2010 ProSales 100
"We refused to participate in a recession. We refused to crawl into a hole."
That's what Joel Fleischman says he was thinking back in 2007, when the president of Campbellsport (Wis.) Building Supply started getting tell-tale signals that business conditions were going south quickly. And so, while some companies soon found themselves on the ropes, if not completely knocked out, Campbellsport kept in the game.
Its results for 2009 show that the company did more than just put up a battle: Campbellsport's sales increased 16% in 2009 to $39.2 million from sales of $33.8 million in 2008.
While Campbellsport's results put it among just seven members of this year's ProSales 100 that posted sales increases, its attitude reflects the hard-headed determination of the entire list's members, all of whom remained standing despite the worst conditions for new home construction in 50 years. No wonder so many ProSales 100 dealers said their biggest achievement in 2009 was being able to see it through to the end. Many of their peers didn't.
Group-wide, sales by this year's ProSales 100 members fell 24.1% to $22.97 billion. Ninety companies posted declines in sales, and 39 dropped by at least 25%. Two others held steady, and one dealer was new.
"It was definitely a survival year," says Keith Berg, vice president of Idaho Pacific Lumber, Boise, Idaho, which saw sales fall about 30% to $65 million in 2009 from $93 million in 2008. "We had to cut staff, and overhead was down drastically from what it was at the start of 2009. We started slimming down in 2008 and had to keep going."
Slimming definitely was in vogue. At the 50 biggest companies that responded to both last year's and this year's ProSales 100 survey, total payroll count dropped by 14,082 to reach 54,636 workers. That's a 20.5% decline, and it comes on top of the roughly 20,000 workers cut by the top 50 companies that took part in both the 2009 and 2008 ProSales 100. Among the biggest reductions were Stock Building Supply (down 54% in sales, 68% in personnel) and BMC Select, the former Building Materials Holding Corp. (down 46% in sales, 51% in staff). Both Stock and BMC spent time last year reorganizing under Chapter 11 and emerging as slimmer, more focused companies.
If evidence was needed to explain why 2009 was such a struggle, one just needed to look at year-end housing results. According to the U.S. Census Bureau, 572,000 housing units were authorized by building permits in 2009, 37% below 2008's 905,400 permits. The number of starts sank 39% to 554,000 units, while completions dropped 29% to 796,000 units.
The result was dealers continuing to trim head count and, in frequent cases, location count.
"We reduced expenses all over," says Pete Scherer, president of Scherer Brothers in Brooklyn Park, Minn. The dealer closed two facilities, selling one and leasing the other to a non-competitive tenant, while reducing inventory and cutting its staff count by 90 employees.
"We took some very good people out of our system," Scherer says of those painful times.
No Credit for Builders
A challenge that numerous dealers faced in 2009 was their customers' inability to get loans from banks.
"The national banks have withdrawn their support of the market and contractors," says Brad Benson, president of the two-unit Benson Lumber in Derry, N.H. Benson says he recently had a customer who couldn't obtain financing to build a single spec house.
A Builder magazine survey of small homebuilders found that 25% of the builders reported that they couldn't get bank financing in the final three months of 2009, up sharply from the 16% who faced the same barrier in the last quarter of 2008. Another 42% of the builders surveyed didn't even bother trying to apply for a loan.
"That is an increasing, growing problem for our customers," says Myron Andersen, president of Builders. in Kearney, Neb., ProSales Dealer of the Year in 2010. "The builder who had credit to build three spec homes can only get credit to maybe build one now. There are a lot of marginal builders out there that are being squeezed out."
The banks "have cut the legs right out from under" customers, says Keith Coleman, president of Hamilton Building Supply in the Trenton suburb of Hamilton, N.J. His company's sales fell 27% last year to $16.2 million, putting Hamilton No. 91 on the ProSales 100. But at least his store still is there. A number of large-scale dealers have fled the Garden State, including Builders FirstSource and Stock, while 84 Lumber closed several locations.
"2009 was a tough one, no question about it," Hamilton says. "The reason those big guys left is because the business left."
Come Out Swinging
ProSales 100 members closed a total of 250 facilities last year, cutting their total count 7.4% to 3,391. They shut 372 in 2008.
As in 2008, the top 10 accounted for the lion's share of the total–240 facilities. Stock alone figured in 138 of the closures, though dozens of those facilities show up elsewhere on the list through the creation of new companies like U.S. LBM and through the purchase of individual Stock units by firms like Professional Builders Supply.
In general, even as companies continued to feel the blows of a down economy, some were not content to rest in the corner, choosing to push for expansion instead. For instance, Potter's Home Center of Jamestown, Tenn., opened an 18th location in Woodbury, Tenn., in June 2009 and plans to open its 19th location in Smithville this August. That's despite a slight falloff in sales to $39.8 million in 2009 from $41.9 million in 2008.
Even Stock is growing again.
Just a few months removed from Chapter 11, and following a period of downsizing that saw it reduce its geographic footprint to 19 markets, the heavyweight emerged in a 20th market with the acquisition of National Home Centers in Arkansas. National had also found itself in Chapter 11 and has downsized from eight locations to five.
Campbellsport added a fourth location at the end of 2009 called Drexel Inc., and kept that landmark company's banner flying in the Milwaukee market. The acquisition also introduced Campbellsport to a new clientele given that 50% of Drexel's business is retail, including flooring and window treatments, according to Fleischman.
The falloff from Stock and ProBuild in Wisconsin helped Zuern Building Products post a record year in shingles, despite sales falling to $24 million from $30 million a year ago. In 2010, window and exterior door sales are proving to be strong, according to Tom Zuern, sales manager at the Allenton, Wis.-based dealer.
A lot of dealers cut back on inventory, Zuern says. But by working with Lumbermens Merchandising Corporation, Zuern says he's able "to provide something on the ground that other dealers have to do through cash flow."
"That's our forte," adds Zuern. "Any new account is fairly impressed not only by the breadth of our products but the depth of our inventory."
Stocking inventory high and letting it fly has been a mantra for years at Erie Materials, which ProSales honored with its Dealer of the Year award in 2009. A recent advertisement by the company aimed at contractor customers preaches that "the most expensive materials are those not on your job site."
Builders., which also swung an uppercut in sales, rising 12.4%, attributes some of its success to opening a new pro-only yard in Denver about two years ago. "The first year we spent beating on the [customer's] door; the second year we saw a significant sales increase," Andersen says. The company's countertop and retail divisions performed well, helping cancel out flat lumber sales.
