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Orchard Supply Hardware files for bankruptcy; fate of Lodi store unknown

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Posted: Monday, June 17, 2013 2:27 pm | Updated: 3:13 pm, Mon Jun 17, 2013.

The future of the Orchard Supply Hardware’s Lodi store is up in the air since the company filed for Chapter 11 bankruptcy.

Lowe’s has agreed to purchase 60 or more Orchard Supply stores, but the firm hasn’t decided which stores to keep open and which to close, according to spokeswomen Julie Yenichek from Lowe’s and Leigh Parrish from OSH.

Lowe’s announced plans on Monday to purchase the West Coast hardware chain for $205 million in cash. Lowe’s offer stands as the starting bid for an auction of the assets of Orchard Supply. Should no competitor outbid Lowe’s by at least $12 million, the Mooresville, N.C.-based company would acquire Orchard Supply.

Neither company has decided the Lodi store’s fate. Parrish said Orchard Supply will know more in about a month.

Lodi has a Lowe’s store at the northwest corner of Kettleman Lane and Lower Sacramento Road, while Orchard Supply Hardware is located at 360 S. Cherokee Lane.

Meanwhile, Yenichek said there is a chance that both Lodi stores may remain open because they serve different clienteles. Lowe’s is a big-box store that averages 113,000 square feet, three times as large as the typical OSH store, Yenichek said.

Orchard Supply is more of a neighborhood store that focuses on paint and supplies for the backyard, she said. Yenichek said that Lowe’s officials hope that the bankruptcy court process will be completed in 90 days.

“I know a lot of people like OSH,” said Pat Patrick, president and CEO of the Lodi Chamber of Commerce. “Orchard employees are knowledgeable — not that the others aren’t.”

Lowe’s Cos. Inc. CEO Robert Niblock says the company’s proposed acquisition of Orchard Supply Hardware Corp. would give the company a much-needed boost in the improving California market.

The smaller store size offers entry for Lowe’s into high-traffic California locations where real estate price and lack of space have limited the traditional big-box store, Niblock told the Charlotte Observer in an interview.

“Orchard is, in some ways, more convenient,” Patrick said. “It’s easier to get in and out of.”

Lowe’s said San José-based Orchard Supply would continue to operate as a stand-alone business.

Lowe’s, the nation’s second-largest home improvement retailer, operates 110 stores in California. Those stores have done well, Niblock said, but the chain needed a bigger California footprint to capitalize on the state’s housing recovery.

Lowe’s saw its sales drop in the first quarter, while sales rose at Atlanta-based Home Depot, its No. 1 rival. Niblock has said Home Depot’s edge in the California market, where it operates 232 stores, helped the company outperform Lowe’s this spring.

Lodi also has a Home Depot store in the Reynolds Ranch area of south Lodi, west of Highway 99 off Armstrong Road. It opened in April 2012.

The West Coast saw comparatively better weather this spring, and Home Depot’s position in California allowed it to reap the benefits, Niblock said.

David Strasser, an analyst for Janney Montgomery Scott LLC, said the deal to acquire Orchard Supply is a low-risk way for Lowe’s to broaden its footprint in California.

“This transaction is both a smart and modest capital investment to attack a critical real estate shortcoming that Lowe’s has relative to Home Depot,” he said in a research note.

Niblock said he sees signs of recovery in the housing market both nationally and in California. He said home values are heading in the right direction and that he’s noticed an increase in home construction.

“Homeowners are starting to feel better and taking on smaller projects again,” he said. “From a psychological standpoint, that’s a good sign.”

The McClatchy Tribune Information Service contributed to this report.

Contact reporter Ross Farrow at rossf@lodinews.com.

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