Scoreboard reflects hard times
Looking at the numbers—and only the numbers—last year was simply deplorable for the majority of distributors in the home channel. It didn’t seem to matter whether they sold to hardware stores or lumberyards or home centers: Sales were down for 113 of the industry’s Top 150 Distributors, with another 29 companies showing no revenue growth. Only 8 wholesalers reported an increase in sales.
But the numbers, as always, don’t tell the whole story. While some two-steppers didn’t survive past 2009, others have passed the torch to a new generation of leaders who don’t seem ready to collapse under the weight of the current housing crisis. In fact, they seem ready to make some bold moves, or at least the necessary changes to ensure they’re still in the pool of fish as the consolidation continues.
Moore-Handley, the Pelham, Ala.-based company, was perhaps the biggest hardlines distributor to file for Chapter 11 in 2009, eventually setting off a bidding war between House-Hasson (No. 73 on this year’s Top 150 Scorecard) and Bostwick-Braun (No. 80). House-Hasson won the court auction, and moved most of Moore-Handley’s operations to its headquarters in Knoxville, Tenn.
On the LBM side, North Pacific of Portland Ore., a $1.1 billion distributor in 2008, was forced into receivership on Jan. 20, 2010, by a consortium of lenders who claimed the company defaulted on its loans. It has been selling off locations through a federal bankruptcy court ever since.
More recently, Amarillo Hardware (No. 111) canceled its spring market this year, and the company appears to be either closed or temporarily shut down. Calls to Amarillo Hardware were not returned, and the wholesaler, which belongs to Distribution America, is no longer placing regular orders.
For large players like Weyerhaeuser (No. 4), which already operates its own nationwide distribution network, carrying another company’s products is starting to make sense. The Federal Way, Wash., company, which most people associate with manufacturing its own engineered wood products under the iLevel brand, is expanding its relationships with other manufacturers, delivering siding and trim from CertainTeed, Louisiana-Pacific, James Hardie, CedarOne and Collins TruWood, as well as Selex plywood, Dow insulation and housewrap, glulam beams and cedar siding, decking and trim. A recent addition across the entire distribution network is rebar, remesh, wire, and other steel and concrete forming materials.
“Our customers are trying to manage their cash and not buy volumes they can’t use,” explained Nate Jorgensen, VP sales for iLevel. Weyerhaeuser’s iLevel distribution centers can offer multiple products, Jorgensen said, along with a quick delivery to a job site. Look for the addition of more third-party products, he said.
While large public companies are doing their best to protect market share, private equity money is also moving into the sector. Cedar Creek, the country’s largest distributor of cedar products, was purchased this year by Charlesbank Capital Partners of Boston and New York. The acquisition of Cedar Creek (No. 15) “was the culmination of a focused effort to identify, research and partner with a strong platform business in the wholesale building materials distribution industry,” according to the investment firm’s announcement on May 20. Future plans call for expansion into other building materials and other trade areas, under the leadership of chairman and CEO William Adams, a former executive at ABTCO, Louisiana-Pacific, Masonite and Trussway.
Longtime distributors will tell you that the two-step business is about more than just money and products. Like the hardware stores and lumberyards they serve, many are family-operated, multi-general businesses or co-ops run by the members who own them. They are based on relationships, and they will continue past this downturn and others to come. Home Channel News interviewed three distributors—a 139-year-old hardlines wholesaler, a 65-year-old LBM distributor and a 45-year-old co-op, all of them facing the next decade with new leadership and new plans to take their company to the next level.
Blish-Mize
When Jonathan Mize was named president of Blish-Mize in April, he became the fifth generation of the Mize family to hold that title. His father, John H. Mize, will stay on as CEO, but Jonathan will run the day-to-day operations of the 139-year-old company.
