Rexel, Graybar and AD Experience Growth in Q1

With recent quarterly reports from Rexel, Graybar and AD in addition to the recent WESCO quarterly report, we now have Q1 performance representing about 30% of sales and about 140 distributors.  IMARK as well as CED, Sonepar, City Electric and a few others do not typically report performance.  The results are varied and begs the questions of why non-public companies (including Graybar) outperform publicly held companies? and why do independents outperform chains (unless moving a “Titanic” is just unwieldy?)

So, let’s synopsis / highlight recent results:

AD

According to a press release,

• AD announced that its Electrical division, which has members in the Canada, Mexico and the US, was up 10%
• Overall member US sales (multiple divisions) were up 8%.
• According to Bill Weisberg, “Construction markets were robust with commodity pricing turning from deflationary to inflationary. Industrial markets are doing a good bit better than 2016. Purchases from AD Suppliers grew by 17% in Q1,…”

So, while we can’t tell why US electrical members, in aggregate, were up, it is safe to say that they were up mid to high single digits. Additionally, while member sales are up, members across divisions are supporting manufacturers in the group at a faster rate than their sales are growing.  Since the US Electrical group is AD’s largest group, it infers that the US electrical group is significantly contributing to this increase, even with the increase in the price of wire.

Graybar

• For the first three months of 2017, Graybar announced a 4.4% sales increase.
• Q1 sales are $1.5 billion
• This represents 5 consecutive quarters of growth.

From speaking with people affiliated with or whom sell to Graybar, the company has been investing in branch expansion, marketing, lighting and salespeople.  It also has initiatives to drive service revenue and is slowly starting to have success in this area.

Rexel

Rexel shared its Q1 report last week.  The following are highlights with emphasis on North America and the US:

• Q1, worldwide, was up 5.1% to 3.3 billion euro which represented 4.8% organic growth boosted by a 4.1% calendar effect and a same-day basis of 0.6%. (but, at least it was growth)
  • Note: regarding the “calendar effect” is was defined as 1 additional work week in the US and 2 days more in Europe (based upon how holidays fell)
• US positive organic growth was 2.1%
  • US overall was up 8.9% on an “actual-day” basis
• North America represents 36% of Rexel sales
• Overall sales up 11.8% which is deceptive, as 5.6% is calendar effect, 4.3% from currency and 1.2% on constant same day basis (but again, at least an increase)
• Sales to the US oil & gas industry were up 10.5%
• Sales at Platt were up 3% but suffered due to weather in the Pacific Northwest with many days of disruption.
• Rexel C&I is up 11.1% (we’ve been hearing about new branch openings, improved regional performance, success in the energy / lighting segment.  Wire pricing would also have helped results.)
• Gexpro was down due to OEM segment and an analyst projected Gexpro was down 1-1.5% (and probably some other niche markets).  Interesting that they mention that Gexpro suffered a bit to the GE offering (and wonder what this could mean for longer-term decisions regarding support of the GE line … if they are given the opportunity to convert to another line?)
• Canada was down 2.1% but it is only 21% of North American sales (so 21% of the 36% continent sales)
• Gross margin in US was up 30 basis points.
• When asked about April trend compared to WESCO comments about a “weaker or a slowdown to negative in the US in April” the CEO, Patrick Berard commented “we just plan and we just see the same trend continuing.” (so, whether the two are experiences differences in the markets or focusing on different customer segments is left to each individual’s interpretation.)
• Opening new branches in California, Florida (which we’ve reported) and some other states.  Rexel plans on opening about 15 new branches this year. with most in the Southeast Coast and West Coast (“and have much more in view”) and hence inventory levels are up somewhat (and inventory has been improved somewhat to provide increased customer service / support, so Rexel may become a stronger competitor in many markets.)
• Growth has been in the contractor business with some industrial
• Opening some Gexpro locations / adding counters. (opening 15 counters in all)

So, to recap:

• AD is up 10% for Electrical
• Graybar is up 4.4%
• Rexel is up 2.1% (or 8.9% based upon actual days)
• WESCO overall -1.7% (see this posting)

Which begs the questions:

• Why non-public companies (including Graybar) outperform publicly held companies?
• Why do independents outperform chains?

Your thoughts?