Retailers dig into lawn and garden category - Brief Article

Home Channel News, July 16, 2001

The decision by HomeBase to close more than half of its stores and convert the rest to a format that features home decor and outdoor living products illustrates how lawn and garden continues to be a growth category, even for dealers struggling to survive.

Those 42 stores, which HomeBase calls House2Home, include outdoor nurseries that range from 13,000 to 25,000 square feet. Mote than 30 sets of patio furniture ate being displayed on these stores' sales floors, the most of any retailer in the western United States, claimed Scott Richards, HomeBase's executive vp-merchandising, marketing and distribution.

The lawn and garden category has become so popular that it's attracting all kinds of retailers -- discounters, supermarkets, drug stores -- that are muscling in on the territory that independent specialty dealers are fighting to hold onto, with fitful success.

In 2000, nurseries and garden centers across the United States generated $11.1 billion in sales, 4.6 percent more than in 1999, according to Commerce Department estimates. Those sales represented less than one-third of the total amount that consumers spent on lawn and garden products last year, based on estimates by the National Gardening Association. The 25 largest specialty lawn and garden dealers, as tracked by NHCN, saw their sales decline 6.7 percent to $1.31 billion, although aggregate sales grew 6.9 percent when Frank's Nursery revenue is excluded.

Several factors -- cold weather, a weakening economy, a topsy-turvy stock market and a contentious presidential election -- adversely affected specialty dealers' lawn and garden sales last year and into the first three months of 2001. At a meeting of the Peer Group in June 2000, CEOs from garden center chains in Michigan, Texas, New Mexico, British Columbia and California traded financial information, none of it too good. "The best anyone could report was even sales," recalled Duane Psota, vp-marketing for Earl May Seed & Nursery, a 53-store chain based in Shenandoah, Iowa.

"The weather took its toll on us in the Midwest," he continued. "Spring was too wet and too cold." Fall sales were affected by the stock market, media reports about a pending energy crisis and the presidential elections, he speculated. "In an election year, people get fidgety about what to do with their money."

Market conditions and its own financial instability undermined the ambitious store opening and remodeling plans with which Frank's Nursery optimistically entered 2000. By the end of the year, the industry's largest specialty lawn and garden dealer had put 44 of its 218 units up for sale. Two months later, Frank's had filed for bankruptcy protection. The Troy, Mich. retailer renegotiated agreements with its vendors in March and greeted spring with fully stocked stores. Sales in April and May rose 10.5 percent over last year's revenues, with comp-store sales increasing 7.8 percent for Frank's remaining 196 stores. During its last quarter, Frank's sales were up 4.2 percent to $143.2 million.

"Spring sales [comprise] 60 percent of our business," said Tony Wasserman, Frank's vp-advertising and marketing. With spring behind it, the retailer is ready to develop and file a reorganization plan with a Baltimore court, Wasserman said. He added that Frank's has borrowed less than $19 million against its $100 million credit line.

Calloway's Nursery, the 20-unit chain based in Texas that ranks 10th among garden center dealers, also enjoyed a "great spring," which should produce "some good [financial news] for the company soon," according to company spokeswoman, Nancy O'Malley. That would be a welcome change for the company, which reported a net loss of $605,000 for its second quarter of 2001. Sales in this period declined 26 percent to $9.1 million, and same-store sales fell 22 percent.

Indeed, the prospects for independents around the country are surprisingly fertile, as many specialists are competing effectively by promoting the quality of their live goods and customer service, as well as the unique "shopping environment" their stores offer (see story, page 24).

Armstrong Garden Centers, a Glendale, Calif.-based chain of 34 stores, replaced its garden center in Glendora (just east of Los Angeles) with a new facility across the street. The ground-upper, which opened in May, is twice as big as the old unit. And at its Carlsbad location in San Diego County, Armstrong's continues to reap benefits from a partnership with The Flower Fields, an adjacent growing operation that draws busloads of visitors each spring.

This year the Flower Fields added an official test garden for All-American Rose Selections, an organization that experiments with new hybrids in 24 different locations around the country. Armstrong also built the only public garden in the United States featuring every AARP selection since 1940. The Armstrong "Walk of Fame" contains 173 prestigious roses, making it a tourist destination of its own.

Independents need all the pizzazz they can muster to lure home-owning gardeners who have a wealth of retailer options to choose from for lawn and garden products.