The 2020 Mid-Year Economic Update_long

Stock Takes Stock

highly fragmented, are an opportunity for Stock, Hord said. The
company has acquired three operations in this area, as well as opened two
greenfield locations this year. Others are planned.

A large number of small
distributors presents an opportunity for acquisition in this area, Hord

Stock has also recently increased
its capacity to supply rebar. Its focus has primarily been on the residential
market in Florida. With its acquisition of K& A Lumber in March 2006, Stock’s
annualized rebar sales in Florida will grow to $100 million 65 percent of that
is the commercial market.

are increasingly demanding installed services in response to tight labor
markets, Hord said. They are also looking to reduce the number of vendors and
subcontractors in the supply chain. Stock tapped an installed sales business
manager to oversee this area back in 2003. Significant product lines in
installed services include doors, windows, trim, siding, components, framing,
cabinets and insulation.

Stock has also worked to grow its
construction services focus through acquisition.

It acquired Las Vegas and Denver
framer Vegas General Construction Co. in July 2005 its operations include a
lumberyard, component plants and door plants. Stock also purchased Michael
Nicholas Carpentry, Chicago, IL, in October 2005, and a Las Vegas electrical and
plumbing contractor in May 2006.

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Stock Building Supply, long on a
mission to expand its product offerings and market penetration, has plans to
strengthen its presence in several new markets, including remodeling, light
commercial construction and installed services, its president and CEO Fenton
Hord told investors and analysts at a recent conference in

Hord joked to investors that
“despite some recent rumors, we do remain America’s leading distributor of
building materials and provider of services to contractors,” ostensibly
responding to Home Depot’s growing presence in the professional supply market
through its Home Depot Supply division.

Stock, with $4.1 billion in annual
sales last year, has grown rapidly since UK-based Wolseley plc acquired it in
the mid-1980s. Wolseley, also the parent company of Ferguson, is a global
distributor of plumbing, heating and building material products.

Stock’s sales break down like this:
77 percent to new residential construction; 10 percent to multifamily
apartments, condos and assisted living; and 9 percent to remodeling and repair.
Light commercial construction comprises 4 percent of its sales. The company
estimates it has a 3-4 percent market share.

Remodeling and repair, as well as
light commercial construction, are “essential to our future growth,” Hord said.

Stock has
been busy in the past year. Arguably, the distributor has been one of the most
active acquirers in wholesale distribution.

In just the past 15 months, Stock
has entered through acquisition eight new markets including Las Vegas, NV,
Miami, FL, and Chicago, IL and four markets through greenfields. New locations
are New Orleans, LA, Anchorage, AK, Jacksonville, FL, and Santa Barbara, CA. In
addition, the building materials distributor added 11 new locations in existing

The company has also expanded its
product line by opening two new component plants (one in booming residential
market Orlando, FL) and implementing a “more robust product line management”
around engineered wood, private-label millwork, cabinets and building


Stock sees the remodeling market as
wide-open, with more than 800,000 remodeling contractors working in the U.S.
According to Stock, the U.S. represents a $50 billion market. The company
already takes in about $500 million in sales in remodeling, but is looking to
grow its market share.

“It’s a huge market,” Hord said.
“We have the resources in place. There’s no reason we shouldn’t be a major

Stock aims to adjust its product
mix and increase its convenience and services for the smaller

Many remodeling contractors shop
the retail channel, but Hord believes they prefer working with a professional
supplier such as Stock. Stock is already present in most of the top 50
remodeling markets in the U.S.

The company recently started a new
platform to respond to the needs of remodeling contractors. The first Remodeler
Center opened in Norwood, MA, in the fall of 2005. Several other locations will
open this year, Hord said. The focus of these centers is on convenience; the
centers feature a drive-through for building materials.

Light Commercial
implemented a commercial national sales office in fall 2005 to target national
general contractors. It has also established commercial sales organizations in
five new markets, and expanded its sales capabilities in 10 markets where Stock
is already present.

“This is an area we have touched
upon but not really focused on,” Hord said.

The commercial doors and hardware
markets, both

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