Gontinued homecenter growth brcseen

Primed by the growth of home centers catering to do-it-yourselfers, retail sales of hardware and building materials, including paint, plumbing and electrical supplies, are projected to multiply three times over in the next ten years for a 1984 volume of $65 billion.

This is the highlight conclusion of a 261-p. study by the research publishing house of Frost and Sullivan, Inc., of N.Y., whose editors point out that home remodeling and redecorating supermarkets, starting from scratch in 196611967. now account for 25%of total retail sales in this product group. By 1984 they will be supplying 48% of the market with a product mix expanding also to garden and leisure supplies, as well as flooring materials, wall c overings, kitchen andbath installations and accessories and major appliances, according to Frost and Sullivan.

There are now some 4,000 to 6,000 home centers-defined as consumeroriented, self-service mass merchandisers with a diversified product mix typically involving some 25,000 different items in inventory. A typical store occupies slightly better than 10,000 feet of inside space, has 25 employees and an average annual turnover of $1.4 million-as against a hardware store's $242,000 and $688,000 for a typical lumber and building materials outlet.

With a return on equity 3%to 3.5% greater than supermarkets, discount stores or department stores, it is hardly surprising that home center chains have grown during the past five years at almost double the rate of sales growth for general retailers. Home centers have shown a 3.44Vo retwn on sales, averaged over the past 5 years, as compared to 0.8% for supermarkets, l% for discount chains, 25% for drug chains and 3% for the three large catalogue-and-store retailers.

Story at a Glance

Hardware and building materials sales, including paint, plumbing and electrical, are expected to triple in the next 10 years according to a new survey excellent return on equity noted for home improvement centers.

Qualifying home centers as "one of the great new growth areas of retail salesin thiscountry," the project directors point to annual homecenter volume gains of 20%, tapering off in the late 1970 s to about l5%. By contrast, retail stores generally are forecast to show annual gains for 191211984 ranging ftom 4.6% (men's apparel) to 9.2% (department).

While new housing starts are highly cyclical, the F & S study notes, the market for residential alterations and repair grows steadily at an annual rate of not less than 8% - 9%. Within this sales expansion, 5O% of it sparked by do-it-yourself homeowners, anticipated growth of one-category outlets falls substantially below the 48% of total 1984 volume projected for home centers.

With sales of $7.3 billion, hardware stores will be handling ll.2% of the market, down from the present \6.5%. Lumber and building materials suppliers will be down from 29.6% to 21 .2% of the market, with dollar volume of $13.8 billion. Paint, plumbing and electrical stores, with 1984 sales of $ 12.8 billiort, will be down ftom 26.5% to 19.6% of market.

Sales growth will be largely concentrated in the home-center chains, the study suggests, with only an occasional independent building the necessary volume. Of the 25 largest homecenter chains appraised, sixteen report 5O% or more of their sales are do-ityourselfers, and I I of them are wholly consumer oriented, with 90% of sales in this area. "This market is rapidly outstripping the contractor market," the project directors note, "and is also a more profitable one to serve."

The current d-i-y market is estimated at about $ 12 billion, representing only sales of products and equipment, or somewhat less than half the total sales in this broad product range. The proportion of homeowner over contractor sales will increase steadily however, considering thar 64% of all residential alterations and repairs are done to owneroccupied, single-family homes. In consequence, as against a 49.5% 1967 1 1972 increase in residential alteration and repair expenditures, outlays on owner-occupied single-family houses rose 58.6%.

Analyzing the growth picture by product category, with specific emphasis on the 50% of sales through home centers. the F & S researchers find lumber and wood products dominant-with 1974, 1979 and 1984 sales of $ 1.9, $4.6 and $7.9 billion through home centers. The decorator group will move strongly into second place ($1.2, $2.9, $5.6 billion) paced in 1984 by paint ($3.3 billion) and cabinets ($1.5 billion). Hardware is expected to fall to third place ($1.3, $2.5, $4.6 billion).

Greatest percentile ard dollar growth over the next ten years is seen in weatherstripping and insulation, lighting fixtures and paint. Substantial homecenter sales are projected in plumbing and electrical supplies ($3.7 billion by 1984), plastic laminates and gypsum board and other nonwood building materials ($2.6 billion), housewares and appliances ($2.3 billion), automotive and garden and other leisure items ($ I .8 billion), carpeting and other flooring ($ I .5 billion).

