From the ground up: 84 Lumber’s expanded store openings create demand for management trainees
January 28, 2017
The view from 84 Lumber Co. headquarters has been getting rosier over the past several years.
Revenue at the country’s largest privately held building materials supplier has been steadily climbing since 2011, following the bust in the housing industry that began in 2007 and was responsible for the Great Recession that began a year later and lasted until a turnaround began in 2010.
The steady revenue improvement, which has tracked the recovery in the U.S. housing industry, has meant that 84 Lumber has been opening new stores around the country and on Sunday will run a 90-second ad just before the half of the Super Bowl asking people to consider applying for management trainee positions, an entry-level spot that offers the chance to move up in its ranks.
One of those veterans of 84 Lumber’s method of bringing someone in at the bottom and rewarding them through a string of increasingly more responsible jobs is Chief Operating Officer Frank Cicero, a 33-year veteran who joined it as a trainee in February 1984. Cicero said during a recent that while the company worked its way out of the housing bust of a decade ago, it found revenue by creating new streams.
“What we learned in the bad times is to carry some of those principles to now to grow business and some really good operating procedures that we have now in our company,” Cicero said, adding that the company wouldn’t be where it is today without the hands-on day-to-day management of CEO Maggie Hardy Magerko.
She took the reins of the company a decade ago from her father, Joe Hardy who founded it in 1956.
“Without her personal commitment, who knows,” Cicero said. “She was working 6 a.m. to 9 p.m. days, leading meetings that were very difficult.
“We have customers, we have associates and we have vendors, and at that time her commitment was transparency to all parties, that everybody knew what we needed to do every day. That’s a true sign of a leader.”
Boom to bust and back
Cicero, who was a math major in college, can put the bad days into perspective with some no-nonsense statistics about where the company was and how far it had to go to get where it is today.
“We got into the housing boom from 2003 to 2006, we’re opening stores, and housing is on an upward spiral. In 2006, there were 1.8 million single family homes built in U.S.”
To keep up with the demand, the company had 500 stores and 10,000 employees across 36 states at the peak of the boom, recording $3.8 billion in sales in 2006.
But as quickly as it had watched and responded to the meteoric rise of homebuilding, it saw it plummet, Cicero said, adding that in 2009, just three years after the construction peak, housing starts were at a moribund 380,000.
Through store closings and layoffs, the company reflected the fallout, with just 2,800 employees and less than half its 2006 store count.
“From 2008 through 2010, we were lucky, blessed to have an owner in Maggie who committed not only her resources but her personal self to the company in getting through those times,” Cicero said.
The recovery for the company began in 2011, when it saw $1.4b in sales;$1.68 billion in 2012; $2.14 billion in 2013; $2.3 billion in 2014; $2.5 billion in 2015; and in 2016, $2.86 billion.
As money began to flow back in, the company opened two new stores in 2014; three more stores and two component manufacturing plans in 2015. At the end of last year, the chain stood at 250 stores and 5,100 employees.
“On slate for 2017, we’ll be in the 15-store range of openings. We’ll open our first store in Boston, one in Greensboro, N.C., and another in Long Island, which services the Hamptons,” Cicero said.
Last week, Magerko, Cicero and some other employees were headed on a trip to review store sites in Seattle, Portland, Ore.; Sacramento, Calif.; and Salt Lake City that will become a part of this year’s new store count.
The current expansion comes amidst some of the best housing construction data since before the Great Recession began. U.S. builders ramped up home construction in December nearly 12 percent over the previous December, with a seasonally adjusted annual rate of 1.2 million units. According to the U.S. Commerce Department, for all of 2016, developers started work on the most new houses and apartments since 2007.
But Cicero noted that today’s 84 Lumber Co. doesn’t just define itself as a building materials supplier for the single-family housing industry. As it worked its way out of the housing bust, it came up with other ways to bring in revenue.
It launched a division that built college dormitories, apartment complexes, strip retail centers and hotels. In addition to supplying its building materials, it also began offering a service to commercial developers to provide the subcontract labor for the framing and other construction activities.
“We discovered that to gain revenue, one of the things we wanted to do was to supply the materials but also put a labor portion on there for the customer and offer management and services and take that off his plate, to let him deal with one person and provide that service,” said Cicero. He noted that of the $2.6 billion the company brought in last year, $600 million was from construction services.
“That business still exists today and it’s growing as we grow,” he said.
In 2011, the company launched the 84 Energy division, selling erosion control products as a response to demand coming from the oil and gas industry.
“We’re a big company, and you have to capitalize on whatever local flair you can find,” Cicero said, adding that the product line, while not an enormous revenue provider, eventually evolved into use by the company’s core customers. Around the same time, the company added its GreenEdge Supply products, to meet demands of builders who need certified sustainable lumber.
“We learned you shouldn’t be so one-sided in your products,” Cicero said.
The company’s rebound has reached a point that it is now on a year-long national search for applicants for its management trainee recruitment program, which kicks off with Sunday’s Super Bowl ad.
With its projection of hitting 265 stores by year’s end, Cicero said, the demand just to fill new stores with the average of 20 people per store, will generate 400 new employees, plus additional people in support roles at headquarters.
The company wants employees who will take an entrepreneurial approach. While a college degree isn’t necessary, Cicero said completing college, whether a two-year or four-year program, demonstrates a commitment. Time spent in the military represents a similar commitment, he added.
“We use the management trainee position as the entry level to management,” said Cicero, himself a product of the system that enabled him to work his way through the ranks. “You start as trainee, learn the company and the culture, with possibly a stint in the purchasing department, becoming a co-manager of a store, then a store manager” with a path to an area manager and upward, he said.
“By hiring the best management trainee candidates we can find, we subsequently use that to grow all of our positions in the company. We take what we have as a core culture and make it go across the country in any market that you want to go to.”
While stating that it’s difficult to state an exact number of management trainees it expects to hire, Cicero noted that the company has added 2,300 employees in its existing stores since its rebound in 2011. In addition to stores in new markets, it’s also seeing a revitalization in other markets like Dallas, where it has four stores and is expanding one of them. At the same time, the company is reinvesting assets in stores and markets around the country that are doing well.
“As the markets grow up again, we’ll grow up with them,” Cicero said.
And while 84 Lumber has two major competitors in the building materials supply industry, Cicero noted that both are owned by private equity firms.
“They’re a conglomeration of 50 different businesses; they don’t have a core culture,” he said. “We can use that to our advantage: Find the right person, that entrepreneur who’s running that store, they know the market, they know the customer. We give them the freedom to run their stores within their market with our culture and our support centralized. We really have the best of both worlds.”
The other message that 84 Lumber wants to get across in its ad is that it’s a national, 60-year-old company in its second generation of ownership. “We’re the only privately held company that’s this big in the space,” Cicero said. “It’s a great story to tell.”
“It’s a great time for our company, a family-owned company here in America that cares.