Despite persistent competition, the housing market's upturn will support industry growth
Los Angeles, CA (PRWEB) November 25, 2013
As with other industries that depend on the US construction markets, the Lumber and Building Material Stores industry was hit hard by the economic recession and subprime-mortgage collapse, which brought new construction across all markets to a near standstill. Most industry sales come from professional contractors and homeowners who purchase industry goods for residential construction, making the industry especially sensitive to changes in the housing market. Over the past five years, significant declines in housing starts and remodeling activity in the United States have caused demand for lumber and other building materials to plummet. Consequently, revenue for the Lumber and Building Material Stores industry has grown at a minimal average annual rate of 1.8% in the five years to 2013.
According to IBISWorld Industry Analyst Kerry Coughlin, “The volatile cost of lumber, which accounts for about 65.4% of industry sales, has also burdened industry firms over the period.” This trend has made it difficult for retailers to anticipate future spending and control costs. Furthermore, the industry has experienced intensifying competition, especially from home improvement stores, which offer the added convenience of one-stop shopping and lower prices. These factors have pressured industry profit margins; IBISWorld estimates that profit declined to industry lows in 2010 only to recover in 2013 with margins reaching 2.6%. Falling margins have caused some operators to either exit the industry or consolidate over the five-year period. As a result, the number of enterprises has declined at an average annual rate of 1.7% to 43,692 in 2013.
“After facing stagnant conditions following the recession, the housing and nonresidential construction markets finally began making significant strides in 2012, and strong gains in both sectors are expected for 2013,” says Coughlin. IBISWorld projects industry revenue will jump 10.1% to $96.3 billion in 2013, driven by an increase in residential construction investment and higher spending on home improvements. Further, as population growth and pent-up demand drive up housing starts, and improved economic conditions boost demand for repairs and renovation projects, sales of industry products will continue to rise. In the five years to 2018, industry revenue is forecast to increase, albeit not as high as prerecession levels.
The Lumber and Building Material Stores industry exhibits very low concentration of ownership. The industry is highly fragmented, with no single operator having more than 5.0% of market share. The majority of industry businesses are privately owned, and they successfully supply the local demand in their communities. In recent years, many of these small operators have merged with other players or exited the industry, increasing concentration. This trend has mainly occurred because of falling industry profitability, as the housing downturn significantly reduced sales and prices of inventory goods remained volatile.
For more information, visit IBISWorld’s Lumber and Building Material Stores industry in the US industry report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld industry Report Key Topics
This Lumber and Building Material Stores industry consists of stores and dealers (e.g. lumberyards) that retail building materials such as lumber, hardwood, stones and brick. This industry also supplies cabinets, floor coverings, roofing materials, electrical and plumbing goods, doors and windows to the construction market. The industry does not include home improvement centers, paint and wallpaper specialty stores, or hardware stores.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com