Payless concentrates on pro business - Brief Article

Home Channel News, March 20, 2000 by Jason Gonzalez

Makes personnel changes, plans remodeling

LEE'S SUMMIT, Mo. -- Three months into 2000, Payless Cashways is taking meaningful strides towards its goals of strengthening its focus on professional builder accounts, growing its e-commerce business and remodeling its stores.

During a one-week span in late February, Payless created two executive positions designed to significantly expand its business with home builders, named three company veterans to round out its e-commerce team and revealed plans to set aside $29 million for capital expenditures that include the remodeling of 35 stores. Payless also promoted 24-year veteran David Krumbholz to senior vp-store operations.

Payless' president and CEO, Millard Barron, said coincidence may have played a small part in the timing of the recent moves, but the overall driving factor was the company's wish to begin implementing the strategies it has developed over the last year.

"Candidly, I think [the moves] do point to us being more aggressive," he said. When Barron arrived at Payless in 1998, he said the first order of business was stopping its financial and market share slide. In 1999, the focus was on engineering the turnaround, while 2000 will be about moving forward again. "These are the results of initiatives we have been working on over the past 18 months," he noted.

Payless got good news last week when it reported that its $5.2 million net loss for the quarter ended Feb. 26 was about half the $9.96 million loss it incurred during the same period in 1999. The company cut its quarterly SGA expenses by $12.7 million. But sales fell 11.4 percent to $347 million, and by 8.4 percent on a same-store basis.

That decline, though, was mostly from DIYers. In a major sign of commitment to the pro business, Payless has hired Frank Chambers as its new executive vp-professional business development and Clifford Caldwell as the new vp-professional builder operations. In Chambers, Payless is gaining a high profile industry veteran whose 30-year-career has included stints at Wickes, Lowe's, Moore's and Pelican. Caldwell is a 30-year industry veteran who most recently served as vp-purchasing for the Ryland Group, one of the country's premier volume builders.

Payless historically has served its professionals from a retail model and, as a result, never won a large share of production builders' business, Barron explained. Now, Chambers will oversee the company's entire professional sales efforts while Caldwell will focus on strengthening Payless' relationships with national home builders. Both men were expected to join the company March 6.

By adding outside people with different talents and experiences, Payless is banking on them to spur the development of new distribution models and services that can be bundled to attract volume builder accounts, Barron said. Payless has spent the last 18 months trying to sharpen its focus on professionals and serious DIYers. Of the dealer's $1.8 billion in 1999 sales, 54 percent came from pros, versus 51 percent in 1998.

Distribution role

Payless is also deepening its e-commerce team. The dealer named Dennis Smith as its new divisional merchandise manager for e-commerce and John Cramer as its e-commerce national accounts manager. Payless also appointed Lewis Logan to the post of e-commerce logistics director. Together with e-commerce director Jim Hollingsworth, they form the core of Payless' e-commerce business development and support organization.

Payless currently maintains a Web site but its content is limited to store locations, press releases and other general information. The company expects to launch a more comprehensive site, with online purchasing capabilities, later this year.

Barron said the e-commerce group will work on other initiatives, including the rollout to its stores of an online special order program, e-catalogs geared toward pros such as plumbers and electricians and the possibility of developing order fulfillment partnerships with existing Internet companies. Barron said Payless' size and infrastructure position the company to serve as the distribution arm for smaller e-commerce sites. Payless has no such partnerships underway yet, he noted.

Payless this year has earmarked $29 million which it will use to remodel 35 stores this year. The retailer plans to remodel another 50 stores in both 2001 and 2002.