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Big deals involving big numbers produced big changes in this year’s ProSales 100 list. Four of the top 12 firms and nine out of 100 businesses on the 2015 list don’t show up on the roster this time because their numbers have been absorbed into surviving companies. And given that the survivors tended to be top 10 firms already, that group’s slice of the total pie got even fatter.
The 10 biggest companies account for $28.84 billion of the $41.74 billion that the entire ProSales 100 racked up in sales for 2015. That 69.1% share of the total is nearly eight points more than it was for last year’s list. The top 10’s share of facilities also grew; their 2,587 yards account for 65% of the PS100’s 3,979 total yards. Last year, the top 10 accounted for only 56.6% of the yards.
Mergers and acquisitions don’t explain all of those gains; there was organic growth, too. While ProSales 100 companies recorded an average sales increase of 10.2% in 2015 from 2014, the top 10 firms saw their revenues rise 11.3% vs. the next 90 companies’ 8%. And as any math major will tell you, the larger you are at the start, the harder it is to show percentage growth.
Who Grew, Who Lagged
All told, 87 of the 100 companies recorded sales increases in 2015, with two of the most active acquirers—US LBM and Kodiak Building Partners—topping that list at 69.6% and 49.2%, respectively. Two companies were unchanged in 2015 from 2014, while 11 businesses said sales dropped. Several of the laggards, such as Shelter Products and Idaho Pacific Lumber, focus heavily on commodity sales, so they suffered from the slump in lumber prices. On the other hand, they still led in terms of sales per employee and sales per facility.
The $41.74 billion in total sales is the biggest total since 2006 and represents an 81% gain in revenue since the ProSales 100’s low point of $22.97 billion recorded in 2009. PS100 dealers added 351 facilities this year, a 9.7% increase (for the top 10, it was a 12.1% rise). The number of facilities owned by PS100 companies has increased 27% since 2009.
Meanwhile, the number of staff members on duty rose by 8,464 last year to total 89,277. That’s a 10.5% rise. For the top 10 alone, a total of 6,119 new people came on board for an 11.9% gain.
Two giants in their categories dominate the list. Specialty dealer ABC Supply took the top spot for the sixth straight year with $5.9 billion in total sales, 99% of it to pros. Builders FirstSource (BFS), which acquired ProBuild last year, actually took in more total dollars than ABC Supply, posting $6.07 billion in revenue. But because only 90% of the sales were to pros, and because the ProSales 100 is based solely on sales to professional contractors, it ended up second on the list.
No other company on the list was even half as big as those two goliaths, but the next eight all reported billion-dollar results.
How Things Have Changed
Membership in the ProSales 100 changes annually as the industry evolves. The first ProSales 100, published in 1992, consisted almost totally of lumberyards and home centers, and it was common to see dealers listed that got only half to two-thirds of their revenues from pros. The ability to build trusses or install items wasn’t even measured.
In contrast, this year’s list features 12 specialty dealers who collectively represent 37% of the entire group’s sales. There also are 56 lumberyards with manufacturing capabilities that account for 54% of all sales, 30 lumberyards without manufacturing capabilities that provided 8% of the sales, and one millwork specialist and one “none of the above” (Central Network Retail Group) that account for the remaining 1%. Expect specialty dealers’ share to grow in future editions of the ProSales 100, if only because a heretofore unreported giant, Gypsum Management & Supply, is expected to go public this year and thus will have to start reporting its revenues.
There’s one thing that hasn’t changed since our 1992 report: optimism for the new-home market. In 1991, housing starts hit a 20-year low. Just how bad was it then? From today’s perspective, not all that bad. The 1991 low point was 1.05 million—only about 120,000 worse than last year’s 1,178,000, which in turn was our best year since the Great Recession a decade ago, when annual starts bottomed out at 554,000.
The starts rate appears to be on a slow climb in which it could reach 1.5 million a year within a few years. Thus, nearly three out of four ProSales 100 companies that offered a forecast had good reason to predict their business from new-home construction would grow this year. Nearly six out of 10 said the same about remodeling, which ProSales’ sister company Metrostudy estimates is having its best years ever. And half the dealers predicted retail sales increases. All this bodes well for the PS100, because its members on average say they get 34% of their revenues from single-family custom or spec builders and 13% from production builders.
On the other hand, a majority predicted there’d be no change in sales for commercial projects, for installed sales work, and for their component manufacturing operations.
Mean vs. Median
Measured by total sales, the biggest company (BFS, at $6.07 billion) is 176 times larger than the smallest (B.R. Johnson, at $29.6 million), so you need to look at the group in several different ways to take its measure. For instance, the whole group’s sales average out to $417 million apiece, but the median sales total—the point at which 50 companies are above that number and 50 below—was just $114 million. The same holds true for locations; the average was 40 but the median was 9. And the difference was even more pronounced for employees, where the average was 893 but the median number only 275.
The numbers are similarly dramatic for sales per facility and per employee. The average for sales per employee was $503,710, but the median was only $440,000. And the average sales per facility worked out to $16.2 million, while the median was $12.1 million.
As usual, same-day delivery, blueprint takeoffs, and showrooms topped the list of services that ProSales 100 companies offer customers. This was the first year in which we asked about loyalty programs, and the results showed about half of the PS100 companies offer them. Notably, another 14% plan to offer dealer loyalty programs in the future.
Just under three out of every five PS100 members manufacture components that go into homes. Door and truss shops are most common here, followed by custom moldings, wall panels, and pre-built stairs. Look for growth in wall panel manufacturing: 15% of the respondents said they plan to get into the business, a higher percentage than any other product.
There’s similar involvement in installed sales but more variety. Of the 21 products we listed, no single one was mentioned by more than three-quarters of the respondents. Entry doors came in first, installed by 73% of the firms that offer any kind of installed sales, while cabinetry came in next at 71%. The biggest area for future growth was wall panels—a logical choice given that this is also where component manufacturing is most likely to grow.
The importance of technology—and the headaches involved in changing it—no doubt were reasons why several PS100 dealers listed a change in computer systems as one of their biggest accomplishments in 2015. And based on the responses received, this trend will continue, though perhaps not at as vigorous a pace.
For instance, last year 13% of the PS100 respondents said they offered online order tracking and 60% planned to provide it. This year, 19% have that service in place and another 50% are planning to add the feature. Likewise, there was a six-point gain (to 27%) in the share of companies offering online access to inventory and pricing. We also asked this year whether dealers have systems in place in which customers can pay bills online. Just under a quarter said they do, and 45% plan to incorporate that service.
Look for more dealers to add apps to their service offerings; 35% said more apps are in their plans for 2016.
Despite those gains—and possibly because revenues are up and increased savings are possible through cloud computing and general technology price cuts—30% of responding dealers plan to spend less than a quarter of a percent of revenues on technology. That’s a reversion to the long-time norm after last year’s ProSales 100 showed a tendency to spend more on IT as a percentage of revenue.
Dealers also remain split over the value of installing a customer relationship management (CRM) system. A quarter of the respondents said they have one already and 17% plan to get one, but the other 58% had no plans to do so.
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There also remains a divide over the wisdom of placing a showroom in a location separate from the main store, with 32% of the respondents to that question saying they do so and 68% saying no. In general, 87% of all PS100 members have showrooms. Of those who do, 79% display windows and doors, 49% display cabinetry and kitchens, 39% display bath stuff, and 33% show off flooring products.—Data compilation assistance for the ProSales 100 was provided by contributing editor Kate Tyndall.