For the fourth consecutive year, most executives at Minnesota's biggest public companies say the next 12 months are going to be strong for sales, hiring and capital investment.
Our 23rd annual Star Tribune 100 survey of Minnesota's largest publicly held companies found:
• Eighty-two percent of the responding firms expect their 2014 sales to improve from last year's. Another 17.6 percent expect sales will be about the same as 2013. None of those responding expect 2014 sales to be worse than last year's.
• Fifty percent of companies said they plan to increase hiring in the next 12 months, down from 63 percent in 2013 and 57 percent in 2012. Meanwhile, 44 percent will keep head count the same. Just 6 percent plan cuts.
• Nearly 46 percent plan to increase capital expenditures, down from 58 percent a year ago and 51 percent in 2012. Another 46 percent will hold capital spending at current levels in 2014. Just 8 percent of responding companies planned to cut spending in the coming year.
The plans for hiring and capital expenditures are consistent with growth in what's been a long, slow recovery from the Great Recession.
'Hopeful thinking'
"Businesspeople tend to want to be optimistic,'' said Chris Puto, dean of the Opus College of Business at the University of St. Thomas. "These results, in terms of optimism, look the same as last year.''
At some point in this gradual and long recovery, contrarians will start to return, Puto said. But for now there is "hopeful thinking.''
The Star Tribune conducted the mail survey in March and April. Of 110 publicly held, Minnesota-based companies that got surveys, 39 responded.
The plans for hiring came from a diverse group of companies, ranging from Ecolab to Polaris, hardware maker Fastenal, SPC Commerce and Vascular Solutions.
Retail and services companies planning to hire include Granite City Food & Brewery and Select Comfort, maker of the Sleep Number bed.
Companies planning to increase capital spending in the coming year include Toro, Allete, G&K Services and Arctic Cat.
David Vang, professor of finance at the University of St. Thomas, noted that 31 percent of responding companies said they have more access to capital — up from just 18 percent a year ago.
"That's some good news,'' Vang said. "A lot of firms have recapitalized their balance sheets. Minnesota-based companies were among the first to cut back [during the Great Recession].''
Yet most companies (48.5 percent) said they plan to focus on internal growth rather than acquisitions (9 percent) to expand their businesses — even though they could borrow to finance a deal.
"They are trying to work their own horses harder rather than buying new horses,'' Vang said.
"Internal growth is better for [Minnesota's] economy than acquisitions,'' Puto said, because acquisitions could be made elsewhere while internal growth would be more likely to occur in Minnesota.
"This investment in capital assets strikes me as extremely positive for our state,'' Puto said.
Corporate concerns
As the economic recovery continues and market indexes are at or near highs, two issues rank of highest concern: the economy and the ability to hire and retain workers.
The A-list of corporate concerns also includes health care benefits, federal tax rates, education, regulatory enforcement, state tax rates and global competition.
Wages rank seventh on the public policy issues scale (Question 1), followed by transportation.
Health care
Asked whether the cost of health care influences their decision to hire additional workers, 11.8 percent said those costs are a "significant influence.'' Those responding included restaurant chain Granite City, precision parts maker Intricon and Canterbury Park racetrack.
Manufacturers Ecolab, Valspar, Fastenal and Hutchinson Technology were among the majority that said health care costs have "some influence'' on hiring decisions.
Most responding companies have embraced wellness programs for their employees (73 percent) and an even higher percentage (82 percent) believe such programs help to reduce health care costs.
Second-tier corporate concerns include digital security, energy costs, the Minnesota economy, the housing slump and privacy regulations. Transportation and climate change ranked last.
oslund@startribune.com • 612-673-7206 pkennedy@startribune.com• 612-673-7926
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