Supply House Times’ annual survey documents a recovery underway.

What a difference a year can make! Last year many PHCP wholesalers reported double-digit declines in year-over-year sales each month of fiscal 2009. This year’s survey found that 75% of the PHCP wholesale distributors had experienced a sales increase in 2010 vs. 2009, and 87% projected their 2011 sales would be up vs. 2010. Even better, when you add in the 9% who projected flat sales for 2011, 96% of the wholesalers surveyed anticipate their 2011 sales will be equal to or greater than sales for 2010.

The American Supply Association said its members reported a 7.5% sales growth rate over the previous rolling 12 months and that March 2011 marked the 11th consecutive month of growth, showing a 7.9% improvement in per work day revenues compared to the same month in 2010.

Sales Trends For Premier 140. Source: Supply House Times/BNP Media Market Research 2011

Regional And Specialty Group Performance

The Canadian Institute of Plumbing & Heating (CIPH) shared information from the confidential report produced by the Profit Planning Group, noting sales increases for its PHCP wholesalers every month in 2010 except January, when sales were reported as flat. Increases ranged from 4% to nearly 5% in February, March and December; 6% to 8.4% increases were reported in July, September and November; and double-digit increases were achieved in April, May, June and August. The best-performing month in 2010 was August, when Canadian distributors enjoyed a 13.8% jump in revenues.

CIPH also reported year-to-date sales by product group: plumbing up 9.7%; HVACR up 4.9%; PVF up 1.4%; waterworks up 14%; hydronics flat.

Russ Morgan of IPEX, who serves as chairman of the board of CIPH, noted the positive impact of the many government stimulus packages in effect in Canada during 2010, many of which have ended or will end in 2011.

“Next year (2011) may prove somewhat more challenging, though cautious optimism seems to be the sentiment of most,” he said. “However, there is still a great deal of uncertainty when you look around the world today, though Canada remains much better positioned compared to most other countries.”

The North Central Wholesalers Association shared the results of a survey done with 29 member wholesalers in Indiana, Michigan, Ohio, Western Pennsylvania and West Virginia. On average they reported a 5.81% increase in sales for 2010 and projected an average of 5.31% sales growth for 2011.

Heating, Airconditioning and Refrigeration Distributors International (HARDI) announced North American HVACR average distributor sales for December closed out 2010 in line with the association’s forecast, but fell short of most manufacturer and analyst projections going into the year.

“Average sales improved in 2010 for every HARDI region and the annual growth rate is the highest recorded in the HARDI Monthly Sales TRENDS Reports since mid-2006,” said HARDI’s chief economist, Alan Beaulieu of the Institute for Trend Research. “We were spot-on with our 10% growth rate projection for 2010, but despite a stronger economic environment we don’t see enough in the HVACR industry to sustain that level of growth next year.”

Omni Corporate Services Ltd. revealed results from a survey of its members about current business conditions at its spring meeting in January. More than half (51%) of those responding said their total sales increased; 34% said total sales were down; and 15% reported total sales as flat.  Survey participants who reported sales growth noted the percentage increase was on average 10%. Those who noted a sales decline said sales were down on average 11%. Remodeling business was either flat or up according to 76% of respondents; commercial business was flat or growing for 66% of respondents; and 51% reported new construction was either flat or increasing.

The Rankings (1-50). Source: Supply House Times/BNP Media Market Research 2011

How Some Leaders Performed

Newport News, VA-based Ferguson’s revenue was 11% below last year, although the like-for-like revenue decline was restricted to 9%, parent company Wolseley said in its 2010 annual report. During the fourth quarter the business generated like-for-like revenue growth for the first time in three years as new residential and repair, maintenance and improvement (RMI) markets continued to recover. Gross margin was slightly lower than the prior year, with pricing pressure largely mitigated by a focus on improvements in the business mix towards showrooms, counter sales and own (private) label products.

Wolseley Canada’s 2010 sales were down 3% in constant currency compared with 2009, but business returned to growth in the second half, Wolseley said. Tax incentives and government stimulus spending provided some benefit. Blended branches, waterworks and HVAC generated growth during the year and improved market share.

