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Klein tightens grip on loyalty

BY HBSDEALER Staff

The typical loyalty program involves another plastic card on a crowded key ring. But Lincolnshire, Illinois-based Klein Tools has taken a completely different (and digital) route with its new Loyalty Rewards Program.

The process involves three steps: Buy, snap and redeem.

“Buy” is self-explanatory. “Snap” means the customer has to circle the Klein Tool purchase on his receipt, take a picture of it and upload the image of the marked receipt to the Klein app, which works for either the iPhone or Android. Each $1 spent earns a point for the final step — “redeem.”

Points are redeemed for items ranging from grills to knives to baseball hats through the company’s Klein Tradesman Club.

“Klein customers have always rewarded us with their loyalty, and we are excited to offer them something in return,” said Tom Barton, product marketing manager.

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Orgill distribution center gets ‘supersized’

BY HBSDEALER Staff

Orgill’s general manager of distribution Randy Williams told HBSDealer in a 2014 interview that success in his business comes from sharing information and making steady improvements. “Every time we have opened a new distribution center, we’ve made a little modification to improve,” he said.

In that sense, a big opportunity is coming Orgill’s way this year, as the company’s Sikeston, Missouri, distribution center is undergoing a significant expansion that will put the facility over the 1,000,000-sq.-ft. mark.

First opened in August 2009, the Mid-America SuperCenter is Orgill’s largest distribution facility (out of five), and this expansion will increase its capacity by more than 25%. Construction on the expansion is projected to be completed by yearend.

In the six years since the facility opened, business has increased in this facility by more than 45%, according to Williams.

“The expansion will enhance our Mid-America operation and our abilities to better service our customers, including our direct import cross docking, which services all of Orgill’s distribution centers,” he said. ”Our mission is simple: Help our customers be successful. The Orgill team will be able to accomplish this with our expanded operations here in this region and in this state.”

Unadjusted Update

After three months, many are wondering when housing starts are going to kick into gear.

So far, on an unadjusted basis, the industry has tallied 214,000 total starts, compared with 206,000 in 2014, a 4% increase.

But March’s housing-starts figure was a leaky 77,400 — the weakest March since 2012. That disappointment followed a February that also backtracked from the previous year’s Census Bureau tally.

The consensus is solid in anticipation of a second year in a row of million-plus starts, but everyone will breathe a little easier once we end this two-month, year-over-year skid.

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A Big Deal, a Big Win, a Big Debt

BY HBSDEALER Staff

“Wall Street loves it,” said one LBM industry executive. “We’ll see if the customers love it or not.”

He was talking about the biggest deal of the year in the lumberyard business — Builders FirstSource’s plan to acquire ProBuild Holdings. Shares of BLDR jumped 68% on the day after the announcement, and then rose even higher.

According to another industry source speaking on background, Warburg Pincus provided financing for the transaction — a $1.63 billion deal — after Fidelity’s Devonshire Investors’ arm had been shopping around the ProBuild Holdings business to a handful of possible buyers, including other private equity firms.

In the end, it was Dallas-based Builders FirstSource that wrote the press release explaining the benefits of the deal. Those benefits, the company said, include an enhanced product offering, significant cost savings, limited overlapping regional coverage and the opportunity to ride the housing recovery as a diversified national dealer.

Sales at ProBuild were about $4.5 billion in 2014. That’s almost three times the sales at Builders First-Source — about $1.6 billion.

One observer speaking on background described the deal as a win on multiple levels, as it shows the investment community standing up for the lumber and building material industry “in a very big way.”

Another reason for the industry to welcome the combination of the two pro dealers is the deal’s potential to relieve some of the competitive pressure that had built up in those markets where both banners compete head-to-head. A map of the footprint of the combined companies shows large swaths without any overlap, but some redundancy in Texas, Florida, Tennessee and the mid-Atlantic states.

At last count, Builders had 80 locations, compared with ProBuild’s 364 locations.

Some sources expressed concern over the debt involved in the deal. On a pro forma basis, the combined company has net debt of $2.1 billion. The company pointed to a financing plan that included $1.6 billion from new debt.

The debt is big, but so are the cost savings. Builders anticipates $100 million to $120 million annual run-rate cost savings within two years. And the timing, according to Floyd Sherman, is right. “Together, we will establish a broader, more efficient platform of manufacturing and distribution capabilities, supported by high-quality service from the best talent in the industry.”

Another industry executive, less optimistic than the first, pointed to “$2 billion of debt on the balance sheet in an industry that doesn’t like leverage.”

In addition to overcoming debt, observers pointed to the standard challenge of cultural and systems integration.

“There is a great opportunity here for Floyd [Sherman] and the team, but it’s not one that’s going to be easy, and it won’t be any more easy with the high level of debt put on the company.”

In the meantime, the announcements of job cuts are expected as a matter of course.

“They’re counting on some major synergies and major cost-cutting efforts,” said the industry source. “There are a lot of people who are going to be left without jobs.”

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