Frank's Nursery sprouts new branches

Home Channel News, Nov 6, 2000 by John Caulfield

L&G retailer expects airier format to strengthen its financial roots

EAST WINSOR, N.J. -- Adam Szopinski surveys the 23,000 square feet of plants, gardening decor and trim-a-tree products displayed attractively and colorfully inside Frank's Nursery & Crafts here and sees a bit of himself.

"I love merchandising and I love discipline," said Szopinski, the 54-year-old president and CEO of Frank's, the industry's largest lawn and specialty dealer, which, for the past two years, has been trying to reverse its downward spiral of sales, profit and market share.

New questions about Frank's financial viability were raised last month when Standard & Poor's downgraded the company's debt rating and put the retailer on its Credit Watch. S&P implied that it expected the deterioration in the chain's same-store sales -- which had declined for five consecutive quarters - to continue.

S&P's move came, somewhat surprisingly, after Frank's revealed its intention to close 33 company-owned and nine leased stores in 11 states that its management had deemed were unproductive. "If we were a public company, Wall Street would be applauding what we did," Szopinski said.

Going public, in fact, is in Frank's Nursery's plans, so it is critical for Frank's to validate its financial health. A key component in those plans will be a more aggressive prototype store format rollout that Szopinski believes will be less expensive -- and therefore more profitable -- to operate.

A higher standard

The Troy, Mich.-based Frank's currently operates 263 stores in 15 states. (The closings will occur after the Christmas selling season.) A typical outlet is an 18,500-square-foot box with a 17,000-square-foot outside selling area sitting on three acres. The prototype, though, takes the company to an entirely new merchandising and display level. The 23,000 square feet of inside selling area under higher ceilings and brighter lighting, with its kelly-green fixtures and wood-paneled checkouts, are a far cry from the dingy, casually-appointed stores that Frank's has been operating for half a century.

"When I came here three years ago, some stores hadn't been upgraded in more than 20 years," said Szopinski, who joined Frank's in December 1997, after spending 33 years with Toys "R" Us. "You'd see stuff laying all over the floors and the stores were a mess. I'm a neat freak, and I do not want to see any broken bags or junk anywhere. If I walk into a store and I see even a piece of paper on the floor, the store manager is going to have to explain to me why that is."

Szopinski's fastidiousness isn't just a personal quirk; he's convinced that Frank's problems stem from a lack of operational rigor that has manifested itself to customers in the appearance of its stores and its personnel. That's why Szopinski -- who once made his son, home from Harvard, remove an earring before entering his house -- instituted a dress code for all store associates. That's why, when showing an NHCN reporter around the East Windsor store, he became noticeably agitated when he saw some pebbles on the concrete path in the 32,000-squarefoot outdoor yard.

Frank's currently has 12 prototype units in operation, with the Nov. 4 grand opening of its store in Lyndhurst, N.J. Szopinski estimated that Frank's is spending around $3.5 million to build new stores, and another $300,000 or so to stock them. (Szopinski said he is adamantly against retrofitting older outlets to the prototype, primarily because their size "is never right.") It has used the prototype to expand into new markets, like Pittsburgh and Richmond, Va.

S&P's evaluation of Frank's debt notwithstanding, Szopinski insists that the dealer has enough cash to proceed with its prototype rollout. Next year, it will open "more than" six stores, yet Szopinski was reluctant to provide specific numbers. He did say that Cypress Group -- an investment firm that acquired Frank's in 1997 -- wants to take the company public eventually so that it has access to enough capital "to be building 20 to 30 stores a year."

Cypress Group, by virtue of its partners' business histories, should have credibility with investors. Szopinski had been vp-operations for Toys "R" Us's international division, where he worked for Joseph Baczko, Frank's current chairman and CEO, whose background includes a stint as president and chief operating officer at Blockbuster, the video-store chain.

Yet, the Catch-22 Frank's finds itself in is that a public offering would be virtually impossible until it starts showing stronger financial results, which in large measure are dependent on its ability to open more prototype stores.

Szopinski said that he expects the prototype format to generate "a minimum" of $3 million in sales in a store's first full year. That would compare favorably to the $1.9 million per store that Frank's, as a chain, averaged in fiscal 1999. More important, the prototype is expected by Frank's management to be more profitable, primarily because it is designed to be more efficient in its operations.