Sun Deviled
The biggest decliner on the top 20 was Foxworth-Galbraith, which slid from eighth to 12th on a 29.6% drop in total sales to $373 million.
Dallas-based FoxGal chose to not report employee or facility totals in both years, but it is believed to have closed at least 11 operations since January 2008, eight of them in Arizona, one of the states hit hardest by the housing downturn.
Erie climbed the most at the top of the list, rising to the 20th position from 27th a year ago as total sales rose 7.5% to $173 million. Syracuse, N.Y.?based Erie, the ProSales Dealer of the Year for 2008, again managed to turn a profit without any actual layoffs.
“We didn’t take any drastic measures,” says company president Chris Neumann. “We try to continue to give the perception that we are operating as business as usual: we have the same [general] level of trucks, people, and inventory.”
Sure, there have been a few subtle changes in the background, according to Neumann. But they have been done in a manner “so our customers and employees see Erie Materials as we always are,” Neumann explains. “We want them to have confidence in us.”
That’s not easy to do these days. In January 2006, the nation’s housing starts were running at a 2.2 million annual rate. By last year, only about 904,300 homes were started. This past March, the federal government said housing starts had slumped to an annual rate of 610,000. ProBuild is gearing its operations based on the expectation of just 400,000 housing starts this year.
Nor does remodeling offer much relief. Contrary to the notion that home-improvement spending goes up when new-home building goes down, Harvard’s Joint Center for Housing Studies forecasts that spending on major home improvements, such as kitchen and bath jobs, will decline 12.3% in 2009 to $110.2 billion. The center’s estimate counts only major improvements; it excludes typical maintenance expenditures and all spending on rental homes.
“There’s no rocket science to it,” says Ross Ridout, vice president of Searcy, Ark.?based Ridout Lumber. “Everything is going bad.”
Timing and location figure prominently into how dealers fared. Of the three dealers that recorded sales declines of more than 40%, two firms, BMHC and Learned Lumber, are based or do extensive work in California. The third, Robert Bowden, serves the same Atlanta market where PlyMart died (though one of its stores has been resurrected as a new business, PMC Building Materials), and another ProSales 100 mainstay, Wheeler’s, went into and out of bankruptcy during 2008. ProBuild, which had seven locations in the greater Atlanta market at the start of 2008, swelled that count to 30 early last year when it acquired both Jasper Lumber and HD Supply’s building material operations. After a wave of closures and consolidations, it now has just eight facilities in the metro Atlanta region.
Location, Location
While dealers serving Arizona, Nevada, California, Florida, and Georgia had to deal with plummeting construction activity, their counterparts in other regions suffered less because they had never risen much to begin with. And some parts of the country–particularly some parts of the Plains states and the Mountain West–actually got boosts in 2008 from high farm prices and energy exploration.
Western Building Materials has benefited in part from its location in Kalispell, Mont., an increasingly popular spot for high-end custom homes. Western has ridden a string of annual double-digit increases in sales since 2000, and last year, it grew 20.7%–the second-best improvement on the ProSales 100–to $70 million.
Western even opened a component plant in June, and co-owner Doug Shanks says the plant was so “well received by a loyal customer base” that after three months in operation, a second shift was added.
A Door Shuts
But even the wealthy have been affected in this recession, and by the start of this year, things were different at Western–very different.
“A lot of projects that were already started carried us through 2008,” Shanks says. “By January [2009], it was like someone slammed a door on us and we’d been hit in the head.”
In the past, National Home Centers also benefited from locale, in this case the fact that Wal-Mart’s corporate headquarters is just 20 miles up the road in Bentonville. No more.
“It’s been growing, but even they are overbuilt,” Hanby explains. “It might not be until the third or fourth quarter that the excess inventory is chewed up.”
Compounding the problem, ANB Financial, based in Bentonville, was closed by the federal government in May 2008, leaving dozens of National Home Centers’ customers without credit. Hanby points to accounts receivables as the No. 2 issue facing dealers, behind only lack of sales.
“Banks are completely frozen where we are,” Hanby says. “Getting credit in this market is the toughest it’s ever been.
“Suppliers around here have taken it on the chin so hard that we can’t afford any more bad debts,” Hanby adds. In many cases, builders and contractors who did manage to draw money from banks never passed that money on to suppliers and subcontractors.
In Arkansas, liens have become meaningless as foreclosures rose. Ridout Lumber turned to more lawsuits and fewer liens. “If you’re the first one on them, you might get paid,” Ross Ridout adds.
Download 2009 ProSales 100 List (PDF)
