During his President’s Address to Shareholders during Do it Best’s Virtual Fall Market, President and CEO Dan Starr outlined the growth strategy behind the co-op’s recent joint venture partnership with Nation’s Best Holdings, a Do it Best member based in Dallas, Texas.
“Our growth plans are intentional, strategic and fully supported by our board of directors. They guide everything that we do as a company, identifying where we’re headed and why. In fact, here’s our plan for the coming year. It connects our entire team to our philosophy, mission and goal to ensure that we are helping you grow. It guides us, and it helps us keep score on our progress,” Starr stated.
“Your co-op is committed to driving growth. Planned growth is fundamentally critical to everyone’s success. It’s the sign of health of any organization to have growing sales. But it’s also critical in light of the trend lines for independents in our industry. Our industry is healthy and strong. The Home Improvement Research Institute projects growth of about 9.1 percent this year and predicts it will finish at nearly $440 billion in sales. That’s the good news. But here’s the concerning part: Over the last 25 years— heck, look at just the last three years—the sheer number of independents has consistently declined, even as opportunity in the home improvement industry has risen. This isn’t just an issue affecting Do it Best—we’ve seen it across the entire industry,” he said.
Starr added, “This trend has been a principal focus for your fellow members who comprise our board of directors. And it’s important to stress that we expect the trend to accelerate—for a couple reasons. First, we continue to see consolidation within the industry at every level. From manufacturing to wholesaling to retailing. Added to that, we believe that the next five to 10 years will present a generational succession challenge. As many folks within our industry reach retirement age, a lack of succession will push them to consider a sale of their business. And we believe the number of aspiring sellers far exceeds interested buyers. But rather than view this as a risk, Do it Best and our board see it as an opportunity.”
He said, “One way we’re addressing those risks and turning them into profitable opportunities is with our joint venture with Nation’s Best. This Do it Best member is focused on long-term investment to drive growth through acquisition of strong players in our industry.”
Starr took members through what Nation’s Best has done so far. “Their acquisitions started at the end of September last year—a single Do it Best location in Broken Bow, Oklahoma. The Nation’s Best team took a look at it—a really strong business—with a strong management team in place. But they had no succession plan.
“The next acquisition was Groom and Sons’. It’s a three-store former Ace chain in the Dallas-Fort Worth market. It was not a competitive situation for any Do it Best members, as we don’t have a strong presence in this market…or at least we didn’t. So, Nation’s Best acquired those three Ace locations and then went and bought five more Orgill locations in the rural outlying area around Dallas-Fort Worth. None of this was Do it Best business. All that was additive. And none of it created competition for an existing member,” Starr pointed out.
Nation’s Best’s most recent acquisition was a single Do it Best location in the panhandle of Florida—a strong business, a unique business, great volume, but, again, no succession plan, according to Starr.
He stated, “What I love about these examples is it gives you a picture of how this strategy allows us to play both offense and defense. In the defense, there are two different Do it Best member locations without a succession plan: one in Oklahoma and one in Florida. And one way or another, these owners were going to retire, which put the business at risk. That problem had to be solved. And we didn’t really have a single solution until Nation’s Best. Broken Bow and the panhandle of Florida? Those are pretty different markets and very different businesses. But Nation’s Best evaluated both and found they were strong businesses. We were able to not only retain them in the Do it Best family, but run more of their purchasing through us—an important and strategic defensive objective. And even though they were already Do it Best members, new volume through the Florida store is up 20 percent and 109 percent in Oklahoma.”
Starr added, “As good as those results are, I think I like the offensive play even better and I think you will, too. The idea of going out and targeting strong businesses that are currently affiliated with Ace, or Orgill, or True Value, or LMC, taking market share in a thriving area like Dallas-Fort Worth is a tremendous benefit to all of us. All of that is additive volume—to the tune of more than $7.5 million just since they joined Do it Best in late spring.
“So, while it’s important to explain what the strategy is, it’s just as important to understand what it isn’t. It is not designed to compete with other members. It simply doesn’t make sense for us to go into an existing market where we have strong member representation. That doesn’t really do anything to address the issues we’ve already identified,” he said.
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