For example, last year Home Depot bought Interline
Brands — No. 18 on this year’s Big 50. In making that
acquisition, Home Depot CEO Craig Menear said his
company was doing well in its remodeling/construction
segment, but had not been as strong in maintenance and
repair. Interline gave Home Depot access to thousands of
new customers and the potential of cross selling products.
But could it also mean that Home Depot could be looking
at other MRO acquisitions. Home Depot, along with its
chief competitor — Lowe’s — is also seeking to grab more
sales from the professional contractors, taking dead aim
at construction distributors.
Lowe’s has an online site for its pro contractors and is
expanding its staff of account executives to handle the
professional market and offer one- to two-hour delivery
to construction sites, as well as special credit terms.
Some construction distributors may have to examine
their existing supply chain and logistics capability to compete with this big box trend. Right now, Home Depot and
Lowe’s each have about 30 percent of sales coming from
the pro contractor’s market, and it’s growing.
But for the general MRO market, several CEOs of large
distributors use the word stabilization in describing sales
during the most recent quarter. Seven different Big 50
company CEOs used that word in describing business at
their companies and are forecasting flat or only slight
gains for the year.
The overriding concern for many our Big 50 distributors
remains the general economic environment, or what Fastenal CEO Dan Florness termed an “industrial recession.”
It seems there is general agreement that the first half of
this year was not a good one for industrial distributors.
Most are expecting a better second half, but even those
words are offered in a cautionary tone. One CEO said
there will be an improvement and a slight uptick in business, but said he could not use the word “recovery” in its
What is not boding well is the severe downturn in the
oil, gas and mining sectors. DistributionNOW, a major
supplier to the energy industry, recently reported a 33
percent year-over-year sales decline in its Q2 ended June
30 and a 9 percent decline from Q1. MRC Global, also a
key supplier to those markets, reported a Q2 sales drop
of 38 percent and a sequential decline 5 percent from Q1.
The company said reduced customer activity across all
segments and sectors drove the decline as a result of
lower oil and natural gas prices. The Q2 decline followed
a 39 percent year-over-year sales drop in Q1.
Although some companies serving the mining indus-
tries declined to give sales numbers for 2015, it is readily
apparent that sales have dropped sharply. Many have
expanded layoffs and closed some branches.
Yet distributors are relatively optimistic about the remainder of 2016. Time will tell if they are right.
Jack Keough is contributing editor of Industrial Distribution. You can reach him at email@example.com
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Big box retailers are also
buying distributors and
increasingly targeting the
market, taking direct aim at
construction distributors and,
in some cases, MRO customers.