Breaking News: A New Day at LESCO

The reality is that landscape contractors think more highly of LESCO than the stock market does, and that cost Bill Foley his job as the company’s chairman and CEO in early April. Foley’s plan for LESCO was for the company to assume a dominant national position in the green industry by building distribution locations that would have everything lawn care and landscape professionals need to do business.

Today, LESCO has 227 such service centers and more than $500 million in annual sales, but growth and profitability slid annually since 1998, dragging the stock down from $25 a share in late 1997 to a low point of about $6 last December. So the LESCO board accepted Foley’s resignation and replaced him with Michael DiMino, who was hired as president and chief operating officer in December.

“As everyone knows, our company’s financial performance and stock performance have not been acceptable over last couple of years,” acknowledged Marty Erbaugh, the former Barefoot Grass and Davey Tree employee who took replaced Foley as chairman of the board. “Michael has been a quick study and quickly learned the business. The board was particularly impressed with Michael’s ideas relative to organic sales growth and expense and capital disciplines.”

DiMino has some clear thoughts on how LESCO can strengthen its business, and one of his goals is to improve customers’ experiences at LESCO. “When Jim FitzGibbon and Bob Burkhardt began the company, they focused on all of the transactions to make sure the customer had an excellent experience,” he observed. “We may have veered a little bit from that.

“When the customer wants to pay us for one of our products, we want to make that a wonderful experience,” he continued. “Right now, we can make that difficult in terms of getting the customer the inventory, using too much paperwork and so on. Those things needs to be modernized and brought up to a standard that’s second to none in this industry so the customer thinks it’s painful not to do business with LESCO.”

At the same time, DiMino has regularly talked about the need for more “financial discipline” atop the company since his promotion. “We had some financial issues that I think just simply relate to discipline,” he admitted. “We need to refresh our thinking, our strategic direction and our capital spending and overall expense control based on making sure the customer has an excellent experience with LESCO.”

Such discipline means taking a closer look at where LESCO’s products come from and whether or not the company continues its manufacturing efforts. “There are other ways to be profitably supplying the marketplace with fertilizer and equipment product lines without manufacturing,” DiMino observed. “The fertilizer side is profitable – it’s one of our meat-and-potatoes areas. On the equipment side, our joint venture [with MTD] could be more profitable, but the whole strategic decision on equipment is tough.”

In an exclusive interview with Lawn & Landscape, DiMino said it’s “safe to say” LESCO will enter into more distribution arrangements with current industry suppliers, similar to the deal it announced last year with Kawasaki. “We’ll try to find people that really want to partner with us and let them have that category so they aren’t competing with other people in our own shop,” he explained, adding that the relationship with MTD to produce MTD Pro mowers will continue.

DiMino also related that he sees the potential for adding as many as 90 stores in the future, but the immediate focus will be on doubling same-store sales growth and developing regional “super stores” with large warehouse capacity to improve the company’s inventory management. “Those hubs don’t exist today, but they will be a large store and they’ll have warehouse capacity to supply the other stores in the area,” he explained, adding that this plan is driven by LESCO’s need to compete better against local or regional distributors. “Local delivery is something that we trip over right now, but this will help that.” – Bob West

The author is Editor of Lawn & Landscape magazine and can be reached at bwest@gie.net.