HD Supply Begins to Unroll-Up

HD Supply has reportedly begun the un-roll-up (roll-down?) process.

The Home Channel News is reporting that HD Supply has agreed to sell its Lumber and Building Materials (LBM) unit to Pro-Build Holdings Inc. Modern Distribution Management estimates that the two largest companies in the division had combined sales of almost $800 million when they were acquired in 2005 and 2006. Total revenues in HD Supply’s LBM are surely lower today given the pressures that I highlighted a few months ago in The Fallout from HD Supply.

I’m sure HD Supply (and its new owners) are feeling the pressure of an especially sharp cyclical downturn. Last Friday’s construction data showed an unexpected monthly decline in non-residential construction from September to October. Read the complete release from the Census Bureau. Both public and private nonresidential construction activity has been partially offsetting the residential downturn this year.

The monthly data are notoriously volatile and often subject to substantial revision. I’m more heartened by the fact that commercial construction was up 17.5% versus October 2006 compared to a year-over-year decline of 16.2% in residential construction. Nonetheless, tightening credit standards and growing vacancy rates suggest that 2008 will be weaker for non-residential construction. Unfortunately, I don’t think we’ve hit the bottom on the residential side.

Be sure to join me this Thursday for my Wholesale Distribution Economic Outlook webcast. I’ll give you more details on the 2008 forecast and its implications for wholesaler-distributors.