The 2009 Electric State of the Industry Report (Excerpts)

Consecutive down years cause an overall 30% decline, yet sales per employee achieve a new standard.
ESOI t4.jpg

When we presented this report last year, with results for fiscal 2008, sign companies had only contended with one lousy quarter. So, for the first time ever, over more than a quarter century, respondents collectively reported a sales decline from 2007 to 2008 even though, by a slight majority, more sign companies reported increasing sales than declining sales. Due to unknown companies that simply went out of business, we estimated an electric-sign sales decline of 10% from 2007 to 2008. Essentially, it was the “worst” Electric SOI ever.
We would’ve been happy with similar results this year. Unfortunately, in one of the more telling tables (Table 3), 70% of the respondents reported declining sales from 2008 to 2009. Collectively, they reported a 12.3% decline in sales. Again taking into account the unknown factor of sign companies that went out of business, we can conservatively guess that the electric-sign industry declined by an additional 20% in 2009, which means a 30% decline over the past two years from $6.2 billion to $4.4 billion. Last year, we estimated $5.6 billion.
Sign companies were somewhat reluctant to share their bad news, or many of them simply no longer exist. The 184 responses are the fewest this research study has received in its 20+ years (Table 1). It’s only the third time responses have dropped under 200. The previous low was 189 for the 2006 survey (2005 results).
On a more positive note, respondents suggest the tide is turning. As always, remember that “this year” refers to 2009, and “last year” references 2008. Here are some of the highlights.
• We’ll begin with the best news. Average sales per employee, $148,524, are the highest we’ve ever seen (Table 16).
• For 2010, respondents expect modest growth, 1.9%, with companies that expect growth outnumbering those who envision declining sales by a 4:3 ratio (Table 5).
• Average sales per respondent, $3.7 million, are the lowest we’ve seen in five years, but it would have been an all-time high in 2004 (Table 1).
• Anticipated equipment investment for 2010 is the lowest ever, just over $18,000, on the heels of last year’s low of $19,700 (Table 6).
• Profit margin fits neatly in the middle of results for the past three and the past seven years (Table 18). The 8.9% resides between the low of 6.4% (2003) and the high of 11.8% (2006).
• Little has quelled increasing use of digital imaging. The percentage of all electric signs that include digital imaging (21%) is an all-time high (Table 9).
• The percentage of companies that own flatbed printers jumped from 11.2% in 2008 to 19.6% in 2009 (Table 11).
• More than 25% of all respondents report that more than a quarter of their 2009 sales came from new customers (Table 19). And more than half of this business is estimated to have resulted from other sign companies that went out of business (Table 20).
Sales volume
Last year’s average sales dropped less than 1%, the only other time in a quarter century that the average respondent reported a sales decline (Table 4). The suffering was fairly evenly distributed as three of the four sales-volume categories averaged losses of 13% or more. Plus, because the median figure (-13%) is so close to the average (mean, -12.3%), the losses seem more standardized. For the four sales-volume categories, the median losses ranged between -10% and -15%.
Overall, 70% of the respondents experienced declining sales in 2009, and 16.3% managed to increase their sales. The smaller companies seemed least affected. More than a quarter of them reported no change in sales. Ironically, they had the least percentage of companies to both increase and decrease their sales. Table 4 also shows, the bigger the sign company, the more its sales have declined, by percentage, over the past two years.
If there’s a silver (maybe only copper) lining, at least sign companies see the worst as possibly being over, as they expect their sales to increase by a token 1.9% in 2010.
So, is it time to come out of hibernation? Is it time to reinvest in your business with new equipment and capabilities? Apparently not. The average amount targeted for 2010 equipment purchases, $18,131, is the lowest this study has seen in 10 years of asking this question (Table 6). Last year’s $19,692 had been the lowest figure.
Sign work
As for the types of sign work performed, three of the first six sign types listed show a higher percentage, and three show a lower percentage (Table 7). By far, the most dramatic number is a big increase in the percentage of companies that sell electronic message centers (EMCs). These increased from 55.1% last year to 66.8% this year. Nothing else changed by more than 4.2%.
As expected, the percentage of sign companies that sells EMCs directly correlates to sales volume; the bigger the sign company, the more likely it is to sell EMCs. Besides EMCs, the biggest gainer was backlit awnings (up 4.2%), and the biggest loser was main-identification signs (down 4.2%).
Digital imaging
Nothing can derail the increasing importance of digital imaging. The eye-popping figure appears in Table 9, where we see that the largest sign companies exactly doubled the percentage of their signs that include digital imaging over the past year, and more than tripled it over the past two years. This has more than countered the smallest sign companies, who’ve curiously seen their percentage of digitally printed signs cut nearly in half over the past two years.
All of the sign companies in between show modest increases. Consequently, the overall percentage of digitally printed electric signs jumped dramatically from 15.1% last year to a new high of 21.5% this year. This nearly doubles the 11.4% figure from 2006. When we first asked the question for fiscal 1999, the percentage was 4.4%. Subsequent acceleration has yet to abate.
The workforce
If we view the average number of employees reported for 2005 to 2007 (43, 45 and 33, respectively) as temporary spikes, then this year’s average of 25.8 (Table 14) is “normal.” Regardless, it falls right in line with the averages for 2002 to 2004 (25, 28 and 27, respectively). As occurred last year, little changed for employment within the three smaller sales-volume categories, but the downsizing continued to accelerate for the $2.5 million+ sign companies.
Last year, the $2.5 million+ companies reported an average of 65 employees, which was the smallest figure we’ve seen (11 years ago, we eliminated the $5 million+ category). Yet this year, the average number of full-time employees for the $2.5 million+ companies dropped another 20% to 52, which is less than half of the average of 106 reported for fiscal 2005.
Table 16 shows that average sales per employee has grown substantially for all four sales-volume categories over each of the past two years. For the bottom three categories, this year’s figures are all-time highs. For the $2.5 million+ companies, this year’s average is the highest since the $158,585 in 2001.
The complete 2009 Electric State of the Industry Report appears in the July 2010 issue of Signs of the Times.