Midwest movers: Nebraska dealers face downturn with steady optimism
—The cornfields have just sprouted ears throughout eastern Nebraska, a little behind schedule for this time of year. Winter hit early and spring came late, so farmers are scrambling to make the most of a short growing season. But corn and soybeans are still fetching good prices, with feed lots, grain elevators and ethanol plants all competing for the same supply.
Building material dealers in this part of the country are also trying to play catch up after winter wreaked havoc on construction projects. Then there’s the housing slump from which no state has been exempt, Nebraska included. But most of the lumberyard owners here have avoided closing locations and laying off employees. On the contrary, they’ve been expanding their operations with new showrooms, upgraded truss plants and additional stores. Two dealers even crossed state lines this year, one into North Dakota and the other to Colorado.
“I’ve been amazed at the amount of money our members have invested in their businesses over the last few months,” said Quent Ondricek, vp-lumber and building material for Do it Best. The Fort Wayne, Ind.-based co-op has a number of LBM dealers across Nebraska, ranging from large metro operators to smaller rural lumberyards. While residential construction has slowed down considerably in Omaha and Lincoln, both cities still have healthy economies and employment rates.
“Housing starts never really spike or collapse in farm country,” observed Ondricek, who was born and raised in South Dakota. “They tend to have peaks and valleys. Conservative nature abounds in rural America, and I think that adds stability.”
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Conservative yes, but not overly cautious. Ondricek still remembers a trip he made to Atlanta in 1982 with a Nebraska lumberyard owner named Myron Andersen. The two men wanted to check out a retailer named Home Depot. Andersen was so impressed that, against all advice, he built a 60,000-square-foot store in Kearney, Neb. It opened in July 1985. The local economy collapsed the following year.
“We almost didn’t make it,” Andersen recalled. “Our bank and vendors worked together to help us survive. I’ll always be grateful to them.” Andersen’s home center in Kearney, called Builders Warehouse, is now 150,000 square feet. This year he chose to upgrade his truss plant with $1.5 million in new equipment and software.
Moving further east, Nebraska dealers in the Omaha area have good reasons to throttle back right now; building permits for single-family homes were off by 33 percent in 2006, and this year’s decline is approaching 50 percent, according to the Omaha Chamber of Commerce. Yet the city keeps adding new jobs and new households.
These contradictions befuddle Rick Russell, president of Millard Lumber, but they haven’t stopped him from converting a former electrical assembly plant into the state’s largest drive-through lumberyard, hardware store and design center. The 450,000-square-foot complex opened this spring.
Tom Christensen, president and CEO of Christensen Lumber and a former chair of the Nebraska Lumber Dealers Association, noted that “you didn’t see any stick yards in Nebraska” during the housing run-up, when a dirt lot and an air conditioned trailer was all it took to sell lumber in some parts of the country.
“We’re pretty well committed to what we’re doing long term,” said Christensen, who built a component plant last year. Even the local builders avoided the easy money, he said, selling mostly to qualified home buyers. “We didn’t have national home builders here with a lot of subprime loans,” he added.
Although he serves the Omaha market from Fremont, Neb., Christensen hears that the state’s rural dealers are “getting a nice boost from the ethanol business.” Kim Carhart, vp-Carhart Lumber, a 10-unit chain of lumberyards in Nebraska’s agricultural markets, confirmed that she’s been selling a lot of pole barns and storage buildings lately. But she expects her home decor departments to be just as busy this fall as her agricultural division.
“If [farmers] have had a good year, they might put in new cabinets or flooring,” Carhart explained. “They tend to put in good quality, too. They’re not going to be moving any time soon.”
ELK POINT, S.D. —The controversy over the proposed $10 billion Hyperion oil refinery here has divided friends, neighbors and church congregations into two camps: those who support what a new power plant can do for the local economy, and those who believe it will ruin their rural atmosphere and lifestyle. Kim Carhart, vp-Carhart Lumber, found herself in the former camp, even through she lives across the road from the oil-to-gasoline facility.
“My property will pretty much be a loss,” said Carhart. “But the plant will bring 1,800 jobs to the area. We have to have something for our kids to come back to.”
