July, 2004

Carter Lumber Company

Carter Lumber Co. executives, heir to a 72-year history, are intent on growing their business while maintaining the quality of service associated with its hometown Midwest origins.

By Martin Rosenburg

The Kent, Ohio-based family-owned Carter Lumber operates 240 stores in 10 states-from Michigan to Pennsylvania and the Carolinas-and employs 3,500. Last year it posted revenues of $562 million, and it is realizing steady revenue gains of about 5% to 10% per year, according to David McCafferty, Carter Lumber's vice president of marketing.

"Seventy-two years in business says a lot," he said.

What sets the company apart from competitors, in McCafferty's view, is "our dedication to service." That gives the business an advantage with the important contractor sector.

Contractors generate 60% of Carter Lumber business, but retail sales are also vital to its ongoing success.

The company was ranked ninth among the nation's lumberyards in revenues, according to one recent industry report, McCafferty said. According to another industry ranking, Carter is the 19th-largest building material dealer in North America.

The company is poised for further growth as it carefully pursues greater market penetration through strategic acquisitions of other retailers. This spring Carter Lumber announced its acquisition of The Holmes Lumber and Building Centers Inc., a three-unit, $46 million independent headquartered in Millersburg, Ohio.

Shortly after reporting the deal, Neil Sackett, president of Carter Lumber, said, "Carter Lumber is looking for opportunities to be a prominent supplier for contractors and do-it-yourselfers in all of our markets, including the Amish communities of Ohio."

Sackett explained the compelling logic of the Holmes deal. "Contractors comprise a large portion of the Holmes Lumber Company's $46 million business, which is why Carter acquired Holmes," he said. "This acquisition of Holmes Lumber integrates perfectly with Carter's growth strategy."

The company says it will continue to be scout out potential acquisitions.

Furthermore, Carter Lumber is opening five new stores this year in West Virginia, Michigan and Indiana.

McCafferty described Carter as a "traditional lumberyard" that also offers roofing, siding, insulation, doors window, plumbing, electric and heating products. Each store provides design capabilities in new home, pole barn, backyard barn, garage, deck and kitchen projects.

The company was launched by Warren E. Carter, who mastered all aspects of the lumber business, from the forest to the lumberyard. In his early years, he led mule-driven log teams through the woods of Arkansas. Along with partner T. Neil Jones, Carter started the company in the teeth of the recession, and it quickly distinguished itself as the only lumber company in the Akron area that could operate profitably during those difficult years.

Eventually Carter bought out his partner. Carter and sons Van and Jim, veterans of World War II, expanded the company through the Midwest. Neil Sackett, grandson of the founder, became president in 1988.

Today, the company has achieved a sufficient size to negotiate a good price from suppliers, which in turn makes the company more competitive in the market. "Our purchasing power gives us a leg up," McCafferty said.

The company gains additional market leverage by carefully training its work force to serve clients. "The knowledge that our managers and associates possess gives us a leg up," McCafferty said. Many managers have been with Carter Lumber for 25 or 30 years, which is generally rare in the business.

Beyond that, the company works hard "making sure we have the right people in place," McCafferty said. As a result, it has strategically designed and implemented a management field structure with added regional vice presidents who provide "hands-on management in the field," he said.

In addition, the company for three years has focused intently on hiring outsides sales contractors to serve contractors on the job site. That enables Carter Lumber to better anticipate the needs of the contractors-as well as serve them promptly at the jobsite.

"We go to them, rather than have them come to the store," McCafferty said. This approach has helped the company to grow contractor sales.

Overall, Carter Lumber is sold on the importance of employee training. This year, for instance, managers received special training on human resources matters, product training and related issues. The managers then take the messages back to their stores to better train local staff.

"Training has been a big component" of company improvement efforts this year, McCafferty said.

What hurdles do officials wrestle with?

"The economy itself," said McCafferty. If the economy stagnates, then construction and homebuilding slacken and so do sales. Also, Carter Lumber faces competitors on both the high and low-end of its product line.

"We're very rural in nature," McCafferty said. "A lot of our stores must deal with local independents."

C arter Lumber is a believer in the power of advertising, and its budget dedicated to advertising is growing. The company uses newspapers ads and monthly circulars as well as a handsome web site, www.carterlumber.com, to get its message out.

The company, however, sees little future in Internet sales "until somebody shows me how to ship a 2x4," McCafferty joked.

Particular care is given to courting contractors. Occasionally, contractors are invited to the Carter Lumber yards to have lunch and listen to a presentation about a new product line or building material. Sometimes, they are invited on plant tours and visits.

Looking to the future, Carter Lumber is planning to offer contractors the option of installed sales. For instance, instead of erecting homes piece by piece, many contractors are eager to receive panels on the jobs site ready for erection, saving considerable time. "We are working with suppliers and vendors right now to be sure that we can get that done for them," McCafferty said.

Carter Lumber has established Woodcraft Centers in three locations-in Ohio, Indiana and Pennsylvania-that supply its stores and customers with trusses, engineered wood and interior and exterior doors.

In addition to paying attention to customer needs, Carter Lumber strives to be a good corporate citizen.

The Carter Lumber corporate office has partnered with Habitat for Humanity to help build local houses. Carter Lumber also supports Future Farmers of America (FFA) Ohio, underwriting scholarships to high school seniors.

"Giving back to the community was always important to W.E. Carter," McCafferty, said. "We are committed to being a viable part of the communities that we serve."

What is the company's underlying, core corporate culture that can help explain its success over seven decades? "My grandfather, W.E. Carter, believed there was nothing more important than hard work, dedication and customer service," Sackett said. "He wanted his customers to be treated like family. Seven decades and three Carter family generations later, we remain committed to those same philosophies."

• 2003 sales were $570 million.
• 19th-largest building-material retailer in North America; 240 stores in 10 states (Ohio, Pennsylvania, Indiana, Michigan, Illinois, Virginia, Kentucky, North Carolina, South Carolina, West Virginia).
• Celebrating more than 70 years in the professional contractor and DIY market.
• Employs more than 3,500 people.
• Opened its first store more than 70 years ago in Akron, Ohio, and has maintained its headquarters here since 1932.