Bankruptcy news comes at a tough time for those in the nursery industry, where sales, profits are lagging.
While the nation’s eyes were turned to the fiscal turmoil on Wall Street last month, the recent bankruptcy of one of Oregon’s largest nurseries has sown the seeds of worry among Washington County growers.
Hines Nurseries filed under Chapter 11 with the U.S. Bankruptcy Court in Delaware on Aug. 20. Hines officials did not return phone calls seeking comment, but released a statement saying that although the company will continue to pay its employees and operate its business throughout the court proceedings, its assets will be sold to Texas-based Black Diamond Capital Management, a majority stakeholder in the company.
That news has some local nursery operates worried that Hines’ creditors will flood the market with cheap plants, driving down prices when sales are already in the tank.
“I think it’s a sign of things to come,” said Brian Bradshaw, owner of Bradshaw Nursery, which grows specialty trees near Forest Grove, Ore. “If sales are falling off and (Hines has) more expenses than they can continue to pay, it’s likely there are other nurseries in similar situations and may see the same fate.”
Hines’ Forest Grove operations are spread across nearly 1,200 acres west of town, where it grows deciduous and flowering shrubs, conifers and perennials on property along Stringtown and Ritchey roads.
The Oregon business is part of a larger holding company that also owns nurseries in California, Arizona and Texas. Hines Horticulture, Inc. earned more than $215 million last year, selling container plants to retailers across the U.S., including Wal-Mart, Home Depot and Lowe’s, according to court documents.
The direct effects of the bankruptcy on the county’s nurseries, which sell about 75 percent of their plants out of state, will be relatively small, however, said Elizabeth Peters, a spokeswoman for the Oregon Association of Nurseries.
“Nurseries who had sold product to Hines were concerned about getting paid, but that wasn’t a big number for any individual nursery,” she said. “There was plenty of warning that this was coming and our nurserymen have been prepared for this kind of thing.”
More worrisome are the larger issues the nurseries now face. A struggling housing market has reduced the need for landscaping plants and rising labor and fuel costs have squeezed profit margins.
“Oregon used to be one of the less-expensive states to do nursery business in,” said Bob Terry, president of Fisher Farms Nursery in Gaston and past president of the state nursery association. “Between raw material and our labor, we are no longer competitive as a state across the country, and it’s hurting us badly.”
The effects of the slump are particularly acute in Washington County, which ranks third among Oregon counties for nursery crop production, with more than $197 million in gross sales last year and 7,000 acres of farmland devoted to nurseries and greenhouses, according to the Oregon State University Extension Economic Information Office.
Sales of container plants, the county’s top crop, saw a meteoric rise over the last few years, contributing to a 10-percent increase in sales in the nursery industry statewide in 2006. But container plants, used mostly for home landscaping, have sold poorly this year with the national decline in the housing market.
Developers aren’t building homes, which means less landscaping. And grocery shoppers have less change left over for flowers and plants.
Lagging sales of those same container plants are now contributing to the industry’s slower growth, just 2 percent last year, according to an annual survey released by the Oregon field office of the National Agricultural Statistics Service last week.
With less demand for their products, nurseries are cutting back on production to reduce the likelihood of excess inventory. As a result, some nurseries have seen as much as a 50-percent drop in sales and have begun trimming staff, said Peters.
Bob Terry thinks Hines’ current woes are aggravated by internal factors. Prior to taking over Fisher Farms he was president of Oregon Garden Products in Hillsboro before Hines bought the nursery more than a decade ago and moved it to Forest Grove.
“I think their problem was more about their national management than it was the economy in general,” he said.
Still, the bankruptcy news came at a tough time for those in the industry.
“The bigger picture is more of a concern than one individual nursery having some difficulties,” said Richard Regan, a nursery horticulturist with the OSU Extension office. “It’s just a nervous time right now for everybody with all that’s going on.”