Know your superpowers
TreeHouse founder urges retailers to discover and focus on their strengths.
LAS VEGAS – It took TreeHouse, the specialty retailer focused on sustainable home improvement, four to five years to discover the true focus of its business strategy.
Founded in Austin, Texas as a green alternative to The Home Depot, the business initially got its clock cleaned and was on the verge of going out of business.
“We were going to be the green Home Depot and it didn’t work out at all,” Jason Ballard, TreeHouse co-founder and CEO, told an audience during a presentation at the National Hardware Show. “All of the co-founders got fired and we almost went bankrupt.”
Ballard said he realized that, despite his efforts to become an eco-friendly home improvement products destination, his business model was never going to “out-Home Depot, The Home Depot.”
The same can be said for retailers looking to take on e-commerce giant Amazon. “You cannot out-Amazon, Amazon. The game they are playing? They’re the best at it,” Ballard said.
Borrowing a page from the philosophical, military strategy guide, “The Art of War” by Sun Tzu, Ballard says retailers “Must find where your enemy is not.”
Fast forward several years from the 2011 opening of TreeHouse’s initial Austin location and the outlet decided to reinvent its business model. Rather than strictly being a retailer selling physical product, TreeHouse decided to maintain its eco-focus but turn its attention toward providing eco-friendly home improvement services to home owners.
“Home improvement and do-it-yourself is intimidating, messy, and slow,” Ballard says. With pros getting involved, Ballard likens the typical home improvement project to “wedding planners ruining someone’s wedding.”
“Home improvement can be a giant freaking disaster,” he says.
By the time the company opened its second location in Dallas, the retail side of the business had been “turned down,” according to Ballard.
Today TreeHouse specializes in helping homeowners through jobs including kitchen, solar, bathroom, landscape, roof, and smart home installations, among other remodel categories, with a focus on eco and energy efficient products. In fact, the Dallas store was designed with natural lighting used to illuminate the location while the structure was actually built around an oak tree on the property. Contractors initially wanted to bulldoze the oak.
The store’s electric is powered by 529 solar panels that feed the grid on most days, while Tesla batteries collect energy and power the store in the evenings. Ballard says the location is “the first positive energy retail building in the world” while being the first Tesla retail partner.
“What we do with our buildings shows customers what they can do with their buildings,” Ballard told the audience.
TreeHouse operates three locations in Texas, including its latest Plano location. Expansion might be on the horizon, Ballard says.
The CEO grew up in the “Big Thicket” region of East Texas and says he lived a Huckleberry Finn-like childhood, which included capturing baby alligators. The number of wildlife species now extinct or near extinction in the area – including alligator snapping turtles, sturgeon, and paddle fish led to his focus on conservation and thinking green. He became a conservation biologist before entering the retail industry.
Ballard is also an avid reader of comic books and delivered an analogy of his business decisions to retailers. Although he’s more of a Marvel reader than a DC comics fan, he used an example from the latter’s mythology.
“What is your business superpower? What is your superpower? Aquaman is never going to beat Superman at flying. Superman has that covered. Aquaman needs to focus on swimming faster – that’s his strength,” Ballard says. “It took us four or five years to figure out who we were and what our superpower was.”
In closing, Ballard reminded the audience of his overall strategy.
“It is existentially important that we find a way to shelter ourselves that doesn’t harm our own health and the environment around us.”
HBSDealer Stock Watch: Wednesday’s ticker
|Gainers and decliners split down the middle on Wednesday, with 15 hardware and building supply stocks finishing higher, and 15 finishing lower. The biggest move on the day was BECN, down 10.8%.|
|BLDR (Builders FS)||19.75||+0.15%|
|BMCH (BMC Stock)||20.00||+1.01%|
|CENT (Central Garden)||38.08||-1.30%|
|DE (Deere & Co.)||145.16||+2.71%|
|HD (Home Depot)||186.36||+0.71%|
|LL (Lumber Liquidators)||21.48||+0.89%|
|SMG (Scotts Miracle-Gro)||80.54||-0.38%|
|TSCO (Tractor Supply)||66.69||+0.32%|
|UFPI (Universal Forest)||33.74||-0.06%|
Builders FirstSource Q1 sales up 11%
Despite facing weather-related issues, BFS grows sales 12.7% per day
Builders FirstSource reported first quarter 2018 net sales of $1.7 billion, up nearly 11% from net sales of $1.5 billion for the first quarter of 2017.
Weather-related facility closures impacted sales during the quarter, the Dallas, Texas-based pro dealer giant said. Sales per day grew 12.7% in the quarter, which was benefited by approximately 9.6% from the impact of commodity lumber price inflation on our sales and 3.1% from sales volume growth.
Sales volume per day, excluding commodity inflation, grew approximately 3.8% in the single-family homebuilding end market and 2.8% in the repair and remodeling/other end market, offset by expected declines in multifamily, BFS reported. Value-added products sales per day grew by 9.8%, including 8.9 percent in our windows, doors, and millwork category and 10.7% in manufactured products.
The dealer also reported a net income of $23.2 million for the quarter compared to a net income of $3.8 million for the same period last year.
“We continued our investments in manufacturing capacity and talent to drive enhanced growth in margin-accretive products and markets, as well as implementing our operational excellence plans, which are included in our longer-term strategy to generate significant EBITDA and cash flow,” said Chad Crow, CEO of Builders FirstSource.
Given the rising cost of lumber, company CFO Peter Jackson said, “Our team rapidly responded to the operational challenges caused by lumber and lumber sheet goods inflation during the current quarter, delivering strong operating results by focusing on disciplined cost and margin management. Commodity inflation generally benefits our business in the long term but can cause short term margin pressure when prices rise quickly.
Looking ahead, Crow hinted that there are expansion opportunities for BFS.
“I remain confident in the outlook for Builders FirstSource and our expanding opportunities for growth,” he said. “We believe demand in the housing industry remains on a solid trajectory.”