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, DistributionNOW, and HD Supply.
                              Industry Forecast
                              Hardware, Plumbing & HVAC Distributors Industry Growth
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              May 18, 2023 - Construction Spending to Drop
                              • North American construction spending is set to decline by 1% in 2023 compared to 11% growth in 2022, according to FMI’s second-quarter 2023 North American Engineering and Construction Outlook. Higher interest rates and a potential recession are forecast to reduce single-family residential construction spending to 0% growth or lower in 2023. The single-family market is projected to remain weak through 2026. However, several nonresidential building segments are projected to see spending growth of 10% or more in 2023, including lodging, commercial, and manufacturing. Other segments will experience spending growth of 5% or more, including multifamily, office, healthcare, and amusement and recreation. Spending growth will be between flat and 4% for education, religious, and public safety.
                              • US shipment volume of central air conditioners decreased 14.9% year over year in March 2023, according to the Air-Conditioning, Heating, and Refrigeration Institute (AHRI). Shipments of air-source heat pumps rose 5.1% in March compared to a year earlier. Shipments of residential gas storage water heaters fell 9.8% in March, and residential electric storage water heater shipments were down 8.4%. March shipments of commercial gas storage water heaters declined 15.7% year over year, but commercial electric storage water heater shipments rose 24.9%. Gas warm air furnace shipments fell 25.9% in March from a year earlier, and shipments of oil warm air furnaces were off by 55.9%.
                              • A recent drop in mortgage interest rates and a shortage of existing homes for sale has boosted demand for newly built homes, according to The Wall Street Journal. In late 2022, many potential home buyers paused their plans when average mortgage rates topped 7%. As of May 11, the weekly average 30-year mortgage rate was 6.35%, according to Freddie Mac. The number of active listings for existing homes in March was about half of what they were four years earlier, according to Realtor.com. Sales of new homes accounted for about one-third of single-family home sales in March, according to Commerce Department and National Association of Realtors data. Historically, newly-built homes hold about 10% to 20% of the single-family market.
                              • The Dodge Momentum Index (DMI) decreased 5.1% in April 2023 to 180.9 (2000=100), down from the revised March reading of 190.6. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which has been shown to lead construction spending for nonresidential buildings by a full year. On a monthly basis, the commercial planning component dropped by 8%, and institutional rose by 0.3%. Commercial planning weakened across several segments, including office, retail, and hotel projects. In the institutional sector, healthcare and amusement gains were largely offset by slower planning growth for education projects. Dodge’s associate director of forecasting said, “On par with our expectations, the Dodge Momentum Index continued to recede in April, due to declining economic conditions and ongoing banking uncertainty. Weaker commercial planning is driving the DMI’s decline, as it is more exposed to real-time economic changes than the largely publicly funded institutional segment.”
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