Last week's acquisitions by Builders FirstSource and US LBM, building on similarly big deals earlier this year, led us to wonder: If you took all retail sales of building materials last year and then subtracted the purchases made at the three biggest home centers and all the hardware and paint stores, how big a share of what's left do the top LBM dealers have?
The answer: Roughly 50%.
Others may question the math and methods used here, and the dominance of The Home Depot, Lowe's, and Menards might make the question seem unimportant. Nevertheless, it's hard to question the notion that, in the pro-oriented branch of building material sales, LBM is evolving toward the kind of market concentration that we've been seeing at builders and many other industries. And given the eagerness by BFS and US LBM to keep buying yards, combined with efforts by 84 Lumber and ABC Supply to open and expand operations and Beacon's more focused growth plans, one can expect the Big 5's share to grow beyond 50% soon.
Now, here's how we calculated the numbers.
We started with the Census Bureau's sales totals for retail building material companies. Home centers, lumberyards, paint, and hardware stores all are grouped into what is known as NAICS category 4441. For 2020, the government estimates sales at those companies totaled $345.37 billion.
From that number we subtracted sales made at The Home Depot ($112.16 billion), Lowe's ($84.31 billion), and Menards ($12.84 billion). Actually, the numbers for The Home Depot and Lowe's are for fiscal years that ended in January 2021, but for this exercise we assumed the January 2020 and 2021 numbers were pretty much the same. As for Menards, we took Forbes' estimate of Menards' 2019 sales and increased it for 2020 by a percentage midway between Lowe's and The Home Depot's growth.
Those three big boxes added up to $219.31 billion in sales, or 63% of the total. We then subtracted all sales made at two subgroups of the NAICS 4441 category: paint stores ($12.82 billion) and at hardware stores ($31.16 billion). Remove those and you are left with roughly 24% of all sales--about $82.09 billion.
Next, we took the Big 5's numbers as reported in Webb Analytics Construction Supply 150 report and added the sales of companies acquired in 2021. For BFS, that includes the multi-billion dollar impact of its merger with BMC, its acquisition of the Alliance Lumber group of Phoenix (roughly $330 million in sales through April), and its acquisition of Detroit-based John's Lumber ($49 million). For US LBM, there's the $703 million gained from last week's purchase of American Construction Source and the $131 million added with the acquisition of Texas-based Higginbotham Bros. Meanwhile, Beacon Building Products' number has shrunk by roughly $1 billion because it sold its interior units to a private equity fund that then merged those stores into Foundation Building Materials, which the fund also had purchased. And US LBM's number actually should be bigger because it has done other deals as well this year--most notably taking over Gilcrest/Jewett of Iowa--but the revenue boost from those deals isn't known.
The impact of all those transactions are represented in the table above: BFS at $13.15 billion in sales, ABC Supply $12.1 billion, Beacon $5.64 billion, US LBM $5.1 billion, and 84 Lumber $4.7 billion. They add up to $40.65 billion.
Subtract $40.65 billion from $82.09 billion and what's left over is $41.44 billion, split among the 34,000 other companies that are in NAICS category 4441. Rounding to whole numbers, you get a 50-50 split.