Grossman's Inc. History

Address:

200 Union Street
Braintree, Massachusetts 02184-5761
U.S.A.

Telephone: (617) 848-0100
Fax: (617) 848-8173

Public Company
Incorporated: 1919
Employees: 5,000
Sales: $833 million
Stock Exchanges: New York
SICs: 5211 Lumber & Other Building Materials

Company History:

Grossman's Inc. is a leading retailer of building materials in the northeastern United States. In the early 1990s the company operated four chains of stores that provided a wide variety of home improvement supplies to customers throughout New England and surrounding states, as well as selected locations in the Midwest and West. Founded in Massachusetts before the turn of the century, Grossman's remained a family-owned firm through the 1960s. It then joined a larger conglomerate, which was subsequently taken over and driven into bankruptcy in the 1980s. Grossman's emerged from the bankruptcy with a semblance of its original business, a chain of lumber and construction supply stores, intact.

Grossman's was founded by Louis Grossman, who emigrated to the United States from Podeski, Russia, paying $17 to travel in steerage to Ellis Island. From New York, Grossman made his way to the Boston metropolitan area, where he first made a living as a peddler, subsisting on $1.50 per week for room and board. After saving enough to purchase a horse and wagon, Grossman became a traveling junk dealer, collecting and selling items on a route that ran between the Boston satellites of Quincy, to the south, and Walpole, to the north. He eventually added the imperfect products of a roofing firm to his line of items.

In 1900 Grossman brought his two oldest sons, Reuben and Jacob, aged 14 and 12, respectively, into his business. In recognition of their involvement, he renamed his business L. Grossman and Sons. He expanded his business, branching out into used furniture. In 1907 the Grossmans bought their first piece of property, acquiring an old monument manufacturing plant in Quincy. The sale of the materials left in the plant at auction netted the Grossmans their first significant profit.

Throughout the end of that decade, and into the first half of the next, the Grossmans gradually expanded their trade in building materials, which had begun with roofing seconds and been boosted by their purchase of the monument site. In 1915, as a result of this expansion, the company purchased a new supply yard. The Grossmans distributed building supplies from this site, although they continued with their junk business as well. Five years later the company bought another parcel of land in Quincy.

In 1922 the Grossmans entered a new business. In the wake of World War I, which had come to a close in 1918, the U.S. government had amassed a large stockpile of equipment that they sought to sell. The Grossmans first entered the war surplus market with a purchase of goods from the Hingham Naval Ammunition Depot. Later, the company purchased army camps, naval installations, and war plants. The Grossmans dismantled buildings and sold off everything salvageable.

In 1923 Sidney Grossman, the youngest of Louis Grossman's sons, joined the family firm. With his arrival, all four of the founder's sons had become involved in the business. By this time the company's first site was used only for storage. Its dwindling junk business was still in operation, but the Grossmans devoted the bulk of their attention to their large and thriving lumber and building materials operation.

Another major war surplus purchase of the 1920s was the Coddington Point section of the Newport Naval Training Station, in Rhode Island. This site became known as the "Deserted City," as the Grossmans sold off 75 different buildings and their contents.

In the midst of disassembling the Deserted City, the Grossmans changed their policy in salvaging such properties. The company decided to preserve and maintain buildings in future projects, rather than break them up for salvage. This was the practice the company followed in taking over the Simon Lake Torpedo Station in Bridgeport, Connecticut.

In 1927 L. Grossman and Son's purchased the wreck of a large five-masted schooner, the Nancy, that had run up on the beach at Nantasket. The company dismantled the boat on the spot and sold the ship's five great masts to a granite producer in the area. Louis Grossman retired the following year, and the company he had founded changed its name to L. Grossman Sons, Incorporated. His four sons took full control of the company, assuming various titles in accordance with their age; Reuben became president, Jacob served as vice-president, Joseph assumed the position of treasurer, and Sidney served as the secretary.

The following year Grossman's opened its first branch lumber yard in Billerica, Massachusetts. This expansion testified to the success of the company's retail concept, which extended the traditional lumber yard to include almost anything needed for home construction or repair. In this way, Grossman's set up a "one stop" store where contractors, carpenters, or home owners could buy "everything to build with, under one roof," as the company advertised. In addition, Grossman's offered generous credit arrangements for many of its customers, a policy that further promoted the company's growth.

With the collapse of the stock market in 1929 and the onset of the Great Depression, many of New England's industries were badly shaken. As companies failed, Grossman's took over their old buildings, maintaining them until new industrial tenants could be found. The company handled textile mills, foundries, chemical plants, shoe factories, furniture factories, and other derelict sites.

