The meeting was supposed to be like all the others. Three or four times a year, the 50-or-so area sales managers of 84 Lumber would congregate at the company’s world headquarters locatedwhere else?in tiny Eighty Four, Pa. During these sales meetings, they would typically discuss how the privately held building materials retailer was performing, they would establish goals, and they would devise a strategy for accomplishing those goals.
When the company’s founder and owner, Joe Hardy, spoke at that 1991 meeting, he certainly didn’t make typical remarks. "Look," he said, "We have to change the company. If we don’t change right now, we are going to be out of business."
This was a company that had been around for 35 years, had hundreds of stores across the country, and was doing more than $600 million annually in sales. How could they go out of business? Two explanations: Home Depot and Lowe’s.
Perhaps the message shouldn’t have been a complete surprise. "We saw what was happening to our business when they opened up near us," recalls Bill Myrick, who was one of the area managers at that meeting. Nevertheless, Hardy’s words shocked him. "Here was a guy who had been doing business a certain way since 1956. Now he was going to change?"
Hardy doesn’t think it was such a big deal. "An entrepreneur has to believe in himself and has to take risks," he says.
Taking a risk wasn’t anything new for him. Imagine a husband and father of two young children going home to his wife one day and telling her he quit his job with a lucrative family business. Hardy did just that.
He wasn’t merely the best of the 50 salespersons of Hardy & Hayes Jewelry, the Tiffany & Co. of Pittsburgh in the early 1950s. Hardy was responsible for nearly half of the sales in the four-story downtown boutique, frequented by many of the city’s corporate executives from the likes of Alcoa, Dravo, Gulf Oil, Mellon Bank, and U.S. Steel. Hardy kept a "little book" in which he chronicled what his customers purchased and what birthdays or anniversaries were near. He wasn’t bashful about picking up the telephone and making gift suggestions.
Hardy’s grandfather had founded the business; his two sons, including Hardy’s dad, went to work there. By the luck of being born first, Hardy’s uncle was now in charge. When he invited his nephew to lunch at the prestigious Duquesne Club, Hardy expected a well-deserved pat on the back for his sales performance. It turned out that wasn’t what his uncle had in mind.
"He chewed my ass out," says Hardy. He recalls his uncle saying, "Why are you so aggressive" Do you realize you sell about half of what’s been sold in this store"’" His uncle wouldn’t have to worry about that anymore. Hardy said, "I quit."
He opted not to search for a position in engineering, the degree he had earned in 1948 at Pitt while working at Hardy & Hayes. "The reason I majored in engineering was I thought, ‘Well, nobody will snow me.’" By honing his analytical skills with some "science stuff thrown in there," Hardy believed he would be well prepared for the world of business. Just not Hardy & Hayes’ business. In fact, at the age of 31, he vowed not to report to anyone ever again, and he passed along the details of his less-than-appetizing lunch to his two younger brothers, too.
Meanwhile, the post-World War II residential building boom was taking place, so, as Hardy says, "It didn’t take a genius to figure out what would happen." Somehow, he and his two brothers, Norman and Bob, scraped up enough money to get into the lumber business. By 1956, in the southwestern Pennsylvania town called Eighty Four, the Hardy’s opend a lumber store bearing the town’s name.
"I built this damned thing and didn’t have any money, that’s how sophisticated I was," Hardy jokes. He helped his cash flow by instituting a cash-and-carry policy and a deposit-in program. For the deposit-in program, he locked in lumber prices and offered a cash discount for customers who paid up front, even when they didn’t need all the lumber delivered immediately. It was a good deal for the customer, because the price of lumber can escalate quickly, and it was a good deal for Hardy, because he "didn’t have any money" and he had a large enough inventory to protect himself against price hikes.
The no-credit policies worked. The store was such a success that it led to another. And another. And another.
Joe Hardy and his brothers became very rich men. The luck wasn’t all good, though. Norman died in a plane crash in the early 1960s. Then, by the early 1970s, Bob, in his mid-40s, was ready for a different pace, cashing out of 84 Lumber. But Joe Hardy wasn’t ready to relax just yet. "I could not play golf two or three days a week; it would drive me crazy." So he kept working, the company continued to prosper, and Hardy’s wealth continued to grow. By 1991, he was recognized by several national publications as one of the richest men in America.
It’s no wonder that area manager Bill Myrick was more than a bit surprised when this self-made, 68-year-old leader said at that 1991 sales meeting that everything could be lost unless there were dramatic changes.
Evidently, Hardy and his daughter Maggie Hardy Magerkowhom Hardy had just brought into the business as his heir apparentrealized that when it came to home-improvement customers, Home Depot and Lowe’s were the Goliaths and 84 Lumber was David. Rather than confront the two powerhouses directly, Hardy and his daughter devised a different strategy: Find a different customer, the homebuilder.
Frank Cicero knew how to do that. He started to work at 84 Lumber in February 1984 as a manager trainee in an Annapolis, Md., store. He was 23, a recent college graduate, hoping to become a store comanager one day. He reached his dream in just eight months. His next goal was to become a store manager. In June 1986, he became a manager of a store in a Washington, D.C., suburb.
