Smith & Hawken to charge ahead after auction

Home Channel News, Jan 25, 1999 by John Caulfield

Garden retailer to expand store count, explore e-commerce and branding

That parent -- Acton, Mass.-based CML -- at one time operated 14 companies but is now left with only Smith & Hawken after holding a fire sale of its failed NordicTrack division assets and filing Chapter 11 on Dec. 17. CML hadn't made money since fiscal 1994, and reported a $127 million loss, on sales of $247 million, for the year ended July 31,1998.

MILL VALLEY, CALIF. -- The fate of lawn and garden specialty retailer Smith & Hawken now rests with its eventual new owner, which will acquire a fast-growing, profitable company that has prospered in spite of the financial collapse of its corporate parent.

Conversely, Smith & Hawken, which wasn't included in CML's bankruptcy filing, celebrates its 20th anniversary this year. Prior to CML's decision to put up the company for auction, Smith & Hawken was poised to increase its store count by 12, to 42 units with 650 employees, by July 31, and then accelerate its annual expansion to between 15 and 20 stores, thereafter. Kathy Tierney, its 53-year-old president and CEO, told NHCN in November that her company eventually wanted to operate between 120 and 150 outlets, 10 alone in the New York metropolitan area.

In fiscal 1999, its retail stores were expected to account for about 60 percent of the company's total revenue, which Tierney projected would increase by 24 percent above the $88 million it generated in fiscal 1998, when the stores contributed 50 percent.

In addition, Smith & Hawken -- which mails more than 18 million catalogs each year and whose partnership with Workman Publishing has produced an array of exquisitely printed garden and plant books -- planned to embark on a more aggressive Internet marketing campaign, as well as expand its "brand" through licensing agreements.

Strong brand, weak managers

How these plans are affected by CML's selloff of Smith & Hawken could depend ultimately on the buyer and whether current management is retained to operate the business.

To this point, its managers have created a retailing entity which Tierney explained serves as an "editor and arbiter" of products and tastes for the highly selective gardener-customer in a market where home improvement centers have been capturing an ever-larger share of sales.

"There is no question that the customer is comfortable shopping' in home centers, she conceded. "But are they leaving us or leaving someone else? In Home Depot, you'll find a 'wall' of garden gloves, whereas in our stores, there's a dozen, pared-down selection. We've done all the hard work for the customer."

Tierney's interest in gardening dates back to when she and her husband lived in England in the early 1980s. And in 1992, Tierney had approached CML about capitalizing on what she saw as the blossoming homeowner attraction to gardening by starting a company she planned to call Garden Spirit. CML actually provided $4 million in seed money for that venture, but then took a bolder step in January 1993 by acquiring Smith & Hawken, installing Tierney as its president, and telling her to start opening stores, fast.

Prior to her taking over Smith & Hawken, Tierney -- a teacher by training and former Peace Corps volunteer -- was running another CML division, The Nature Company, where she helped develop its catalog and expand its store count to 120 from 14 between 1986 and 1993. She also learned about the value of "great service, attention to visual detail in displays and quirky merchandise" to attract customers.

At Smith & Hawken, which at the time was a struggling catalog retailer with three disparate outlets, Tierney hired a retail team "who knew something about running stores" (something she said was alien to its previous owners) and went about executing its expansion. In contrast to her strategy for The Nature Company, which placed stores inside "triple-A" malls, Tierney has chosen to place Smith & Hawken's stores, which range from 4,000 to 5,000 square feet, in "eclectic, destination" locations, and, until recently, stay out of enclosed malls.

For the company's stand-alone units, Tierney has made creative use of some unusual spaces. The store in New Canaan, Conn., is located where a gas station once stood; its store near Lincoln Park in Chicago is a converted pump house. The Highland Park, Ill., unit used to be an auto body shop the old name is still visible on the storefront. "As long as we can get adequate parking, we'll consider any site," said Tierney. When the company opens its first mall store in the King of Prussia mall near Philadelphia, it will include an outdoor patio area and skylights for plant life.

Merchandise changes four times a year

Like all retailers that sell lawn and garden products, Tierney said Smith & Hawken faces the challenge of "how to take a 12-week business and turn it into a year-round business." Smith & Hawken's approach has been to conform with the seasons by changing. what it sells four times a year. So in the summer, the merchandise mix is driven by furniture; in the winter, by indoor products; and in the spring, by lawn and garden preparation.