Welcome to the second half of the year, the time when, according to many we’ve spoken with, that business will improve.
The first half of the year, based upon a number of conversations we’ve had over the past 45 days range from flat, to down, to “okay”, to very good. We’ve heard of national chains being slightly up to down as much as 6% (or more) to independents “knocking the socks off the ball” (18% increase!). Essentially, it’s all over the board.
And the strange part is, everyone says the second half of the year will be better (and you can image that those who are down or flat really believe this!)
The part that we can’t figure out is “why?” We’ve asked many distributors and manufacturers why the second half will be better? What gives them their optimism? Some say the stock market (okay, it’s up over 15% so far this year, but it doesn’t drive investment). Some feel that “at some point” companies will deploy the reserves they have (why, they haven’t since the recession and the entire time money has been cheap). Some think the resi market will drive commercial growth (are enough new homes really being built and has anyone looked at commercial strip center vacancy?)
We’re not trying to be negative, but, if you’re waiting for the water to rise to raise your boat, you may be left on the shore.
Now’s the time to quickly evaluate your first half, consider your second half plans and make course corrections if necessary and pull the trigger on strategies that can affect the second half. Thinking that the economy is going to provide the lift is hoping for success (and who said that “hope is not a strategy”?”) To affect change you need to make change.
So, what does your crystal ball say about the 2nd half of the year? Are you sticking to your course, revising your strategy (every ship makes course corrections to get to where it wants to go) or “is hope your strategy”?
5 Comments
We were down 25% in the first half, a flat second half would be great! Whoever said construction was up doesn’t live in the northeast.
We’re a national chain and your observations about industry performance mirrors our business. We have some areas that are up 5-6%, especially in the southwest, and others that are down 6-8%, especially in California, Washington and Pennsylvania. Seems like management is reacting in a number of locations by reducing personnel or putting people in more sales roles. Don’t see corporate developing any strategies to generate growth as their focused solely on bottom line for the next quarter.
Pollyanna joined the electrical industry when she grew up and now serves as its principle economic forecaster.
Hope springs eternal in this business and every forecast seems to only look at upside opportunities instead of a balanced projection of the ebb and flow of market segments over a period of time.
It would appear that those who look to the stock market as a leading indicator don’t understand how it works (or doesn’t) today. Very little of the market activity today has anything to do with creating capital for investment in hard assets (which the ED channel sells).
With construction a huge part of the ED sales equation, it is reasonable to look at real estate supply and demand and what the real estate industry is saying. With local and regional anomalies excluded, what I have been reading would suggest “better but soft” in terms of demand with supply still historically high. Not the makings of a huge bump.
As for some of the other ED served segments, there may be some areas of growth (oil & gas activity, MRO, OEM) but government driven spending will almost certainly be lower.
Net/Net my best guess for the second half is “more of the same:” at a national level.
Washington is so out of touch with the challenges American business people face, it is a testimony to the business community’s creativity, ability and tenacity that things are as good as they are.
Our first half was up 18% over last year. It would have been more if we had developed more products to accommodate the opportunities. There are no crystal balls to use but if you listen to your customers and develop the products they need, then you are ahead of the game.
The second half of the year depends, IMHO, on financing. Both mortgages and vendor credit to dealers. Vendors have abdicated the growth of their companies to insurance companies. Only willing to ship dealers as much as the insurance company is willing to insure. They continue to reduce our lines even though our outstanding days continue to decline and are not sliding into the next month. I can only purchase in some cases $5000 from a wholesaler when the average project will take $ 5000 to $35,000 per month. With Bluelinx moving out of the West Coast our vendor credit lines are even more problematic. I fear being able to buy enough material to ship outstanding orders to my customers.
One last observation, Insurance companies & finance people are calling the shots on growth. Why are we allowing the very same people that brought us the Mortgage Meltdown to run our businesses?
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