84 Lumber Company
Address:
Route 519
Eighty Four, Pennsylvania 15384
U.S.A.
Telephone: (724) 228-8820
Fax: (724) 228-4145
http://www.84lumber.com
Statistics:
Private Company
Incorporated: 1956
Employees: 4,500
Sales: $1,800 million (1999)
NAIC: 44411 Home Centers; 44419 Other Building Materials Dealers
Company Perspectives:
84 Lumber Company is dedicated to being the low cost provider of lumber and building materials to professional builders, remodelers and dedicated do-it-yourselfers, while adding value to our products through a trained, knowledgeable and motivated team of professional sales associates.
Key Dates:
1956: Company is founded.
1964: Company expands to 15 stores.
1993: Maggie Hardy Magerko is named president.
1994: Company reaches $2 billion in annual sales.
1998: International Sales Division is added.
1999: 84 Plus store format is introduced.
Company History:
84 Lumber Company is a family-run company that has grown from being a no-frills provider of lumber and building supplies that catered almost exclusively to the do-it-yourself market to becoming a preferred vendor of professional contractors. In recent years the company began to export its products, posting impressive sales figures in nine countries, including China, Japan, and Germany. Its new 84 Plus store format also has positioned 84 Lumber to compete in the home improvement category dominated by such major players as Home Depot. Even as it pursues an aggressive program to build new 84 Plus outlets, the company also is converting traditional stores to the concept.
Company Origins
The history of 84 Lumber is primarily the story of entrepreneur Joseph A. Hardy, Sr. After military service in World War II and earning a degree in industrial engineering at the University of Pittsburgh, Hardy went to work for the family jewelry company, Hardy & Hayes. Although proving to be a top salesman, at the age of 31 he left to start his own business, entering the building materials supply business at the suggestion of a friend. In 1952 he started Green Hills Lumber, which fared so well that by 1956 Hardy partnered with his two younger brothers and a friend to build a new 'cash-and-carry' lumber yard at a location that would be convenient to home builders in the tri-state area of Pennsylvania, West Virginia, and Ohio. The property on which Hardy settled was located near a small town 20 miles south of Pittsburgh called Eighty Four. The town (at least according to the most likely of many competing legends) was named in honor of Grover Cleveland's presidential election in 1884. In any case, Hardy liked the sound and decided to name his new lumber yard after the small town. The number 84 would provide the basis for the company's marketing and graphics for the next 50 years.
Hardy's business philosophy consisted primarily of 'nothing fancy.' He soon became renowned for his frugal approach to sales and management. As he built more stores, he continued to pay cash for land and facilities that, typically, had no heating or air conditioning systems since that would have increased overhead costs. Hardy's example sent a message to company employees, whom he preferred to call 'associates' in order to foster a sense of family working toward a common goal. The plain, no-frills stores conveyed the company's commitment to keeping costs down for its target market of skilled do-it-yourselfers and small contractors. Hardy told Do-It-Yourself Retailing magazine, 'We want the pickup truck crowd. We want the guy who backs his truck up, smashes the bumper into the loading dock and says, `Let's get going'.'
Hardy continued as owner and president of 84 Lumber for almost 30 years, working in the lumber yards, visiting each store, and talking with the associates. Although he strove to maintain his image as a small-town, small business owner, his interests were diversifying during this time. He acquired real estate in several states and began collecting artwork, including paintings by Norman Rockwell, Pablo Picasso, and Andy Warhol. In 1983, Hardy spent $170,000 to purchase an English lord's title and an additional $58.1 million to acquire and renovate Nemacolin, a 550-acre retreat in southeastern Pennsylvania. Hardy's daughter Maggie took charge of the resort, which soon featured a spa, five restaurants, and a golf course.
Expanding and Diversifying in the 1980s
While Hardy focused on new interests and enterprises, the character of 84 Lumber changed as the stores began to stock nonlumber items in order to compete with such home improvement superstores as Home Depot, which were taking market share away from lumber yards. The company also ordered a 200-store expansion. Rapid expansion and diversification of products, however, resulted in a drop in earnings from $52 million in 1987 to less than half of that two years later. Hardy responded by slowing his expansion plans and even closing some stores. Furthermore, Hardy's oldest son, Joe Hardy, Jr., who had served as executive vice-president and had run the company for several years, was found to be in the early stages of multiple sclerosis. When his father decided that his son was not up to the task of running the company, Joe, Jr., left in anger to run his own real estate development company. A rapid succession of top executives at 84 Lumber ensued, and the company continued to lose its focus, targeting 'yuppie' consumers rather than its traditional market of contractors and do-it-yourselfers.
