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(June 2009) posted on Sun Jun 21, 2009

The expected "worst ever" could have been much worse.

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By Wade Swormstedt

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We couldn’t help but cringe as we awaited the results of this year’s Electric State of the Industry Report, like the kid who didn’t study, awaiting the results of his final exam. Although this year’s data isn’t positive, it’s not nearly as negative as those that other industries might be experiencing. Sure, the average sales volume per respondent is the lowest we’ve seen since 2004, but, back then, it would’ve been the highest ever.

Yes, 2008 was the first time our respondents ever reported an overall decline in sales from the prior year, but by less than 1%. Would you be happy if that percentage of decline was the hit your 401K just took? And yes, the 7.6% anticipated average decline in sales 2009 drastically contrasts with the previous worst of an expected 6.5% increase last year, which was the most pessimistic guesstimate ever.

However, electric-sign companies seem to have reacted appropriately by having reduced their workforces accordingly, which has led to the second-highest, sales-per-employee figure ever. Profit margin crept back up to double figures.

This year’s study includes a couple, new, recession-oriented questions, regarding mergers/acquisitions and new customers, including those gained from competitors who went out of business. These will be addressed in the final tables.

Overall, we estimate the overall on-premise, electric-sign industry dropped by 10% to $5.6 billion in 2008, the fourth time we’ve seen an industry decline in the past two decades. The most severe was the 10.4% drop from $3.57 billion to $3.2 billion from 1989 to 1990. The most recent had been a 5% drop from $5.4 billion to $5.1 billion from 2001 to 2002.

Remember that references to “this year” mean fiscal 2008, and “last year” means 2007. Here are some other high(low)lights:

• The outlook for 2009 is the gloomiest ever, as the average respondent anticipates a 7.6% decline in sales from 2008 (Table 5). Never before had respondents expected anything less than a 5% increase, which was anticipated this time last year.

• However, average sales per employee, $144,878, is the second highest ever (Table 16).

• Anticipated equipment investment in 2009 ($19,692) is the lowest in our nine years of asking the question (Table 6). Laminators are the only type of equipment that has seen increased interest (Table 6b).

• For the ninth consecutive year, the percentage of electric signs that includes digital imaging has increased, although negligibly (Table 9).