Orchard Supply Finally Goes Beyond California
Well before Sears purchased Orchard Supply Hardware (OSH) back in the mid-1990s, Orchard was looked upon as an iconic brand even though the company confined its growth within the state of California and mostly centering around the area of its San Jose roots. Throughout its history dating back to 1931, the company was generally viewed as unique, if nothing more than for the size of its stores -all hardware stores. The current location prototype weighs in at 44,000 sq. feet with an additional 8,000 sq. feet of exterior nursery and garden space. While most noted for its customer services, OSH has never been shy about championing the advantages of its relatively vast retail selling space for a hardware store, which dwarfs most Ace, True Value and Do It Best locations.
Prior to the Sears’ purchase many industry observers wondered when this unique design would finally expand beyond the considerable confines of California. Orchard management however remained cautious and determined that a temperate pace of expansion was the most useful. Management consistently indicated that the importance of knowing and fully serving customers by carefully maintaining close ties to local communities was a valuable key to its success and thus expansion had to be carefully planned and executed.
Shortly after the company’s acquisition by Sears, Orchard’s new parent indicated the sincerest form of admiration for its newest retail unit. Similar in total store count though noticeably larger than individual Sears Hardware stores, Orchard’s operations caught the eye of Sear’s management and indications abounded that the blueprint for Sears Hardware Stores would essentially become close to clones of Orchard. In fact, it was expected that Sears would shortly rename its traditional hardware stores with the Orchard Supply Hardware brand. Ultimately, it was expected that Orchard was destined to be the national brand of the Sears Hardware Stores division.
This plan was never brought to fruition. Less than a decade after Sear’s acquisition of Orchard, Sears itself was acquired by Kmart. Shortly after this acquisition, Sears sold a 19% interest in Orchard to a private equity firm. Again considerable expansion plans for OSH were announced. Again they remained unfulfilled.
At the beginning of this year Sears Holdings spun off Orchard and OSH became a public company. This year, as an independent, Orchard has again begun to flex its muscles. Not only has OSH used its new found independence to embark on the road to expansion, it has created a customer inspired prototype for its new locations openings while eagerly converting some of its veteran stores to the new format.
Now comes the announcement that many have waited nearly two decades to hear. Orchard is building two new stores which it expects to open early next year in Oregon. After all the expectations for expansion both prior to and after the Sears merger and again after Sear’s sale of a significant percentage of OSH to an aggressive private equity firm, Orchard Hardware Supply has created a lot of headlines less than a year after it independence from Sears.
This year the company reduced its debt by more than $90 million and secured financing for store remodels, primarily by executing multiple sale-leaseback transactions. Orchard also refinanced its Senior Secured Credit Facility in October. As of Oct. 27, the company had about $64 million of cash and credit available. The company now has eight stores in its new neighborhood format. These include new openings and grand re-openings, all accomplished this year.
Troubled financials seem to be shaping up despite a still questionable market economy. Despite these concerns, the company has embarked on a prudent spending spree to modernize its store design, better connect with its customer base and promote both short and long term plans to expand and remodel. Finally even outside the state of California.