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The industry’s top dealers reported booming sales in 2021, all while navigating ongoing supply and labor challenges.
Last year, we launched the LBM 100 in the midst of one of the building material industry’s most challenging—and intriguing—times. A year into the pandemic, dealers had spent the previous 12 months on a roller coaster of uncertainty, as they first tried to keep their businesses afloat during closures, then quickly pivoted to supplying an unexpectedly robust construction and remodeling market. The result was a list of strong numbers put forth by dealers portraying a combination of optimism, pride, perseverance, and whiplash.
Fast forward to 2022, and we’re compiling our second-annual list. The overall results feel a bit familiar, with absolutely tremendous growth and a unique set of challenges. Though the nation’s dealers continued to navigate the pandemic in 2021, the challenges that accompanied it were slightly different. Pandemic-amplified labor shortages and continued supply chain constraints and price hikes have only worsened and have recently been joined by rising inflation and fuel costs, due in part to the war in Ukraine. At the same time, booming residential construction activity continued throughout 2021, forcing dealers to channel their problem-solving even more as they tried to keep materials in customers’ hands, deliveries on time, and expenses down.
Dealers make dramatic gains
Judging by the numbers on this year’s LBM 100, dealers are absolutely proving their mettle.
All but one dealer on this year’s Top 100 experienced an increase in sales from 2020 to 2021. Twenty-nine companies saw sales grow 50% or more year over year; 10 companies (US LBM, Matheus Lumber, Idaho Pacific, Tibbetts Lumber, Timberland Lumber, Dufrene Building Materials, Gleckler and Sons Building Supplies, Howard Lumber & Hardware, Griffin Lumber & Hardware, and Sunrise Builders Supply) grew by 75% or more. Multiple companies reported record sales or revenue growth, including a handful of companies—Mans Lumber, Cassity Jones, Beisser Lumber, and Howard Lumber— that passed the $100 million mark for the first time; Bliffert Lumber + Hardware passed $200 million for the first time.
Much of that growth was organic from steady construction activity, but it also was driven by ongoing M&A. Twenty-two companies reported growing through acquisition. Dallas-based Builders FirstSource, which completed its integration with BMC last year, closed seven M&A transactions in 2021 on its way to 55.5% sales growth and securing the No. 1 spot on the LBM 100 list for the second time. Buffalo Grove, Ill.-based US LBM closed 16 acquisitions, including American Construction Source (No. 10 on last year’s LBM 100), Professional Builders Supply (No. 14 last year), and Higginbotham Brothers (No. 42 last year). As a result, the company’s 2021 sales increased a whopping 116.6%, and it moved from No. 4 to No. 2 on the list.
Kodiak Building Partners (No. 7), headquartered in Highlands Ranch, Colo., also continued to flex its acquisition strength, acquiring Carl’s Building Supply, Shepley Wood Products, Alpine Appliance Center, and Ricci Lumber, which contributed to 32.7% growth in sales. Edwardsville, Ill.-based R.P. Lumber Co. Inc. (No. 19) acquired Alexander Lumber, Dick N Sons Lumber, and Malcom Lumber; the company also opened a new division, R.P. Home & Harvest, in the retail farm and ranch segment.
It wasn’t just the big players making moves. Companies across the rankings made acquisitions this year.
And there was plenty of growth to be had outside of M&A. Gleckler and Sons (No. 57), in Jacksonville, Fla., saw the largest growth, 154.3%, while remaining at just two locations. Meridian, Idaho-based Idaho Pacific (No. 22) grew by 77% while holding steady at 13 locations.
“Our biggest opportunity is growing our market share now that some of our competitors have sold to national conglomerates,” said one Midwest-based dealer. “If we can find and retain employees well, and purchase enough product that may be on allocations, we can capitalize on this opportunity.”
Expect M&A to continue going strong: More than half of the LBM 100 said they expect to expand in the next one to two years, with 70% planning to do so through acquisitions and 67% planning to open new locations.
Labor, supply challenges persist
The strong numbers across the LBM 100 list camouflage the immense challenges dealers are navigating behind the scenes. The obstacles dealers are facing in 2022 have a similar ring as the year before. By far, individual responses to our survey’s open-ended questions pointed to supply chain constraints and labor shortages as the biggest tests for dealers large and small.