Grossman's continued to sell building materials and salvage abandoned properties throughout the 1930s. In 1938 an enormous hurricane struck New England, felling vast numbers of trees. The federal government purchased the timber in an effort to bail out devastated landowners, then contracted with Grossman's to turn the fallen trees into usable lumber. The company created the Eastern Pine Sales Corporation to handle this task. The new firm sold 800 million feet of lumber&mdash-ough to circle the earth six times--before the supply of storm-downed trees was exhausted.

In the following decade, Grossman's repeated its war surplus endeavors in the wake of World War II, only on a much larger scale. The company formed the Grossman Surplus Company in 1946 and purchased a one-hundred acre site in Braintree, Massachusetts, to store unused war supplies. The company took possession of the contents of dismantled army camps, naval bases, and shipyards. The vast array of goods stored at the site in Braintree soon attracted tourists as well as potential buyers.

Grossman's also profited from the explosion in demand for housing in the wake of the war. The company purchased surplus Quonset huts and army barracks and encouraged young couples to turn the structures into temporary homes. Grossman's sold them for no down payment and a monthly fee that was less than the usual rent on a space of the same size.

When a wider variety of building materials became available, Grossman's developed the "Build-It-Yourself" home. The company sold blueprints, instructions, and materials for building a house to customers who owned land. This program eventually grew into an entire Grossman Homes Division.

Grossman's expanded its core areas of business throughout the 1950s. In 1950 the company bought the 240 buildings of Passamaquoddy, an abandoned Seabee camp, which it attempted to restore to usefulness. In 1954 the company took over the abandoned mill property of the Goodall-Sanford textile mills in Sanford, Maine, and found new tenants for the space within a year, thus ensuring the town's economic stability. The following year, the company took over the facilities of the Bigelow-Sanford Carpet Company in Amsterdam, New York. Six years passed before Grossman's was able to lease all the space in the company's 40 buildings.

In 1958 Grossman's embarked on a new campaign to expand the market for home improvement supplies, coining the slogan, "Do It Yourself--Or We'll Do It For You." The company hoped to entice those novice homeowners who were uncomfortable with tools and projects to turn to Grossman's for assistance. For customers with greater proficiency, Grossman's marketed the "We Start It--You Finish It," concept, in which free plans, advice, and competent workmen helped homeowners upgrade their property. Throughout the post-war era, the company's enormous full-service lumberyard and hardware store operations consolidated their share of the building materials market. They drove many smaller hardware store operations across New England out of business.

In addition, Grossman's began to manufacture prefabricated component homes in a plant in Braintree, Massachusetts. The company also made office buildings, vacation cottages, garden houses, and garages. The various pieces of these structures were shipped up and down the east coast on flatbed trucks that bore the legend, "Here Comes Grossman's," the company's long-time logo.

In the 1960s Grossman's continued with its efforts to broaden the available market for its products. In 1962 the company inaugurated a pilot "cash and carry" home improvement store in Wallingford, Connecticut. Instead of a full-service lumberyard, this outlet offered low prices to customers who were able to serve themselves. The store carried only lumber, lumber products, building materials, and high volume plumbing, heating, and electrical supplies. Buyers brought their own cars and trucks to the railroad sidings where supplies were delivered, and loaded up the products they wanted themselves.

When the first test store proved successful, the company expanded the cash and carry concept throughout New England, opening stores in Springfield and Wellesley, Massachusetts; Woonsockey, Rhode Island; and other locations. By this time, a third generation of Grossmans had entered the family business. Six of Louis Grossman's grandsons--Nissie, Maurice ("Mike"), Bernard, Everett, John, and Morton--joined the company. The enterprise they ran operated throughout six northeastern states.

Grossman's remained a regional, family-owned business throughout the 1960s. By the end of the decade, the company operated 81 building materials stores in New England, New York, and Pennsylvania. In 1969, however, Grossman's was purchased by the Evans Products Company of Portland, Oregon, for $801,000 in cash and 572,000 shares of stock. Evans was a forest products company that had diversified into related fields of home building, household items, transportation, and retail building products (the division in which Grossman's operations were placed). Despite the new ownership, Grossman's management, made up primarily of Grossman family members, remained in place.

Grossman's experienced continued financial growth in the 1970s, despite the parent company's remote ownership. By 1980 the company's corporate parent had attracted the attention of corporate raider Victor Posner, who began to purchase stock in Evans through Sharon Steel, a company that he controlled. In March 1980 Sharon Steel purchased a 5.3 percent interest in Evans; by the beginning of 1982 he controlled 42 percent of the company's stock. In February 1982 Sharon and Evans tentatively agreed to merge. By this time, Maurice Grossman had become president of Evans' retail division, its biggest and most profitable unit.

