You have to go back to the Great Recession 15 years ago to find as many LBM dealers reporting sales declines as we had in 2023. But the reasons are far different, and so are the consequences.
Three-quarters of the companies constituting the 2024 Construction Supply 150 reported revenue drops last year. The entire CS150’s U.S. operations sold $382.03 billion worth of goods. That’s 5.7% less than the year before. Reports haven’t been this bad since 2007 to 2009, when 84% to 93% of the companies in the ProSales 100 said sales had fallen year over year.
However, it’s wrong to read these numbers as reason for panic. The Great Recession was a deadly cocktail of toxic mortgages and homebuilding mania that ultimately led housing starts to plunge 75%. The drop in 2023 was more like a steep roller-coaster dip that came after a climb to unsustainable heights. And while 2023’s ride has been sobering, dealers have emerged safe—and optimistic for the future. On average, CS150 members predicted sales would rise 4.4% this year.
How did we get on this roller coaster? In a word: Lumber.
In 2021, unprecedented rises in lumber prices caused the members of that year’s Construction Supply 150 to report a 19.2% gain in revenue. The next year, even with prices by year-end down more than 60% from where they were at the start, the CS150 membership posted a gain of 9.5%. (Every year, the CS150 membership changes a bit, so you can only compare each group’s numbers with what they did the previous year.)
In 2023, the average price for framing lumber fell roughly 48%. Dealers that rely heavily on the product—both as a commodity and as part of the cost of truss and panel manufacturing—got mauled. For instance, at Builders FirstSource, revenues from sales of lumber and sheet goods dropped nearly in half, accounting for close to 70% of the company’s revenue decline in 2023. Even big boxes suffered: The decline in lumber sales amounted to 36% of The Home Depot’s total sales drop, while at Lowe’s it can be said that lumber’s drop produced 25% of its overall decrease.
The Lumber Effect can be seen when you break down the CS150 membership by type of company. Sales at lumberyards with manufacturing operations went down 22.7%, while at lumberyards without manufacturing the drop was 12.8%. Hardware stores and home centers are much less dependent on lumber (aside from The Home Depot and Lowe’s), but they still reported 4.3% less revenue. Only specialty dealers—companies that primarily sell products like roofing and siding, with very little lumber—saw a sales increase. They rose 5.1%.
Lumberyards also were hurt by the 5.7% decline in single-family home starts. Specialty dealers benefited from the 2.3% rise in remodeling spending as well as from more commercial sales; multifamily units under construction were up 9.7%.
Big dealers kept getting bigger, with this CS150 class adding 516 branches to bring their total to 15,287. Of those, The Home Depot and Lowe’s have 3,761 branches in the U.S. (excluding distribution centers and warehouses), while the rest of the CS150 at year-end 2023 had 11,025, up 4.5% from 2022.
Employment changes were more modest, perhaps in recognition of the slowing sales. The entire CS150 had 887,381 employees at the end of 2023, up just 0.3%. Excluding The Home Depot and Lowe’s, the employee count rose 3.5% to 308,181.
(Note: All these numbers are for CS150 members’ U.S. operations. Their locations in Canada and Mexico contributed another $15.92 billion in revenue. That’s a sharp drop from 2022’s $21.1 billion because Lowe’s sold all of its Canadian operations. Store counts fell to 674 from 891. Exclude the Lowe’s selloff and you’ll find that sales dropped just 0.8% and the location count went up by 15.)
Once again, this report shows that LBM dealers do more than just sell stuff. Nearly half the CS150 also manufactures building products. Truss plants and door shops are most popular. A slightly different half of the group installs products, particularly windows, doors, and countertops. Forty-two percent of the revenues at 84 CS150 companies come from manufacturing and installations. That’s $18.37 billion of their $43.6 billion in total revenues.
The Construction Supply 150 are the biggest stars in a universe of tens of thousands of construction supply companies, and they definitely are the ones that count most. Webb Analytics estimates the CS150 figures in just over 64% of all revenues collected by all of America’s construction supply companies.
Along with benchmarks on such key performance indicators as sales per branch and per employee, Construction Supply 150 also covers IT spending. While this industry is known for being frugal about technology spending, the survey reveals great interest in software that lets customers track deliveries, see past orders, pay bills, and even check whether a product is in stock. There’s also budding interest in artificial intelligence. As for personnel issues, this year’s CS150 members reported having a slightly easier time finding truck drivers and yard workers than did last year’s CS150. The report also indicates one-fifth of all construction supply workers are female, just over one-third are members of minority groups, and 14% are over 65 years old.
The entire 61-page PDF report is available for download at https://www.webb-analytics.com.
Webb Analytics is a data and research consultancy that helps executives in construction supply spot the trends, threats, and opportunities that matter most. It’s led by Craig Webb, one of the nation’s best-known industry figures and the former editor-in-chief of ProSales, the construction supply industries most honored publication. Aside from the Construction Supply 150, Webb Analytics also produces an annual deals report, consults with dealers, publishes research reports, and speaks at industry events.