Carhart Lumber didn’t know about the Hyperion plant five years ago when they decided to enter South Dakota. But the fourth-generation lumber dealers, whose nine locations are all in Nebraska, were willing to bet on the Sioux Falls region. Home to several financial institutions and health insurance firms, Sioux Falls has grown into a population center with 130,000 people. A local philanthropist named T. Denny Sanford—he made his billions from credit card processing—has pledged $400 million to build a 185-acre medical research park in town. The city already has two major medical centers.
Last January, Carhart Lumber opened its 10th location in the town of Tea, on the southern edge of Sioux Falls. The company leased two adjacent buildings in an industrial park, and her landlord is the president of the local home builders’ association. Carhart brought up five employees from the chain’s other locations, two of whom are locals. “In this neck of the woods, people buy from people,” she explained.
Carharts’ other stores do a 75/25 mix of pro and homeowner business, but the Sioux City location will serve mostly contractors. The Carhart family—Kim and her cousin Scott are the fourth generation to run the business—began planning the North Dakota location five years ago. All of their locations were in small towns with populations of less than 10,000 people; some were losing DIY sales to big boxes. Sioux Falls looked like a good place to try an all-pro yard in a bigger market.
“All these new people will need somewhere to live,” Carhart said. She’s also banking on the NAFTA Superhighway, a planned Mexico-to-Canada truck route that will pass through Sioux Falls on Interstate 29.
In the short term, there’s still plenty of pole barns to be built and kitchens to remodel. “Right now the smaller stores are doing well because the ag business is doing well,” said Carhart. “You can’t believe the number of pole barns we’re quoting.” Carhart makes trusses at a component plant in Wayne, Neb., its headquarters, and each yard sells addition lumber and steel to complete the project. Half of the units offer home decor showrooms for kitchen, bath and flooring. Carhart is expecting both sides of the business to be busy this fall.
By the end of the year, farmers know what kind of harvest they’ve had, and they’re [no longer] too busy to put up a building or do some remodeling,” she explained.
Carhart Lumber also has plans to open a unit in Vermillion, S.D., a town of approximately 11,000 people even closer to the Hyperion refinery. Vermillion is also an exit on the NAFTA Superhighway. “You have to have a long-term vision,” Carhart said.
, KEARNEY, NEB. —This is how Myron Andersen, president of Builders Warehouse, describes Kearney Neb.: “It’s not the end of the earth, but you can see it from here.” Yet Kearney is the headquarters of his $30 million company, which includes a 150,000-square-foot home center and, 45 miles away in Grand Island, a 52,000-square-foot lumberyard and design center. Andersen visits LBM operations all over the country, looking for ideas he can take back to Nebraska, where the self-made lumber dealer is determined to stay abreast of current trends, regardless of the economy, the price of lumber or the weather.
Especially the weather. “We haven’t seen a winter like this in 15 years,” said Andersen, interviewed while driving past stacks of lumber and sheet goods in his indoor lumberyard in Kearney. The place was designed by Ron Johnson, the former Emery Waterhouse merchant and store designer. Andersen’s other location is also an indoor drive-through where contractors and lumber are both protected from the elements. So are the Menards employees who regularly stop by to do price checks, according to Andersen. He nodded at two of them as he drove by.
Everything about the Kearny store is big: the retail side of the operation, counting the design center, is 60,000 square feet. Outside the drive-through lumberyard (which is 44,000 square feet) are nine acres of paved lot. This is where the lumberyard’s fleet of vehicles—semis, boom trucks, delivery vans—spent a lot of idle time this winter.
“I would leave work at night, and a dozen trucks would be sitting there, all loaded up for deliveries the next day,” recalled Andersen. “And when I came in the next morning, the guys would be unloading those same trucks because they couldn’t get to the job sites. The rain or the snow had turned everything to mud.”
But Andersen couldn’t spend much time staring wistfully at his inventory. January was pretty busy with the opening of a new unit in Denver, the first location for Builders Warehouse outside the state of Nebraska. Andersen left his son Chad behind, along with three other employees, until it’s time to ramp up the operation. “It’s a good long-term prospect,” Andersen explained. “The idea is to get a presence and get ready for when better times return.”
The same thinking was behind this year’s $1.5 million upgrade of Spelts Schultz, the company’s truss plant in Grand Island. Acquired in 1995, the facility lacked the software and equipment to make wall panels. So Andersen installed a laser-guided saw, auto stackers and other improvements to support the new line. “Wall panels are big in the eastern part of the state and in Colorado,” he explained. “We felt that we had to be in it to protect our market.”
