Although more than half (58%) of the quick and small commercial printers surveyed have experienced increased sales during the first quarter of 2011—up at least 10% for a quarter of the group—increases in paper, energy, and employee healthcare costs have wiped out the gains, according to the latest issue of the National Association for Printing Leadership (NAPL) Quick and Small Commercial Printers Trends Report released July 1.
The report, sponsored by Xerox, found that total costs for those surveyed now average 93.9% of sales, up from 92.9% during the first quarter of 2010, but owner’s compensation fell to 6.1% of sales during the 2011 quarter, down from 9.6% in full year 2010. Individual compensation varied widely, however, between the segment leaders—sales up 16.4% and compensation at 18.2%—and those in the bottom 20%, where sales fell 6.8% and compensation was in negative numbers (-1.3%).
Rising costs in many areas appear to be taking the greatest toll on profits, according to the report, which finds that cost of goods sold for the survey group jumped 4.2% in the first quarter of 2011, and now average 32.7% of sales. In addition, although employment fell 4.3% last quarter, payroll costs rose 2.3%, primarily the result of increases in employee healthcare benefits. Survey respondents cited rising costs of paper, energy, taxes and regulations, ink, toner, and other materials.
Cost increases in these areas are offsetting the gains made by the group’s aggressive moves to cut overhead, down by 5% during the first three months of 2011, following a 5.5% reduction last year, and its improvements in sales per payroll hour, up from $63.36 in the first quarter of 2010 to $73.88 this year.
“When we asked quick and small commercial printers about their biggest obstacles to profitability, rising healthcare costs was cited most frequently—by 60.6%, followed by a weak economy and markets for their services and products, and a limited ability to raise their prices,” note report authors Andrew Paparozzi, NAPL Senior Vice President and Chief Economist, and Joseph Vincenzino, Senior Economist.
The report points out a number of steps companies are now taking to improve operational efficiency, detailing strategies and practical tactics that will improve profitability without relying exclusively on increasing sales. “According to our survey participants, fewer than one-in-five companies are no longer just focusing on the top line,” note Paparozzi and Vincenzino. “Poor profitability results indicate that it might be wise for more companies to seriously consider adopting this strategy.”
The NAPL Quick and Small Commercial Printers Trends Report, is issued quarterly by the NAPL Research Center as a benefit of membership to corporate members of the Association. Non-members may order a copy for $49.95 by calling Donna Komlo at (800) 642-6275, Ext. 6345, emailing firstname.lastname@example.org, or ordering through the NAPL store at www.napl.org/store. To order online, enter product code NP252.
For information on NAPL membership, contact Director of Membership Kristen Hartman at (678) 594-0048 or email@example.com. Learn more about NAPL Research Center economic studies and analysis by following the NAPL BizTrends blog (www.naplbiztrends.org).