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Robert Hastings is attempting to instill new life into the 20 hardware stores they acquired from Scotty's. Hastings is attempting to create a mid-sized hardware-store chain in Florida, a state dominated by Home Depot and Lowe's and his efforts are being supported by Do it Best.
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Dynamic duo: Robert and Leslie Hastings believe they can instill new life into the 20 hardware stores they acquired from Scotty's.
ORLANDo, FLA. - It may be a while before Robert Hastings gets back to working on his golf game.
The transplanted Australian businessman is spending nearly all of his time these days getting the 20 smaller stores he acquired from Scotty's on Jan. 28 into shape. All 20 are undergoing a complete remodeling and remerchandising to return them to what Hastings calls "their hardware roots." Hastings' efforts are being supported by Do it Best, the dealer-owned buying group that has supplied the store design, computers and products, and will handle the stores' replenishment once the operation is fully reopened in late July or early August.
The 51-year-old Hastings, a 5-foot 6-inch dynamo with an indefatigable spirit, now finds himself scheduling painters and tilers, haggling with landlords and encouraging 117 store employees whose demoralization under Scotty's had approached despair. What he's trying to do - create a mid-sized hardware-store chain in a state dominated by Home Depot and Lowe's - may seem folly to some, especially after Scotty's disastrous conversion of these stores into bargain outlets whose product mix included everything from pantyhose to dolls. But don't tell Hastings that.
"You have to create your own identity, and I think we're actually five years ahead of most startups because we took over a going concern," he stated confidently, while leaning back into a huge couch in the living room of his 5,000-square-foot home here.
That house is serving as Hastings Hardware's temporary offices until it moves into more permanent digs this month. Hastings' 40-year-old American-- born wife, Leslie, is perched behind an ever-growing bank of personal computers. She helped design the company's Web site and is serving as her husband's right hand in this fledgling enterprise. "It's been exciting and fun," she said, with a wry smile.
Stores had become 'a joke'
Fun is hardly the word that Hastings Hardware's employees would use to describe Scotty's failed attempt to inject new life into its chain of differentsized stores by adding a volatile mixture of closeout merchandise. The larger stores could more easily absorb these products, but as much as 80 percent of the smaller stores' inventory became nonhardware products.
"The customers saw us as a joke," said John Baluha, a 10-year Scotty's veteran who manages Hastings Hardware's 6,500-square-foot store in Winter Park, Fla. He noted that his store's commercial business, which accounted for 13 percent of its sales, dropped to less than 1 percent when Scotty's made the switch. In addition, this store like many that Hastings acquired - is in a strip mall near a supermarket, which made selling foodstuffs Scotty's had brought in virtually impossible to sell.
Scotty's executives at its headquarters in Winter Haven, Fla., apparently arrived at the same conclusion late last year, and were mapping out a major restructuring of their company that did not include the smaller stores in its long-range plans. Here's where fate, friendship, fortune and golf came into play.
In June 1999, Hastings was easing into semi-retirement. He had sold his burgeoning electronic components company, Sydney-based Amtron Australia, to Tyco International. He also sold his holdings in a hotel and pub in the Hunter Valley wine-- growing region of New South Wales.
Hastings had planned to take two years off and concentrate mostly on lowering his golf handicap, which he got down to 9. What drew him to Orlando, he said, was an article in Unique Homes, a magazine published in Australia, that was written by golf pro Mark O'Meara about Isleworth, a course designed by Jack Nicklaus around which was being developed an affluent community of "McMansions" whose residents eventually would include rich pro athletes like Tiger Woods, Shaquille O'Neal and Ken Griffey.
At a Pro-Am tournament held at Isleworth Country Club, Hastings met two men who would pull him out of early retirement: Tom Morris, Scotty's CEO, and Tom Hansen, an entrepreneur and former manager with General Electric, who describes Morris as "my best friend."
Hastings, who after graduating from high school became a carpenter's apprentice and eventually started his own construction company, was intrigued by Morris' offer to sell him six Scotty's stores. "But running six stores would have been a two-- day-a-week job," Hastings recalled. So six became 10. And then Hansen - who runs a $100 million, 2,000-employee database marketing company in Louisville, Ky., called Accent Marketing Service - offered to come in as a second investor. Hastings and Hansen (who has known Morris for nine years) paid Scotty's $6.2 million for the 20 stores, a deal that Hastings said closed very quickly. "I actually wanted to consummate the sale on March 28, but the whole thing happened in only around 10 days."