In 1990, chief operating officer Jerry Smith joined 84 Lumber. In an effort to refocus the company, he drafted a mission statement clarifying the goals and values of the company and communicating its character to associates, vendors, and consumers. The mission statement said, in part, that '84 Lumber is dedicated to being the low-cost provider of lumber and building products to residential builders, residential remodelers, and dedicated do-it-yourselfers, while adding value to our products through trained, knowledgeable and motivated associates.' The company further hoped to gain an edge through personalized service, inventory maintenance and competitive prices, and growth and strong leadership. Associates began carrying laminated business card sized copies of the mission statement in their pockets, and messages posted throughout company buildings and in an employee newsletter reminded associates of company goals and plans.
Modernizing in the 1990s and Continuing Success into the 21st Century
In 1991, Hardy reclaimed a more active role as head of the company and designated his daughter Maggie as his heir-apparent to the company presidency. He halted the expansion plans and recommitted the company's merchandising efforts to the lumber business. But the increasing number of home improvement superstores was still an impediment to 84 Lumber's growth. Hardy's response was to diversify into do-it-yourself home and kitchen design centers. In 1991, 84 Lumber opened 24 new kitchen design centers, which featured state-of-the-art computer technology for designing kitchens and baths.
In its approach to materials purchasing, 84 Lumber opted to switch to a centralized system for its hundreds of lumber yards during this time. The company had tried unsuccessfully to implement such a system in the mid-1970s, but had quickly returned to regional and store purchasing. Regional buying had allowed more market awareness since inventory could be tailored to the specific store in response to customer demand and new markets. This splintered purchasing structure, however, also meant loss of bulk-buying power. Furthermore, the lack of coordination with company headquarters also meant dead inventory in stores and wide discrepancies in prices each region or store paid for its products. When company management decided to institute centralized purchasing, it also moved operations, accounts payable, and sales from the store and regional levels and centralized them at company headquarters. A team of 'purchasing managers' was formed from former store managers familiar with operations at the store level. Purchasing managers developed expertise in specific product categories. Vendors had not been in the habit of making site visits to 84 Lumber stores, but with the new arrangement, they were encouraged to train 84 Lumber sales associates and aid them in merchandising. Stores adopted vendor suggestions for improving efficiency.
The company also invested in new computer technology to upgrade communications and information management, so that each night, daily sales data from each store could be sent to the company headquarters by telephone modem. This daily information became the basis for purchasing. The operations department could now keep in close communication with each store through biweekly bulletins and telephone calls twice a day. The company made communication with store managers a priority, making sure that they were kept up-to-date on any changes or additions to product lines. Despite the centralization of many functions, company executives maintained that store managers and associates still had significant input into product and promotion decisions.
The company continued to purchase wood in the United States and in Canada. About one-third of its stores were served by railroad, some with direct rail service right to the yard. Other 84 Lumber stores were supplied through reload centers, where freight from a rail car was loaded onto trucks or further rerouted by rail. This latter practice allowed the company to reduce inventory at a single 84 yard by splitting railcar loads among several yards rather than sending an entire carload to one yard. The reload centers also allowed the company to send both lumber and plywood to its lumber yards. A reload center in Aurora, Illinois served 84 Lumber yards as far east as Ohio and as far south as St. Louis, Missouri; Charleston, West Virginia; and Charlotte, North Carolina.
In 1992, 84 Lumber launched a new concept entitled 84 Affordable Homes Across America, a line of do-it-yourself homebuilding kits. Hardy was willing to double the company's long-term debt to $80 million to back the new enterprise, which consisted of 30 home models in a price range of $39,900 to $59,900 (not including the cost of the lot). Included in the price were all the supplies necessary for the structure itself as well as the costs of excavation, plumbing, wiring, and heating.
