Full speed ahead at Orchard Supply Hardware

Orchard Supply Hardware is still marching toward its expansion goal of 100 stores and $1 billion in sales by 2017. And the San Jose, California-based retailer with deep Golden State roots has learned a thing or two during its journey, according to president Bob Tellier.

The 76-store chain is actively upgrading its fleet into a shopper-friendly "neighborhood format" while finding a comfortable home in various urban locations.

In the North Beach neighborhood of San Francisco, Orchard Supply transplanted its 35,000-sq.-ft. store format that -- with the help of a catwalk joining two separate buildings -- fits into the neighborhood with a full assortment and limited architectural disruption.

"We're not leveling city blocks to do it; we're doing creative work," Tellier said.

That opening followed a new store in Portland, Oregon, built in a former bowling alley, and using remnants from the lanes as store decor that preserves the history of the neighborhood. The company also expanded in La Brea neighborhood of Los Angeles.

"We've proven now in three different cities up and down the West Coast that we have a vibrant urban format," he said.

The company is eyeing expansion in other areas -- including Tracy, Stockton and Santa Maria. Tellier says the company will finish the fiscal year with 80 locations. "After that we're looking to open about 20 to 25 brand new locations, and we'll hit our 100 mark on schedule."

Meanwhile, 10 stores will be celebrating grand re-openings -- conversions to the new, modern Orchard Supply Hardware neighborhood format. The event will be celebrated and promoted, not just at the new-look stores, but across the chain. "I always felt that celebrating a single grand opening was leaving out the other 75 stores," Tellier said. "This time, every store is going to participate. And we're getting the message out that this growth at Orchard Supply is real."

The growth is real, even as the California chain faces the challenge of California drought, mixed with the coming reality of El Nino-influenced rains. The retailer's three pillars of business are the backyard, paint and home repair. And when the state announced a 30% mandatory reduction in water use back on April 1, the retailer knew it would take a hit on its backyard business. It did. And so did other home improvement retailers.

"Our mix is heavily weighted to the backyard," Tellier said. "The drought did affect our business, and affected the business of anyone that sold fertilizer, weed killers and grass seed."

The silver lining for the company, he said, is that customers are increasingly aware of Orchard Supply Hardware as a resource for weather-related projects. The stores provided drought seminars for communities across the state, and it will be doing more on the topic of the coming rains, as well as providing buckets, tarps, emergency goods and other products to survive El Nino.

"We've seen this coming for a long time," Tellier said.

Orchard Supply Hardware is a division of Mooresville, North Carolina-based Lowe's. In May, the company accepted the HBSDealer 2015 Retailer of the Year award during the National Hardware Show in Las Vegas.