2 | PEI.ORG | First Quarter 2015
to boost profit levels more quickly than is realistic.
Management would be well served to retreat to a “slow
but steady wins the race” philosophy.
Dr. Albert D. Bates is founder and president of Profit Planning Group and the author of the newly released Breaking
Down the Profit Barriers in Distribution, available from
Amazon.com and Barnes & Noble.
The Profitability Yo-Yo
Five-Year Return on Assets
has just been
completed by the
report, which is
based on data
from 34 different
lines of trade,
reveals an up-and-down profitability
the past five years.
(the last year for
distributors, as a group, experienced slowing sales
growth, which led to an increase in expenses as a
percentage of sales. That problem was more than
offset by an increase in the gross margin percentage.
The net result was a slight increase in profitability.
Despite the seemingly good 2013 news, the
results do nothing more than continue a pattern
of a profitability increase one year followed by
a decrease the next. The up-and-down pattern
Year Return on
Assets bar graph
the yo-yo effect
of recent years.
is the best
ROA is profit,
after all expenses
expressed as a percent of the total investment in the
business. Simply put, it reflects the economic viability
of the firm.
As the graph shows, ROA for all distributors
increased from 2009 to 2010, fell in 2011 and
has gone back up in the last two years. The
pattern for PEI members is a little different, but
also shows no real profit momentum during this
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