Hansen lives full-time at Isleworth but isn't directly involved in the day-to-day operations of Hastings Hardware. He referred to Hastings as the "driving force" behind this transaction. "Both of us have proven track records in starting new companies, and we have a great partnership. But if Robert wasn't in this, neither would I be."
Still wanting a hardware store
What Hastings and Hansen bought was a group of stores whose annual sales were only around $11.5 million, and whose annual inventory turns had fallen to under two times. However, the stores still generated $1 million in annual positive cash flow. And customers' craving for a neighborhood hardware store never went away.
"We did market potential surveys on each store, and I've never seen numbers like these," said Bill Fincannon, a Retail Plus manager for Do it Best who has been guiding Hastings Hardware's resurrection. "The neighbors were screaming for basic hardware stores, and the locations that Robert bought are all great."
Hastings readily admits he's a neophyte when it comes to retailing. But relying on his instincts, it didn't take him long to grasp the essence of retail leverage. For example, he said that Sherwin-Williams, Do it Best's primary paint supplier, "missed the boat" to supply Hastings Hardware's stores because "they took [the business] for granted," whereas a representative for Valspar, Roger Ball, gave "a totally progressive presentation," going so far as to create a limited paint line with Spanish labeling for the retailer's stores serving Hispanic communities. Hastings believes that each of his stores could do between $250,000 and $400,000 in paint sales per year.
After acquiring the Scotty's stores, Hastings kept them open while he liquidated their nonhardware closeout merchandise as quickly as he could. (He had nothing but praise for Scotty's during this transition period.) Hastings had the stores gutted so they could be remodeled to the design specifications developed - at a cost of $3,500 per store - by Do it Best.
Most of the stores, which average around 8,000 square feet and stock around 25,000 skus and $35 per square feet of inventory, are expected to follow Do it Best's Vision 2000 design and merchandise formula, although they'll have their own distinct features. For example, its 15,000-- square-foot store in Longwood, Fla., one of three freestanding units among the stores Hastings bought, will stock some convenience lumber and includes a 4,800-square-foot outside garden center. Many of the stores will offer customers Internet-enabled kiosks through which they will eventually be able to order merchandise. And Hastings Hardware is an authorized dealer for Nextel wireless communications devices, which could boost its business with pro customers.
The Fort Wayne, Ind.-based co-op has many dealer-members with multiple stores. But this could be the largest single restoration project the buying group has undertaken. The co-op has a major stake in Hastings Hardware, from which it could be getting between $5 million and $6 million in purchases annually. But given that Hastings only intends to have four headquarters employees, the success of Hastings Hardware invariably will hinge on the in-field execution of Do it Best's programs. That's why Hastings wants store managers who can react decisively to market conditions and can make decisions independently. "It's all about leadership at this point," Hansen said.
Not looking too far ahead
If Hastings Hardware can turn its inventory one more time per year than these stores did as Scotty's outlets, Hastings said his company "would do well." He's also banking on the patronage dividends that Do it Best pays out to its members for purchases made through the co-op to help fund his operation.
Both Hastings and Hansen concede that some of the 20 stores they bought may not work out. "We have to make sure we identify the winners and the losers," said Hansen, who foresees some "pruning" once each store's competitive strength can be determined. On the other hand, Hastings noted that Scotty's still operates 13 stores that are buying through Do it Best that he might be interested in purchasing "down the road."
Hansen projected that Hastings Hardware should be generating $1 million per store eventually, as long as the company didn't try to be too creative to quickly. "Until we prove them otherwise, Do it Best is the expert," he said.
But beyond the next 12 months, Hastings said he has no real game plan, except to suggest that he might want to expand outside of Florida at some point. As for his golf game, for the time being he'll have to live vicariously through Andy Johnson, a pro on the tour sponsored by Buy.com, who has agreed to place Hastings Hardware's name and logo on his golf bag.
"It really looks good on TV," Hastings quipped.
Copyright Lebhar-Friedman, Inc. Apr 16, 2001