The Top 200, signs of progress
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.
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
“[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,
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
Look who’s in charge
The Pro Dealer Industry Scoreboard command center here at 425 Park Ave. was humming with the sound of survey submissions when the editors noticed something interesting.
Several respondents were answering a simple question about corporate structure as if it were a profound inquiry into corporate culture.
The simple question was: “Who’s in charge?”
And the unexpected — but in retrospect — perfectly reasonable answer we saw again and again was: “The customer.”
Maybe there’s a connection between the enthusiasm or discipline or salesmanship in that answer and the ability of the Top 200 to generate a combined 6.4% increase in sales compared with the previous year.
The first 100 companies — from ABC Supply to Barr Lumber — are listed on pages 16 and 17. The full list of the 200 leading lumberyards and building material dealers is available at Homechannelnews.com. It’s free. All you have to do is register.
In addition to a combined sales gain, companies on the Pro Dealer Industry Scoreboard showed a strong ratio of sales gainers over sales decliners. Using data based on actual reported 2011 sales figures (as opposed to HCN estimates), 70% showed growth compared with only 8% that did so two short years ago.
You’ve probably been trying to forget this, but remember that 2011 was the weakest year on record for single-family housing starts, which for years have been the bread and butter of the typical pro dealer. Construction of new homes was the lowest since the government began keeping track in 1959, and yet, the Top 200 as a group moved in the right direction.
How did this happen? Many reasons. During downturns, a strong-get-stronger principle takes effect. Weaker players exit markets, expanding opportunities for former competitors. And consolidation or acquisitions boosts the top line of the top 200. Pricing, of course, is a factor, lifting all boats. For instance, the NAICS 4441 category of retailer — building material and supplies dealers — saw a 3.0% sales increase in 2011. Even at the big box, the building materials category at Lowe’s in 2011 showed the biggest percentage increase of all the retailer’s 17 merchandise categories.
All this tells you something else: Somebody is doing a lot of remodeling.
As builders changed gears throughout the downturn, the best suppliers were right there with them, supporting them and anticipating their needs. In that spirit, Home Channel News invited five forward-thinking lumberyard and building material executives to share their thoughts in a kind of remodeling roundtable.
Listening to the customer drives success on the Industry Scoreboard. And we believe it is crucial to our success as a media company. Home Channel News recently undertook a reader survey, the results of which have already sent us down the road to improvement. (More on that later.) You can still take the survey at HCN.com. Or just tell us how we’re doing. You’re in charge.