Hardware, Plumbing & HVAC Distributors

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 9,750 hardware, plumbing, and HVAC/R distributors in the US consolidate a variety of products from many different manufacturers to offer customers wide selection, reasonable prices, and a single point of contact. Distributors may sell a combination of product categories or specialize.

Construction Drives Demand

Hardware, plumbing, and HVAC distributors depend on construction projects as major sources of revenue.

Consolidation Continues

Distributors continue to expand into new industries and geographical markets or gain market share via acquisitions.

Industry size & Structure

A typical hardware, plumbing, HVAC and refrigeration distributor operates out of a single location, employs about 31 workers, and generates $16.3 million annually.

    • The hardware, plumbing, and HVAC/R distributor industry consists of 9,750 companies, employs 302,000 workers, and generates about $159 billion annually.
    • Most distributors are small, independent operations - 52% operate out of a single location and 79% have fewer than 20 workers.
    • Customers include building contractors, residential and commercial builders, dealers, hardware retailers, government accounts, and industrial and institutional customers.
    • Large companies include Ace Hardware, Ferguson, MRC Global, Hajoca (EMCO), Watsco, NOW Inc. (DistributionNOW), and HD Supply.
                              Industry Forecast
                              Hardware, Plumbing & HVAC Distributors Industry Growth
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Jan 23, 2024 - Wage Growth Outstrips Pricing
                              • Producer prices charged by hardware, plumbing, and HVAC distributors were up slightly in early Q4, year-over-year, but wages grew by more than double the rate of pricing over the same period. If hardware, plumbing, and HVAC distributors’ wage growth outpaces pricing, margins may suffer. Industry employment increased slightly in Q4 compared to a year earlier.
                              • The value of US commercial construction starts is expected to be mixed in 2024, depending on project type, according to a recent forecast by Dodge Construction Network. Marking a potential record level of activity for the sector, manufacturing construction will rise 16% to $112 billion in 2024, supported by the CHIPS and Science Act and the Inflation Reduction Act. Amid a pullback in planned investments by major warehouse builders Walmart and Amazon, the value of warehouse construction is expected to decline 11% in 2024 to about $44 billion. Low occupancy and weaker demand will reduce office construction spending to about $37 billion in 2024, down 6% compared to 2023. Office projects will be mostly confined to alterations to existing buildings. Speculative office construction, where offices are built before securing a tenant, has become less common.
                              • Pressures, including high interest rates and a shortage of new homes available to purchase, are prompting housing bulls on Wall Street to construct entire build-to-rent communities, according to The Wall Street Journal. In Q3 of 2023, large landlords that own between 100 and 1,000 homes purchased just 1% of homes sold in the US, compared to 3% for all of 2022, according to John Burns Research and Consulting. Once a model that worked well when foreclosure rates were higher, industry watchers suggest that finding and managing investment homes individually has become too time-consuming, costly, and inefficient. While the build-to-rent community market is still small – about 900 neighborhoods in the US, according to the Urban Institute – the National Association of Home Builders believes that soon 10% of new homes will be build-for-rent.
                              • Home builder confidence improved in December amid moderating mortgage rates that remained well below 7%, according to the National Association of Home Builders (NAHB). Home builder sentiment, as measured by the NAHB/Wells Fargo Housing Market Index (HMI), rose seven points to 44 in December 2022, which marked the second consecutive month of strengthening confidence. Any HMI reading over 50 indicates that more builders see conditions as good than poor. The NAHB said that while lower interest rates have improved affordability and drawn more buyers back to the market, 2024 could bring supply-side headwinds, including shortages of workers, materials, and available lots.
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