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By Robert Siu In a deep recession one might expect the textile rental industry to suffer when its customers curtail spending. On the contrary, the recent TRSA Business Growth Survey data suggest that the industry is in good shape. Industry sales as a whole grew an estimated 9.90 per cent for the 12 month period ending June 30, 1982. That is the largest percentage growth in the last few years since the 9.00 per cent growth in 1979. Surprisingly, industrial sales for the 12-month period did not suffer as many had anticipated. In fact, industrial rental sales growth (12.49 per cent) outpaced linen supply growth (7.45 per cent). On the six month basis ending June 30, 1982, sales increased at a slower pace. Linen rental sales grew by 5.75 per cent while industrial sales grew by 10.12 per cent with an industry average of 7.87 per cent. This possibly indicates that the textile rental industry did not feel the impact of the recession until well into 1982. Informal input from several major companies also indicate that overall sales are softening even more into the second half of 1982. However, formal survey results for the period ending December 31, 1982 probably will not be available to members until mid-1983. Price increases reported by members also slowed. Twenty-seven companies around the country reported an average price increase of 6.17 per cent for linen supply rental sales while 17 companies reported no increases. That brings the average price increase down for all reported linen supply sales to 3.79 per cent. Nineteen companies reported industrial rental price increases averaging 5.97 per cent and 25 companies reported no increases at all. The average increase for the industrial rental sales for all companies was 2.58 per cent. The information provided implies that companies try to hold off price increases for fear of losing market share. As it turned out, while prices stayed low, sales volume actually increased at a surprisingly healthy pace, especially in the industrial segment of the industry. Overall, the signs represent an optimistic outlook. The 44 reporting companies are represented by 28 linen supply plants, 27 industrial plants, and 218 mixed plants with sales totaling $709,832,211 in the 12-month period ending June 30, 1982. The same group 12 months ago in June 30, 1981 reported sales of $645,899,311. The 1982 figure represents an increase of 9.9 per cent. Three companies each with annual sales below $500,000 reported 1.04 per cent gain in linen supply sales for the 12-month period but only a .24 per cent increase for the six-month period ending June 30, 1982. These companies also reported a minus 1.93 per cent growth in industrial rental sales for the 12-month period and an 18 per cent growth for the most recent six-month period. For companies with annual sales between $500,000 to $1,000,000, linen rental sales grew by 6.65 per cent while industrial rental sales grew by 11.82 per cent for the 12-month surveyed period. That number drops to 4.26 per cent for linen rental and 6.82 per cent for industrial rental for the six-month period. Six companies in the $1 million to $2 million annual sales category reported a 15 per cent linen sales growth and a 5.57 per cent industrial rental sales growth for the year. The six-month linen growth percentage is at an even more spectacular level of 20.16 per cent while industrial rental growth was 9.22 per cent. Further verification of the input data confirms that the growth percentages hold true for most of the reporting companies. These growth percentages represent net sales excluding acquisition and divesture. As for companies with $2,000,000 to $4,000,000 in sales, eight reported an average of 5.65 per cent linen rental sales growth and a 9.26 per cent industrial rental growth for the 12-month period. Six-month sales for linen, however, took a downturn for the first six months of 1982 with a net loss of minus .89 per cent. Industrial sales growth for the same period, however, maintained a healthy 8.85 per cent. The first four groups of companies that responded to the survey are primarily single plant operating with sales ranging from $500,000 to $4,000,000 annually. There are 25 companies represented by 26 plants in these groups. Due to the small number of plants represented, one can expect wider fluctuations in the data received. The last reporting group is composed of 19 multi-plant companies with sales over $4,000,000 per company. The 19 companies are represented by 200 plants and well over $600,000,000 annual sales. For the 12-month period this group reported a 7.47 per cent gain in linen supply rental and an impressive 12.66 per cent gain in industrial rental. However, as the companies move into the first six months of 1982, sales begin to soften. Six month growth is reported to be at 5.91 per cent for linen supply and 10.18 per cent for industrial rental. Where will the industry go from here? The recession's effects seem to have hit the industry slowly, but began to show up in 1982 sales volume. The next survey will tell more about the industry's ability to cope with economic cycles. Because TRSA members reported industrial and linen rental sales separately for the first time in this survey, the results give a better indication of how the two segments of the textile rental industry will perform in the future. |