This year, 84% of companies indicated that recruiting, hiring, and retaining employees is a challenge, up 7 percentage points from last year. The most difficult positions to fill, by a significant percentage, were drivers and yard workers. “Our biggest challenge currently is extended lead times and the constant rising costs,” said Charlie Parks, owner and vice president of Dahlonega, Ga.-based Parks Lumber & Building Supply (No. 95). “Both of these challenges make it extremely difficult to play a consistent and reliable role in our customers’ attempt to get jobs under contract.”
Still, Parks says, “Priority customer retention was over 95% during extremely unprecedented times in which keeping the customer fulfilled was more difficult than ever.”
Dealers are taking steps to stay attractive to job candidates, and many listed recruitment and training as their biggest opportunity for this year. More than 41% of the LBM 100 report having a mentoring program. Mentor Lumber (No. 87), of Mentor, Ohio, noted it is “Completing the succession plan of hiring and training the next group of superstars here to replace the several soon-to-be retirees,” said President Thomas Kirk.
Arnold Lumber (No. 71) is looking outside the traditional scope. “We’re continuing to hire talent from outside of the industry,” said Matt Semonik, vice president of sales and operations. “We’re leveraging their attitude while developing their technical skills.”
The shortage of workers is currently more indicative of a nationwide problem and not necessarily a reflection of the LBM industry’s status as a good employer. Among the accolades LBM 100 dealers racked up this year, Hancock Lumber (No. 25) and Hammond Lumber (No. 21) were both named “Best Places to Work” in Maine, and Napa, Calif.-based Central Valley (No. 41) also was bestowed a “Best Places to Work” honor in 2021, by the North Bay Business Journal.
It’s further proof that despite the challenges, LBM dealers continue to prove their resilience, whether navigating keeping workers safe during the pandemic or finding new ways to secure products for customers.
Technology and reinvestment
Experts agree that one of the ways to attract younger workers is to embrace technology, something the construction industry overall hasn’t always been on the leading edge of. Dealers are continuing to add and improve technology offerings and digital platforms.
For example, Star Lumber & Supply (No. 35) in Wichita, Kan., implemented a new Warehouse Management System in its main distribution yard, and Kodiak noted investments in IT equipment and systems upgrades, cybersecurity protection, and its Kodiak App.
Despite the changing purchasing habits stemming from the pandemic, online sales still haven’t taken off as much as in other industries. Compared to 2020, fewer LBM 100 dealers—just 31%—say they conducted sales online last year. However, among those companies, more are seeing greater chunks of sales online: 3.9% are seeing 25% to 49% of sales take place online, up from 0% the year before, and 3.9% are seeing 10% to 24% of sales take place online.
Nearly half of the companies say they are updating or adopting GPS delivery management systems, followed by takeoff (38%) and ERP (34%) software as the next most popular upgrades and additions.
Along with upgrading technology, a handful of dealers reported capital investments to improve facilities and equipment. For example, Houston-based Scholl Forest Industries (No. 73) added a rail spur; Stine (No. 24), in Sulphur, La., created an 80,000-square-foot standalone appliance warehouse distribution center; and Heister House Millworks (No. 94), of Mt. Pleasant Mills, Pa., added a new high-speed milling facility that helped expand production of mouldings, jambs, paneling, and more.
“[We made] extensive updates to our facilities—a new facade roof on stores, $120,000 worth of additional improvements and upgrades to facilities, two new tandem trucks, one new tow behind, and two new tow motors,” said Mentor’s Kirk. Mentor also implemented new vision and core values statements, created a video highlighting the entire company, implemented a central dispatch delivery system, and made upgrades to its Epicor POS system, resulting in several efficiency improvements.
As we’ve seen these last two years, as well as throughout the industry’s history, it’s not likely dealers will let these challenges hold them back. When asked about the biggest opportunities facing them over the next year or two, developing future leaders, recruiting and retaining talent, and implementing training programs were among the responses dealers provided. Others noted the opportunity to grow online sales on both the retail and commercial sides.
And, of course, navigating the supply chain challenges by continuing to build strong relationships with supply partners and customers.
The investments and commitment to excellence during a time that is both flush with success and fraught with obstacles are just further proof of the resilience and resourcefulness of the LBM industry—and continued evidence as to why construction and building materials continue fueling the nation’s economic engine. “In 2022, with all the difficulties that builders are having keeping jobs flowing, we as suppliers have an opportunity to lend a hand and go the extra mile to ease the process. We have an opportunity to do what everyone else has been telling them cannot be done,” Charlie Parks explained. “With the help from our great vendors, we have been able to fulfill the needs of our customers in one way or another. Simply telling a loyal customer that we can’t help them has been removed from the playbook, and we feel that this mindset will pay dividends in years to come.”