Moore-Handley, Inc. - Company Profile, Information, Business Description, History, Background Information on Moore-Handley, Inc.

3140 Pelham Parkway
P.O. Box 2607
Pelham, Alabama 35202

Company Perspectives:

We set as our company goal becoming the highest quality operator with the lowest operating costs of any full-service hardware-home center distributor in the country. While these goals may seem contradictory, we believed we could accomplish them by pulling together a team of dedicated, knowledgeable associates and equipping them with the latest in electronic communication products. ... We believe our company has become a leading-edge distributor in the hard goods industry.

History of Moore-Handley, Inc.

Moore-Handley, Inc. is the nation's third-largest independent building-materials wholesaler. It is a full-service distributor of a wide array of hardware and building supplies, including hand and power tools; paint and paint sundries; builders' hardware and materials; lumber, plumbing and electrical supplies; lawn and garden tools and equipment; fastening tools; heating and cooling equipment; locks and home security devices; fasteners, cordage, wire and chain, fencing, automotive and mobile home and recreational vehicle parts, and home housewares and appliances. It also offers special support services, including advertising and promotional campaign services and materials, retail-store installation and design services, and computerized inventory control systems. Under the name 'Hardware House,' it also provides a store identification program and additional promotional aid. Additionally, it offers similar programs under the 'Pro' trade name. The company maintains a state-of-the-art, 500,000 square foot distribution facility in Pelham, a suburb of Birmingham, Alabama, the city of its corporate headquarters. It also maintains 20,000-square-foot redistribution facilities in Ocala, Florida, and Winston-Salem, North Carolina. Its customers include retail home-improvement centers, hardware stores, building material dealers, combination stores, and a select number of mass merchandisers. Most of its current 1,500 customers are located in Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia and West Virginia. In 1999, none of its clients accounted for more than 1.6 percent of the company's net sales, indicating that its business is securely spread across its customer base. A fair portion of Moore-Handley is owned by its employees, including CEO William Riley, who owns about 20 percent of its stock.

1880s Origins and Development Through the 1960s

The Alabama-based business which would evolve as Moore-Handley, Inc. came into being in 1882 as Moore, Moore & Handley, named after its founders James D. Moore, Benjamin F. Moore, and W.A. Handley. James Moore had moved to Birmingham that year, though he and Handley had been business partners in an earlier venture, a rural country store in Randolph County, Alabama, where Moore, for several years a teacher, had helped found Roanoke Institute. He and his partners proved to be both shrewd and lucky, and the early record of the new company was unusual for 'its rapidly enhancing fortunes and daring enterprise.'

The company was created as a wholesale hardware business at the outset, but the good fortune of the partners initially came from real estate investments. In 1884, after already having moved twice, the company bought property for $15,000 from which they made a considerable profit. They built the Metropolitan Hotel on a portion of the land, rebuilt it after a fire, and then sold it for $175,000. Also, from rents and the sale of a portion of the property they garnered revenues great enough to capitalize their business at $100,000 when they incorporated it as the Moore & Handley Hardware Company in 1888. The company would move again in 1903, six years before Handley died. Just before his death in June 1909, the partners reincorporated the business with a capital of $500,000. Thereafter, Moore-Handley emerged as 'one of the great mercantile houses in the South.' Through the next several decades, Moore-Handley developed into a chain of hardware and building supply stores located throughout the southeastern part of the United States. It was also a distributor of industrial and electrical supplies and machine tools.

1968-80: New Parent Company Focuses on Homecrafter Division

In 1968, Union Camp Corporation, a major lumber producer and manufacturer of paper and corrugated board, purchased Moore-Handley for about $10 million. Its principal reason for acquiring the company was its interest in vertical integration. It planned to convert Moore-Handley's company-owned lumber yards into product outlets, thereby not only producing lumber but directly marketing it as well. Industry gurus at the time were touting the 'homecenter' concept, convinced that it would become to the 1970s and 1980s what the giant discount-store concept had been to the 1960s. The idea was to develop Moore-Handley's rural lumber yards into homecenters. Accordingly, Union Camp hired consultants and drew up plans for transforming Moore-Handley's lumber yards into Moore-Handley Homecrafter centers operating under a new Homecrafter Division. W.W. French III, whose family had guided the development of Moore-Handley for several decades, remained on as the company's president and CEO.

