WEBBLog, by Craig Webb, Editor in Chief, PROSALES

Logging Miles and Learning LBM
Since arriving in September, I have racked up close to 20,000 miles traveling around the country visiting lumberyards. The road show so far has covered Delaware, Georgia, Nevada, Washington, and Arizona; as you read this I'm visiting Michigan and Indiana, and soon I'll be flying to Texas. What have I learned so far? Primarily two things: 1) There's no single way to succeed in this business; and 2) The best way to learn Lesson No. 1 is to see where and how you work. Expect to see me on the road early and often in 2007 as well.

Tell Us: Who's New and Independent?
During my North Carolina visit, I stopped by the offices of Professional Builders Supply, located in the center of the state's booming Research Triangle Park area. In many ways it's no different than thousands of other lumberyards, but nevertheless it's quite different-it's new, and it's independent. Professional Builders Supply was created in 2003 by a team led by a former Stock Building Supply executive. It's taking in about $20 million in revenue this year and is looking to get $30 million next year. I asked company president Van Isley how he succeeded. His reply: "It takes equity. It takes sweat. It takes balls." So now my question is: How many other folks like Isley are out there? Who else has created a stand-alone LBM dealership since 2000 and who appears to be making a go of it? When I asked one consultant about whether any new pro dealers are being set up today, he said he doubted there's nary a one in the country. Well, Professional Builders Supply is one, and we've received word that there may be another in Boise, Idaho. Are there any more? Tell me at cwebb@hanleywood.com.

The Home Depot, Part I: Measuring the HD Supply Threat
Before The Home Depot announced its 3rd quarter earnings report earlier this month, it was possible to take at face value the company's claim that, at $12 billion in annual sales, its HD Supply was several times bigger than any company on the PROSALES 100. Now we know that HD Supply is indeed big-possibly the biggest of all pro dealers-but it doesn't dwarf the opposition. HD officials noted that only 20% of HD Supply's myriad business units service new-home builders, and residential construction-related sales by the rest of the divisions add perhaps another 20 percentage points. That adds up to 40% of $12 billion, or $4.8 million. In contrast, Stock Building Supply posted $4.4 billion in 2005 revenues, and given its acquisitions this year the number easily could rise. Factor in the new Pro-Build Holdings (with just over $4 billion in combined 2005 revenues) and you have the makings of a horse race.

The Home Depot, Part II: A Paler Shade of Orange
The Home Depot executives' prepared and off-the-cuff comments made during the company's 3rd quarter earnings report show that HD Supply's executives didn't have any antidote to fend off the housing industry's slump. While the press release trumpeted the 159% increase in HD Supply's net sales to $3.53 billion in the 3rd quarter against $1.36 billion a year earlier, it didn't note that virtually all the growth was via acquisitions; that only came out in HD executives' earnings report conference call. Count only those HD Supply units acquired by July 2005 and sales were up only 7%, the execs said. In addition, gross margins for HD Supply fell to 26.5% from 30% a year earlier, while net profits shrank to 6.9% in the July-September period from 8.26% a year before. And the LBM operations recorded a year-over-year drop of 2%, HD reported. The shrinking home construction market was blamed, but so was a 24% drop in the price of lumber and a 48% decline in prices for paneling.

Calling All Canadians!
We'd like to hear your opinions regarding the Canadian Broadcasting Corp. drama Intelligence, which appears likely to be the only TV series playing in North America in which the lead character owns a lumberyard. Of course, it's not your typical yard, even for British Columbia: It's a front for the owner, slickly coiffed Jimmy Reardon, to launder drug profits. Like many LBM dealers, he's a 3rd-generation member of the family business (at least the bad parts of the business), and Reardon's character bio on the Intelligence Web site describes him as having "a diligent work ethic, which has resulted in the family business flourishing." He's also said to be "gentle and ruthless at the same time." Canadian TV blogger Diane Kristine says the lumberyard set appears every few episodes, but usually not as often as another of Reardon's "legitimate" businesses: a strip club. Kristine runs a blog called TV, Eh? So to her fellow Canadians, the question is: How good is "Intelligence," eh? Let me know at cwebb@hanleywood.com.

Small But Mighty: Award-Winning Pacific Building Center
LBM success stories are rarely as heart-warming as the tale of Pacific Building Center in Blaine, Wash., winner this month of the 2006 Distinguished Dealer of the Year award from the Western Building Material Association. Bob and Pam Christianson took over on Jan. 1, 1997, what was then a 3,500-square-foot retail space in a shopping center in the small town near the Canadian-U.S. border. At the time, there was only a small fenced-off area behind the store to hold some building materials. Bob traded in his own car to buy a one-ton flatbed pickup so the center could do deliveries, and he, Pam and daughters Kimberly and Stephanie proceeded to run the store pretty much on their own. Three years later, the Christiansons had upgraded to a 33% bigger space: a former tavern. Dozens of townspeople volunteered their time and their pickup trucks to help the center move. Just three years after that, Pacific Building Center had grown so much it needed to move again. Now it operates out of a 12,400-square-foot store on 3 acres. The family continues to provide one-third of the center’s staff. They also are active in WBMA affairs--Kimberly Christianson Akre is president of the association’s Young Westerners Club—as well as in Blaine’s civic life.

Do you have a question, a tip, or a sage piece of wisdom? Feel free to contact PROSALES' Editor in Chief, Craig Webb, at cwebb@hanleywood.com.