:

• There is a guardedly positive outlook for Q3 with many saying, “depends upon tariffs.” Overall, the projection is approaching mid-single digits. Some / much of this is due to price realization. If manufacturers resist negotiating for projects the market could grow, although this would not represent unit growth.
• Given that, reportedly, there is an agreement with China, it is safe to say there will be some tariff impact but not as severe as expected. What this means for eventual pricing of product sourced from China is unknown. What may be more concerning for many is tariffs on other APAC countries as lighting comes from Thailand, Vietnam, Cambodia, etc. Mexico sourcing is not much of a concern as long as it complies with USMCA guidelines. Products that are Made in America, or USMCA, will have an inherent advantage, which can be a price negotiation tool for distributors to use with Asian-made products.
• The large new construction market is “challenged.” Look for small to mid-sized renovation market.
• Many commented on the impact of interest rates to stimulating the new construction market.
• Backlogs seem to have been “worked down,” which is a little bit of a future warning.
• Some expressed economic concerns: however, this could be localized, or regional. Those in the southeast / southwest, anecdotally, reported “good” markets.
• Manufacturers expressed concern about agency consolidation as it limits their choice, however, they admit, that there is not much they can do but there is a sense that they would welcome “options.”
• Looking beyond 6 months, manufacturers and reps are sensing that specifiers are “less concerned” than they have been.
• Average pricing was mid to upper single digits, on average, with most of this coming into effect in June / Q3.

This time we added a rotation question relating to lighting agents / reps quoting direct. The feedback is that about 60% of agents do this regularly, that it represents about a third of distributor quotations and that margins are in the 10-15% range (sometimes lower … and yes, there could be a survey halo effect here.) For supply reps taking on lighting lines, this mo

del is “different,” however, will become more prevalent based upon findings in the upcoming 2025 Rep of the Future report (email me to get on the early distribution list.)

The full Pulse of Lighting report, with all of the details and over 100 comments to open-ended questions is available for only $35.

Residential Market

The SFH market is challenged given increased housing costs driven by tariffs, land costs, regulatory expenses, student borrowing costs and interest rates. While it is stronger in selected markets, especially in the Southeast and Southwest, it is a niche market.

The home renovation market is still viable, although it typically is served by the small contractor market. The “large” competitor here is the DIY market.

When Linda spoke to distributors, showrooms, manufacturers, and reps at Lightovation she learned that many are seeing some success in the multi-family market. Check out her story.

Read her insights, and more, on the multi-family opportunity.

Acuity

Last week Acuity shared their Q3 earnings (presentation). Since its acquisition of QSC, Acuity’s earnings is more challenging to parse given that it is more diversified. From a financial viewpoint, it’s a win for Acuity.

Kevin Coleman, who supports Channel Marketing Group’s market research efforts, shared some observations from their earnings call:

• “Outstanding results – both top line and bottom line. Margin impacted positively by top line growth, productivity improvements, cost cutting. I believe first time hit 50% margin, question is, is that sustainable?
• Maybe had a tariff windfall – selective price increases but full tariff impacts did not happen, accelerated orders bumped up sales in the quarter, which should carry through to next quarter. Did not reprice the backlog, expect tariff impacts to hit next quarter.
• Successful strategy of diversifying supply chain
• Sensor Switch Air package available Contractor Select – making controls easier to buy and install
• Expanding into underpenetrated categories or verticals where they had no presence, notable sports lighting with M3 Innovation acquisition – also with floodlights, further growth in education and municipalities. New products and attention to the healthcare segment – Nightengale brand.
• Showing growth in OEM channel, turning the OSRAM business around? Strong 7.6% growth in Independent Sales Network channel – agents performing, demand healthy, esp. with the pull forward.
• Discussion on QSC – solid growth and rolling out new products. Strong Distech growth highlighted driven by Eclipse building automation platform. Acuity Intelligent Spaces now represents over a $250m per quarter business – of which $173m was from QSC alone.
• Between supply chain shifts (out of tariff countries) and pricing, believe they can cover tariff dollar impacts.
• Discussed Design Select (in addition to Contractor Select):
• Design Select drives productivity for architects, specifiers, contractors, etcetera. And then, finally, we’ll have the made to order portfolio. Really, the progress at Design Select has been strong, although this is, as we’ve said consistently, a long-range project.”

Thank you for Kevin for the “deep-read.” Based upon his input, I took a read-through to focus on the ABL (lighting) business:

• “Diversified our supplier options and locations” which means – we’re not dependent upon China so tariffs do not impact us much. Reportedly 53% comes from Mexico (no tariff), so significant pricing actions enable them to improve profitability, although they have some increased costs for components.
• “Strategic pricing actions” – meaning, we did a couple of price increases … might as well! The company sees the opportunity to “expand” margins.
• Increased their backlog, which helped Q3 and enabled them to book business for Q4. Further, this could be a red flag for Q1 (CY Q4) if backlog dries up.
• Filled in some product gaps with the acquisition of M3, which will help them in markets that continue to have growth – education, municipalities, and infrastructure. The M3 offering will help them compete better vs Cooper Lighting’s Ephesus offering.
• For those distributors that also have an HVAC division, Acuity’s Distech offering may provide a vehicle to capture crossover (HVAC / Lighting) business.
• Sales Performance
  • Overall, ABL sales were up 2.7%
  • The independent sales agent, which is typically 2/3rds of ABL sales, was up 8%, hence Acuity took sales in the electrical distribution lighting market.
  • Corporate accounts were down (but this is direct project-driven business that historically is up and down.)
  • Retail was nominally down.
• The company had a reduction in force. A number of tenured people were let go. Between this and some other reorganization, they incurred a $30M charge (but given the sales increase, a good time to do it, unfortunately for the people.)
  • There was an inference, in the Q&A, that some of the “productivity actions” were done to “rebuild the percentage margin over time.”
• Analyst Q&A
  • Planning “conservatively” for FY 2026.
  • Much of Design Select is manufactured in Mexico and US … so should not have much impact from tariffs (other than some components).
  • Agents that have embraced controls are also seeing how this helps them increase their lighting sales (this could be something other lighting agents / reps should consider … are you making investments to drive the business or waiting for the business to appear and then investing … same question for reps that want to grow this category.)
  • Enhanced vertical market focus
    • Refuel market – have enhanced offering, some specialized agents.
    • Healthcare – introduction of the Nightingale brand
    • Benefits from M3 acquisition – sports lighting, municipalities, infrastructure … flood lights which will impact FY Q4 and beyond.
    • Horticulture is slower than Acuity expected

So, much is going on in the lighting market. How is your lighting business? How is Acuity doing for you compared to other lighting companies (or other lighting companies as compared to Acuity?)