Volume 47, Issue 5 - June 2008

From the Editor
THE ISSUE AT HAND

Not all Gloom and Doom
A Slower Economy is Hitting Some Markets Harder than Others

When I began researching my article about the supply chain and the economy (see page 14), I couldn’t believe how hard it was to find credible sources to confirm that the United States is, in fact, in a recession. One source would say we are, and then one would say no we are not. I was getting very frustrated, but in the end, I decided to do two things: One, include NAHB chief economist David Seiders’ comments that we are in a recession (see page 14), and two, contact Shelter readers to find out what exactly the market is like in their area and how a slower economy is affecting them.

There’s no doubt that the economy has affected 84 Lumber (see Shelter May 2008, page 30), which is closing 30 stores across the country and consolidating nine stores in six markets. Number-one retailer Home Depot just announced it will be closing 15 of its underperforming stores—three in Wisconsin, two in Ohio, two in New Jersey, two in Indiana and one each in Kentucky, Louisiana, Minnesota, North Dakota, New York and Vermont. While Home Depot plans to open 55 new stores, including 36 stores in the 2009 fiscal year, it will no longer pursue the opening of approximately 50 U.S. stores that have been in its store pipeline, in some cases, for more than ten years. 

“This is a continuation of our disciplined approach to capital allocation that we outlined last year,” said Frank Blake, chairman and chief executive officer. “We will invest in our core retail business, in this case our existing stores, which drive our most profitable sales. Our capital efficiency model will also provide improved returns for our shareholders through dividends and share repurchases.”

Yet, in one of the same cities that Home Depot is discontinuing a location, Sarah McComb, a sales specialist for the contractor sales division at Lowe’s in Fort Wayne, Ind., says her location is incredibly busy. “We are extremely busy in commercial sales here,” McComb told Shelter.

Louis Gifune Jr., a third-generation owner of Rome General Lumber & Hardware in Rome, N.Y., also a location Home Depot is pulling out of, says his business is doing well.

“It can’t hurt us,” Gifune said of the big box retailer’s withdrawal. “Last year was a tough year for everybody, but this year, even without their announcement, we looked pretty good for the year.”

Seiders recently released “The 2008-2009 State and Metro Forecasts.” In it, he said that markets in the Northeast and South, with the notable exception of Florida, will recover ahead of markets in the Midwest. He said the industrial states have a greater risk of continued weakness than the farm belt and the Western markets in Las Vegas, Phoenix and California.

When you read the article, “Surviving an Economic Downturn,” on page 14, you will see that distributors and dealers mirror what Seiders projects. Before you assume that my article is all gloom and doom, however, there is some great advice in the article from building supply company managers who have been through recessions before. One of my favorite quotes in the article is from Kevin Wilson, president of Timber Fab Inc. in Tarboro, N.C., who says, “Cut back and get lean, but don’t stop the marketing.”

Wilson’s words are great words to live by.


Shelter
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