Ernst Trying New Tactics To Reverse Free Fall Hardware Retailer Will Feature New Product Lines, Store Design

Ernst is fighting back. Facing intense competition and a general decline in home-improvement sales, the Seattle-based retailer is introducing new products and changing the look and product mix in its stores.

Company executives believe the changes will help differentiate them from similar stores and help to revive a lackluster market.

Some analysts agree.

“I think Ernst is on the right track,” Anne Brixner, director of marketing for The Retail Group in Seattle, said Thursday. “They have recognized that the environment has become more highly competitive than before and they have taken very aggressive moves to make changes to their product mix.

“The long-term future remains good.”

But investors have less confidence. The company’s stock has been trading below $4.00. Just seven months ago, the stock was trading at $14.75.

Kenneth Thomas, who follows Ernst for Red Chip Review in Portland, said Ernst is carrying “quite a bit of debt. It’s going to be a long pull.”

Just how sluggish the home-improvement market has become is reflected in figures for the fourth quarter ending Oct. 28, released Thursday by Ernst.

Although overall sales were up 13 percent, to $152.7 million, sales at stores open more than one year were down 7 percent. Comparable-store sales are regarded as a better indicator of a company’s performance because they exclude store openings and closings. Sales for the year were up 8.5 percent, at $562 million, but annual comparable-store sales were off 4.6 percent, Ernst said.

The figures cover only sales. Profit figures for the fourth quarter will be released later. In the third quarter, Ernst recorded earnings of $966,000, compared with $5.68 million the year before.

“Our entire industry has been hit really hard,” Jim Fox, director of marketing and advertising at Ernst, said. “Our comparable-store sales for the year are not that bad if you take a hard look relative to the industry.

Ernst is aiming to combat the trend by distinguishing itself from other home-improvement retailers.

It has taken several steps:

The company recently had “blow-out” sales. Brixner said Ernst eliminated products that were not the best sellers.

“That was a good idea,” she said.

New “homestyles departments” were opened Wednesday in all 94 Ernst stores.

They feature products not carried previously by Ernst, including furniture, accent lighting, office furniture, specialty appliances, rugs, home storage and decor.

The restructuring moves Ernst away from the styles of Home Depot, which offers cheap prices, or Eagle Hardware & Garden, which seems to have one of everything, Thomas said.

“These stores offer heavy-duty competition,” Thomas said. As a result, Ernst is trying to restructure its inventories more toward the soft focus - “away from the lumber, the tools, that type of thing.”

The homestyle department is a logical extension of what Ernst offers, Fox said.

Ernst has adopted a “shop from the door” format, which makes it easier to find what you want once you enter the store, Brixner said. New signs make it easier to find products.