Slashed costs creating higher profit margins

Report: 10 of 15 economic sectors saw better figures as companies cut jobs, other costs.Recession-driven cost cutting and layoffs are yielding higher profit margins — and businesses that can maintain margins once sales pick up will have a chance to grow profits to new levels, according to a report from Sageworks, a provider of financial information on private companies.

In a report released Monday, Sageworks said profit margins rose in 10 out of 15 economic sectors, as companies slashed overhead costs in order to stay afloat.

Dan Saklad, chief operating officer of Sageworks, said the recession has forced companies across the board “to evaluate how they structure their business and determine the most crucial component to their success.”

“As the economy gets back on track, and businesses thrive again and have more revenue coming in, they will be well-positioned to grow profits.”

The real estate and rental and leasing sector is running an average profit margin of 7.52 percent, up from 5.65 percent in 2007. Other winners: health care, 14.99 percent, up from 10.46 percent in 2007; lodging and food service, 7.79 percent, up from 3.83 percent; professional, scientific and technical services, 10.10 percent, up from 9.41 percent; retail trade, 3.59 percent, up from 2.67 percent; transportation/warehousing, 6.22 percent, up from 4.16 percent; and arts, entertainment and recreation, 6.25 percent, up from 3.46 percent.

Sectors where profit margins are declining during the recession include construction, wholesale trade, manufacturing, and finance and insurance.

E-mail Beth Fitzgerald at [email protected]