Union Camp elected to concentrate on the Homecrafter Division. It sold Moore-Handley's Electrical Division to Westinghouse and allowed its Steel and Coal Divisions, already performing poorly, to decline further. By the mid-1970s, over 60 percent of Moore-Handley's revenue was generated by the Homecrafter Division. In 1974, Moore-Handley was operating 42 stores, with each long-established store logging annual revenues of between $2.5 million and $3.5 million. At the time, about 65 percent of their sales were made to contractors and most of the remainder to weekend, do-it-yourself enthusiasts. Meanwhile, the Wholesale Division's customer base was dwindling as more and more mom-and-pop hardware operations were failing, unable to compete with much larger chain stores.

Although by 1980 the Moore-Handley Homecrafters outlets increased to 50 locations in six states and had annual sales between $125 million and $130 million, the division could not offset Moore-Handley's operating expenses. Union Camp's solution was to sell all the company's assets except the Homecrafters Division. Officially, the divestment was justified as part of Union Camp's renewed commitment to its core paper, packaging, and chemical business.

1981-90: Going Public and Refocusing on Wholesale

The remaining divisions and assets were bought by William Riley and a group of investors. Riley reorganized and reincorporated the company in 1981. He wanted to revamp Moore-Handley, returning to its earlier concept as a wholesale distributor of building supplies and tools to independent retailers. The new focus was on the distribution facility in the Pelham suburb of Birmingham.

In 1986, a year in which its revenues reached $85 million, Moore-Handley elected to go public. In that same year, the company sold the assets and businesses of its Industrial Supply and Machine Tool Divisions for about $2.06 million, and in the following year purchased certain assets and the primary inventory of the wholesale hardware division of Pleasant Hardware Company for $2.25 million in cash. Although in 1988 it reacquired Moore-Handley Machine Tool & Industrial, Inc. for about $170,000, it shortly sold it off again.

At the end of 1994, the directors of the company, who were also its principal owners, indicated that the growth path Moore-Handley had taken in the 1980s had become untenable and that in the late 1980s and early 1990s the company had taken steps to rectify the situation. Previously, Moore-Handley's policy had been to increase revenues by adding sales personnel and expanding its customer base without sufficient regard for quality. By 1986, the customer base had swelled to about 4,000. However, analyses later indicated that the company's operating costs more closely paralleled the size of its customer base than any other single factor. It acknowledged that its business customers faced stiffening competitive pressure from Home Depot and similar chains, forcing them to price their goods more competitively in order to survive. The result was that Moore-Handley began cutting its customer base down to size. It was already reduced to 2,400 customers by 1989, and over the next five years would be thinned down to 1,200. In the same period, its sales climbed to $136 million, up 46 percent.

1991 and Beyond: Modernization and Struggle for Profitability

However, between 1991 and 1994, the company's investment in automation, rather than saving money, actually increased its cost of doing business. First, in 1991, it installed a bar-code-driven sorting and routing conveyor for its central warehouse; and even though sales reached $123.6 million, the company had a net loss of $1 million.

In 1993 and 1994, the company followed with the installation of additional hand-carried bar-coding controls at select locations in the warehouse and in the delivery system. These were the initial steps needed to develop an efficient computerized warehouse management and delivery system, but the installations increased warehouse expenses to a unacceptable degree, despite the fact that their operation helped reduce errors, resulting in a higher degree of customer satisfaction and a lower percentage of returns or credit charge-backs. Sales were improving, resulting in net profits, though only marginally.

