2008 ProSales 100: Red Scare

After years of growth, the vast majority of ProSales 100 members report painful sales drops in 2007. But the size of those declines--and dealers' responses to them--varies dramatically. Here's where things stand, and how dealers are striving to get back into the black.

2008 ProSales 100

For the first time in quite a while, dealers across the nation had to pull out red ink pens to complete their ledgers for 2007.

The worst home-building slump in 20 years resulted in 84% of the companies on this year's ProSales 100 reporting lower sales in 2007 than the year before. The average drop was 13.6%, but some reported sinking far further–as much as 50%. In addition, a number of high-profile dealers that appeared in previous ProSales 100 listings declined to participate this year, some saying they didn't want to reveal how far they'd fallen.

Even with those absences, the fact that most big dealers did take part in the survey means this ProSales 100 provides the clearest, most comprehensive view yet of how larger dealers (those racking up $30 million or more in annual sales) have been hurt by, and are responding to, the market's downturn.

Among the findings:

Collectively, ProSales 100 companies' sales totaled $34.1 billion in 2007 vs. $39.5 billion for the same group in 2006. On average, 88.6% of 2007's sales went to pros.

The number of facilities grew by 80 to total 3,675. But there also are signs that a number of facilities officially listed as open have been mothballed or are running on skeleton crews.

ProSales 100 companies counted just over 101,000 workers in 2007. However, they used to have many more employees on their payrolls.

For example, the top 50 companies on this year's list that also were in last year's list dropped roughly one of every eight workers, slimming their total payrolls to 92,300 employees. Ten of the 50 cut their payrolls at least 20%, and one slashed its worker count by 45%.

The top 10 dealers account for two-thirds of the total sales, number of facilities, and number of employees in the ProSales 100. But they employ three-quarters of outside salespeople.

Dealers remain, on the whole, optimistic. More than 70% plan to expand within their regions in the next five years, and more than half expect their installed sales and component manufacturing operations to grow as well during that period.

At the moment, however, dealers are retrenching their businesses. Conditions don't seem to be getting better; in March, housing starts fell 11.9% from February to a seasonally adjusted annual rate of 947,000. That's 36.5% below the March 2007 rate, and far less than half the rate when the market peaked early in 2006. Building permit figures don't provide any relief, either. The March rate fell 5.8% from February to hit 927,000, and stood 40.9% below where things stood in March 2007.

"We've told our people: business is going to be tough," ProBuild CEO Paul Hylbert told ProSales in mid-February. "We had planned on 1.1 million starts [in 2008]. We'll be lucky to get 1 million."

Big Worries

Denver-based ProBuild, the industry's largest player for a second straight year, saw total sales fall 16.7 % to $5 billion in 2007. This came despite several key acquisitions last year, including Dunn Lumber of Daytona Beach, Fla. According to Hylbert, comp sales on gross basis before deflation were down 20%, while retail sales fell 13%. All told, permits in ProBuild's markets fell 27%.

Others near ProBuild atop the ProSales 100 list also slid dramatically. Stock Building Supply, the second-largest dealer in the industry, fell 13.2% to $4.71 billion last year. 84 Lumber, the third-largest dealer, said its total sales shrank almost 21% to $3.1 billion. Further down, No. 5 Building Materials Holding Corp.'s revenue plunged 29% to $2.29 billion, and revenues at seventh-seeded Builders FirstSource (BFS) declined 28.9% to $1.59 billion.

Geographically, no area was darker than the Sunshine State of Florida, where three top 100 dealers–Manning Building Supplies in Jacksonville, Causeway Lumber in Fort Lauderdale, and Kimal Lumber in Venice–saw sales plummet between 41% and 46%.

HD Supply, regarded as a potential threat throughout the Southeast when it was part of The Home Depot, decided to exit the LBM industry altogether in February, selling to ProBuild its 39 yards in Georgia and Florida.

Conditions were scarcely better in the Atlanta area. Wheeler's, the Rome, Ga.-based dealer, ranked 24th on the ProSales 100 last year with sales of $270 million and 23 locations. This year, it filed for Chapter 11 bankruptcy protection after it closed numerous locations and laid off more than 250 employees. It's not on this year's ProSales 100. Meanwhile, Ply Mart of Norcross, Ga., posted a 24.1% drop in sales, while Robert Bowden Inc. of Marietta, Ga., said sales slumped 34.5%.

But not everyone is singing the blues. "All of this happened before, and it will happen again," says Jay Curtis, owner of Curtis Lumber, borrowing a line from the Sci-Fi television series "Battlestar Galactica." Curtis was one of a handful of dealers on this year's ProSales 100 that reported a sales increase in 2007, with overall sales climbing nearly 10% to $167.8 million. Two years ago, Curtis made a key acquisition when it picked up Gregory Supply, the four-unit dealer in the Plattsburgh, N.Y., and Burlington, Vt., regions, split by Lake Champlain. Jay Curtis attributes some of this year's success to the dealer's first full year operating with Gregory integrated into the company.

"If you know your history, the players change but the play doesn't," Curtis says. "It's like the best of Shakespeare."

Download 2008 ProSales 100 List (PDF)