Top 350 pro dealers cope in a difficult housing market
When the Chinese Year of the Dog came to an end on Feb. 17, 2007, some pro dealers looked at their 2006 sales figures and saw an apt comparison. Sagging lumber prices and dwindling housing starts had a negative effect on many dealers’ revenues. But overall pro sales for the industry’s top 350 players, according to HCN’s annual survey, grew by 9.0 percent, to $55.98 billion. View the top 350.
Although some dealers posted double-digit declines, others were able to break even or grow their business through the downturn. Of the 350 dealers on the list, 119 reported revenue increases, 77 experienced declines and 154 companies are listed with flat sales.
In terms of rankings, Pro-Build, Stock Building Supply, 84 Lumber, BMHC and ABC Supply still occupy the first five positions among lumber and building material dealers. Several of the Big Five continued making acquisitions through 2006, which helped boost their revenues. Altogether, they accounted for 35 percent of the Top 350 sales.
One of the businesses acquired was Rowley Building Products, a 10-unit chain of lumberyards in New York’s Hudson Valley. Rowley’s owners decided to join Strober, a division of Pro-Build, when they noticed national builders moving into the area. But by the time the deal was finished, in July 2006, single-family permits in the New York, New Jersey region were on track for their weakest year since 1996.
“[Strober] has been around awhile, and they understand the cyclical nature of the business,” co-owner Brian Rivenburgh told HCN at the time.
Most of the pro dealers on the Top 350 list have been through housing downturns before, the last one beginning in 1995 and lasting three years. But this downturn is different, with production builders pulling back on the reins quicker than anyone can remember.
“Literally, in early July, it was just as though somebody turned off the faucet,” said Builders FirstSource CEO Floyd Sherman, speaking to a group of analysts last October.
Builders FirstSource showed a decline of 4.2 percent in sales last year, despite expanded manufacturing capacity in Greenville, S.C.; a new lumberyard in Lake City, Fla.; and an acquisition, Freeport Lumber, in the Florida Panhandle.
Florida dealers listed on HCN’s Top 350 scorecard showed a pattern of similar results, with 14 out of 18 companies reporting sales that were flat or down for the year. But the story behind the numbers is one of robust sales in the first half of 2006 followed by steady declines in the last two quarters.
“By the end of the year, many of our dealers had [experienced] a solid year,” explained Bill Tucker, president of the Florida Building Material Association.
Of course, 2007 is another story. “It continues to fall off the roof,” Tucker said. “I’ve spoken to dealers whose sales are off by 40 to 50 percent.”
One of the bright spots on the building landscape — commercial construction — is doing well in Florida, according to Tucker. Dealers across the country are turning in similar reports. O.C. Cluss, a nine-unit pro dealer based in Uniontown, Pa., acquired an Ohio truss manufacturer last year that makes, among other products, steel trusses used in commercial construction. Other Cluss acquisitions in the past two years include a glazing operation and a wholesale plumbing supply company, both of which serve the light commercial market.
O.C. Cluss reported a 30 percent rise in sales in 2006, from $85 million to $110 million.
Even the big guys, the ones who grew more muscle during the production home cycle boom, are turning toward commercial work now that times are lean. BMHC’s construction services division is “pursuing limited commercial construction work where it makes good business sense to do so,” according to SelectBuild president and CEO Mike Mahre.
Although the first half of 2006 was a busy time for acquisitions, M&A activity tapered off toward the end of the year as the outlook grew dim. Stock Building Supply announced employee layoffs in June and November, and the other major LBM players quietly reduced their work forces. Pro dealers who had relied on tract home builders for revenue began looking at multi-family housing, the remodeling contractor, and in some cases, the consumer.
Chip Mortimer, president of Mortimer Lumber in Port Huron, Mich., served home builders from his four locations in southeastern Michigan during the boom days. But with single-family building permits in the Detroit metropolitan area down by 44 percent this year, Mortimer calls his housing market “the worst place to be right now.”
Yet business is holding steady at this $25 million chain, which has shifted its customer mix by redirecting advertising dollars and beefing up its kitchen cabinet and decking division. “We never abandoned our remodelers and our consumers, so business is still strong,” Mortimer said. “The customer count and the transactions are just different.”
Dealers also turned to multi-family housing as single-family starts dried up. Although the condo market has weakened considerably, there are still pockets of intense multi-family building activity in some urban centers. Condo and apartment projects are going up all over downtown Seattle and Bellevue, Wash., some with commercial mixed in, all fed by the job growth in those cities.
In San Jose, Calif., ORCO Construction Supply store manager Mark Tabaldi said his sales figures are running 12 percent to 15 percent higher than last year’s. He attributes the growth to commercial and multi-family construction in the Bay Area.
“Everybody is going up,” Tabaldi said, referring to high-rise residential projects like those being built next to a Bart station near ORCO’s corporate headquarters in Livermore, Calif. “There’s a lot more hardware in these kind of projects, and the order is always pretty big,” he explained. Threaded rods that go between the floors of an apartment building — commonly known as a “hold down system” — can add up to $50,000 for a large project, according to Tabaldi, who isn’t mourning the slowdown in single-family construction.
For more on the Top 350 pro dealers, read the Aug. 27 issue of Home Channel News.
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Class action lawsuit to proceed against Lowe’s
A California state court of appeals has granted class action status to a group of current and former Lowe’s employees suing the retailer for unpaid overtime. The California Appellate Court 2nd District reversed a lower court’s decision, clearing the way for the case to proceed on behalf of hourly workers employed by Lowe’s since Oct. 29, 1997.
The original complaint, filed in Los Angeles Superior Court in 2001, claims that Lowe’s restricted or refused to pay overtime but required employees to work “off the clock” until their assignments were complete. The Los Angeles trial court ruled in 2003 that the case should be adjudicated on behalf of individual plaintiffs. It also denied a motion to compel Lowe’s to provide the names and addresses of all its hourly California employees.
The three-person appellate panel disagreed, granting class action status to that case. The potential number of plaintiffs could exceed 25,000 people, according to court documents.
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RONA spars with Greenpeace over forestry issues
Following a report from environmental group Greenpeace condemning 35 major retailers — including RONA — for buying wood logged from upper Canada’s Boreal Forest, RONA issued a statement saying “sustainable development” has long been a priority of the Canadian home improvement retailer.
“The company has a responsible purchasing policy that applies to all of its products,” RONA said in a statement. “With respect to forest products, the company does not buy any product derived from endangered species and favors the purchase of products that bear Forest Stewardship Council (FSC), Canadian Standards Association (CSA) and Sustainable Forestry Initiative (SFI) as well as ISO 14001 certifications.”
RONA said it has planned to release a “sustainable development plan” in October. The company also said it has been in talks with forest protection groups, including Greenpeace, while developing the plan.
Greenpeace named several other companies, including Toys”R”Us and Best Buy, as being customers of logging and pulp companies that the organization said contribute to “destructive logging” in Canada’s Boreal Forest. The forest is one of the largest intact forest ecosystems in the world.
The Greenpeace report also blames the government of Ontario for protecting less than 9 percent of the forest, and the government of Quebec for protecting less than 5 percent from industrial development.
RONA is one of Canada’s largest distributors and retailers of home improvement products, with 671 franchise, affiliate and corporate stores.
It seems like no one has a
It seems like no one has a sure idea of who's to blame for the logging problem. What I do know is that North America is no longer the powerhouse for home improvement products manufacturing that it use to be. Ontario needs to fix this issue in a timely matter so that North America does not fall further behind. www.sabineshome.com