Strouds Looks at OC for Stores, Possible HQ
By JENNIFER BELLANTONIO
The new owners of Industry-based Strouds Inc. say they hope to revive the ailing bed and bath retailer with plans that include opening up to three new stores and possibly relocating its headquarters to Orange County.
Strouds, which operates 50 stores, is scouting locations in Orange and San Diego for possible new stores sites. The company also is hoping to consolidate its corporate operations here or elsewhere in Los Angeles, according to Walter Cruttenden, Strouds’ chairman and majority shareholder.
“Hopefully in a month we can have a decision made,” he said.
The retailer currently has a 40,000-square-foot office, 100,000-square-foot distribution center and 50,000-square-foot Internet fulfillment center in the city of Industry.
Cruttenden leads Strouds Acquisition Corp., which bought the retailer out of bankruptcy last spring for $39.5 million. He’s also head of Cruttenden Partners LLC, a private investment firm in Newport Beach, and started what now is Newport Beach-based Roth Capital Partners LLC.
Cruttenden said he was attracted to Strouds, which had been trying to reorganize, because it had built a solid business selling bed and bath products to mostly affluent customers.
“The thing that really swayed me was my wife and all her friends shop there,” he said. “They know what is happening in the bed and bath space.”
As part of the deal, Strouds, which ran into credit trouble, went from public to private and closed 20 unprofitable stores, leaving the new owners with 50 stores spread mainly throughout California, including three in OC.
Annual sales are estimated at $160 million to $170 million, down from $230 million when Strouds operated 70 stores.
The bankruptcy proceedings also expunged the company from more than $25 million in debt, Cruttenden said. Strouds emerged from bankruptcy in May and now is profitable, he said.
“It’s a painful process for the old shareholders, but for the buyers it’s a way to end up with a clean streamlined organization,” Cruttenden said.
Still, Cruttenden and the new owners have their work cut out for them.
The first order of business: putting new management in place.
“We got rid of the fat cats,” Cruttenden said.
Several existing employees, who invested in the company, were promoted to executive status. Among them are Robert Valone, former merchandise manager, who now is president, and Chief Financial Officer Gary Van Wagner, who added the title of chief operating officer.
Strouds has spruced up stores, put employee training programs in place and refocused on bed and bath products.
Cruttenden said after founder Bill Stroud became ill and left the company, the old management team took the store in too many directions, including adding jewelry to the merchandise mix, expanding into the Midwest and developing “superstore” concepts. Those have closed.
“We had trouble when we started doing stores that were too big,” Cruttenden said. “Your customers want you to be known for something and be darn good at it. We’re sticking to our knitting.”
Plus, Strouds saw its business being devoured by competitors such as Union, N.J.-based Bed Bath & Beyond Inc., which sells home products, and Clifton, N.J.-based Linens ‘n Things Inc., which sells home textiles, housewares and home accessories
Now Strouds is hoping to ride on its rivals’ coattails, as both companies have seen their stock prices and business rise following Sept. 11. Strouds also reported that business is up 5% to 8% since mid-September.
“We were trying to figure out what the heck’s going on,” Cruttenden said.
One theory, according to industry observers, is that people are spending more on their homes as opposed to flying.
“There is a renewed interest in appreciating what you have and enjoying life,” said Tony Cherbak, a retail analyst in the consumer products group at Deloitte & Touche LLP’s Costa Mesa office. “People have been spending more money on their homes as opposed to taking trips.”
Cruttenden said the trend won’t last forever.
“If you look back historically, (sales) tend to move with the economy,” he said. “If the economy is in pretty good shape, we’ll be in pretty good shape.”
Instead, Strouds is concentrating on carrying the right product mix, making it easily available to customers online, in stores and catalogs. It is also monitoring what sells,things it got dinged on in the past.
Cruttenden said the old owners had invested in sophisticated software but hadn’t fully implemented it.
“When you’re carrying nearly $100 million in inventory through your 50 stores, you really have to watch it and make sure it’s turning, and make sure we have things that customers really want,” he said. “We’ve now been able to utilize a lot more of it.”
