Few areas of the country have suffered more from the building downturn than Southern California. Particularly hard hit are the inland communities—commonly referred to as the “Inland Empire”—once the epicenter of new housing developments and now ground zero for bank foreclosures and home repossessions.
Barr Lumber, a chain of six lumberyards headquartered in San Bernardino, has made a number of adjustments to keep its head above water, according to CEO John Shirley Sr. Next day delivery? No problem. Price adjustments? Keep talking. Fuel surcharge? Wouldn’t think of it.
“We haven’t even attempted to add a fuel service charge,” Shirley said. “Customers are much more demanding on service now. If you don’t pay a lot of attention to them, they’ll just go to the competition.”
The competitive landscape is changing, however. Most of the bigger LBM players have backed off on M&A pursuits. In analyst conferences, they claim the prices are still too high; cash flow might also play a role. Either way, independent chains like Barr Lumber—No. 105 on the HCN’s Top 350 Pro Dealer Scorecard, with $76 million in sales last year—are keeping one eye on the bottom line and the other on the horizon.
Last month Barr Lumber acquired Pick’s Building Materials, a one-unit dealer that serves the San Gabriel Valley, a collection of suburban communities directly east of Los Angeles. Pick’s sales had been heavily affected by the downturn, but the 58-year-old pro dealer served a number of commercial/industrial businesses, making it an attractive buy.
Shirley admits that the timing wasn’t perfect for an acquisition, given the latest figures for San Bernardino and Riverside counties: single-family housing starts during the first half of 2008 were 3,473 units, down from 11,023 during the first six months of 2007. Three years ago, builders in the Inland Empire started construction on 31,529 units, according to the California Building Industry Association.
“It’s been absolutely horrible,” Shirley said. “But in this business, you have to take the opportunities that come along to expand. The long-range opportunities make it worth the risk.”
Pick’s former owners, Chuck Daugherty and Steve Thur-good, will be staying on in management roles, according to Shirley. The West Covina lumberyard will be converted into a Do it Best format and renamed Barr Lumber, joining the chain’s six other locations in Rosemead, Long Beach, Yucca Valley, Twentynine Palms and Apple Valley. The company also operates a door shop and a truss plant.
Shirley attributes part of his survival to custom builders, who make up a large share of his customer base. Southern California lumberyards that relied heavily on production builders for their revenues are in serious trouble, he observed. “They need things to turn around fairly quickly, within the next six months, if they’re going to make it,” Shirley said.