HD Supply (Atlanta, GA) announced a 1% increase in net sales for fiscal year 2010 vs. 2009, and its gross profit increased by 4.1%.

Net sales for the fiscal 2010 fourth quarter ended Jan. 30, 2011 were up 6.7% compared to the same period in 2009, and gross profit increased by 12.7%.

WinWholesale (Dayton, OH) noted that its revenue and profit were up slightly for 2010 because of the company’s emphasis on sales, expense control and asset management.

“I’m pleased with WinWholesale’s performance this past year, especially given the tough conditions that have continued in the residential and commercial construction markets,” said Rick Schwartz, president and CEO.

Interline Brands (Jacksonville, FL) said its 2010 sales were up 2.6% vs. 2009 and its fourth quarter sales increased nearly 16%.

“We made significant progress toward our goals in 2010, and exited the year a much stronger company,” said Michael Grebe, chairman and CEO. He pointed to the company’s completion of a comprehensive refinancing, the acceleration of certain investments in key growth initiatives, and the acquisition of CleanSource, which will enhance its position in the janitorial and sanitation market.

The Rankings (51-100). Source: Supply House Times/BNP Media Market Research 2011

Independents Share Results

Howard Frankel, president of Central Plumbing Specialties/Grande Central Showrooms of New York (Yonkers, NY), noted that 2008 was the bellwether year for his company. “In 2009 we had our first drop-off ever, but 2010 has retrenched us back to 2008 levels,” Frankel said. “We expect 2011 to surpass that.”

Mike Michel, vice president of marketing at R.E. Michel (Glen Burnie, MD), observed, “Through acquisition and organic growth, we added seven locations in 2010, our 75th anniversary. We have five additional locations scheduled to open this year and are optimistic regarding business growth in 2011.”

Kip Miller, president/CEO of Eastern Industrial Supplies (Greenville, SC), said, “Although our sales declined in our fiscal year ending September 2010, we met our annual return on equity goal. Our business is off to a fast start this year with sales and profits exceeding expectations for the period October through February.”

Rogers Earl Jr., president/CEO of Valley Supply Co. (Elkins, WV), said that 2010 was a struggle in the West Virginia market area. “We did come out ahead by 13% at three locations,” he noted. “One location was down. Overall, the whole company experienced an increase in sales. For 2011 we anticipate sales growth of 15%.”

Michael Taylor, president, Columbia Specialty Co. (Long Beach, CA), noted that his company “experienced rough going through the first half of 2010 due to recessionary conditions in California, but improved through the second half of 2010 and continues sales gains into 2011.

Brian Tuohey, president, Collins Pipe & Supply (East Windsor, CT) said he expects a 12.5% sales increase in 2011.

The Rankings (101-150). Source: Supply House Times/BNP Media Market Research 2011

Notable Expansion & Acquisitions In 2010

  • Ferguson (Newport News, VA) completed the acquisition of Summit Pipe & Supply and Summit Pipe & Supply of Mississippi Dec. 31. Summit is a waterworks distributor with three locations in Northport and Wetumpka, AL, and Jackson, MS. All former Summit locations will operate as satellite locations of the Ferguson Santa Rosa, FL, branch.

  • Irr Supply Centers (North Tonawanda, NY) acquired L.A. Hazard & Sons (Derby, NY), a 4-branch electrical, plumbing and heating product distributor that also operates two registered Kohler showrooms.  The Hazard locations will continue to keep the L.A. Hazard name.

  • Valley Supply (Elkins, WV) expanded its 100-year-old facility to create a new showroom, DreamScapes.

  • Comfort Supply, a wholesale distributor of Ruud HVAC products, announced plans to open a fourth location in Clarksville, TN.

  • Eastern Industrial Supplies opened a new location in Charlotte, NC.

  • Security Plumbing & Heating Supply (Selkirk, NY) hosted a grand opening for its Middletown, NY, branch.

  • Northeastern Supply (Baltimore) opened a branch in Georgetown, DE.

  • Brauer Supply Co. (St. Louis, MO) started its 130th year in business with a new 100,000-sq.-ft. headquarters and distribution center.

