Tight School Supplies Market Hits Old Company Hard
J.L. Hammett Closes 52 Stores Nationwide
Few customers strolled through Hammett’s Learning World on a recent frosty weekend morning. The school supplies store, which sits in a modest strip mall here between a cosmetics shop and a dentist’s office, sported blue and yellow signs visible from the road.
The signs read: “Only 8 Days Until We Close,” and “60 Percent Off Our Lowest Price.” Inside, most of the store’s shelves were empty. But customers could still buy navy-blue finger paint ($1.20), 16-ounce bottles of Elmer’s Glue ($1.12), and dusty packages of chalk (28 cents a box).
This store in suburban Washington is one of 52 across the country that planned to shut their doors permanently last week. They were owned by the Braintree, Mass.-based J.L. Hammett Co., the nation’s oldest retailer of school supplies.
The company, founded in 1863 by the man who invented the blackboard eraser, announced in early January that it would close its brick-and-mortar operations because of lower-than-expected revenues. Hammett will continue selling merchandise from its Web site.
Hammett’s shutdown of its stores is the latest development in a tough school supplies market that keeps shrinking and consolidating, analysts and other experts say.
A still-uncertain national economy, tight state and district budgets, and reductions in dollars spent directly by teachers on supplies can mean the difference between profitability and insolvency for retail companies such as Hammett, said Tim Holt, the president and chief executive officer of the National School Supply and Equipment Association. His group, based in Silver Spring, Md., represents companies that sell goods to schools and educators.
“The economy, more than anything, caught up with them,” he said of Hammett. “In a school market where the margins are so tight, it doesn’t take much of a shift to really hurt any kind of distributor in this business.”
J.L. Hammett’s president, Richmond Y. Holden Jr., the great-grandson of one of the investors who bought the company in 1895, declined to comment on the closing of the stores.
Yet just five years ago, Hammett’s future looked bright. While the privately held company faced strong competition from Greenville, Wis.-based School Specialty Inc. and other school product suppliers, Hammett’s gamble on its e-commerce site was starting to pay off. ("School Supply Company Still Chalking Up Success," May 17, 2000.)
Web-based orders had garnered 10 percent of the company’s sales, and Mr. Holden said at the time that he hoped the Internet would power up to 40 percent of company sales within two years.
In addition, Hammett partnered with child-friendly Web sites such as Skoodles, Time For Kids, and the Discovery Channel.
But Hammett, like many other companies in a number of different industries, found that the promise of the Internet did not become reality. Schools were slow to buy products online, and Hammett’s Web partnerships were not as lucrative as expected. And at least one of its dot-com partners, Skoodles, went belly-up.
“Online was overhyped,” said Trace Urdan, a senior research analyst at Robert W. Baird & Co., a Milwaukee-based investment firm. “There were a lot of grand ideas on how the Internet would transform people’s purchasing decisions. It didn’t pan out that way.”
Partly as a consequence, in November 2000, Hammett sold its wholesale division, which included a 60-person national sales force, to its main rival, School Specialty, for $82 million. Over the years, the division had generated about $100 million annually in sales.
The sale helped solidify School Specialty as the No. 1 company in the multibillion-dollar school supply market, experts say.
School Specialty’s strength and future growth projections come in part through its diversification, according to analysts. Over the years, it has acquired companies that serve different education niches.
For instance, a year ago, it purchased Califone International Inc., a Chatsworth, Calif.-based developer of multimedia and audiovisual school equipment, for $26 million. And in May 2003, the company acquired Select Agendas for $17 million. The Quebec-based company produces student planners and calendars.
In fact, School Specialty has expanded so much beyond its traditional school supply inventory of pencils, paper, and other products that its specialty divisions account for more than 50 percent of annual revenues, according to the company’s 2004 annual report.
But what the company hasn’t done is go into the retail business, said David J. Vander Zanden, the president and chief executive officer of School Specialty. “We don’t sell to consumers,” he said. “That’s not our target.”
Over the past couple of years, Hammett’s financial outlook worsened. In May of 2004, it borrowed $10 million from Braintree, Mass.-based GMAC Commercial Finance to finance ongoing operations. It wasn’t enough.
The shuttering of Hammett’s Learning World has saddened many teachers and parents, said Jutta Stuart, the manager of the store here in Springfield.
“The teachers are all in mourning,” she said.
Adrienne Fischer is one of them. A 3rd grade teacher at Kerrydale Elementary School in nearby Prince William County, Va., she said the store fills a niche ignored by other retailers.
“Staples doesn’t have teacher things,” she said of the office-supply chain store. “My parents are teachers, so I know this store. It’s kind of sad it’s closing.”
Vol. 24, Issue 21, Page 8