Midwest movers: Nebraska dealers face downturn with steady optimism

Home Channel News, August 25, 2008 by Brae Canlen

LINCOLN, NEB. -- The cornfields have just sprouted ears throughout eastern Nebraska, a little behind schedule for this time of year. Winter hit early and spring came late, so farmers are scrambling to make the most of a short growing season. But corn and soybeans are still fetching good prices, with feed lots, grain elevators and ethanol plants all competing for the same supply.

Building material dealers in this part of the country are also trying to play catch up after winter wreaked havoc on construction projects. Then there's the housing slump from which no state has been exempt, Nebraska included. But most of the lumberyard owners here have avoided closing locations and laying off employees. On the contrary, they've been expanding their operations with new showrooms, up graded truss plants and additional stores. Two dealers even crossed state lines this year, one into North Dakota and the other to Colorado.

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"I've been amazed at the amount of money our members have invested in their businesses over the last few months," said Quent Ondricek, vp-lumber and building material for Do it Best. The Fort Wayne, Ind.-based coop has a number of LBM dealers across Nebraska, ranging from large metro operators to smaller rural lumberyards. While residential construction has slowed down considerably in Omaha and Lincoln, both cities still have healthy economies and employment rates.

"Housing starts never really spike or collapse in farm country" observed Ondricek, who was born and raised in South Dakota. "They tend to have peaks and valleys. Conservative nature abounds in rural America, and I think that adds stability."

Conservative yes, but not overly cautious. Ondricek still remembers a trip he made to Atlanta in 1982 with a Nebraska lumberyard owner named Myron Andersen. The two men wanted to check out a retailer named Home Depot. Andersen was so impressed that, against all advice, he built a 60,000-square-foot store in Kearney, Neb. It opened in July 1985. The local economy collapsed the following year.

"We almost didn't make it," Andersen recalled. "Our bank and vendors worked together to help us survive. I'll always be grateful to them" Andersen's home center in Kearney, called Builders Warehouse, is now 150,000 square feet. This year he chose to upgrade his truss plant with $1.5 million in new equipment and software. (See story on page 35.)

Moving further east, Nebraska dealers in the Omaha area have good reasons to throttle back right now; building permits for single-family homes were off by 33 percent in 2006, and this year's decline is approaching 50 percent, according to the Omaha Chamber of Commerce. Yet the city keeps adding new jobs and new households.

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These contradictions befuddle Rick Russell, president of Millard Lumber, but they haven't stopped him from converting a former electrical assembly plant into the state's largest drive-through lumberyard, hardware store and design center. The 450,000-square-foot complex opened this spring.

Tom Christensen, president and CEO of Christensen Lumber and a former chair of the Nebraska Lumber Dealers Association, noted that "you didn't see any stick yards in Nebraska" during the housing run-up, when a dirt lot and an air conditioned trailer was all it took to sell lumber in some parts of the country.

"We're pretty well committed to what we're doing long term," said Christensen, who built a component plant last year. Even the local builders avoided the easy money, he said, selling mostly to qualified home buyers. "We didn't have national home builders here with a lot of subprime loans," he added.

Although he serves the Omaha market from Fremont, Neb., Christensen hears that the state's rural dealers are "getting a nice boost from the ethanol business." Kim Carhart, vp-Carhart Lumber, a 10-unit chain of lumberyards in Nebraska's agricultural markets, confirmed that she's been selling a lot of pole barns and storage buildings lately. But she expects her home decor departments to be just as busy this fall as her agricultural division. (See story on page 35.)

"If [farmers] have had a good year, they might put in new cabinets or flooring" Carhart explained. "They tend to put in good quality, too. They're not going to be moving any time soon"

HCN's annual Top 350 Pro Dealer Scoreboard tells the story of an industry coping in a contracting economy. This report, starting on page 17 describes how some dealers are holding on and even expanding.

Dealers with annual
sales over $1 billion

    Company      Sales

1   ProBuild     $5.00
2   Stock        $4.60
3   84 Lumber    $3.10
4   ABC Supply   $2.60
5   BMHC         $2.29
6   Allied       $2.00
7   Bradco       $1.70
8   Beacon       $1.65
9   BFS          $1.59

(in $billions)