National Lumber Retains Banker to Help Raise Funds

National Lumber & Supply Inc., the struggling home-improvement retailer, said Friday that it has retained Wedbush Morgan Securities of Los Angeles to help raise money for a continuing restructuring program.

National Lumber President Melvin C. Jaffee declined comment on whether a sale of all or part of the Fountain Valley-based firm was being contemplated, saying he was “waiting for advice” from the investment banker on how to raise “millions” in new funds.

Jaffe also said the company will close its Santa Ana warehouse next week and that it is entering the market for upscale kitchen, window and door products as part of a revamping aimed at bringing the company back to profitability by the middle of the year.

The company, a pioneer of the do-it-yourself hardware store, has suffered declining fortunes since the mid-’80s. For the three quarters ended Oct. 31, it reported a loss of $4.4 million. The company lost $4.6 million a year ago. It has not yet reported year-end figures for fiscal 1990.

Industry analysts have attributed National Lumber’s problems to a failure to respond to the competitive challenge posed by the proliferation of hardware “superstores” such as Home Depot. Jaffee personally has been criticized for not delegating more authority and not adapting to changing market conditions.

Jaffee said the 112,000-square-foot Santa Ana warehouse could be closed because the company has a new inventory system that will allow it to reduce the amount of merchandise in stock while allowing quicker delivery of products. Inventories will now be managed within the 21 individual stores, which have been grouped into four districts.

Closing the warehouse will save the company $250,000 per month, Jaffee said, and more efficient inventory management will result in further savings. The 56 warehouse employees have been placed in other jobs with the company.

National Lumber has begun renovating its stores to accommodate the new displays for the upscale kitchens, windows and doors, Jaffee said. In addition, the company will for the first time be offering in-home sales and installation of those products and also of complete custom kitchens.

Jaffe said kitchens, windows and doors now account for just 2% of sales but that the new upscale-product strategy could raise that to 10% or 15%. Renovation for all stores is scheduled to be completed by the end of April.

There are no plans for other major changes in National Lumber’s product mix or pricing strategy, Jaffe said.

The company has, however, implemented other cost-cutting measures, including a $1-million reduction in advertising expenditures and a $1.2-million cut in payroll costs resulting from a new “flex-plan” staffing system. Jaffee said there have been no layoffs among the company’s 1,300-member staff and that none are contemplated.

Last week, the company appointed Frank Stephen as the company’s chief financial officer, succeeding Jim Carnavale, who will remain as a consultant to the firm. Bill Takacs has been named vice president and chief of operations.

The company is also increasing the amount of training given store managers and assistant managers. In addition, to enhance supervision and customer contact, it is establishing separate areas, each with its own assistant manager, in the stores.

Jaffee said he expects the company to be profitable again, after six consecutive quarters of losses, by the fiscal 1991 second quarter ended July 31.

The company’s stock closed at $1.25 Friday, up 25 cents in trading on the over-the-counter national market system.

National Lumber was founded by Sol Jaffee in 1942. Melvin Jaffee, who now owns 50% of the stock, was credited with spearheading a successful expansion beginning in the 1960s.