Evans Products is currently negotiating with llickes CorP. to sell33 of its wholesale bldg. mtls. distribution centers in 2O states to Wickes for about $20 million; a go/no go decision is expected mid-month....

Permanent closure, additionally, by Evans of certain of their mobile home and building materials plants will greatly reduce their rnarket position as a supplier; 4 home rnfg. plants (3 closed earlier); two prefinishing Plants and related distribution facilities, a Canadian stud mill and a high pressure laminate plant are being closed, sold or liquidatedl no figs. yet released on the $$ involved....

In what may be the 1sr ciU in the U.S. to fund remodeling directly, the Portland city fathers have ok'd $200,000 for lowinterest loans to the old, poor or handicapped to fix-up theirhomes ....The Oregon Dept. of Veterans Affairs has stepped up its loan program to vets for buying or remodeling: interest rate: 5.9Vo....

Arcata Redwood's parent, Arcata National, has settled its suit against the feds over the 1968 takeover of its lands for the Redwood National Park for $35.4 million plus interest; it had earlier received $57.8 million in cash and exchange property, making the total settlernent approx. $93.2 million, exclusive of interest....

Commercial Lumber Co. plans to move into its new HQ in City of Industry, Ca., this mo. from their old yard at Wilmington.... Del Mar Lurnber, a branch of Shale Lumber, Orange, Ca., has acquired a 34,125 sq. ft. lot in Solana Beach for an undisclosed amount....

A new retail lumber and bldg. mtls. yard is being built North of Wheatland, Wy., by Ray Fertig, A&R Fertig Construction Co..... Ward & Hanington has closed its contractor-oriented yards at Fullerton and Santa Ana, Ca.; the Fullerton sales people have moved to W&H's Orange yard....Ganahl Lumber plans a Mar. I grand opening for their new Corona, Ca. store.

The Nt'I. Assn. of Home Builders' Dallas annual meeting produced innumerable horror stories about present building conditions, but general optimism that by mid-'75 the turnaround will be underway ....Ford Administration moves to free more cash for housing via a no. of programs were good - news, gratefully greeted....

Bolstering hope for housingi mtl. suppliers has been the decline of the prime interest rate, now at 9% and tilting downward some feel massive federal borrowing later this year to finance Pres. Ford's proposed $16 billion tax cut may strain the $$ markets, pushing up the cost of money....

Final figs. on housing in'74 were strictly l'rom Grimsville: smallest total no. of starts since '67 (1,340,000); Dec. starts of 868.000 were the lowest for a singie mo. in 8 years; the drop f1o_m lhe.-p3gceding year'was a sickening 35%....

Consumer Building Marts, Inc., Portland, owner of the Mn Plywood stores in Or., Wa. & Co., has sold its SZYzVo interest in its wholesale subsidiary, Northwest Plywood Sales, Inc., to the former owners...Pope & Talbot has resumed partial production at its Kalama, Wa., specialty plywood plant....

A large part of the No. Ca. lumbermill town of Happy Camp was razed in a 3-hour blaze said to cause 6-figure damage....Orepn Pacific had a minor forklift blaze at their Cordelia, Ca., warehouse which could have been serious but for quick action by driver Tim Henry and the local firemen....

Gallegher Hmdware & Lumber, Terra Linda, Ca., has been sold to J. Clyde Strouss and Robert L. Langbehn, owners of Fairfax Lumber, Fairfax, for an undisclosed amount by DanietGallegher ....Yosemite Falls Lumber Co., (formerly Oakhurst Lumber) Oakhurst, Ca., is now owned and operated by Mrs. Carolyn Skaggs of Dos Palos; her father founded Madem Hardware in 1906....

Tho it's all speculation at this point, a number of advisors and other industry experts are advising management to prepare company records for a renewed bout with wage and prtce cottffols.... the U.S. treasury is currently investigating to see if wooden daar parts from Japan are being dumped in the U.S. at lower prices than the home market...

Buitders Emp orium, H an dy man and Globe International are test marketing a new 4x8 flocked panel in vibrant colors that resemble crushed velvet; early reports are favorabl e..,.C re a t iv e Mar k e ti ng Co. has moved from Anaheid, Ca., to Santa Ana....

The Ai:oustical & Baard Pro' ducts Assn is the result of the recent merger of the American Hardboard Assn. and the Acoustical & Insulating Materials Assn ....the Nt'1. lloodwork Mfgrs. ,4ssru. estimates that dollar volume of its member firms was down 7%; they see June '75 volume running close to normal.

IUfiIBER