The Trump Administration's Magic Act: For LBM, How Much Is Real? How Much an Illusion?

By Craig Webb, President, Webb Analytics

LMC President and CEO Paul Ryan spoke for many on March 7 when he discussed the news from Washington. "Uncertainty is not good. .... Whichever way it's going to go, we're better off knowing than not. If there are tariffs placed on commodity products, prices are going to increase up the whole supply chain. But we need certainty."

In the month since Ryan's comments, you could argue uncertainty levels have risen. That's in part because both the White House and Congress are engaged in sleight-of-hand maneuvers in which what's displayed for the audience is, logically, near impossible.

Take President Trump's recently imposed--then delayed--Reciprocal Tariffs. They're promoted as a way to raise revenues that will help pay for tax cuts. But if President Trump negotiates with countries to reduce their tariffs down as far as zero, as Vietnam has proposed, where's the new tariff money to fund the deficit?

But tariffs are only one of the tricks we're seeing. Congress is pressing ahead on a tax-relief bill that blithely ignores having to recognize $4 trillion in fiscal impact from extending the 2017 tax-cut package.

Lumber is another issue, and not just because of prices. The Agriculture Department and U.S. Forest Service issued directives recently that were meant to improve the national forests' health and lay the groundwork toward cutting more trees in those forests. But the Trump Administration also is firing Forest Service and Agriculture Department staff. This raises prospects that the federal government will lack the people and institutional knowledge to manage its objectives wisely. Washington also wants timber companies to open more mills in the U.S., but federal money for training programs is the kind of spending DOGE likes to target.

What can dealers do?

Write Multiple What-If Plans. In 2020, Webb Analytics published a stress-test spreadsheet created by Jim Enter, one of the industry's leading consultants. The years mentioned need to be updated, and other numbers have to be entered to match your conditions today. But once you do that, you can quickly see the impact of revenues falling 10%, 20%, 30%, or more. It works with rising revenues, too, so you'll enjoy playing with it once the magician's session ends and we get back to more certain times.

Revive Some COVID-era Practices. We're in another period in which two-way communications with customers is vital. During COVID, dealers commonly sent out far more newsletters to their customers, sometimes writing daily. That's not a bad practice now. Lots of dealers report that they've received lots of requests for bids lately, sometimes because bad weather stopped contractors in January and February. As spring arrives, sales reps should step up contacts with customers for signs of whether contractors' customers are going ahead with those plans or holding up because of economic fears.

... But It's Not a Total COVID-era Repeat. Don't forget that it wasn't just good management that enabled dealers to get through COVID. While other stores were closed, LBM dealers and hardware stores caught a massive break: They were allowed to stay open because they were regarded as essential businesses. That fact, plus bored COVID shut-ins, prompted a surge in home-related spending, and rising lumber prices provided extra rocket fuel. This time, there's no COVID-style surge in the offing. If America has a recession, you won't be spared.

Research Better Pricing Techniques. The old days of A, B, and C price categories can bring you modest profit margins, but smarter pricing can add a point or more to the bottom line. Companies like Orgill have multiple pricing tiers, while automated systems can keep an eye on what's happening online so that you don't get undercut. Electronic shelf labels deserve attention, if only for the speed with which you can adjust the price tag.

Watch Volume as Well as Sales. Dealers typically answer the "How Are You Doing?" question by comparing revenues from recent months year-over-year. When lumber prices shot up during COVID, some dealers were so giddy over higher revenues that it took a while for them to realize they were doing less work. Today, with lumber prices returned to earth, a decline in volume will hurt more, so it's important to track unit as well as dollar sales. We already had been seeing signs of a volume slowdown even before Trump's inauguration. Back in January, the National Kitchen + Bath Association forecast K+B revenues would would rise 3.8% this year, but the problem was that NKBA also forecast volume would drop by the equivalent of three revenue points. The result: A tiny 0.8% revenue gain overall expected for all of 2025.

Focus on the Rich. The richest 20% of all Americans account for a grossly oversized percentage of all spending. The wealthy also are likely to survive tariff-induced price increases better than their poorer cousins because they are more likely to own their homes (and thus have more home equity) and spend a smaller share of their total paycheck on living expenses. Custom homes and custom remodeling jobs are likely to become even more important to small dealers.

Take Heart. America remains severely underbuilt. Our population continues to grow. People keep getting married, having babies, moving to new jobs, becoming single again, and dying. People forever will need well-built, well-functioning homes to live in. As a result, they'll need building material dealers. Despite the shakiness going on now, your construction supply business has a solid foundation.