True Value’s first 100 Days
CEO John Hartmann says the company is ‘off and running.’
Chicago — July 29 marks the 100th day since True Value’s members voted in favor of the ACON Investment deal that converted the company from a co-op to a no-stock-required hardware distributor. As part of the deal, True Value members kept 30% of the company, and received payouts totaling some $230 million.
True Value CEO John Hartmann pointed to a number of achievements in the first 100 days of the new deal. Topping them off was the return of equity to the dealers.
“Almost a quarter of a billion dollars have flowed back to dealers in the last 100 days,” he told HBSDealer in an interview at True Value headquarters in Chicago. “We’re still in the early days, and we’re seeing a lot of that money reinvested in retailers’ business,” including in the form of new branch locations, paint programs and inventory purchases.
During the first 100 days, a number of boxes have been checked:
- True Value delivered $210 million in capital to shareholders within three weeks of the close;
- The company mailed patronage dividend checks in late July, a month ahead of schedule;
- The company sold more Customized True Blue assortments in the last 90 days than were sold at the previous market; and
- In the first half of 2018, 69 new customers have come on board, with the vast majority post transaction. That figure is well above the 19 new members who came on in the first half of each of the two prior years.
Of those roughly 70 new customers, a third of them are going to fly the True Value flag,” he said. “So, we are off and running.”
There’s no surprise, he added, that some of the ambiguity and uncertainty during the transitional period from co-op to distributor resulted in lost business. Some customers were unsettled by the rumors, he said. But since the members voted 84% in favor of the deal, new business has more than made up for the lost time.
Meanwhile, Hartmann remains bullish on the growth opportunities of the independent retailer who invests in their business and maintains a relevant offering of products and services. “I believe firmly in the capability of our independent retailers to continue to innovate and adjust as they have for decades and generations,” he said. “Amazon isn’t the first challenge for these guys.”
Neither is the big box. And True Value has seen countless examples or dealers of all stripes who continue to thrive in the shadows of Home Depot, Lowe’s and Menards.
Hartmann elaborated on the strength of the independent. “It’s the differentiated service model. Whether it’s a professional contractor-based model, or a core hardware store, the successful independent typically (though not always) operates out of a smaller format; they are embedded in the community, they know their customers. They offer quick in and out. And they not only have the products that customers need, they have the knowledge and ability to explain to customers how to use them.
“Those attributes can’t be duplicated by a drone,” he said.
Looking ahead, Hartmann said he can’t wait for the company’s first post-deal market – the True Value Reunions in Denver in late September. “I’m fired up about Denver,” he said. “Our message will be: ‘Here we are, nothing’s changed. And you’ll see the same passion for the independent retailer.”
And looking back at the first 100 days since the transaction, Hartmann’s assessment is one of business as usual, and business fuel-injected with previously untapped equity for True Value dealers.
“We have met every commitment that we made to our shareholders and members of the cooperative. Our premise was to continue to constantly serve our existing customers while we get stronger as a whole company by adding new customers. And we are just keeping our mouth shut and doing exactly what we said we were going to do.”
BlueLinx opens a new chapter
With a blockbuster merger settling into shape, CEO Mitch Lewis sat down with HBSDealer.
Atlanta-based BlueLinx Holdings makes its living by moving bulky building materials across long distances. It knows logistics. It knows building products. It knows trucking. And these days for Mitch Lewis, the CEO who orchestrated the acquisition of Cedar Creek to create one of the largest wholesale distributors of LBM products in the industry, there’s another skill that’s been elevated to mission critical.
That skill is communication.
Since the deal hit the books in April, the company began what it expects to be an 18-month process of merging and integrating two large building products distributors. With more than 70 locations in 40 states, the combined company reached about $3.2 billion in 2017 sales.
Last month, the company announced its decision to move ahead under a single brand — BlueLinx. Many more decisions remain.
“For an acquisition of this nature, one of the things you do, in my experience, is you over communicate,” Lewis told HBSDealer during a recent interview that covered a wide range of industry topics. Here are some of the highlights.
On the first steps toward integration of BlueLinx and Cedar Creek:
“One of the early moves we made= — and we think it was the right thing to do — was split up and hit every facility in overlapping markets. [COO] Alex Averitt [Chief Transformation Officer] Shyam Reddy, [Vice-Chairman of Operating Companies] D. Wayne Trousdale and I in one week developed that sense of community early. We told our team what we could tell them. We told them what we didn’t know. And we told them when we could tell them what we didn’t know. And I think that communication helped reinforce our culture of honesty and transparency.”