About 70 percent of the customer base at Builders Warehouse is professional, with the remainder split between homeowners and commercial accounts. Although one customer builds 50 houses a year, most are custom or spec builders, averaging 10 homes annually.
Andersen shares the market with five or six other pro dealers, and to the east, near Omaha, is another group of strong independents. Menards operates large format stores in both of his markets, Kearney and Grand Island.
Builders Warehouse has design centers at both its locations, and Andersen is continually upgrading them. He added Do it Best’s flooring programs to both locations and in 2007, lighting showrooms as well. At last count, 38 doors and windows were on display in the millwork section. Andersen imports his own containers from China to supply its showrooms with kitchen and flooring tile, along with quartz and granite for its countertop fabrication shop.
Andersen belongs to several national roundtables and travels extensively to participate in them. Yet he holds fast to Midwestern values, and hands out a set of “guiding principals” to all employees. Number two on the list: “Never do anything that will tarnish the pride that our parents have in us.”
, HASTINGS, NEB. —A sign on the wall of Big G Ace Hardware bills it as “The Largest Ace Store in America.” And no one has stepped forward to contest that title, according to general manager Linda Dill. When Big G relocated in 2002, moving from a cramped, 18,000-square-foot building in downtown Hastings to a remodeled ShopKo discount store, Dill had 77,000 square feet to work with. Almost 75 percent of that was selling space.
No one knew at the time that Menards would open one of its 280,000 sq. ft. megastores right across the road in 2008.
Some folks might call this a bad turn of events, given the money, time and energy invested in Big G by the Foote family, who have owned the store for three generations. But in this part of the country, people are self-reliant, and prepared.
“The first thing we did was retrain the staff,” recalled Dill, who has worked for the Foote family for 32 years. “We had been doing a lot of that already, but we really hit it hard.” Each sales associate had to know their own department inside and out, plus the departments on either side of them.
The store also revamped its merchandise, deepening its assortment in some categories and eliminating others. “We increased our hardware assortment immensely,” said Dill. Knowing they couldn’t compete on appliances, Big G stopped selling them, freeing up room for customer service desks and shopping carts. Ace corporate helped with the design.
By the time the project was over, about two-thirds of the store had been changed around. Dill agreed that, under normal circumstances, Big G’s owners would not have remodeled their five-year-old store. But looking on the positive side, “We knew what we would have done different the first time—and we got the chance to redo it,” she said.
The new and improved Big G Ace Hardware feels roomier, according to Dill. Not as roomy as a 280,000-square-foot store, but not every customer wants that much retail space around them. While Menards continues to experiment with groceries and other unusual product categories across the street, Big G offers pipe insulation in 10 different diameters; a minishowroom with windows, doors, and roofing displays; and an entire aisle devoted to commercial-grade fluorescent light bulbs. Contractors still have their own entrance and separate checkout on the left side of the store. Big G sells entire house packages and also operates an equipment rental center.
As expected, business fell off after Menards opened its doors on March 18. But sales began climbing back up three months later and are still heading in that direction.
Dill doesn’t seem particularly worried about Menards; she has plenty of other things to keep her busy. Interviewed during a torn ado watch last June, the 52-year-old store manager was busy directing incoming traffic from the garden center.
“When ever there’s a storm watch we have to bring the plants in from outside,” she explained. “We’ve had so many this spring, they should be able to walk in by now.”
Luckily, the twister bypassed Hastings that night but landed in Aurora, 20 miles to the east.
, OMAHA, NEB. —When Rick Russell purchased a 68-acre tract of land here in October 2006, single-family building permits in the Omaha area had already dropped 33 percent from the previous year. But the industrial-zoned property came with direct access to the interstate, a rail complex and the old Western Electric manufacturing plant.
Millard Lumber was scattered between a dozen buildings in the city’s old business area, where Russell’s father founded the business in 1948. Public streets separated one operation from another, making communications difficult. Russell’s two sons now worked in the business, and the family wanted to consolidate the Omaha operations under one roof.
A 580,000-square-foot former cable factory would do the trick. The mammoth building also made it possible to build an indoor, drive-through lumberyard, several of which Russell had visited back East.
Construction began in 2007, and this past spring Millard Lumber opened its U-shaped drive-through lumberyard designed by Ron Johnson of Portland, Maine. “Our [pro] customers’ most valuable asset is their time,” Russell explained. He pointed to a “greeter” in the lumberyard entrance who can radio ahead a contractor’s order. After the materials are loaded on the truck, the customer pays at an exit kiosk. Said Russell: “We can get them in and out in 10 minutes.”
The lumberyard adjoins a new retail store, designed with help from Do it Best. Both opened in March 2008. Three months later, Millard Lumber unveiled its 13,000-square-foot design center, which took the longest to complete. A Minneapolis architect was hired to do the main design, although Russell supplied his own inspiration: the “indoor jungle” at the Omaha Zoo.
“Our concept was to put in a winding path so that people have the opportunity to discover things,” Russell explained. Among the many surprises are a home theater room with cherry wood paneled ceilings and walls (“Every man’s dreamden,” he observed.), several working kitchens, a kitchen pantry vignette and cabinetry that ranges from Mission to traditional to ultra modern. One section of the showroom is devoted to fireplaces (gas and electric, installation available), and another contains a gazebo that displays different types of exterior siding and interior decking.
The Millard Lumber showroom was designed to wow most homeowners, and it hits the mark nicely. Russell held a separate grand opening for the public in June, and he’s hoping that, in his market at least, consumers will let go of their irrational fears about buying or remodeling a home.
“Yesterday one of my builders came in and said his customer had just cancelled her [custom home] project,” Russell said. “She said she thought it was the wrong time to build. But [building material] prices are low—it’s the best time to build. We have a solid economy in Omaha and good job growth. The downturn here is driven by fear and the media.”
Russell has been through other down turns before, and without a doubt, this one is the worst, he said. Single-family building permits in the Omaha region continue to drop, with declines approaching 50 percent. But the former banker has decided to focus on what he calls “the medium to long-term horizon.”
This horizon also includes green building materials: all three of the company’s lumberyards, including those in Waverly, Neb. (near Lincoln); and Des Moines, Iowa, are certified by the Forest Stewardship Council (FSC). All three locations offer installed sales, which started with insulation in 2003 and then branched out into framing, trim, siding, windows and exterior doors.
This year the company also opened its Turnkey Building Solutions division, a program that packages labor and materials, including components from Millard’s truss plant in Waverly. The program serves commercial as well as residential builders, although the emphasis is on wood framing. Builders and contractors make up approximately 85 percent of Millard’s customer base.
On the near horizon, the $76 million pro dealer has to figure out what to do with 145,000 square feet of unused space in the former electrical plant. Millard Lumber is also looking to develop or sell some of the land purchased for the new Omaha location.
Toro’s earnings decline in third quarter
Pointing to the weakness of the domestic economy, Toro reported fiscal third-quarter net earnings of $38.2 million, down 10.1 percent from $42.5 million last year.
New sales grew 3 percent to $492.6 million, up from $478.7 million the previous year, which the company attributed to the strength of its international business.
Professional segment net sales for the quarter increased 5.9 percent to $351.6 million, while residential sales declined 0.6 percent to $132.1 million.
The company expects overall economic conditions to remain difficult for the remainder of fiscal 2008. “In the current environment, we’ll maintain our focus on driving retail demand, managing inventory levels and addressing rising commodity costs,” said Michael J. Hoffman, Toro’s chairman and CEO.
Do it Best names e-commerce manager
Do it Best has hired Joe Caldwell — who has a background in e-commerce infrastructure and more than five year’s experience in network administration — as its e-commerce manager.
In this position, Caldwell will oversee the development, administration and operation of the company’s Web site, doitbest.com, including coordinating on-site advertising with vendors and shipping orders. The company’s customer service center, which helps members with logistics, shipping and product information, also falls under his jurisdiction.
Caldwell will report to Bill Zielke, vp-marketing, for the Fort Wayne, Ind.-based co-op.
Caldwell previously worked as facility manager with Brentwood, Tenn.-based American Color, one of North America’s largest full-service premedia and print companies, where he managed the print projects for Do it Best. Prior to that, he worked with Kruse International in Auburn, Ind., as a network administrator, coordinating the online and live auto auction administration.
Aresident of Fort Wayne, Ind., Caldwell is currently working toward his bachelor’s degree in internet information security at ITT Technical Institute.