Frank's revolving door ushers out another ceo - Frank's Nursery & Crafts, Bruce Dale

DSN Retailing Today, Feb 9, 2004 by Debbie Howell

TROY, MICH. -- The third ceo at Frank's Nursery & Crafts in as many years stepped down last month after a report of poor December sales--a troubling development for this lawn and garden retailer attempting a post-bankruptcy turnaround.

Bruce Dale was recruited in April from Aaron Brothers, a division of Michael Stores, and replaced former ceo Steve Fishman, who lasted 14 months. Dale's resignation came a month after Frank's reported a 10.4% drop in comparable-store sales for December, a reversal from positive gains of the past year. Dale, who could not be reached for comment, also resigned from the company's board.

Frank's, which emerged from bankruptcy in May 2002, lost $10.5 million through its first three quarters. While this was better than 2001, ongoing financial difficulties apparently prompted Frank's to amend its existing $7 million credit facility to $25 million. This financing through Kimco Capital is available through May 2005.

Upon announcing Dale's resignation, Frank's revealed that consulting firm Abacus Advisors has been hired to assist with running the company. The board of directors chose Alan Cohen, chairman and ceo of Abacus, to head Frank's during its repositioning. There was no mention in the release of searching for a permanent ceo.

"Abacus is well-positioned to provide interim management at Frank's, which we expect will lead to a strengthening of Frank's core nursery business as well as other year-round complementary product lines," said Cohen in the press statement.

Over the past two years, Frank's has attempted several different strategies to revive its business. Under Fishman, the chain exited crafts and expanded into home decor. Dale's vision focused on emphasizing Frank's core competency, its lawn and garden business, including expansion into the wholesale nursery business through a partnership with a local grower that was to begin this month in two markets. Another new initiative is the addition of patio furniture and grills this spring.

Though Frank's has not specified reasons for the surprising decline in December comps, one industry expert speculated that tough competition and lack of a differentiated format may have hurt the retailer during the important holiday sales season.

"Competitively speaking, they're outsized and out-assorted," said Jim Robisch, senior partner of The Farnsworth Group, a consulting firm that specializes in the hardware industry. "Because of the competitive landscape, it's affected them."

Robisch said the expansion and improving expertise of Wal-Mart, Lowe's and The Home Depot in lawn and garden are proving difficult not only for Frank's, but for nursery retailing in general. Offering competitive prices or unique assortments have become critical for gardening chains to compete against the big boxes.

"With any outsized specialty retailer in the shadow of the big boxes, in order to survive, they've got to make a significant change in their strategy, and that has to be highly focused, and they have to be the best at it. Frank's used to have some unique things you could get nowhere else, but now everybody has that," Robisch added.

Frank's, which has downsized in recent years and now operates 170 stores in 14 states, also may be feeling the impact of less-optimal locations. Robisch said Frank's has always done well in upper-income neighborhoods and speculated that stores in lower-income locations may be among those reporting the largest sales declines.

Whether upheaval in executive leadership and indications of financial trouble point toward another bankruptcy filing is uncertain. One clear takeaway from the chain's troubles is that a changing retail landscape increasingly dominated by big boxes is causing headaches for smaller niche chains such as Frank's.