  • McJunkin Red Man Corp. (Houston, TX) acquired South Texas Supply Co., which has two branches - Carrizo Springs and Dilley, TX - and signed an agreement to acquire Dresser Oil Tools & Supply, which operates four branches in North Dakota.

  • Kelly Pipe (Santa Fe Springs, CA) opened a master distributor branch in Las Vegas following the acquisition of Iron County Pipe’s assets.

  • Pacific Plumbing Supply opened a 2,100-sq.-ft. radiant and hydronics showroom at its headquarters in Seattle, WA.

  • Segment Leaders. Source: Supply House Times/BNP Media Market Research 2011

  • WinWholesale (Dayton,OH) announced the openings of Lehigh Valley Windustrial Co. (Bethlehem, PA); Fargo Winnelson in Fargo, ND; Pensacola Winnelson in Pensacola, FL; and Albuquerque Winwater Works Co. to serve New Mexico.

  • Coburn Supply (Beaumont, TX) opened a PROSTOCK store in Lake Charles, LA, and announced plans to open three more in coming months.

  • Northeastern Supply (Baltimore) acquired Standard Supply and Equipment (Front Royal, VA), a distributor of residential plumbing and well and pump products.

  • Litco Supply Co., owned by Torrington Supply Distribution Group of Waterbury, CT, opened a Luxury Bath Center showroom in Torrington, CT.

  • APR Supply (Lebanon, PA) announced plans to acquire YC Supply (York, PA), a plumbing, heating and air conditioning distributor.

  • Blackman Plumbing Supply (Bayport, NY) acquired Ridgewood Corp. (Mahwah, NJ).

  • First Supply LLC (Madison, WI) acquired J.J. Koepsell Co. (Sheboygan, WIS), including a 4,000-sq-ft. Kohler Premier showroom.

  • Noland Co. (Dayton, OH) opened a location in Pinellas Park, FL.

  • Deschenes Group (Montreal) signed an asset purchase agreement to acquire the 17-branch Mueller Flow Control division (a PVF distributor) of Mueller Canada from Anvil International.

  • Munch’s Supply Co. (New Lenox, IIL) entered Chicago with a new 55,000-sq.-ft. branch.

  • The Granite Group Wholesalers LLC (Concord, NH) opened its 26th location, including an Ultimate Bath showroom, in Lebanon, NH.

  • Aaron & Co. (Piscataway, NJ) acquired S. Franklin & Son (Fairfield NJ).

  • Noble acquired the assets of British Columbia-based wholesaler M.P.H. Supply Ltd., which operates five branches under the Better Bathrooms banner, and signed an agreement to acquire Canadian HVAC distributor Don Park.

  • Texas Pipe & Supply (Houston) acquired Energy Metals, a Houston-based stocking distributor of specialty stainless and nickel alloy pipe, fittings and flanges.

  • Combined Sales For Premier 150. All sales in U.S. dollars. Source: Supply House Times/BNP Media Market Research 2011

    Strategies For 2011

    The risk of rapid fluctuation in the market or a second downturn remains, influenced by the rate of GDP growth, consumer confidence, credit availability, mortgage and interest rates, government economic stimulus initiatives,   unemployment and demographic trends, Wolseley said in its annual report.

    In the last 12 months Wolseley completed a group resource allocation program, dedicated cost reduction and pricing initiatives, and reviews of aspects of the company’s property estate. Its businesses have active programs to identify and exploit counter-cyclical opportunities and diversify into more robust sectors such as RMI.

     Noble, one of Canada’s largest distributors of PHCP supplies, announced it has embarked on an expansion strategy that includes U.S. distributors.

    Mid-Way Supply (Zion, IL) a supplier of HVAC products, partnered with a business consulting firm to design a financial and operating plan.

    Interline Brands consolidated smaller distribution centers with larger, more efficient regional centers throughout the year, according to Kenneth D. Sweder, president and chief operating officer. The company also has focused its efforts on supply chain enhancements, e-commerce investments and operational initiatives to enable greater levels of profitability.

