Do it Best – Looking ahead for LBM growth
Do it Best’s LBM members are spread out all over the country, and they’re feeling the downturn like everyone else. But there is a shakeout going on in the building materials industry, and players at either end of the spectrum are either dropping out or cutting their losses. Somewhere in the middle are a number of Do it Best lumberyards, and they’re more than willing to pick up the slack.
Quent Ondricek, vp-lumber and building materials for Do it Best, can recite a list of members who have opened new locations, bought up competitors, or opened/upgraded truss plants and door shops this year. They are all repositioning themselves for the recovery, he said — the 2010 recovery.
“Most of our members are not expecting a sustainable recovery until the first quarter of 2010,” Ondricek said. In the meantime, he said, “People are repositioning themselves in the marketplace.”
“Repositioning” can mean anything from doing more commercial work to expanding their product offerings and services to residential builders. Best Lumber and Building Center of Mesquite, Nev., one of the worst housing markets of the country right now, opened a new door shop this year. So did Husky Lumber, a three-unit pro dealer in the Nashville, Tenn., area.
Husky Lumber already sells lumber packages and trusses to builders (production and custom) in central Tennessee. But the downturn prompted the business to “reach out a little further,” according to owner Jim Husky.
“We want a bigger piece of that builder’s wallet,” he explained.
Three months ago, Husky Lumber opened a new door manufacturing facility at its Franklin location. Word has gotten out, and business is just starting to pick up. “Quality is always an issue in the manufacture of doors. You have to do it right the first time,” said Husky, who strives to find “just a few degrees of separation” from his competitors.
Do it Best, which operates a door shop program, advised the business on what equipment to buy. Husky orders Masonite door slabs through the Fort Wayne, Ind., co-op, which also sells an assortment of jambs, hinges, window lights and security hardware. Husky’s new truss plant, which also gets supplies from Do it Best, opened this year on 22 acres in Murfreesboro, Tenn. Twice the size of Husky’s component plant in Franklin, the new facility can make wall panels, stair parts and custom millwork. Husky is in the process of installing a Hundegger saw so he can provide builders with pre-cut iLevel flooring systems.
Builders Warehouse of Kearney, Neb., another Do it Best member, upgraded its truss plant this year with $1.5 million worth of equipment and software. The immediate goal was to produce wall panels for the commercial market in eastern Nebraska. But owner Myron Andersen is also looking toward Colorado, where the three-unit dealer opened a Denver lumberyard in January. Andersen says he’s laying the groundwork for when the area’s production builders kick into gear again.
Do it Best dealers have watched competitors pull out of many of these markets. BMHC sold three of its BMC West lumberyards in western Colorado last year, and 84 Lumber consolidated in the Denver market. In Ohio, 84 Lumber closed five stores; only one had a larger “hub” location nearby.
“There’s a huge opportunity for our members because everybody is downsizing and [reducing] services,” said Ondricek. “They’re also finding new business in light commercial. They’ve been able to take some market share because their customers are moving over to these projects.”
Hartville Hardware, located halfway between Akron and Canton, Ohio, has sold building materials for a number of years. Scott Sommers, Hartville’s general manager of building materials, has watched more than two dozen lumberyards go out of business in these cities and the surrounding communities since the downturn began. One of them, Schumacher Lumber, was only two miles away and operated a full-line millwork shop.
“They were still doing $3 million in business,” Sommers said. “We were able to purchase them and pick up their sales, which also gained us some new customers.”
The acquisition, completed in June, also expanded Hartville Hardware’s offerings of interior trim and custom moldings. “It completed us for remodelers,” Sommers observed. But none of these reasons were the primary motivation for the purchase, he said. “We’re not looking at what it’s going to do for us now,” Sommers said. “We’re investing not for this year, or next year, but for two or three years from now.”
Further north, in Cleveland, Nisbet Brower bought a roof truss plant when the owner decided to retire. “It’s a business we’ve never been in before but wanted to be,” said president Mark Rippe. The purchase was in late August, and two weeks later, a wall panel plant belonging to a larger competitor went on the market. Rippe bought the assets, picked up five salespeople, and moved all the equipment into one facility. Going forward, Nisbet Brower will no longer be outsourcing its roof trusses and wall panels.