On the vision behind the acquisition:
“One of the things we said from the outset may be counter-intuitive from a synergy perspective. The goal here is to grow the business, not to shrink the business. The number one benefit is the sales growth opportunity.”
On the legacy strengths of the company:
“Cedar Creek had a tremendous entrepreneurial spirit, and they had experience acquiring companies – both of those factors will serve the consolidated company and make us better. As for the legacy BlueLinx business, it had incredible knowledge as it relates to products and analytics. And from a logistics standpoint, BlueLinx is state of the art.
“What may have surprised me most is how the core values of the organizations were very similar. For both companies, the customer centric orientation at the local level were dead on.”
On the branding decision to unify under the BlueLinx name:
“Generally, our customer base understands who we are. And most importantly, they want to talk to the same people that they’ve talked to in the past. They want to know that they’re going to get great service, competitive pricing and someone who is knowledgeable from a product standpoint. The name does matter to customers. But we’ve verified that the branding isn’t as important to our customers as quality service and quality products.”
On the growth challenges facing the industry:
“Labor right now is problematic. It’s challenging. And it probably puts a restriction in the short-term on the highest level of accelerated growth. We see manufacturers trying to develop solutions and products that enable cost savings and reduce hours at the job site.
“Meanwhile, tariffs are challenging in that they create uncertainty. I don’t think anyone knows exactly what the tariffs are going to look like, a month from now or a year from now. And uncertainty in business is never good — especially in housing.”
On Amazon and industry disruption:
“Most of our products are flatbed friendly. If you deal with products that can be picked up by a drone, then you’re definitely more at risk – much more so than a company that ships 20 2x4s that are 16 feet long.
“Another point to make about Amazon; they have so much access to capital, if they decided they wanted to go after a space, they would be a formidable competitor. However, when a disrupter comes into a market, they typically aim for a space where they feel they have a lot of margin opportunity. Would you chase the pharmacy industry, the retail electronics industry or the local dealer industry selling lumber? The chances are your margins are going to be better in pharmacy and electronics than they are here.”
On the importance of variable contribution margin:
“A lot of times, you’ll run into this view that if you move a lot more volume, you make a lot more money. And that’s not necessarily the case. Recognizing the importance of variable contribution margins has played a significant role in our revival. It helps us track how much incremental profit we make on each incremental dollar we sell. So, if you send out one more unit, how much do you make on that? Obviously, if you send a truck one mile or 200 miles, then your profitability differs dramatically. So, understanding the variable contribution margin is really important.”
On the importance of relationships in the LBM industry:
“Relationships really matter, everywhere. The way it moves from theoretical to real is when you have a sales person leave and take a lot of business with them. If that happens a few times, it certainly makes it feel like we’re in a relationship business.”
On innovation at BlueLinx:
“For us, innovation is primarily tied to one of our core competencies: logistics. We also try to leverage technology and have put tablets in the hands of our sales force, so our team can order from the road and customers can better understand the inventory and products we have. We’re on the forefront of some of the things being done in logistics. We’re always thinking about ways to lower the costs in the supply chain. But developing the next iPhone? That’s not us.”
Do it Best names national logistics manager
Do it Best Corp. announced the promotion of co-op veteran Steve Rose to national logistics manager.
Rose has served as safety director since joining Do it Best Corp. in 2011. In that role, Rose was responsible for the safety of the co-op’s 1,500-plus employees across its 10 locations, managing its safety program, worker’s compensation and other related initiatives. He also contributed to initiatives that improved loss prevention and reduced waste in the distribution process while consistently enhancing supply chain effectiveness.
“I’m incredibly honored to join the outstanding Logistics team at Do it Best,” said Rose. “I’m excited to return to logistics. It’s where my career began and developed. Technology is bringing about rapid and important changes, as well as opportunities for us to build on our already industry-leading distribution excellence and continue to deliver results for our members.”
Prior to joining Do it Best Corp., Rose worked for 10 years in operations for Wal-Mart distribution. During that time, he focused on enhancing operational efficiency, project management, strategic planning, safety initiatives, and staff training and teambuilding.
“With his extensive experience in distribution, safety and strong institutional knowledge, Steve is the perfect individual for this senior leadership role,” said Tim Miller, VP of logistics for Do it Best Corp. “The effort and energy he’s put into building relationships with our logistics team members will serve him very well as we work to continue enhancing our distribution and supply chain excellence.”