Orchard Supply swings to a loss in 2011

Orchard Supply Hardware

In the California company’s first full-year fiscal earnings report since separating from Sears, Orchard Supply posted a net loss of $14.5 million, compared to net income of $8.7 million in fiscal year 2010.

The company’s sales in 2011 were $660.5 million, roughly flat from the prior years. Same store sales declined 0.6% -- average ticket was up, but transaction volume was down.

CEO Mark Baker pointed to some of the major changes at the San Jose-based retailer: “During fiscal 2011, we initiated a turnaround strategy designed to restore growth and increase Orchard’s market share. As part of our strategy, we enhanced our organizational structure with key additions to the management team, we improved our in-stock inventory levels on core products while reducing overall inventory levels, and we strengthened the service and shopping environment in our stores.”

Net sales in the fourth quarter of fiscal 2011 were $141.6 million compared to $141.5 million in the same period last year. Comparable store sales increased 2.3% -- the second straight quarter of positive comps. Fourth quarter net loss was $7.2 million, compared to a net loss of $3.4 million in the fourth quarter of fiscal 2010.

Store improvements are a big part of the company’s 2012 plans. Orchard Supply is refurbishing about 35 stores with exterior signage and paint in Orchard’s new logo. It’s also providing direct access from the parking lot to the nursery and garden centers in about 15 locations. 

“At the same time, we’re implementing extensive product line reviews to upgrade our assortment, improve inventory levels and help drive gross margin,” said Baker. “Importantly, we are pleased with the early results of our new, productive store format, which we are rolling out this year. Our plans include the opening of up to three new stores and the remodeling of up to six existing Orchard locations during fiscal 2012.”

Baker added that the first quarter of 2012 has so far been softer than expected in seasonal and outdoor products. Still, the company expects positive comp-store sales in fiscal 2012, he said.


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