The slump in the housing market has prompted two of the LBM industry’s largest players to pull out of additional markets and make further cuts in their staffing. Stock Building Supply, No. 2 on the Home Channel News Top 350 Pro Dealer Scoreboard, will close 86 facilities and reduce head count by some 3,000 associates over the next few weeks, according to an Oct. 23 announcement.
The decision to close nearly one-third of Stock’s 295 locations was made by Wolseley, its London-based parent company. In late September, Wolseley signaled it might take drastic action to stop the hemorrhaging at its Raleigh, N.C.-based unit, which posted a loss of $246 million for fiscal 2008.
Wolseley executives considered closing down all the Stock locations, but decided against this action because it would destroy shareholder value, according to comments made at a conference call following the announcement. A sale of the business was also on the table, but no viable offers were forth coming. Wolseley decided to embark on a restructuring, which will remove Stock from 16 markets in six states. The company did not give specific locations, although it did say Stock will exit Louisiana.
The 86 branches represent 25 percent of Stock’s revenue and 28 percent of its head count, according to Wolseley. The closures will leave Stock with 209 locations in 27 states.
“We are holding on to the operations where we are No. 1 or No. 2 in the markets,” said Wolseley CEO Chip Hornsby. The company lists Stock’s “top states” as North Carolina, South Carolina, Florida, Texas, California and Utah. “Be certain that, when the market does recover, we’re in the markets where we have the strongest position to be able to benefit as soon as possible,” Hornsby said. By “recover,” Wolseley means 1.1 million annual housing starts—the figure it determined as its threshold for profitability in the building materials business.
Although no timeline was given for the 86 branch closures, Hornsby said, “Our intent is to move pretty rapidly. It’s already being put into place.”
84 Lumber, the industry’s third largest player, decided to close up first and announce it later in this latest round of cutbacks. On Oct. 22 the company confirmed it had already closed 29 stores in 14 states from Sept. 30 to Oct. 20, bringing the pro dealer’s total store count down to 335 units in 37 states. The Eighty Four, Pa.-based chain of lumberyards started the year with more than 400 locations.
The state of Kentucky absorbed the most closures, with stores in Crest wood, Nicholasville, Hopkinsville, and Bowling Green all shut. Customers in these areas will be served from other 84 Lumber locations, according to the company.
In Georgia, 84 Lumber will consolidate its locations serving Atlanta from six to four. This will result in the closing of its Newnan and Dawsonville stores. Goose Creek, S.C., has also been closed, with customers served from another 84 Lumber location.
The nation’s third largest chain of lumberyards is pulling out of the Montgomery, Ala. market. “Extremely low housing starts…do not support our business model, and [this market] is assessed to remain extremely low for many years,” 84 Lumber said in a prepared statement. The company also closed units in Fultondale and Mobile, Ala.
Extremely low housing starts were also being blamed in Michigan, where 84 Lumber pulled out of Lansing and Fremont. Stores were closed in Hinckley, Ill.; Genoa, Ill.; Oklahoma City; and Ozark, Mo. Indiana saw two 84 Lumber closures: Greenfield and a truss plant in Tipton.
In Pennsylvania, the pro dealer’s home state, a consolidation effort will close the Belle Vernon, Meadville and Reading stores. The Philadelphia market will be served from the Douglassville lumberyard, which will be expanded and remodeled, the company said. The greater Pittsburgh metro area will still be served by 21 of the company’s stores.
The central New Jersey market will lose its Pennington location. Newburgh, N.Y., will be consolidated with a nearby location. 84 Lumber will close its lumberyards in Lafayette, La.; San Benito, Texas; and McKinney, Texas.
The closing of the 84 Lumber facility in Dublin, Calif., marks the company’s departure from the San Francisco Bay area. The company still has a store in Auburn that can serve Sacramento, and stores in Modesto, Clovis and Bakersfield that deliver through the Central Valley of California.
In the Washington, D.C./Baltimore/Maryland area, 84 Lumber is closing its Clinton, Md., and Haymarket, Va., stores. The company has been remodeling and expanding its Annapolis, Md., and Clarksville, Del., yards, adding more inventory, warehouse space, installed sales and kitchen design centers to both locations.
The privately held company experienced a 24 percent drop in sales last year, ending 2007 with $3.1 billion in revenues.