Evans posted losses of $12 million in the first six months of 1982, and the company decided to sell its most profitable unit, the 340-store retail building products division, in order to raise funds. Grossman's, a unit of the retail building products division, tracked the efforts closely. By the end of the year the company was still seeking a buyer for these operations. In the meantime, its losses continued to mount. "We haven't had a buyer offer what we consider a fair price," an Evans spokesman told the Wall Street Journal.

In April 1983 the banks to which Evans owed money refused to allow the company to merge with Posner's Sharon Steel. Unable to sell Evans' retail products division, Posner, who took the title of chairman of Evans in June 1983, decided to raise money to reduce debt by spinning off the division as a public company. Following this announcement, Posner moved to solidify his control of Evans, installing family members and other close associates in key positions.

In January 1984 Posner himself took over as chief executive officer. He announced that the company's headquarters would be moved to a heavily guarded residential hotel where Posner lived in Miami in April 1984. Upon hearing this news, a number of Evans' upper level executives resigned their positions. In April 1984 four more directors of Evans, including Maurice Grossman, quit their jobs. These moves followed grim financial performances the previous two years. The company posted 1982 losses of $64.8 million and a 1983 deficit of $63.9 million. The plan to spin off the retail products division had fallen by the wayside as the company struggled for survival.

By March 11, 1985, that effort had largely failed. Evans filed for bankruptcy, but the company's creditors charged that Posner had stripped the company of cash. This move came after Posner rejected two offers for the retail buildings products division, one from outside his company and one from within, despite the fact that Evans was unable to win investment capital from banks to finance the profitable unit's further growth. After major vendors cut off shipments to the retail group because of uncertainty about Evans' financial condition, the company as a whole was forced into insolvency.

Throughout 1986 Evans struggled to emerge from bankruptcy. In July the company's creditors rejected a plan that would have enabled Posner to maintain some stake in the company. Finally, in November, a re-structured Evans emerged from bankruptcy. The company's lenders had dissolved the company and made Grossman's the umbrella company for all of Evans' retail properties. Maurice Grossman returned to take control of the company. Evans' bank lenders and vendor creditors were paid, in part, with Grossman's stock. The company was saddled with a heavy debt load, although this debt was partially offset by tax loss carry-forwards that promised to exempt it from taxes for years to come. With 7,800 employees, the new Grossman's included 273 retail outlets, including separate chains of building products stores in the Northeast, the mid-Atlantic region, the South, and northwestern California. The company also owned warehouse stores in the Pacific Southwest.

Grossman's first priority after its re-establishment as an independent company was to upgrade its stores, which had been allowed to languish while Evans was in its financial death throes. In 1987 Grossman's benefitted from a robust economy in the mid-Atlantic and Northeast regions, its primary stronghold. In July 1987 the company offered stock to the public. By 1988 the company had established a prototype store in Hanover, Massachusetts, for its $75 million remodeling plan, which included a much wider array of merchandise and features designed to attract female shoppers.

Despite success in remodeling stores and reducing its debt, Grossman's stock price remained low. In February 1989 the company announced that it might sell off all or part of its operations. Seven months later, Grossman's completed one part of this effort when it sold its 59 Moore's Division stores, located in the mid-Atlantic and South, to Harcros Lumber and Building Supplies, Inc. Stores in the Northwest and in the East were also sold or closed, and the proceeds from these transactions lessened the company's debt load. When the divestment was completed, the company had reduced its number of stores by more than 100, to 156. Most of the company's remaining outlets were located in the Northeast.

By 1990 Grossman's effort to refinance had attracted the interest of a Hawaii real estate investor. The investor acquired 4.7 percent of the company's shares and made an offer to acquire the rest. When this offer was rejected in April 1990, the stockholder launched an attempt to take over the company by replacing Grossman's corporate board. The Hawaiian investors charged that Grossman's had not taken sufficient steps to meet the challenge of nationwide hardware giant Home Depot, which was moving into the Northeast. They noted that Grossman's returns had faltered as the overall economy in the Northeast went into a tailspin. The effort to unseat Grossman's management failed, though, and the company undertook a study to determine how best to remain competitive.

In the first half of the 1990s, Grossman's moved to implement the new plan that resulted from that analysis. The company repositioned its eastern stores and expanded operations once again in the West. In 1993 the company announced that it would expand its Contractor's Warehouse concept to the Midwest. By the mid-1990s, Grossman's had further reduced its eastern operations and launched an international venture with a joint partner in Mexico as part of its effort to thrive in the coming years.

Grossman's Inc. History

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