Notes from the Leaderboard
Lumber prices sat in the penthouse at the start of 2022 before taking a gradual, slow ride down to the ground floor at year’s end.
And in 2023, lumber and commodity prices have been a source of frustration for some of the industry’s biggest players. During their first quarter 2023 conference calls, the CEOs of The Home Depot, Lowe’s, and Builders FirstSource all reported lower sales numbers and pointed to commodity prices as, perhaps, the biggest setback in revenue for the period.
But while lumber and wood product prices are down as much as 16% with softwood lumber prices lagging more than 40% from a year ago, housing suddenly has legs after a slow start in 2023. A lack of existing inventory has pushed buyers back toward new single-family home purchases despite high price tags, inflation, and lofty mortgage rates.
Housing starts in May increased 12.2% to a seasonally adjusted annual rate of 763,000, the U.S. Census Bureau and the Department of Housing and Urban Development reported. The latest figure is also 20% above the May 2022 estimate of 636,000.
Bob Dietz, chief economist of the National Association of Home Builders (NAHB) said the most recent forecast calls for 860,000 single-family starts and 500,000 multifamily starts in 2023. But the NAHB is also projecting new home sales will hit 670,000 this year.
In Syracuse, N.Y., Erie Materials saw 2022 sales rise 11% to more than $298 million.
“In 2022 we were able to win orders by just having the product in stock,” Chris Neumann, president of Erie Materials told HBSDealer. “We have always kept robust inventories on all products and this strategy was never more successful than in 2022.”
This year the company is celebrating its 50th anniversary and has expanded to nine locations with 350 associates since its founding in 1973. Location number 10 is scheduled to open in upstate Poughkeepsie, N.Y. in 2024. But a celebration may also come with much more work on the front lines.
“As supply lines have begun to stabilize, we are back to competing more on price,” Neumann told HBSDealer. “Inventory positions, while still important, are not giving us the same advantage. We are back to ‘Sales 101,’ making more purposeful sales calls, showing the value that Erie Materials brings to our customers as well as strengthening our relationships with customers and vendors.”
In the next state over, 84 Lumber based in Eighty Four, Pennsylvania, has continued to put up big sales gains over the past several years. In 2022, sales increased 11% to nearly $8.8 billion. It was less than 3 years ago, when 84 Lumber hit a milestone of $4 billion in sales for the first time.
“We’ve always operated with the belief that we can only control what we can control,” says Maggie Hardy, CEO and owner of 84 Lumber. “When looking at 2022 vs 2023, there are outside forces we can’t control such as lumber and panel indexes, housing starts, etc. We can control how we operate our stores, take care of our associates and our customers.”
Hardy says 2023 is about putting in hard work to develop new customers while gaining greater market share through the opening of new stores and panel plants. At the same time, the company is giving its employees the right tools to take care of its customers.
“We implemented several key technologies focused on better serving our customers,” Hardy said. “We have enhanced the integration between our operational systems at stores with the ordering systems of our customers.”
For its growing installed sales division, 84 Lumber has implemented a completely new platform to manage its end-to-end process with mobile on-the-job site technology for real-time updates of project status and task completion.
In its components division, the company has moved several solutions that manage design and production to the cloud.
“Additionally, we implemented a new secure payment platform in all of our locations, which allows customers to pay securely and with new features such as tap to pay and Apple Pay,” Hardy noted. “What we do in 2023 will pay off in future years."
According to Steve Swinney, CEO of Kodiak Building Partners in Highlands Ranch, Colorado, the biggest challenge the company faced in 2022 was having enough labor and materials to meet demand. “
In 2023, it’s managing expense levels while retaining your people to be ready for renewed growth that is coming in later 2023 and beyond,” Swinney says.
Swinney also said that Kodiak, with more than 110 locations in 25 states, is preparing for “beyond” with investments in technology. While the automation equipment has been brought on board for various aspects of the business, the dealer has implemented A.I. and new tech for back-office support, dispatch, and delivery, along with new warehouse tools.
Vancouver, Washington-based TAL Holdings has been extremely active in 2022 and 2023. The lumber, building supplies, and hardware dealer acquired seven companies since the start of 2022, including two moves this year.
“In the past year alone, TAL’s significant growth presented its own set of opportunities and challenges,” says TAL Holdings CEO Jason Blair, who joined the company in January 2022.
“We expanded our market presence and diversified our offerings, enabling us to remain resilient in the face of falling commodity prices. Yet, the increased scale also presented us with challenges in integrating new entities and cultures into the larger TAL organization, increasing the complexity of our operations.”
When new housing demand began to slow, Blair said it gave the company an opportunity to streamline operations while focusing on efficiencies that will support future growth plans.
When new housing demand began to slow, Blair said it gave the company an opportunity to streamline operations while focusing on efficiencies that will support future growth plans.
“This is an opportunity for us to show our adaptability and commitment to our customers.” said Blair. “And while it hasn’t been easy, we’re confident we have the right approach and team to keep moving forward.”
At TAL, the dealer is always looking for ways to improve our services and customer experiences.
“We have made significant enhancements and investments in technology, with an emphasis on BisTrack by Epicor,” Blair notes. “This will help enhance our ability to efficiently manage business processes, inventory, and customer service. The technology allows us to provide real-time data and streamline operations across all our divisions, enabling us to offer added value to our customers.”
With 32 locations in Washington, Oregon, Idaho, and Montana, TAL also continues improving communication with the right suite of tools. “Having clear and direct communication channels will help us work seamlessly as a team and provide a better customer and vendor experience,” Blair says.
And like many companies on this year’s leaderboard, TAL is not satisfied with business as usual.
“Our focus is not merely on overcoming immediate challenges, but on setting the foundation for long-term success,” Blair says. “We believe in the potential of our team and our ability to adapt to changing circumstances while always upholding our core values.”
(A version of this article originally appeared in the July/August 2023 edition of HBSDealer.)
