Rough Patch
In March, the coronavirus quickly disrupted many American lives and businesses. It brought some industries to a grinding halt and damaged many businesses. Fortunately, state and local stay-at-home orders across the United States largely deemed construction supply dealers as essential businesses, enabling them to keep operating during the pandemic. Actually, according to the Hanley Wood State-by-State Tracker (visit prosalesmagazine.com) of stay-at-home orders, at the time of this writing, not one state deemed construction supply dealers non-essential. However, several states, such as New York, New Jersey, and Pennsylvania, had either deemed commercial and residential construction as non-essential businesses or issued a stay-at-home order that was too vague to make a clear determination. This is naturally taking its toll on dealers, especially as so many of them heavily depend on pros for their business.
Read the ProSales 100 profile on Griffin Lumber & Hardware
A small percentage of dealers temporarily closed their stores, such as four Builders FirstSource locations in Pennsylvania, where the governor briefly deemed “lumber and other construction materials merchant wholesalers” as non-essential business.
Most others stayed open and many of them have been following the Centers for Disease Control and Prevention’s hygiene and social distancing guidelines to help mitigate the spread of the virus. Additionally, many dealers closed their doors to customers, replacing in-store sales with curbside pick-up and deliveries.
As dealers made these adjustments and did their best to serve customers, several unanswered questions remained. How long will this pandemic last? How will it affect employees, customers, partners, and business? How should dealers respond?
To get a sense of what dealers are thinking about regarding the coronavirus and its impact on their businesses, ProSales magazine surveyed 130 LBM professionals between April 3 and April 9. Nearly 56% stated their companies had already experienced a decrease in customer demand due to the coronavirus pandemic. Half (50%) of respondents believe the viral outbreak will negatively affect their business for more than six months. More than half (58.5%) believe their companies will lose 10% to 30% of their revenue in 2020, due to the coronavirus. And 49.2% stated they are at least “somewhat worried” that revenue lost due to the coronavirus could force their company to permanently close this year.
These concerns are not unfounded, as many dealers have little visibility into their sales pipeline to determine how much of an impact the coronavirus might have on their business. However, some dealers, like Hammond Lumber Company, are using creative measures to forecast sales.
“We have Home Planning Centers (drafting services) in many of our 21 branches. This has always been a very good bellwether tool for us in predicting upcoming projects,” says Hammond Lumber Company’s Mike Hammond, adding, “a majority of the projects in drafting phase are proceeding forward.”
In the absence of a forecasting tool, many dealers look to housing starts to help them gauge the near-term health of the industry and their business.
Unfortunately, those statistics are signaling a rough patch ahead. Housing starts in the U.S. plunged 22.3% to an annualized rate of about 1.2 million in March, the lowest since July of 2019. It was the biggest decline in housing starts since 1984. Declines in housing starts were seen in all regions, with the Northeast being the hardest hit, falling 42.5%. At the time of this writing, according to the Hanley Wood State-by-State Tracker, four of the six states in which construction was deemed non-essential business are in the Northeast. Housing starts in the South fell 21.3%, in the West they dropped 18.2%, and in the Midwest, housing starts fell 21.5%.
Despite the early damage caused by the coronavirus, L.T. Gibson, president and CEO of US LBM, takes an optimistic, longer view. At the 2020 ProSales 100 Conference, he said: “Rather than just think about the year 2020, look at the decade ahead. When you look back at 2010 to 2019, we actually built about half as many houses as we normally build per million people in the United States. That’s the lowest number in the last 60 years … When you look at the number of houses needed in the country, I think the next decade looks really strong for this industry.” PS
