Top LBM Dealers See Dramatic Growth Alongside Supply and Labor ChallengesMay 31st, 2022
The 2022 LBM 100 from LBM Journal and the Construction Supply 150 from Webb Analytics are not just lists of the leading LBM dealers in the country—they’re a reflection of the state of the greater construction industry and its challenges and opportunities. As such, it’s not surprising that dealers reported dramatic sales increases all while navigating a series of unprecedented obstacles.
“Though the nation’s dealers continued to navigate the pandemic in 2021, the challenges that accompany it were slightly different,” LBM Journal said. “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.”
Growth indeed. The magazine reported that all but one dealer on the list experienced sales gains in 2021, with 29 growing 50% and 10 companies experiencing gains of 75% or more. Some of the growth was driven by acquisition, but much of it can be attributed to booming construction activity.
Skyrocketing lumber prices also played a role, Webb Analytics noted. “Largely because of softwood lumber’s 116% price increase between January 2020 and January 2022, according to the Producer Price Index, lumberyards with manufacturing operations saw their revenues shoot up 58.6% in 2021 from the year before,” the analysis said. “This group—one of five subcategories tracked in the CS150—gets a lion’s share of its revenue from sales of framing lumber as well as from manufacturing wood-based components. Thus, a huge amount of what these dealers stock sold for drastically more than it did just a few years ago.”
Here are other notable trends from this year’s LBM Journal 100 and Construction Supply 150:
• Ongoing labor woes: Not surprisingly, LBM dealers are feeling the labor strain like elsewhere in the construction industry and the rest of the country overall. “This year, 84% of companies indicated that recruiting, hiring, and retaining employees is a challenge, up 7 percentage points from last year,” LBM Journal reported. “The most difficult positions to fill, by a significant percentage, were drivers and yard workers.”
In response, dealers said they are implementing a number of efforts, from mentoring programs to pay and benefit increases.
• Price and supply: Also expected, dealers cited price hikes and tight supply as another top hurdle. “Our biggest challenge currently is extended lead times and the constant rising costs,” Charlie Parks, owner and vice president of Parks Lumber & Building Supply, told LBM Journal. “Both of these challenges make it extremely difficult to play a consistent and reliable role in our customers’ attempt to get jobs under contract.”
Yet dealers still came through for their customers. “Priority customer retention was over 95% during extremely unprecedented times in which keeping the customer fulfilled was more difficult than ever,” Parks said.
• Acquisitions abound. The trend of dealers gobbling each other up continued. Webb Analytics reported 156 deals covering 693 facilities in 2021. At the same time, 167 new facilities opened.
• Ecommerce growth: Webb Analytics said that 72.7% of the Construction Supply 150 are allowing customers to access bills online, and 58.6% are allowing online payment, a significant increase from 56.7% and 42.3% the previous year, respectively.
On the other hand, online sales are still sluggish, LBM Journal found. “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.”