LUMBERYARDS

Builders FirstSource sales rise 7.6%

BY Andy Carlo

Builders FirstSource (BFS) reported third quarter 2017 net sales of $1.9 billion, a 7.6% increase from third quarter 2016 net sales of $1.74 billion.

The Dallas, Texas-based pro dealer also reported a third quarter net income of $39.8 million compared to a net income of $125.5 million for the third quarter of 2016. Net income for the third quarter of 2016 was weighed down by a tax valuation allowance of $117.6 million against BFS’s deferred income tax assets offset by $53.3 million in debt issuance and refinancing costs.

2017 year-to-date net sales were $5.3 billion, a 9% percent increase over net sales of $4.8 billion for first nine months of 2016. For the first 9 months of 2017, BFS reported a net income was $81.5 million compared to a net income of $137.9 million during the same period a year ago.

“We proved our agility to respond to unexpected challenges, including two major hurricanes and commodity inflation,” Floyd Sherman, BFS CEO. “The company is positioned to capitalize on the growth opportunity from our national footprint, our strong customer relationships and our end market diversity. We continue our commitment to investments in strategic growth initiatives, including building our sales force and expanding our manufacturing footprint to grow shareholder value, while making further progress in paying down debt and reducing our leverage ratio on a year over year basis.”

Sherman has lead BFS for the past 16 years and will step down as CEO, effective Jan. 1, 2018

“The outlook for Builders FirstSource for the balance of 2017 and the years ahead is very promising,” said Chad Crow, BFS president and chief operating officer. The new residential housing market continues to show steady growth in demand.  Against this backdrop, we continue to invest to further leverage our scale, to broaden our product portfolio, and expand our geographic and end market diversity to capture growth in the coming years.”

Builders FirstSource is one of the nation’s largest pro dealers with more than 400 locations in 40 states. 

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84 Lumber: Meet the Owner

BY Ken Clark

“I only know one business, because I started here when I was 5,” Maggie Hardy Magerko said. 

The owner and president of 84 Lumber took over leadership from her father, Joe Hardy, in 1992 at the age of 26, and she led the lumberyard through both the go-go building boom and a devastating housing downturn, and now the industry comeback. 

In a forward-looking, wide-ranging interview with HBSDealer, Maggie talked passionately about the importance of technology, her admiration for her “guys” (a term that applies to both men and women who work at the company’s more than 260 stores), and the biggest adrenaline rush of her career. 


What’s the next big story to come out of the company?

One thing about us here at 84 Lumber: It’s never business as usual. If everything around us is business as usual, that’s when it’s time to disrupt things and cause some chaos. That’s where the biggest opportunities are. You don’t sit around and wait until things are bad. I like to disrupt things when things are good to make them even better. 

In 2018, operational efficiency and technology are going to be the key for us. And that’s where my money is.  


How do you describe your leadership style?

I’ve been doing this since 1992. And it’s up to me as the leader and the owner, to remove obstacles that prevent our people from accomplishing their goals. Information technology is just one area. I want to do anything I can to make things smooth, to grease the works. I am the grease, and that’s my mission. We come together and make a decision. We hope it’s the right decision. If it’s not. Oh well, we screwed up. Let’s make the right decision next time and move forward.

As far as going out and opening another 100 stores, that’s not very fun to me. Fun is going to be making our stores more efficient, and a better experience for our associates and our customers. 

We talk a lot about giving tools to our people and making 84 Lumber much better as a company, and today a lot of those tools are in the technology and IT world. And I’d be a hypocrite if I didn’t try to be the leader that makes that happen for my people.


Does that mark a change from the early days of 84 Lumber? 

I guess the biggest difference is that I don’t really care who screwed up. I really don’t have time for it. I really don’t. I want to focus on the positives and move forward. My dad is 94 years old, and in his era, it was management by intimidation. I manage by encouragement.

I don’t necessarily go around and shake hands and kiss babies and go on to the next facility. I’m not on a campaign trail. I go where I’m needed. And unfortunately, it’s not always a pleasant situation. I like to work with people, especially when times are tough. It’s very guttural, very real, very personal. 


What about the physical stores? You can’t help but notice how those have changed from the early days of 84 Lumber. 

That’s great because I helped design them!

So, yes, we need facilities. I didn’t want to go around and build little tin cans. We listened to our customers and we designed facilities for our customers. And yes, they’re absolutely very different from before. 

In the old days, we would buy an eight-acre lot and build on four of them. And then we would say, ‘if you can hit these benchmarks, then in two or three years, you’ll get more resources.’ But after the depression — and I call it a depression — we’ve become more aggressive. We want to go into a market with all of our guns loaded — not only with our people, but with the EWPs, the mill shops, the kitchen design showrooms, installed sales. All of these services that make us ready to compete.


There was huge interest in the 84 Lumber Super Bowl commercial, both in the industry and outside of the industry. What did all of that teach you?

I learned just to be me. The whole experience was humbling and empowering. I had no idea the impact it would have, from all walks of life. I was in Manhattan the next day (Feb. 7), and I had strangers come up to me and start crying. The thing with the wall, with Trump, with politics and immigration — it all came to a head. That wasn’t planned. And what I find is people have a tough time talking about it, even to this day.

