Margins Tighten, Value-Add Matters In Construction Supply

[Editor's Note: At The Builder’s Daily, we work to shine light on areas of housing’s business ecosystem that too often get short shrift in strategic planning conversations. One of those crucial areas—especially in a Spring Selling season that’s fallen short of expectations—is the building materials distribution and supply chain channel.

That’s why we’re proud to present this exclusive contribution from Craig Webb, founder and president of Webb Analytics, and one of the most trusted, insightful analysts covering the pro dealer and construction supply landscape in America. Craig’s annual Construction Supply 150 (CS150) report is a one-of-a-kind, data-rich snapshot of the companies who build, manufacture, move, and install the materials behind every structure you create.

This year’s report captures a stark truth: unit volumes are down, margins are tightening, and even the biggest players are under pressure. But hidden in the noise is a critical signal for homebuilders and their partners: value-added services — trusses, millwork, doors, window shops, and install services — are doing more than adding convenience; they’re anchoring growth, empowering velocity, and insulating against volatility.

Craig’s insights carry implications that cut to the core of homebuilding operations today. Builders who ignore their supply partners' evolving capabilities and economic health, especially those embedded deeply in the pro channel, do so at their own risk.

What follows is a strategic read on the pulse of the materials and service infrastructure that fuels your business. Craig’s work makes the case for paying closer attention—and investing smarter. Enjoy Craig's piece! – John McManus]

Weak economic conditions were a main reason why a majority of members on Webb Analytics’ latest Construction Supply 150 (CS150) posted revenue declines for a second straight year. The number of single-family housing units under construction dropped 5.3% in 2024, multifamily units under construction were down 22%, and remodeling expenditures shrank 1.4%. Those debilitating conditions meant declining unit sales volumes were the main culprit. That makes 2024’s story much different than 2023, when a 48% drop in framing lumber prices was the overwhelming reason for losses. 

This year isn’t looking much more promising. Of the 112 CS150 companies that gave predictions for the year, 17 predicted declines, 10 expected no change, and 40 predicted increases of just 1% to 5%.

Lumberyards without manufacturing operations — a group that focuses on serving custom builders — recorded an 8.5% drop in revenue last year vs. 2023, the report reveals. Meanwhile, there was a 2.1% revenue decline at lumberyards that go after production as well as custom builders by offering value-added products such as truss factories, pre-hung doors, and installation services.

Roofing, drywall, and other specialty dealers did better, posting a 3.1% gain, but that was fueled in part by acquisitions and Greenfield openings. Home centers and hardware stores grew 1.6%.

The entire CS150 saw their revenues go up 1.3% to collectively take in nearly $412 billion, but if you remove sales at The Home Depot and Lowe’s, the other 148 companies posted a mere 0.7% rise to $168.56 billion. CS150 companies that expanded reported a 1.6% rise in sales; those that didn’t fell 2.4%.

The report again reveals how important value-added products and services are to CS150 members—and, by extension, the construction industry. The Home Depot and Lowe’s get 3.2% of their total revenue (more than $7.77 billion) from installation services, while other CS150 members collect $2.07 billion more from installations. Manufacturing products is an even more important source revenue for the 80 companies on the CS150 that build trusses, create custom millwork, and operate door and window shops. Together, they get $14 billion from manufacturing things. All told, value-added products and installations amount to $23.84 billion, or 5.8% of total revenue.

Webb Analytics estimates that CS150 companies account for more than two-thirds of a more than $600 billion U.S. market for their products. That number grows to $620 billion if you add the roughly $17 billion that some CS150 members get from operations in Canada and Mexico.

Despite what has been two depressing years in construction supply, the industry keeps getting new entrants. Most prominent is Brad Jacobs, whose QXO this year acquired Beacon, the No. 2 roofing dealer. This follows The Home Depot’s 2024 purchase of SRS Distribution and comes as new startups are popping up nationwide. There have been fears that independent building material dealers are dying off, and one Census Bureau count suggests there was a 21% drop in the number of building material and supply firms between 2010 and 2022. But the number of stores dropped only 14% during that period, and the number of employees has risen almost 20%. 

Some of these numbers might differ from what CS150 companies have reported because the CS150 report seeks to limit a company’s activity to the pro market. Thus, for instance, the CS150 counts only the part of Universal Forest Products that’s in its construction segment, and only the paint store operations at Sherwin-Williams. In cases where CS150 members’ fiscal years differ markedly from the calendar, this report pulls from quarterly reports to get 2024 figures. The numbers also include contributions from some eligible companies that didn’t want to be identified. The entire PDF report is available for download online.