In 1991, Hardy turned over 40 percent of the 84 Lumber stock to Maggie. Within two years she would be named president. At 27 years old, she faced a tough challenge replacing her father. She had no college degree and her only management experience was at the Nemacolin Woodlands Golf, Spa, and Conference Center. Hardy maintained, however, that Maggie, the youngest of his five children, displayed more of an aptitude and interest in business than her older siblings. In fact, since the age of five she had spent time with her father on the job and over the years accompanied Hardy at new store openings and on-site inspections. She worked for a time in her early twenties at the Bridgeville, Pennsylvania store to become familiar with everyday operations at 84 Lumber.
Maggie was not afraid to wield her power. She terminated a number of managers that her father had brought in to run the company; she was unhappy with their buttoned-down look and attitude, which conflicted with the traditional 84 Lumber shirts everyone else wore at headquarters. The following year, the 84 Lumber Company pursued an extensive training and development program, requiring every associate to attend the '84 University' program to learn about new products and sharpen their sales skills. In 1992, 84 Lumber opened a new management training center and dormitory in Eighty Four, Pennsylvania, and throughout the year store managers and other employees from all over the country attended three-day training sessions.
Under Maggie, 84 Lumber reached the $1 billion plateau in annual sales. Much of the success was due to a renewed commitment to contractor sales, which at 25 percent of the company's business would climb over the ensuing five years to account for 75 percent. The purchasing executives also anticipated a shortage of materials in 1993 and took steps to make sure that 84 Lumber had inventory. Many of its competitors were left short. Building on this success, Maggie would lead 84 Lumber to record-breaking sales for the next six years, topping $1.8 billion in 1999.
In 1998, 84 Lumber established an International Sales Division to export building materials, including complete home packages. Shipping primarily from the Port of Baltimore, the company supplied nine countries located in Europe, Asia, and South America. In the first year, the company totaled $300,000 in sales. The following year saw even better results, as international sales reached $2.7 million, or a 900 percent increase over the previous year.
In 1999 the company also took major steps to increase its domestic business. 84 Lumber introduced a new design center called Maggie's Building Suggestions Showroom, a 17,000-square-foot facility located in Pittsburgh. The interactive center, geared toward homeowners, builders, designers, and architects, featured a showroom with hundreds of home products and décor, as well architectural consulting services, multimedia conference rooms, and staff designers. In 1999 84 Lumber opened two Installed Sales Centers and announced plans to open several more. The centers would then support outlets on a regional basis. Builders would be able to leave blueprints, materials list, sketches, or just ideas at a local 84 Lumber Store, which would then forward the information to the Installed Sales Center, which would estimate the materials and cost. Within 48 hours a delivery could be made to a contractor's site. The company also instituted a 30-day price guarantee that allowed builders to lock in a price and take delivery as needed without incurring any extra charges.
Perhaps the biggest change, one that would have the most impact on 84 Lumber in the future, was the introduction of its new '84 Plus' store--a radical departure from the company's traditional warehouse approach. Aimed at the contemporary do-it-yourselfer, the suburban SUV rather than the rural pick-up truck customer, the 20,000-square-foot, consumer-friendly units devoted half of their space to a hardware store that offered an expanded line of supplies and a showroom that showcased kitchen, bath, door, and window displays. In December 1999 the company announced that it planned to open 50 84 Lumber Plus stores each year for the next three years, as well as begin converting old units to the new format. If the building program is a success, 84 Lumber will boast 500 stores and be well positioned to continue its pattern of increasing sales.
Principal Competitors: Carolina Holdings; Home Depot, Inc.; Payless Cashways; Sutherland Lumber.
Further Reading:
Aeppel, Timothy, 'The Favorite,' Wall Street Journal, April 24, 1997, p. A1.
'Business Brisk at 84 Lumber Co.'s New Convenience Store Prototype,' Do-It-Yourself Retailing, April 1999, p. 23.
Johnson, Walter E., 'Life at 84 Lumber,' Do-It-Yourself Retailing, February 1992.
Mallory, Maria, 'The Lord of 84 Lumber Co. Is Back Behind the Counter,' Business Week, June 22, 1992, pp. 80-81.
Stern, Gabriella, 'More Daughters Take the Reins at Family Businesses,' Wall Street Journal, June 12, 1991, p. B2.
'Two Views of Decentralized Purchasing,' Building Supply Home Centers, November 1989, pp. 52-56.
Source: International Directory of Company Histories, Vol. 39. St. James Press, 2001.
