Harry & David Holdings (HDH) wants customers to enjoy the fruits -- and flowers -- of its labors. Its Harry and David Direct Marketing catalogs and e-commerce unit offers gift baskets filled with gourmet foods, most notably its Royal Riviera pears, Moose Munch popcorn snacks, and Tower of Treats gifts. It also runs the Fruit-of-the-Month Club. Harry and David Stores sell fruits, flowers, gourmet specialties, and wine through about 70 locations in more than 35 states. The company's products are sold under its namesake Harry & David, Wolferman's, and Cushman brands. HDH emerged from six months in Chapter 11 bankruptcy protection in September 2011 after the court approved its reorganization plan in August.
The tough economy has taken a toll on HDH as both businesses and consumers reeled in gift spending and turned to lower-priced gift suppliers (including big-box retailers and online merchants). In its March bankruptcy filing, the company listed $304 million in assets and $361 million in liabilities; it owes Wells Fargo, its largest creditor, nearly $200 million. HDH's overall sales have declined by about 20% between fiscal 2008 (ends June) and fiscal 2010. Compounding the situation, the company had a disappointing holiday season in 2010, during which sales for the quarter ended December 25th declined by 2% compared to a year earlier. (The holiday season is a critical time for many retailers, HDH included, because it is often the only quarter to generate positive cash flow.) In addition, HDH lost money in both fiscal 2009 and 2010. The company decided that filing for Chapter 11 puts it in the best position to strengthen its business operations and its balance sheet.
Before heading to bankruptcy court, HDH shuttered more than 50 stores and laid off about 100 employees. It also installed new leadership. In early 2011 Kay Hong took over as interim CEO and chief restructuring officer. Hong, from professional services firm Alvarez & Marsal, has headed up similar reorganizations for Spiegel, London Fog, Movie Gallery, and Eddie Bauer. She replaced chief executive Steven Heyer, who retained his role as chairman. Heyer was named chairman and CEO in early 2010, succeeding Bill Williams, who left the firm. Previously, Heyer served as CEO of Starwood Hotels & Resorts Worldwide and president and COO of Coca-Cola.
Launched in 2001, HDH's wholesale business supplies products, such as Moose Munch popcorn and other snacks, to retail clubs, department stores, grocery retailers, and other mass merchants. The wholesale channel helps to boost the company's sales during the non-holiday selling season. Indeed, more than 60% of the company's sales are made between October and December.
Harry & David Direct Marketing takes orders at two year-round call centers and a third seasonal call center. As the popularity of online shopping increases, HDH is mailing far fewer catalogs than in the past. Indeed, in fiscal 2010 the company mailed about 67 million Harry and David, Wolferman's and Cushman's catalogs (a decrease of about 35% over the prior fiscal year). About 60% of all direct marketing orders were placed over the Internet in fiscal 2010, up from 52% in fiscal 2007.
HDH owns about 3,400 acres of land in Oregon where it grows it pears and operates a 54,000-square-foot bakery, confectionery and chocolate plant. The company grows or makes about 85% of its products.
New York investment firm Wasserstein Partners and its affiliates control two-thirds of HDH's shares. Highfields Capital Management, a privately owned hedge fund sponsor, and current and former members of HDH management own the rest. Wasserstein Partners bought HDH (formerly known as Bear Creek Corp.) in 2004 along with Highfields Capital Management for $253 million.