He had an immediate problem. Lowe’s opened a store right across the street. Instead of watching all his business disappear, Cicero developed an outside sales force there that operated on the "builder side of things." When Home Depot opened two stores in Baltimore in late 1991, Ciceronow an area manager, who was armed with a mandate from the corporate officewas ready for the challenge.
"I just went there and did the same things I had always done," says Cicero. "We needed to go after builder business, we needed to hire outside salespeople. When Home Depot opened, there was one outside salesperson in my 10 stores; by the time I was done a year later, there were 28 outside salespeople."
Per Hardy’s instructions in what the area managers dubbed "The Survivor’s Speech," the company's outside salespeople were to go to the homebuilders’ construction sites.
"They’ve become like pseudo-employees of the builder," says Myrick. "They do all the estimating for the builder, they anticipate the builder’s needs. And if our salesman is out there every day, he can see, for instance, that a house is just about done and is going to need windows next week. So, even if the builder is not calling the salesman, the salesman is calling the builder saying, ‘Hey, I was out at lot 103 yesterday, I can see that they are about framed up, I think you are going to need your windows on Monday.’ Then, the builder says, ‘Oh man, thanks for watching that for me, because I have so many other things going on right now.’ We try to teach our salesmen to almost become like an employee of the builder."
This new way of business for 84 Lumber meant a new way of chargingthe dreaded accounts receivable.
"Today, we have about $2 billion in accounts receivables, about 80 percent of our business," says Maggie Hardy Magerko. "In 1990, we probably had about $20,000 on any given day; today it’s $280 million."
Obviously, the decision to target homebuilders worked. Myrick, who is now the company’s chief operating officer, reports that the company in 1991 did about $600 million in sales; 90 percent of that business was from homeowners. "Here we are 13 years later," he says, "and it’s a $2.5 billion company and 90 percent of our business is homebuilders. We are number two in the industry right now. Number one is a company called Stock Lumber. They probably do about $2.7 billion. We are catching them fast."
Cicero believes 84 will pass Stock Lumber, in part, because of Hardy’s personality. "He definitely has an intensity. He is just as intense as he ever was. His intensity makes your intensity go up," says Cicero, who is now the company’s vice president of store operations.
What if Hardy hadn’t changed the course of the company" Would it have been as ominous as he depicted in his Survivor’s Speech"
Absolutely, says Myrick. "There are many people in our industry who are out of business today because they chose to fight Home Depot and Lowe’s head-to-head. Hechinger’s isn’t in business anymore. Rickles isn’t in business anymore. There are just multitudes of people who used to be in this industry who aren’t anymore because they either chose the wrong battle to fight or they chose not to move fast enough in the builder arena."
Today, 84 Lumber operates 453 stores in 34 states, employs more than 6,500 associates, and opens about 25 new stores every year. The company went from having practically zero contractor salespersons before the Survivor’s Speech to more than 1,500 today.
Although he is 81-years-old, Hardy isn’t slowing down. His daughter is now president/owner of the company, but he still goes to work every day, focusing on the development of new stores. Hardy Magerko is thankful to have him around.
"He’s my guide," she says. "Because I know there is no hidden agenda with him and me. He just wants me to be happy, and he wants 84 to be healthy." She, in turn, wants to make him proud. "You know," she says reflectively, "why am I really doing this, when I could easily be at home having babies or something" I don’t want to let him down; I want to please him. So, that’s really my motivation. It’s not the profit-and-loss statement. I want him to say, ‘Hey hon, you did a nice job.’ It’s that simple."
Hardy doesn’t spend all his time at 84 Lumber. Last year, he ran for Fayette County commissioner. "I’ve been quite active in national politics, state politics, so I’m positioned well, and I would like to do something for Fayette County. It's probably the lowest of the 67 counties in Pennsylvania, by a lot of criteria, but it’s such a beautiful part of the country. It has so many possibilities." Hearing talk of potential must have intrigued voters, because Hardy, a Republican, won in the heavily Democratic county.
Located in this "beautiful part of the country" is Nemacolin Woodlands Resort and Spa, purchased by Hardy in 1987 for $3.1 million. They have been on a $100 million renovation ever since, adding attractions such as Mystic Rock golf course, a stop on the PGA tour, and the European-inspired Chateau LaFayette, which has 124 rooms equipped with everything from computer hookups to marble bathrooms. "People will come back once a year primarily just to see what the idiot built next," jokes Hardy. Nemacolin, which Travel & Leisure listed in its World Best awardshouses 300,000 guests per year, bringing in around $50 million, compared to about $3 million in 1987.
With 84 Lumber, political office, and Nemacolin, Hardy has quite an agenda. Yet, he doesn’t appear overworked. He’s a big, robust man who carries his weight well; it adds to his presence. He has a full head of hair, and if he has any 81-year-old wrinkles, they’re not apparent. His lifestyle seems to work for him, especially when considering that most of his contemporaries are retired or deceased.
"I haven’t changed in the last 50 years," he says. "I love to make things happen, and I believe this, no kidding, nothing is impossible. People sit around and read The Wall Street Journal to see how bad things are. Hey, that’s ridiculous! But so many people do that, and they hold themselves down. Things are still happening, happening, happening."
Robert Mendelson is editor in chief of Pitt Magazine.
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