Furthermore, in the mid-1990s the company hit something of a slump. Sales stagnated and produced bottom-line losses. The first red-ink year was 1996, when Moore-Handley reported a net loss of $1.07 million, although the loss was partly explained by disruptions caused by a warehouse modernization project which drove the company's net income down by about $1.5 million. According to Riley, the changes were being made 'in an effort to make the company as low cost and high quality a distributor as possible.' The show piece in the changes was the addition to the 488,000-square-foot Birmingham warehouse and distribution facility of a 50,000-square-foot mezzanine strictly limited to individual-item picking. Stocked in accordance with the turnover rate of items sold in it, the new addition was designed to allow customers to pick out single items as quickly and efficiently as possible. However, Moore-Handley paid the bottom-line price during the mezzanine's construction; it disrupted operations and drove 1996 warehouse and delivery costs up by more than $2 million over the previous year.

During the last few years of the century's final decade, Moore-Handley struggled to regain the profitability lost in 1996. To turn its bottom line figures black again, the company invested substantially in warehouse retrofitting, employee training, and a renewed commitment to computerization. Among other things, in 1997, when revenues dropped off slightly from the previous year, the company entered into a marketing alliance with PPG Industries. Under the agreement, Moore-Handley would sell a full-line of DIY (do-it-yourself) products under exclusive Lucite WallCare and HouseCare names and promote the sale of other PPG products. It was also in 1997 that Emery H. White resigned as Moore-Handley's CEO and president. Michael Gaines, a former Grossman's Inc. executive who joined Moore-Handley earlier in the year, replaced him as president.

In 1998, the company discontinued issuing its printed catalog, thereafter relying solely on its electronic sales catalog, dubbed SalesHelper and first introduced in 1992. In 1999, it also added paint store and industrial-commercial clients, a diversification that increased its account base to about 1500 customers.

During the first year and a half of the turn-around efforts, the cost of the retrofitting, training, and installation of new computers and electronic communications kept the bottom line red, but after a net loss of $1.4 million in 1997, the company's performance began improving. Total revenue, which had flattened out between 1995 and 1997, rose significantly in 1998 and again in 1999, reaching $167.2 million that year, up almost 13 percent from the company's 1997 revenue of $145.7 million. In 1998, it eked out its first net profit since 1995, even though it still had to pay out $500,000 in construction costs carried forward from the 1996 revamping of its warehouse.

A major factor in the change was Moore-Handley's improved efficiency. For example, order-picking errors that had been averaging between four and five per 1,000 improved to less than one per 1,000 after the installation of a radio-frequency picking system. Plans also called for other improvements, including another modification of the company's SalesHelper tentatively called Sales Helper Lite. When on it went online in 2000, it allowed Moore-Handley's key customers to place orders directly from the company's warehouse. Riley believed that the company's CD-ROM catalogs would be of greater benefit to Moore-Handley's customers and ultimately preferable to e-commerce and online purchasing. Just how much the company's improved efficiency and its CD-ROM modus operandi would benefit its sales in the long run remained to be seen.

Principal Competitors: American Builders & Contractors Supply Co. Inc.; Builder Marts of America, Inc.; Cameron Ashley Building Products, Inc.; PrimeSource Building Products, Inc.


Additional Details

Further Reference

Allison, David, 'Big Hardware Distributor Cries Foul Play,' Atlanta Business Chronicle,' April 22, 1991, p. 8A.'A Formula That Differs from Home Centers,' Discount Merchandiser, August 1974, p. 33.Gonzalez, Jason, 'For Moore-Handley, Change Has a Price,' National Home Center News, November 24, 1997, p. 6.'Moore Handley Returns to Profitability after a Tough Three Years,' National Home Center News, April 3, 2000.'Moore-Handley to Offer Exclusive Line of Paint and to Distribute Company Catalogs on CD-ROM Only,' Do-It-Yourself Retailing, December 1997, p. 27.Toriello, Monica, 'Moore-Handley Ready to Fly after Weathering Storm,' National Home Center News, June 21, 1999.Washburn, Don, 'Moore-Handley Reports `96 Losses,' Home Improvement Market, April 1997, p. 24.

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