ASA distributors report another huge sales increase

Respondent to ASA’s monthly Pulse sales survey reported yet another steep increase of 30.8% in average sales for May 2021 vs. May 2020.

The full, detailed Pulse sales benchmarking report is an exclusive benefit for ASA members only and can be accessed through the MyASA portal at www.asa.net. In this report, based on the number of respondents reporting results by state or area of operation, ASA is able to provide detailed results for 14 different market areas. Many additional areas are very close to having sufficient sample size to report results.

On a trailing 12-month basis, respondents reported an average sales increase 11.1% in May of 2021 as compared to 7.3% in April 2021, when compared to the 2020 data. Inventories rose a whopping 18.9% for May 2021 compared to a year ago, a notable increase from even April 2021, which was 14.9%.

The median three-months days sales outstanding increased to 41.2 days in May of 2021, as compared to 39.2 days in April of 2021.

The number of respondents showing a decrease in gross margin remained the same as in May 2021 as April 2021, which is 16.7%.

“Again, as was the case last month, it is worth noting that May 2021 results reflect a full month of robust performance compared to May 2020 (a month in which much of the country remained partially shut down, depending on the location),” Industry Insights Vice President Greg Manns said. “This is reflected in the strong sales growth figures reported by respondents in this month's results. Also, the YTD and TTM figures for much of the year will be impacted throughout 2021 as we continue to compare against a year that had multiple weeks, if not months, of closures or partial closures.”

“The upward trend in sales continues as is evident from the Monthly Pulse data. The U.S. is back at pre-pandemic growth numbers. We are already witnessing higher consumer confidence, home prices are up as demand is up, home improvement is also up, but is being impacted by the supply chain disruption and labor shortages,” ASA Business Intelligence Analyst Ayesha Salman said. “However, our members must be mindful of the fact that periods of growth don’t last forever, and they should take this opportunity to save cash for the any drier times ahead. COVID-19 has taught us at least that much. Profitability not only provides peace of mind for any season, but it also gives you the freedom to avoid making rash, hasty decisions that you might regret later.”

Economic indicators

GDP: The prediction for the global economy in 2021 is at 5.4% — better than was the case in 2020, but still more than six points below what it was in 2019. The U.S. economy has been growing at a 6.4% rate (Q1) and is expected to be in that neighborhood in Q2 as well, but slowing slightly in the second half of the year. The year should end around 6.5%. The latest Fed estimate has it as high as 7%.

Housing starts: Housing is still a strong sector — more activity than at any time in 15 years, and up by 15% over last year. That said, there are signs of this surge slowing down. Mortgage rates are starting to edge up, labor shortages and the high cost of commodities have continued to drive prices up. The cost of lumber is down by 40% from the peak earlier this year, but is still 120% higher than it was last year. The sales of existing homes have been sagging as well.

Home improvement retail: The home improvement sector has been hit by the commodity shortages as well. Their prices have had to rise and that has affected demand. There has been less urgency in terms of making improvements now that the lockdowns are easing, but there are still many who are working to sell their homes.

Industrial PVF

ASA members doing business in the industrial PVF space reported an extremely sharp growth of 26.4% in May compared to a year ago. Trailing 12-month sales for ASA industrial PVF distributors showed a decline of 2.2%. Average Inventories rose by 11.5%, while median change in ending inventory grew by 14.5%.

The average days sales outstanding for this sector grew to 47.7 days. Forty percent of ASA industrial PVF distributors responding to the survey reported an increase in the total number of full-time-equivalent employees compared to a year ago, while 70% of industrial PVF distributors reported an increase of gross margin percentage, and 30 % reported a decrease as of May 30, 2021 compared to the same reporting period a year ago.

Industry outlook: ASA sales were sharply stronger Y/Y in April. Year-to-date through April, sales were up 16.1%. For the trailing 12 months prior, sales were up 6.2%.

The U.S. Transportation Services Freight Index (TSIFRGHT), which typically leads ASA sales by about five months, was stronger in April (latest available). The report showed that the TSI was at 136.8 for freight, up 0.7% M/M and stronger by 8.9% Y/Y. More recent data (comparing similar industry data to the TSI) from other sources is showing strong activity. DAT was reporting at the end of May that spot truck demand was 290.1% higher than it was a year ago. Spot trucking rates have increased 67.0% Y/Y, and fuel surcharges are now up 34.5% Y/Y. Granted, year-over-year figures are against arguably much easier comparisons as the economy was locked down on a national basis.

Looking forward over the next 18 months, the ASA sales forecast continues to be bullish, although some sectors are going to remain weaker because of near-term supply-chain disruptions, while significantly higher raw material prices continue to create much uncertainty about the outlook. Generally, most sectors remain in a strong growth trend, and as the leisure and hospitality sector experience improvement in growth over the next six months, that will boost spending.