Orchard Supply Hardware stores everywhere are closing for good by February, CEO says

Five things to know about Orchard Supply Hardware closing all of its stores

Orchard Supply Hardware is closing all of its stores, including three in the Sacramento area, two in Modesto, one in Turlock, one in Manteca, and one in Sonora.
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Orchard Supply Hardware is closing all of its stores, including three in the Sacramento area, two in Modesto, one in Turlock, one in Manteca, and one in Sonora.

All Orchard Supply Hardware stores in California and elsewhere will close by February, the company’s parent — home-improvement retail giant Lowe’s — announced Wednesday.

The move comes five years after Lowe’s bought most OSH stores out of bankruptcy following an ill-fated spinoff from the chain’s former owner, Sears Holdings Corp.

Orchard’s 4,000 employees learned of the permanent shutdown Tuesday, Jackie Hartzell, a spokeswoman for Lowe’s, told The San Jose Mercury News.

Store liquidations are set to begin Thursday.

There are a total of seven Orchard stores in the central San Joaquin Valley, including off of Blackstone Avenue in north Fresno, North Figarden Drive in northwest Fresno, Champlain Drive in northeast Fresno, Kings Canyon Road in southeast Fresno and off Shaw Avenue in Clovis.

There are three stores in the Sacramento area. There are two stores in Modesto, one in Turlock, one in Manteca, and one in Sonora.

The closures also comes amid big changes at Lowe’s that may have sparked a rethinking of OSH’s place within the larger firm.

Lowe’s named Marvin R. Ellison, the former top executive at J.C. Penney, as its president and chief executive effective last month. Ellison told investors in a conference call Wednesday that OSH, which operates stores much smaller than Lowe’s locations, was not running well. Even if it were performing better, he said OSH could never become a big part of the company’s overall business.

“It became clear to me we wanted to be focused on our core retail business,” Ellison said.

He added that even if Orchard were a much larger business, it would “have very small benefit to the shareholders.”

OSH last year posted sales of $600 million — less than 1 percent of Lowe’s overall sales of $68.6 billion, executives said.

OSH, founded in San Jose in 1931, started out as a co-op supplying fruit growers in the days when what’s now Silicon Valley was filled with orchards. It grew into a more general hardware store, one that in recent years catered to homeowners and do-it-yourselfers, setting it apart from contractor-focused big-box retailers Lowe’s and Home Depot.

OSH stores are smaller — about one-third the size of a typical Lowe’s — and known for hands-on customer service.

Sears acquired the chain in 1996 when the Chicago retail giant was looking to expand its share of the home-improvement market. In 2012, it spun off OSH as a separate business, but the newly independent company declared bankruptcy less than two years later, crushed by hundreds of millions of dollars of debt it was saddled with as part of the spin-off.

Lowe’s bought 72 OSH stores out of bankruptcy. The company’s CEO at the time said the deal was an opportunity to quickly expand operations in California, where executives believed Lowe’s needed more locations, and would give the company “the opportunity to participate more fully in California’s economic recovery.”

Ellison on Wednesday said there “were some strategic decisions made that, if they had to be done over, would be done differently.”

He said that Lowe’s will provide job placement services for OSH workers and that those employees will have priority when applying for positions at Lowe’s. He noted that 86 percent of OSH locations are within 10 miles of a Lowe’s. Shares of Lowe’s were up 7.64 percent in midday trading to $107.21.

The Los Angeles Times contributed to this report.

Stores that have been staples of the American shopping tradition for decades are closing in large numbers. Take a closer look at the reasons why it’s so hard for retailers to stay open.

Bryant-Jon Anteola: 559-441-6362, @Banteola_TheBee