January 25 2009
Volume 39, Issue 2 - 01/25/2009
39
2
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Distributors, to say the least, are facing more uncertainty now than in recent memory.
In a recent MDM Webcast, Manage the Panic of 2009: New Rules for New Economic Realities," Evergreen Consulting's Brent Grover says we are now seeing the worst business conditions in his decades of work in the industry.
"Distributors are not accustomed to dealing with this uncertainty," he told participants. "Or the speed of decline in demand and prices."
Now more than ever leaders need to avoid hunkering down, and instead strategically prepare their companies for the upswing. When the downturn does reverse course, fewer companies will emerge, …
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While the lead article’s title – Manage the Panic of 2009 – might seem extreme, it’s important to clarify its real meaning. Reports we’re hearing from distributors in January indicate they are not in panic mode. On the contrary, every distribution company has become very focused by necessity on cost control, created by the panic and instability in financial markets.
I think that’s an important distinction. This isn’t a typical downturn, where a company just needs to reduce costs across departments by a certain percentage until the tide turns. This time a distributor needs to upgrade financial skills.
The traditional financing and cash flow models distributors have used for decades have changed significantly, with much tighter …
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During the first part of 2008, the Brazilian economy experienced high growth in most sectors with an outlook for that expansion to continue. The first nine months saw loosened credit conditions, rising internal demand and strong export activity despite unrelenting currency appreciation.
But the fourth quarter was a different story. Growth slowed at an alarming rate.
Though the country is still in positive territory, the fourth quarter of 2008 was surprisingly on the downside, according to Fernando Sedano, an economic consultant for Manufacturers Alliance/MAPI based in Brazil. “I expect a tough first half of 2009.”
On the other hand, international companies that are already doing business there are seeing continued …
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Fastenal Company, Winona, MN, reported sales for the year ended Dec. 31, 2008, were $2.34 billion, an increase of 13.5 percent from the prior year. Profit was up to $279.7 million, an increase of 20.2 percent.
While its annual numbers were strong, the distributor said in its earnings call that the fourth quarter slowed significantly.
In October, sales growth was at 11.9 percent; November was at 6.8 percent, and December saw no sales growth. CEO Willard Oberton said that December was the first time in Fastenal’s 42-year history that the distributor saw no growth year-over-year.
Looking forward into 2009, things are very slow, Oberton said. “It’s difficult out there. Right now, looking at our January sales numbers, we …
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Interline Brands, Jacksonville, FL, a distributor of MRO products, plans to cut its work force, consolidate 10 distribution centers over the next six months and make other moves to cut costs. The distributor says it is seeing adverse conditions across its core end-markets and does not expect to meet its previously issued earnings per share range for the fourth quarter 2008. Interline will be eliminating 85 full-time positions. This reduction and other cost cuts are expected to generate annualized savings of about $12 million. More
Hagemeyer North America, Charleston, SC, has launched its 2009-2010 Electrical MRO catalog. The 642-page catalog is the first full-line Electrical MRO products …
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These select product groups provide a snapshot of inflation trends based on the Producer Price Index from the U.S. Bureau of Labor Statistics. Fourth quarter 2008 is compared with fourth quarter 2007, third quarter 2008 with fourth quarter 2008, and the full year 2007 with the full year 2008. Graphics depict trend for that product from the start of 2007.
The product groups in this report:
