Remodeling roundtable

BY Brae Canlen

Still operating during a residential construction downturn, pro dealers are increasingly turning to remodeling to lift their top and bottom line. Spending on renovations is experiencing healthy growth in 2012, according to the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. In their most recent quarterly forecast, the researchers pointed to stronger pending home sales and continuing low interest rates as contributors to an expected 5.9% rise in spending on home remodeling projects this year.

The National Association of Home Builders, which also surveys remodelers, found that both kitchen and bathroom renovations have increased 17% from two years ago. Bathroom remodels were cited as a common job by 78% of remodelers and kitchen remodels at 69%.

The “let’s stay put” mindset of homeowners is certainly contributing to the trend, with barriers to move up home sales and purchases slowing down the pace of new construction. So home builders have morphed into home remodelers, and LBM dealers have watched their mix of customers shift. In some cases, this required a bit of tweaking in product assortments and a sharpening of services. In others, dealers served remodelers the way they always have — but made a few adjustments on price.

Of course, customers vary from region to region, which is why Home Channel News talked to five different LBM dealers in different areas of the country.

Here are our dealers, and what they had to say:

Justin Ellis, Corporate sales manager
Builders Do it Center, Roswell, N.M.
Builders Do it Center recently rebranded itself after operating its two stores under separate names: Roswell Lumber Do it Center and Artesia Lumber Do it Center.

Greg Belcher, Sales manager
Edward Hines Lumber, Buffalo Grove, Ill.
All four of Edward Hines locations are in the Chicago suburbs, although the company ships materials regularly into the city. Part of US LBM Holdings, Ed Hines serves remodelers, builders (custom and production) and commercial accounts.

Ron Labbe, President
Naples Lumber & Supply Co., Naples, Fla.
Naples has one of the highest concentrations of Fortune 500 individuals living within its city limits. So the recession had less of an impact on this one-unit dealer, which deals almost exclusively with designers or contractors. 

Brandy Souza, Assistant general manager
National Lumber, Mansfield, Mass.
In addition to a millwork shop and truss plants, the eight-unit New England pro dealer operates kitchen design showrooms with their own website: Brandy Souza oversees 11 other kitchen and bath designers.

Rick Roberts, Co-owner
Sunnyvale Lumber, Sunnyvale, Calif.
Located outside of San Jose, Sunnyvale Lumber’s fortunes are closely tied to those of Silicon Valley. Although they deal mostly with contractors, the end customers range from Google millionaires to IT executives who lost everything in the tech bust. Rick Roberts, who operates the lumberyard with his two brothers, is active in lobbying at the state capitol for a more business-friendly environment in California.

Are your remodeler customers becoming more demanding?

Greg Belcher: Yes. They’ve always been demanding on service, but now you have to hit the [right] price. More and more, remodelers have an open book with their customers; they line itemize their bids. They tell us. ‘My homeowners just went to Home Depot or Lowe’s or Menards.’

Justin Ellis: They’re becoming more conscientious about price. There’s been a real split between the high and the low, and it goes across all [product] categories. There’s not a lot of middle ground on price anymore.

Ron Labbe: I don’t believe so. The demand has always been there for quality and service from our customers, who specialize in high-end homes. We understand them and their timelines, so we didn’t have to adapt.

Brandy Souza: The biggest handholding is through the budget [process]. We’re sharing our cabinet and countertop [total spend] with the appliances. So we have to pay attention specifically to what they want and what their budget is.

Rick Roberts: Yes. All my service- and quality-oriented guys have become conscious of price. It’s a more competitive bidding environment out there.

Name one or two products that you’ve added to your assortment that has gotten your remodelers excited.

Belcher: Factory-finished siding, like LP SmartSide and HardiePlank. People are upgrading their siding, and they don’t want junk back on there. [Also], the wife can pick from 300 colors.

Ellis: MI Windows and Doors. We’ve had a good deal of luck with that. Around here people tend toward vinyl and aluminum, and it’s a very high-end vinyl.

Labbe: Andersen has come out with some new [window] products, the 100 series, that sold really well. They came and did a seminar for our customers. [Also] people are looking for different architectural hardware than [what’s on] their neighbor’s house. They don’t want brass anymore.

Souza: We’ve done a lot more with our [kitchen and bath] hardware, like adding the Berenson & Schaub line. Customers no longer want stainless steel or brushed nickel [knobs and handles]. They want to put something on their cabinets that they like to see every day.

Roberts: Tube skylights — those sun tunnel things — were popular for a while. Kleer trim board has done well, especially for facia. Exotic hardwood decking, like ipe.  

Do you think remodelers use social media for work purposes, and are you reaching out to them through those channels?

Belcher: We tried to push it, hoping our customers would want it, but they’re not interested. Most of our remodelers don’t know what Twitter is, and they use Facebook to get back in touch with their high school friends.

Ellis: We haven’t seen any really active use [of social media] by our customers. Sometimes we send our customers to YouTube for instructional videos on how to take on projects or solve problems. A lot of manufacturers have great product info and installation videos on there. Some customers are starting to use Pinterest to find and organize pictures and ideas of projects they’re planning, especially kitchen and bath. It’s really an exciting new tool. Photos are so powerful and useful to our customers. [Ellis also writes a blog about his experiences in the LBM industry at]

Labbe: No. We’ve tried to direct customers to our website, but we’ve found it to be marginally successful. But we still [promote] it. Contractors will put their projects up on YouTube, though. 

Souza: We’re on Facebook, our designers blog every week, and we do have a Twitter following. We’re hoping customers can find us when they have specific questions, and sometimes they do. We can help with problems like [remodeling] an L-shaped kitchens or a small kitchen.

Roberts: It’s evolving, so we’re watching it. You get a complete cross-section in construction. Some guys are very [savvy], and other guys think voicemail is high-tech.

How do you compete with the big boxes?

Belcher: We have certain categories they can’t compete in. We give remodelers more options, and that’s where we seem to excel.

Ellis: Selection. Home Depot keeps seven or eight SKUs of shingles, and I have 32 in stock. We price aggressively on power tools. But we’re not in every category, and we use only two or three manufacturers. 

Labbe: Most people know we’re a little less expensive than Home Depot and Lowe’s on moldings. They are definitely higher on special orders. That’s where they make their margins. For example, doors. We have a door shop right on the premises, [so] we’re much quicker to react.

Souza: We’re not order-takers. Our designers are all degreed, so you’re not getting someone from the plumbing department. We also keep up on the latest trends by going to trade shows.

Roberts: I compete with them on price. We sell stuff to Lowe’s and they mark it up and sell it to a customer [who] thinks he’s getting a great deal. [Although] they can be challenging on some items.

Tell me something about your local market.

Souza: Our customers have very specific tastes: white or gray cabinets, clean lines. No molding or raised panels on the drawers or cabinet [doors]. We call it the New England style. If we do something on Martha’s Vineyard or Cape Cod, it’s always white cabinets.

Labbe: We have a very sophisticated customer base. This is not their second home. This is their fifth or sixth home. Homes get remodeled even if they’re five years old. Our customers are not shy over spending $10 million or $15 million on upgrades when they move in.

Tell me something unique about your local market. You’re located in the heart of Silicon Valley.

Roberts: Our customers are doing a lot of tear-downs and thrasher houses, where they knock down the home and start new. My salesmen call them starter castles.

In Chicago, does all the [Teamsters] union unrest affect your business?

Belcher: Picketed job sites have limited our delivery and unloading service, so that’s been a challenge. But that’s closer to Chicago. Once you get outside the city, there are very few residential builders using union framers. It’s been really hard for the carpenters’ union. 

Your market is already unique in one way: Many people believe that an alien spaceship crashed in Roswell in the 1940s, and the government covered it up. What do you think?

Ellis: Our Roswell store is two blocks from the International UFO Museum. I believe that something happened in Roswell, N.M., in July 1947. It could have been extra-terrestrials [landing]. Could have been a weather balloon. I just don’t know for sure. But we got rid of a bunch of fluorescent green hoses once when there was a UFO convention in town.


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Who do you view as your biggest competitor?

The Top 200, signs of progress

BY Ken Clark

The 2012 Home Channel News Pro Dealer Industry Scoreboard reveals that the nation’s top 200 leading lumberyards and building material dealers are collectively moving forward.

There’s no doubt that pockets of pain remain in the lumber and building material retail and distribution industry, as housing construction advances ever so slowly from the record lows of 2011. But each day the positive news seems to take a step or two ahead of the negative news.

Here’s the good news from an analysis of the Scoreboard.

• The 200 companies showed a combined estimated sales increase of 6.4%, up from $31.56 billion to $33.58 billion.

• Collectively, companies are generating more sales per unit, up from an average of $5.05 million in 2010 to $5.23 million in 2011.

• Despite a year of record-low single-family housing starts, data from companies that shared data (as opposed to HCN estimated) reveal that 80% of the Top 200 showed sales growth ranging from 0.8% (San Marcos, Texas-based McCoy’s Building Supply at No. 12) to 64% (Green Bay, Wis.-based US LBM Holdings at No. 13).

The bad news for companies is that the long-awaited economic and housing market recoveries are moving at frustratingly slow paces.

The 2012 Pro Dealer Industry Scoreboard ranks lumberyards and building material dealers by sales in the most recently completed fiscal year. Research has been ongoing since February, with email surveys and telephone follow-up generating the majority of the data. There are only three publicly held companies on the 200.