The younger Mize is quick to point out that he’s worked at the company for 20 years, learning almost every job. As chief operating officer, he was put in charge of Hardware House, a private-label brand acquired in partnership with House-Hasson last November. Mize led the effort to evaluate the assortment, bringing the SKU count down from 4,000 to 2,500. Now he wants to expand the assortment of lighting, bath fixtures, builders hardware, paint sundries and other imported products to make it more relevant to Blish-Mize’s customers, who cover 12 Midwestern states, as well as House-Hasson’s customers.
Mize also hired, all at once in March, 12 salespeople from Amarillo Hardware. His plan is to expand into west Texas, New Mexico and parts of Oklahoma. “We’re covering more of the Southwest than we ever did before,” said Mize, who’s added 5,000 new items to the Denver and Atchison warehouses to accommodate the farm, ranch, oil and other new types of customers.
Total sales in 2009 were $70 million, down 2% from 2008, but the new territories have helped boost sales 9% so far this year. In 2011, the distributor, where Mize’s sister Blish Connor works as communications director, will mark its 140th birthday. The siblings say they’ll have some kind of celebration, but they’re saving the big party for the 150th birthday.
Allied Building Stores
When Allied Building Stores (ABS), No. 17 on the Home Channel New Distributors Scoreboard, put a new president in place last year, it was a big deal for the 45-year-old organization. Laddie Woods had led the LBM co-op for the past 30 years, bringing its membership to 175 dealers representing 260 stores in 12 states. Sales were $449 million for its fiscal year.
But ABS is big on succession planning; it even has one for each of its buyers and traders. New president David Stiles, who joined Allied Building Stores in 1997 as manager of dealer relations, has also worked on the manufacturing side. Before he took over the helm in August, he worked as “president elect” at ABS headquarters.
One of the changes Stiles has instituted is a new chain of command that could be described as more cooperative.
“We used to operate under a line of VPs, but now we work under a team structure,” Stiles explained.
Because there have been so many changes in personnel on the vendor side, the co-op is also looking to improve communications by inviting suppliers to visit its Monroe, La., headquarters more often. Stiles said he realizes this is a two-way street: ABS executives hope to attend the meetings of their key vendors as well.
ABS manufactures exterior doors for its members, and at their request, brought in some new products last year, like an expanded line of windows. But Stiles doesn’t see geographic expansion as a goal for his co-op.
“It’s not all about growth,” Stiles explained. “It’s about sustainability. If we’re servicing our members properly, the growth will come.”
Klumb Lumber
Buddy Klumb’s father started the business in 1945 with $10,000 in savings, plus the mortgage on his house and the cash value of his life insurance policy. Buddy joined him in 1953, after working for another lumber company. He was the third employee.
Fast forward a few years. Then a few years more. Buddy Klumb is now 83 years old, and his LBM distribution business reached just under $87 million last year. (The record year was 2006, when sales hit $200 million.) Klumb Lumber, No. 91 on the Distributors Scoreboard, was able to stay profitable by controlling credit limits through margins and prices.
Of course that’s only one strategy to employ when checks start showing up late in accounts receivable. Some companies stopping shipping or insist on cash payments. Others give their better customers more leeway in the billing cycle.
Klumb’s 40-year-old daughter, 50-year-old son and 44-year-old son-in-law will be making those decisions someday soon. Klumb Lumber is transitioning over to the third generation, which also includes some cousins. They will have a big territory to cover: Eastern Texas, Louisiana, southwest Arkansas, Mississippi, Alabama, Florida, the Atlanta market, parts of North Carolina and east Tennessee.
Although Klumb Lumber sells primarily specialty wood products—flooring, siding, interior and exterior trim, and moldings, to name a few—Klumb also imports Radiata Pine from Chile and softwood species from Europe, in addition to exporting Southern Pine to the Caribbean. This business has grown considerably following the Haiti earthquake, he said.
The hardest part of the business right now, in Klumb’s opinion, is morale. “Trying to get your yard managers and salesmen pepped up after three or four years [of a downtown> is tough,” he admitted. “On a Friday afternoon, how do you get them to make that last call on a customer who hasn’t given them an order in three or four years?”
