Back to basics: Hancock Fabrics focuses on merchandise mix in stores

Dennis Seid | Buy at photos.djournal.com The renovated store in Tupelo puts a focus back on the company's core business – fabric.

Dennis Seid | Buy at photos.djournal.com
The renovated store in Tupelo puts a focus back on the company’s core business – fabric.

By Dennis Seid

Daily Journal

BALDWYN – In a bid to boost sales and profit and reclaim its market share, Hancock Fabrics is focusing on its core business – fabrics.

“This is who we are; this is what built the company,” said Steve Morgan, who was named Hancock’s president and CEO in October 2011.

It’s not a case of the company abandoning the “crafts and more” segment of its business at all. Rather, it’s a move to determine what works best in a particular market.

The Baldwyn-based retailer has 266 stores in 37 states. But what might sell in Tupelo might not do as well in Toledo.

And the days of the 20,000-square-foot, everything-under-one-roof store format are going away.

Instead, Hancock Fabrics has embarked on reformatting its stores, in content and design. The company has two formats it is rolling out: a 6,400-square-foot model and a 9,200-square-foot model.

The smaller format is simply called a Hancock Fabrics store, carrying a full line of fabrics and related products. The larger format stores are called Hancock Fabrics, Crafts & More. They’ll carry all the smaller stores have, in addition to crafts and home decor.

It’s a change that won’t happen overnight, however. Hancock only has a handful of the new formats – and the project is capital-intensive.

But new locations will see one of the new formats. And as existing stores roll off their leases, they’ll be evaluated whether they’ll be refurbished where they are or be relocated.

Not every store will move. Some are in good locations and will stay where they are. But many need to move to higher-profile locations, another move that takes some investment.

“I’d like to do all the stores right now if I could,” Morgan said.

The mission for Morgan and his executive team is clear – Hancock Fabrics is getting back to basics and focusing on what the customer wants.

“Quite frankly, the company had gotten too comfortable with what it had been doing for years,” Morgan said.

In other words, there was no “fire in the belly” to change the dynamic of the company that was founded in 1957 by L.D. and Elaine Hancock in Tupelo.

The company had gotten stale even as competitors like Michaels, Hobby Lobby, A.C. Moore Arts and Crafts and Jo-Ann Fabric and Crafts moved ahead.

Hancock had grown through the years – much of it through acquisition – and nearly 500 stores in the early 2000s. The company moved into its spacious Baldwyn headquarters, with its 500,000-square-foot distribution center, in 2004.

But fortunes turned, and the company filed for Chapter 11 bankruptcy protection in 2007 under former CEO Jane Aggers. It slashed stores and employees. Hancock emerged out of bankruptcy a year later, but has posted an annual profit only once since.

Hancock couldn’t continue what it was doing, Morgan said. There had to be a better way.

No blank walls

As the former president of GameStop as well as EB Games, he oversaw the companies’ merger in 2005. Morgan also was an executive with May Department Stores and Federated Department Stores.

Morgan joined Hancock’s board of directors in 2010. He was named the interim president and CEO in October 2011 after the departure of Aggers. He was soon named to the post on a permanent basis.

Thomas Wells | Buy at photos.djournal.com In the distribution center, one area is used to separate and parcel out the fabrics that will go out to the company's 266 stores.

Thomas Wells | Buy at photos.djournal.com
In the distribution center, one area is used to separate and parcel out the fabrics that will go out to the company’s 266 stores.

With his strong retailing background, Morgan moved ahead with his plan to get Hancock back on course, to get back in the black.

A key strategy is introducing the new store formats, and the company’s flagship store in Tupelo was a good launching pad for the larger format design.

Located in the Tupelo Commons retail shopping center, the store once covered 30,000 square feet. It’s now less than half that size

“Even when it was full of people it felt empty because it was too big,” Morgan said.

Joe Finley, the company’s vice president of marketing described the Tupelo store as “more customer-friendly. … more intimate.”

The furniture that took up valuable space was eliminated, a move that has been implemented company-wide.

Merchandise is now stacked high on the walls, and more display space is given to products, which gives the impression that the store actually has more to sell than in the previous floor space.

That is exactly what the designers, marketing and merchandising experts at Hancock wanted. Working with the team that builds fixtures and displays in-house – which itself is virtually unheard of in the industry – the company has a fully stocked model store of each format inside its sprawling headquarters building.

“Every fixture has been redesigned for higher capacity,” Morgan said.

For example, a fixture that might have previously allowed six rows of merchandise to be displayed now has seven. Baseboards were lowered. Additional shelving was added. Displays were lengthened.

Everywhere customers look in the redesigned stores – no matter the size – they’ll see something for sale.

“I can’t sell blank walls,” Morgan said. “Some executives go into stores looking for dust and dirt; I go in looking for blank spaces where we can sell something.”

Taking a display tip from Bed Bath & Beyond, merchandise in Hancock Fabrics now covers floor to ceiling.

Signage has been a problem area, but new clearly marked signs over specific areas in the store help point customers in the right direction.

“It’s important that customers know where they’re going to get what they want,” Morgan said.

Financially, the company isn’t where it needs to be yet. Its third-quarter earnings report comes out Tuesday after the markets close.

But there have been signs of improvement. In the second quarter, announced in September, Hancock saw gross profits increase. For the first half of the year, it narrowed its loss compared to a year earlier. Also, operating income was positive, compared to a loss a year earlier.

It will take time to fix the merchandising and strategic missteps of the past, but Morgan said the course has been charted.

“We’re focused and we have a direction, we know what we want to do,” Morgan said. “Now it comes down to execution.”

dennis.seid@journalinc.com