    Consolidation Update (by billions of dollars). Source: Supply House Times/BNP Media Market Research 2011

    Outlook For 2011

    In the first half of fiscal 2011 Wolseley’s U.S. operations achieved 6% in like-for-like revenue growth for the first quarter and an 11% increase in the second quarter. Wolseley’s Canadian business reported 7% like-for-like revenue growth in the first quarter and a 4% increase in the second quarter.

    “We expect markets to remain somewhat flat until the U.S. economy really begins to gain strength and construction, especially housing, resumes in a meaningful way,” said Rick Schwartz of WinWholesale.

    Interline Brands recognizes that its markets are stabilizing but still in recovery for fiscal 2011, according to Michael Grebe. “We are encouraged by the trends within each of our markets and our January acquisition of Northern Colorado Paper, and we are optimistic about the future potential of our business,” he said.

    Morris Cregger, president of Cregger Co. (Columbia, SC), commented, “We anticipate the year 2011 to reflect a growth in revenues of 15% in same store sales.”

    Jack Stapley, vice president and partner at Farnsworth Wholesale (Gilbert, AZ), shared, “We expect to see an increase in all three divisions - plumbing, HVAC and waterworks - in 2011. We also expect our Kohler showroom to see a substantial increase over 2010.”

    Steve Bellar, president of Thrifty Supply (Bellevue, WA), noted, “With no federal rebates ($1500), we see the market as the same or likely less than 2010.”

    Charlie Murray, CEO of Murray Supply Co. (Winston-Salem, NC) observed, “It would appear that we have weathered the storm and the worst is behind us, but we still expect 2011 to be very similar to 2010 with very little commercial construction activity in our area.”

    Lynn Piller, president, O’Connor Co. (Lenexa, KS), said, “2011 should improve over 2010, but the going will still be tough.”

    Steve Berger, president, Modern Plumbing Supply (New Milford, CT), shared, “In the Northeast, 2011 started off with a lot of bad weather, but that is translating into increased heating and pump sales. Also, record numbers of roof leaks and damage is leading to strong contractor remodeling business. Traffic in our showrooms has increased with people renovating. After not spending much over the past couple of years, people are forced to start remodeling if they plan to stay in their homes.”

    Changes To The Premier 150 List

    These wholesale distributors appeared on the 2011 Premier 150 list but were not included in 2010:

  • Active Plumbing Supply (Avon, OH)
  • Bakersfield Pipe & Supply (Bakersfield, CA)
  • Cayce Mill Supply (Hopkinsville, KY)
  • Central Plumbing Specialties/Grande Central Showrooms (Yonkers, NY)
  • Century A/C Supply and Air Management Supply (Houston, TX)
  • Collins Pipe & Supply Co. (East Windsor,CT)
  • Eastern Penn Supply Co. (Wilkes-Barre, PA)
  • General Plumbing Supply (Edison, NJ)
  • Industrial Piping Systems (York, PA)
  • Monumental Supply Co. (Baltimore, MD)
  • Noble Supply (Concord, Ontario, Canada)
  • ProSource LLC (Greenville, SC)
  • Shore Distributors (Salisbury, MD)
  • Valley Supply Co. (Elkins, WV)
  • Honorable Mention: Modern Plumbing Supply, New Milford, CT, with 3 branches and 3 showrooms.

    The following companies were listed in 2010 but left off the 2011 list because they were acquired or requested to be removed, or because we were unable to confirm their information and did not want to estimate based on several years’ worth of past estimates:

  • Aireco Supply (Savage, MD)
  • Allied Refrigeration (Signal Hill, CA)
  • Andrew Sheret (Victoria, British Columbia, Canada)
  • Bruce Supply (Brooklyn, NY)
  • C.C. Dickson (Rock Hill, SC)
  • Consolidated Pipe & Supply (Birmingham, AL)
  • Habegger Corp. (Cincinnati, OH)
  • Portland Group (North Billerica, MA)
  • Ridgewood Corp. (Mahwah, NJ)
  • Solar Supply (Lake Charles, LA)
  • Solco Plumbing Supply (Brooklyn, NY)
  • Thermal Supply (Seattle, WA)
  • United Refrigeration (Philadelphia, PA)
  • United Supply/USCO (North Plainfield, NJ)

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