DiMino: Lesco must improve sales and distribution

Golf Course News, Jun 2002 by Overbeck, Andrew

CLEVELAND - Four months after joining the company as chief operating officer, Michael DiMino has taken over the top spot as CEO of Lesco (GCN May 2002). In that short time, DiMino has grasped the major challenges facing the beleaguered fertilizer manufacturer, supplier and distributor and has implemented a multi-- step plan to bring the $500 million company back into the black. At press time, Lesco's stock had risen 25.7 percent from $8.75 to $11.00.

DiMino's strategy is simple: leverage the huge amount of capital that Lesco has invested in manufacturing facilities by improving the company's selling and distribution capabilities.

Me bottom line is almost anyone can get a lot of our molecules from almost anyone," DiMino said. "So it really comes down to technical expertise and delivery."

With that in mind, DiMino and his team are revamping the company's distribution, sales force and point of sale system.

HUB-AND-SPOKE DISTRIBUTION

In a move to beat local and regional distributors and formulators, DiMino said the company will dismantle part of its existing distribution network in favor of a hub-and-- spoke system over the next 18 to 24 months.

"We have a national presence, but we are getting hammered by these little guys and we have to be able to deal with them," he said. "Instead of making product at the factory and then storing it nearby and shipping it out when we need to, we are going to eliminate that step and bring inventory closer to the market."

Of the company's 16 distribution facilities, 10 to 12 will be relocated. In addition to improving customer service and product availability, DiMino expects the cycling of distribution centers to reduce transportation costs dramatically.

The sales force has also been realigned to operate more efficiently. Lesco has combined its golf and lawn care operations to better serve all the people in a region and to eliminate idle salespeople. DiMino has also separated the sales and service departments so that individual roles are better defined.

"With sales and service overlapping we had people who enjoyed selling who were restocking shelves," said DiMino. "Now we there isn't any confusion about what they are supposed to be doing. The sales people can now concentrate on selling."

DiMino said the changes in distribution and sales will allow for same store growth of five to six percent this year.

SHIFTING INTO REAL TIME

To better track sales from its distribution centers, Lesco has partnered with AT&T, Microsoft and IBM to improve its existing reporting system.

"Right now the stores are not in real time," DiMino said. "Fixing that will allow us to get a jump on replenishing stock, manufacturing product and forecasting sales growth."

Combining these new changes with organic growth like the expansion of its independent marketer program, which now has four members, DiMino said that going forward Lesco could approach eight to 10 percent growth in year-to-year same store sales.

According to DiMino, Lesco is already seeing the benefits of the changes that have been implemented to date. While they have raised prices one to two percent to increase margins, the new CEO reported modest sales growth and lower than expected first quarter losses.

"We have seen a recovery towards profitability because of our efforts to concentrate on productivity and efficiency," said DiMino.

However, Lesco still faces several challenges, the most pressing of which is saving its underperforming Novex specialty fertilizer brand.

"It is a great product, but it is expensive to make," admitted DiMino. "On a return on invested capital basis, it is not in the sweet spot at all. Novex by itself will probably not be a $20 to $25 million product line."

Lesco will be mixing it with its PolyPlus fertilizer to create 10-- to 60-percent blends, giving its regular fertilizer the slow-release qualities of Novex. The move is expected to offset production costs while also improving PolyPlus profits.

Lesco is also watching external issues such as golf sales, which have remained flat because resort courses are still facing low levels of play. Sales from national accounts also dropped nearly five percent during the first quarter as large accounts like American Golf are in financial trouble.

"We are going to be a little more careful about the customers we are choosing," said DiMino. "We are not going to chase unprofitable business."