One of those public companies is Builders FirstSource, ranked No. 7, a company whose quarterly reports are seen as a kind of bellwether for the building supply industry. The Dallas-based southeastern pro dealer in 2011 saw sales gains of 11.2%. And it finished the year with an even stronger top line — up 31.0% in the fourth quarter. However, profits remain elusive, as the company posted a $65 million net loss in 2011.

Looking beyond the top 200, the U.S. Census Bureau’s sales estimates for all companies classified as “building material and supplies dealers” (NAICS 4441) showed a sales increase in 2011 — the first year-over-year increase since 2006.

“Optimism is returning to contractors for the first time since the recession,” said Rob Rourke, L.E.K. Consulting’s VP growth strategy.

Acquisition-minded LBM and specialty distribution companies US LBM Holdings and SRS Acquisition appear in the fastest-growing chart, along with National Lumber, which shares some of its remodeling thoughts in a special report beginning on page 20.

There are many interpretations of the metrics. Chief among them is that the dealers that have survived the drastic building downturn have emerged with battle-tested business models and loyal customers. If they can get a little from the macro-economy, the theory goes, then they are poised to make a deep run into positive numbers. 


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Who do you view as your biggest competitor?

Readers Respond


The economy, after further review

“Right now it looks like I was too conservative in my prediction. (HCN, Readers Respond, January 2012) We are internally adjusting our expectation higher. Hail and windstorm activity has certainly had a positive influence. Housing starts in DFW, Austin, San Antonio and Houston have reached double-digit increases over last year, but construction does appear to be starting to back off a little and level off. Overall, we now believe Texas may achieve an 8% to 10% rise due to the increase in multi-family construction, about three to five points higher than I originally thought. Nationally things appear to be better due to the tremendous rise in multi-family construction, not all of which is true demand-based. There is a very favorable investment climate right now to build and sell rental property.

“An economic service I trust and follow predicts 10% to 12% gains annually, but I still see things more in the +6% to +8% range. All of this is without federal stimulus. If the Feds stimulate, we will do better — for a while.”
— Byron Potter
Vice-chairman & CEO

Dallas Wholesale Builders Supply, Inc.

The future of the penny at POS

“Like the horse-drawn carriages, Dodo birds and lots of other bygone things, the penny has outlived its usefulness and reason for being. It’s about time to eliminate it!”

— Paul Siegel

GoPro Construction

“[Banning the penny is] not a good idea. The larger the increment, the larger the cost. At retail, sales tax payments, income tax payments all would round up so the end consumer pays the price.

“It’s like the 3.99.9 cost on gasoline. Leave the 10th of a cent there; or in the transaction sense, leave the pennies there.”

— Charles “Chaz” Mott

“My father received a personal citation from President Franklin Roosevelt for his idea to mint pennies out of zinc, instead of copper; thus diverting the copper to ammunition for our troops. Bus and streetcar drivers hated those zinc pennies, as riders often mistook them for dimes and they jammed the fare boxes. Several weeks after my father passed away, I received a letter from a former infantryman from WWII who read of my dad’s passing, who wanted to thank my father for probably saving his life. It seems that infantryman was saved by the fact his foe ran out of ammo, and he still had about 150 shells left to fight on. No one can be sure, but I thought about your articles on the passing of the penny and it’s meaning to my family and that soldier.”
— William A. Keller,
Keller Mfg. Co. dba Gardex,
St. Louis

Taxes and the Internet

“We are both a storefront retailer and an e-tailer. Several years ago, Kansas (where we are located) passed a streamlined sales tax that was supposed to simplify the sales tax so that Internet sellers could easily collect sales taxes. I can tell you that the simplified tax based on shipped-to-location is absolutely impossible to work with. We have very few Internet purchases made where the buyer lives in Kansas, so we don’t want to spend thousands of dollars to buy a program to figure the sales tax due on those Kansas sales. The four to five Kansas sales we do have adds about 45 minutes to an hour of time to look up the rate on the computer every month. I do not have a good solution to the sales tax mess, but I understand how it hurts my store when another retailer can offer the exact same goods I’m offering without the Kansas sales tax, because they don’t have a Kansas location.

“I understand that, because I sell the same goods in their state without collecting their state sales tax. I hope we can come up with a solution that keeps both of my operations in business.”

— Gary Fry

“No one wants to pay more taxes. But, in this case it’s not more — it’s the fair and right way to level the playing field. I have a brick-and-mortar store, and the Internet is stealing my customers with the lure of ‘no tax and free shipping.’

“What is this? If there is no tax for one, then no tax for all.

“I can compete with anyone, but no tax is not an option. Make it right. Make it fair for all retailers.”

— David Wood

Owner, Smitty’s Lawn & Garden Equipment

Olathe, Kan.


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Who do you view as your biggest competitor?