I had no idea it would be that enormous. It rocked my world. And it’s opening doors in a way that I never would have expected. It was an adrenaline rush that I never experienced in my life. I really wanted 84 Lumber to get known, in a big way. The time was right, and we did it. 

The moon and the stars lined up for us. I was really angry at first when I found out that Fox censored our commercial, but from a marketing standpoint, it turned out to be an advantage. We had lightning in a bottle.


What’s the best part of your job?

I have to tell you, when I walk into a store, and I see the manager, and their families tell me ‘thank you for allowing us to be part of a company to better our lives,’ there is no better high, and it’s still that way today.

If I’m able to touch somebody in any way, to be able to affect somebody, I take that in a very humbling way. The older I get, it’s what life’s all about. I hope we make a positive impact with my company and with our people. 

It’s fun. I love my guys. When I’m down in the dumps, all I think about are my guys at 84, and I get the biggest smile on my face.


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See more coverage of 84 Lumber in this special issue of HBSDealer.

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84 Lumber: Meet the Manager

BY Ken Clark

Bridgeville, Pa. — The work day begins at the crack of 6 a.m., but the work actually begins at the end of the previous day, when 84 Lumber crews plan ahead for the early morning rush.

“You want to make sure all of your materials are already built and ready to go,” said John Hay, manager of the 84 Lumber facility in Bridgeville, Pa., which in some ways is a flagship in the 84 Lumber fleet. “We probably ship 30 to 40 loads every day. It makes it a lot easier for everyone if it’s all laid out nice and neat.”

That kind of attention to detail is the name of the game at the Bridgeville facility, which features an impressive designer showroom, a bright new facility, close proximity to the company’s Eighty-Four, Pennsylvania, headquarters and also the distinction of being the facility that president Maggie Hardy Magerko called her own early in her development as an 84 executive. 

The examples of attention to detail here are numerous.

  • There’s the 3-second line. This is a physical and symbolic line on the floor near the entrance. “There’s a little yellow line,” Hay said. “And that reminds our guys to say “hey, how are you?” before customers cross that line.”
  • There’s the load-first, invoice-later approach. As Hay describes it, writing up the invoice too early is a disservice to the customer, and it also has a chilling effect on add-on sales. “We don't invoice customers first,” Hay explained. “We load them first because we can sell them companion products. He might want 2x4s, but as I'm talking to him and asking about what he's building, you realize he needs glue, nails, this and that. So that's why we always ask, "What's your project? What are you building today?"
  • There’s the so-clean-you-can-eat-off-it kitchen and bath showroom on the second floor, where the designs are selected to the tastes of the local builders and homeowners.
  • Even the rolling door to the outside has been carefully designed with a poster promoting excavation, construction and pipeline supplies. (The sign was created by 84 Lumber’s in-house printing press that has emerged as a profitable service business.)

And then there’s the attention to detail in the facility’s computerized EWP saw, which slices to 1/32 of an inch as it stamps lumber with directions for the builder. (See sidebar)

All of these steps and more are necessary to compete in an increasingly sophisticated and competitive building supply industry. “There are so many places customers can go,” Hay said. They can go to Home Depot and buy a kitchen. But our people will go out to your job site. They'll lay it out on your floor, what it's going to look like, they'll give you a very fair price, and we can install it if you want to.”

For Hay, the process is all part of a job he claims to love in an environment he describes as a second family. In fact, former store manager and current 84 Lumber leader Magerko is “almost a sister,” to Hay, he said. 

“When she comes into the store, she’s all ‘What do you need? How can I help you. What do you want to sell here?’” he said. “She approaches it with the understanding that the local manager knows the local market better than anyone else.” 

The autonomy of the store manager is a highly respected and well-established practice in the LBM industry. But 84 Lumber believes they took the autonomy to a new level.

“More than any of our competitors in the industry, we incentivize our managers,” Magerko said. “And, really, those incentives are the basis of our success. So, when you succeed here, you succeed very well. But when you fail, you fail just as bad.”

That corporate emphasis on people and policy of autonomy help explain the company’s investment in recruiting the next generation of leaders through an advertising campaign that kicked off with a famous Super Bowl commercial — a first for a lumberyard. 

Hay’s path to 84 Lumber reflects the company’s culture-first and our-doors-are-open-wide approach to human resources. A California University of Pennsylvania graduate who played football and earned a degree in business management, Hay happened into the 84 Lumber management trainee program almost by accident. 

Important point: he wasn’t always a source of trusted advice regarding insulation, plumbing and drywall. 

“Before I got here, I definitely had no clue about building materials, and had no interest in them,” he said. “My dad suggested I go work at 84 Lumber, and I told them I had no idea what they did.

“During my interview, I said, ‘look, I don’t know anything. I like to talk to people. I like to be outside and I played sports all my life.’ And I was told: if you played sports or any other kind of activity and enjoy that interaction with people, you’ll love it here. So I came onboard and loved it ever since.”

The building product expertise came over time, and so did success. When the opportunity came to manage his first store, Hay moved to New England and oversaw growth from $2.3 million in sales to $5 million in 18 months. At Bridgeville, Hay oversees a $32 million business. 

How does he do it? Gladly.

“I'm 51 years old and I'm still loading and unloading customers,” Hay said, oversimplifying his duties. “I'm still moving. This is the place to be if you want to smile and work hard.”

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See more coverage of 84 Lumber in this special issue of HBSDealer.

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