The 2005 ProSales 100: with demand from residential contractors reaching all-time highs in tandem with commodity lumber prices, unparalleled growth rules the day for our annual ranking of the nation's leading construction suppliers

Prosales, May, 2005 by Chris Wood

Phenomenal growth. There's no other way to succinctly describe the general pro dealer economy and the overall business climate during the past year for the 2005 PROSALES 100, our annual survey and ranking of the nation's top construction suppliers. Fueled by record housing starts, a strong remodeling market, and high commodity wood prices, building material dealers and specialty distributors posted what for many was the most successful year in their pro sales history. Balance sheets were solidly in the black, and a staggering 95 firms out of the PROSALES 100 registered double-digit growth, with 25 companies reporting a sales surge of 40 percent or more (see "The 25 Fastest," page 81).

Leading the pack was The Strober Organization, which through, acquisitions of Lowe's Contractor Yards and Moore's Lumber, added units and increased sales by a whopping 170.8 percent. "We added the 42 stores and have been integrating those companies into the Strober family to establish intimacy with customers from market to market," says Alan Schulman, corporate marketing manager for the Brooklyn, N.Y.--based pro dealer. "But we had organic growth in 2004 as well. We had an increase in same-store sales that would have been around 25 to 28 percent [notwithstanding] the acquisitions."

While impressive, that 25 to 28 percent still would have trailed Alexandria, Va.--based Smitty's Building Supply, the 2004 industry organic growth leader with an astounding 77.5 percent leap in same-store sales. "It was a fantastic year," says Smitty's president Jeff Smith. "For years we've always been telling each other, 'If we really wanted to, we could double our sales or have a 50 percent increase,' and last year we said, 'Let's go after it, let's get aggressive.'"

Big Prices, Big Demand

Like most in the PROSALES 100, Smitty's and Strober enjoyed a commodity lumber market in 2004 that hit lucrative pricing highs for both dimensional and panel products. "The entire industry was impacted in a positive way with inflationary [commodity wood] prices," says Schulman. "One could argue that about 20 percent of growth across the industry was due to prices rising, [approximately] 50 percent in panel and 20 percent in [umber."

In what turned out to be a fantastic pro dealer economic scenario, demand for both lumber and panels increased even as prices spiked. On March 23, Portland, Ore.-based Western Wood Products Association released preliminary data showing that lumber demand in 2004 reached a record 61.8 billion board feet, an increase of 8.4 percent above the previous high set in 2003. According to the association, all of the growth in lumber consumption came in new residential construction and repair and remodeling, with record housing starts pushing residential lumber use to 26.7 billion board feet and a hot remodeling market consuming an all-time-high 19.5 billion board feet.

Even in markets that had been soft on housing starts or otherwise trailing the national economy, dealers used lumber prices to jumpstart impressive recoveries from slower sales. Westminster, Colo.-based Alpine Lumber, for instance, pushed gross sales up 64.7 percent to $168 million. "We have a couple of markets that have just turned around, and inflation was a factor, but only as much as it factored into other people's growth, maybe around 20 percent," says president Kip Oram. "But it was a surprise, we certainly did not budget it or anticipate it. [The success] was a whole lot of things breaking at the same time for us, but we didn't have much trouble handling the growth."

Another company yet to feel substantial growing pains is Raleigh, N.C.-based Stock Building Supply, which raked in nearly $3.5 billion in pro sales, landing the dealer at the top spot on the PROSALES 100 for the sixth year running. "I think we have had a good market, and it seems to remain good as we speak," says Stock CEO Fenton Hord. "I think this year will be a good follow-up." Stock's commitment in the marketplace to double-digit growth, however, has created the need for large dollar volumes of business as the dealer looks to best sales performances from one year to the next. "It's funny--when we were a billion, we woke up and we had to put on an extra $100 million just to meet what we were saying to the marketplace. Now we are looking at $350 million. It's a little daunting but it is what we think we can do," Hord says, adding that a primary key to success will be having well-trained, qualified personnel throughout the company.

With more than $2.9 million in pro sales per employee, Boise, Idaho-based Idaho Pacific Lumber seems to be another firm with the personnel side working to its advantage, at least when it comes to sales efficiency. Idaho Pacific joins Woodinville, Wash.-based Matheus Lumber and Portland, Ore.-based Shelter Products in having passed the $1 million mark as the industry's sales per employee leaders (see "Pro Sales Per Employee," page 81). "We have worked hard to find the right people and they have worked hard to find the right customers," says Idaho Pacific president Kent Mills. "We also became an ESOP about six years ago, and we are starting to hit our stride. As [our employees] see their asset balances begin to grow after five years, I think they realize that this deal is for real and wonder how they can work to make it better."