Hanging Tough in a Tough Market


    Flash back 15 years ago.  Coolio had the #1 hit on the Billboard charts with “Gangstas Paradise”.  E.R. was the top television show.  Bill Clinton was our President, overseeing an era of seeming prosperity.  Believe it or not, in 1995 builders in the Truckee Meadows pulled over 3,100 new residential building permits.  And Reno Lumber opened in November of 1995 as Reno Lumber Service. 

   Reno Lumber was unique in Northern Nevada as it was designed to be focused on the production home builder as well as residential and commercial framing contractors.  Its owners knew that in order to be successful, they would need to be very disciplined and carry only a certain product mix, cater to a narrow range of customer types, offer low price points, great service, and  deep inventories where warranted.  This business model worked, and with very little modification, is in force to this day.
   Reno Lumber Service was purchased by Buck Yaeger and two local investors in July of 2004 in the middle of the housing boom.  They did a great deal of business through early 2007 until new home construction came almost to a complete halt, where it remains today.  Coping with this industry trend has been challenging to say the least.
   The slowdown has mandated they cut costs wherever possible, and that means just about everywhere you look in the business.  They have gone from about 110 employees at its peak, working 2 shifts for 22 hour days and 6 days a week to 12 employees working 1 shift and not quite 5 days per week.  They have also cut expenses in insurance, truck leases, equipment needs, donations, and banking costs.  Like many others, they have lowered inventory levels, and even paid off their property to reduce monthly expenses.  These measures have been tough, especially reducing a workforce of good employees, but Reno Lumber has been able to remain an ongoing enterprise even at the severely reduced sales levels we see today.
   While material costs are higher than they were a year ago, they are still much lower than in 2006.  The lumber and panel markets experience ups and downs and are subject to extreme changes in either direction.  Pricing is dictated strictly by supply and demand, with all facets of the industry—from the builder demanding lower costs to the log suppliers and timber companies wanting higher returns—affecting the day to day profitability of the business.
   Buck Yaeger and Reno Lumber’s employees know that until the housing crisis subsides—meaning foreclosures and some oversupply are absorbed and the financial and unemployment numbers return to something closer to sustainability—then construction and related businesses will struggle.  Although Reno Lumber has been able to maintain at this reduced pace, some of their customers have suffered deeply, and a few have had to close their companies.  The remodeling business, hailed by some as the industry answer during these difficult times, has not really taken up the slack, as such a high percentage of homeowners are “upside down” and have negative equity.  For many, it doesn’t make sense to remodel, as they are not really adding value. 
   “I think Reno Lumber will work through this situation for the next couple of years, doing the best we can for our customers and our employees,” stated Yaeger.  “Hopefully things will get a little better.  In the meantime, we enjoy the business we have.  We are happy and thankful to live in Northern Nevada, a great place with such promise and opportunity that ensures a bright future for the housing and construction industry.  We are committed to being part of that future.”

 



 

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