“This fulfills our vision of the company,” Rippe said. “It’s the last two pieces of the puzzle.”
The three-unit pro dealer is still selling to production builders, although many of its customers are shifting over to multi-family. “Apartments are back on the build again,” Rippe observed. “There’s also a lot of business in senior housing and assisted living.” Nisbet Browser has even found a way to sell into high-rise projects: the company can supply interior trim packages or make countertops at its fabrication shop.
Cabinets and vanities
Do it Best’s home decor program was originally designed for members who want to sell flooring or kitchen and bath remodels to contractors and homeowners. But a number of co-op members are using the program’s buying power to bring in granite and marble slabs and ready-to-assemble (RTA) kitchen cabinets and bath vanities from overseas.
“We’re doing more and more direct importing to our members’ stores,” said Tom Snyder, division manager, building products. Dealers import anywhere from one to a dozen containers a year, offering a limited selection of cabinets at a competitive price. This works well with multi-family builders, Snyder explained, because they install the same bathroom or kitchen over and over again.
Snyder oversees the home decor department, but he’s considered part of Do it Best’s 80-member LBM department. The division has done some repositioning of its own this year, involving how it handles its own customers. The millwork sales department was converted to building materials sales and received product knowledge training on every sku in the department.
“We were receiving too many calls from members who didn’t know the [breadth] of what we had,” Ondricek explained. “We had a lot of products that were invisible.”
Members might find what they needed in the electronic catalog, or they might not. A call to a merchandise manager would get an answer, but not always a complete or immediate one.
“Now that call goes to a trained sales specialist who [can] help with the size of the order, the purchase options, pricing, and [availability],” Ondricek said.
“A lot of what we do is still over the phone,” he added. “We talk to the membership more than anyone in the company.”
Hackett’s to open 11th location
Hackett’s, a chain of department stores with full service True Value Hardware departments, has made an agreement to open its 11th location, the Ogdensburg, N.Y.-based company reported.
The new store, which will be located in Lake Placid, N.Y., will occupy a 41,000-square-foot building that was formerly a Tops Market. The company said the store should be open by spring of 2009.
Hackett’s, a subsidiary of Seaway Valley Capital Corporation, opened its 10th location on August 2 in Sackets Harbor, N.Y. The company is one of the nation’s oldest retailers with roots dating back to 1830.
Each of its larger stores contains a True Value hardware department with hardware, tools, plumbing, paint and electrical departments. Other departments in the stores include men’s, women’s and children’s brand name apparel, athletic, casual and work footwear, home dZcor, gifts, seasonal merchandise and sporting goods.
Losses widen at KB Home
CORRECTED – As losses widened at KB Home in the third quarter, the company said that part of its new strategy is to build smaller houses, as demand for less square footage appears to be outpacing demand for the outsized homes that were popular during the housing boom.
Losses in the third quarter were $144.74 million, steeper than the $35.6 million in losses recorded in the comparable period last year. Losses at KB Home totaled $668.8 million for the first three quarters of the year, falling further from losses of $156.8 million in the same nine-month period last year.
Revenues were $681.6 million, down from $1.54 billion in the same period last year, a 55 percent decline. The company also saw an overall 10 percent decline in the average home selling price, to $239,700.
KB Home delivered 2,788 homes, compared with 5,699 homes in the year-ago period. The company’s cancellation rate jumped as well, to 51 percent from 27 percent a year ago.
KB Home CEO Jeffrey Mezger said the cancellation rate reflected “broader dynamics” in the housing market. To respond, the company is trying a variety of tactics, including building smaller homes and cutting the number of developments underway.
In the Inland Empire area of California, he noted, the company is shifting to smaller, less expensive homes, going from an initial size of 3,400 square feet at $450,000, to 2,400 square feet at $300,000 last year. Mezger said that change “worked for a time, but the market continued to move away from us.” In response, the builder has started building three-bedroom, 1,230-square-foot homes selling for $200,000 in the Inland Empire, he said.