Hobby Lobby Stores Inc.

7707 S.W. 44th Street
Oklahoma City, Oklahoma 73179
U.S.A.
Telephone: (405) 745-1100
Fax: (405) 745-1636
Web site: http://www.hobbylobby.com

Private Company
Incorporated: 1972
Employees: 16,000
Sales: $1.5 billion (2005 est.)
NAIC: 451120 Hobby, Toy and Game Stores

Hobby Lobby Stores Inc. is a chain of about 370 crafts superstores located in 28 states in the South and Midwest; it is the country's largest privately-owned crafts retailer and third overall behind Michaels and Jo-Ann's stores. The chain specializes in selling products and supplies for arts and crafts, hobbies, picture framing, jewelry making, fashion fabrics, florals, cards and party, baskets, wearable art, home accents, and holiday goods. Always a family-owned operation, Hobby Lobby openly operates strictly on Christian-based principles, and the stores are closed on Sundays to allow employees time for "family and worship." The company's employee turnover rate is considered very low. Hobby Lobby's headquarters is located in a 2.6 million-square-foot Oklahoma City manufacturing, distribution, and administrative complex. Other companies at this complex include Mardel Christian & Educational Supply and Crafts, Etc!, all affiliates of Hobby Lobby. Widely successful, Hobby Lobby saw its profits rise in the 1990s more than 1,000 percent. Going into the 21st century Hobby Lobby was opening at least one new store in the United States every month.

BEGINNINGS

Company founder David Green reportedly loved the retail business ever since he was a stock boy at the local five-and-dime in his hometown of Altus, Oklahoma. Green, who chronicled his life and principles in a book titled More Than a Hobby, was a preacher's kid, one of six in a household that relied on hand-me-downs and had little disposable income. In 1958, as a high school junior, Green worked some 40-plus hours a week at Mc-Clellan's five-and-dime. Not the best scholar by his own admission, Green found something he was good at and enjoyed: working in retail.

Green would later recall that he learned a lot under the supervision of the store manager, including strong work ethics and the importance of merchandise display. Soon he came to believe that he could manage a store himself. While at McClellan's, Green met a young clerk named Barbara, whom he would marry shortly after high school.

After high school and duty in the Air Force Reserve, Green returned to his job at McClellan's for a short time before taking a position as store manager at another retail outlet called TG&Y. At age 21 Green oversaw a 4,000-square-foot store and a work force of six. Over the next ten years, as his family grew, Green was moved up in the retail ranks while learning the dynamics of retail management through experience.

Green and another TG&Y manager, Larry Pico, had ambitions beyond store management. As Green recalled in More Than a Hobby, they "were sitting at the counter one day having coffee when we got to dreaming about what we might start on our own." Green noted that customers were always asking in the craft department for framed canvases they could paint on directly and then hang on the wall. So Pico and Green decided to try manufacturing these picture frames. They secured a bank loan for $600 to purchase supplies and machinery and set up shop in Pico's garage.

They called their new company Greco Products (a combination of the names Green and Pico). Barbara Green and two of the couple's sons helped out by assembling the frames at the kitchen table. The new company received several orders for their product after a salesman Green knew shopped the idea around his territory. Another bank loan helped Greco purchase more materials to fill an increasing number of orders from retailers in Oklahoma and in Texas.

Two years later, on August 3, 1972, Green opened his first store, in Oklahoma City. It was a 300-squarefoot arts and crafts center located near the state capitol. Green kept his job at TG&Y for another three years, however, until he was sure that they could make Hobby Lobby succeed.

The shop was a success, and Green soon moved locations to occupy a 1,000-square-foot house. Increasing demand for the frames meant an increased need for assemblers. Barbara Green approached the local Cerebral Palsy Center to contract with the clients there who were seeking gainful employment. Hobby Lobby provided them with training and supervision, and the workers assembled frames and then bagged and labeled them for ten cents apiece.

In 1973, Larry Pico left the business, selling his share of Greco to Green for $5,000. John Seward, a new partner, came aboard the following year to oversee the creative direction of the product lines and the general store operations. Also during this year, Green decided to commit to his Hobby Lobby store full-time. He left TG&Y, and the company opened a second store.

FINANCIAL WOES RESULT FROM RAPID EXPANSION

Sales were good, and in the early 1980s, Hobby Lobby began expanding its reach with new store openings. By 1986, the company had 12 stores in operation. It also began expanding the scope of their merchandise beyond the arts and crafts sector, adding such luxury goods as furniture, fine arts, expensive cookware, and luggage to their offerings. The move was intended to diversify interests and protect the company from fluctuations in different sectors. The move, however, nearly bankrupted the company. Green had seen luxury goods sales increase as the area's oil business boomed; when it went bust, the disposable income of many prosperous Oklahomans and Texans plunged. For fiscal 1985, Hobby Lobby had sales of $25 million but was $1 million in the red. In response, Green shuttered the non-core lines and returned the company's focus to hobby materials, vowing to "grow quality and not quantity," according to Discount Store News. The company was able to refinance with another bank, and disaster was avoided. Green regarded the events of the early 1980s as a learning experience provided by God, and he attributed the turnaround to his Christian faith.

Faith informed the opening of Green's Mardel Christian & Educational Supply as well. The enterprise was actually the domain of Green's son, Mart DeLyn Green (and the company name is contraction of his first two names). The concept (Christian books, music, and gifts) was well received in Oklahoma City and eventually became a chain with several locations.

COMPANY PERSPECTIVES

In order to effectively serve our owners, employees, and customers the Board of Directors is committed to: honoring the Lord in all we do by operating the company in a manner consistent with Biblical principles; offering our customers an exceptional selection and unbeatable value; serving our employees and their families by establishing a work environment and company policies that build character, strengthen individuals, and nurture families; providing a return on the owners' investment, sharing the Lord's blessings with our employees, and investing in our community. We believe that it is by God's grace and provision that Hobby Lobby has endured. He has been faithful in the past, we trust Him for our future.

At Hobby Lobby stores, the target market was, according to Green, a woman who wants to improve her home, a woman who appreciates a wide selection of interesting merchandise and enjoys the shopping experience. Moreover, the company sought to carry everything in home decorating and crafting, concluding that people wanted everything they needed to do a project under one roof. A wide selection of merchandise was therefore important. Hobby Lobby stores had entire departments devoted to crafts, art supplies, baskets, candles, cards and party items, fabrics, florals, frames, garden, hobbies (plastic models, trains, science projects), home accents, jewelry-making supplies, needlework, scrapbooking products, holiday items, small furniture, and wearable art. One of Hobby Lobby's most enduring product lines was its original forte, picture frames.

RETURN TO PROFITABILITY

In the early 1990s, Hobby Lobby consisted of some 30 stores doing over $2 million apiece in volume. Industry analysts began to wonder when the company would go public. Green, however, remained committed to his business being a family operation answering only to himself, his family, and their principles. He had no doubt that a stock offering would net a big profit, but insisted that more money was not as important to him as how he spent the profits the company was already realizing.

Green's Christian beliefs were increasingly reflected in the corporate culture. He averred that Hobby Lobby was not a secular business and that his views were not private. In 1997, the company began taking out full-page ads in local newspapers touting the true meaning of the Easter and Christmas holidays. Although Green admitted that these ads were not traditional for a retailer and were considered by some to be politically incorrect, he claimed that 99 percent of the feedback the store received was positive. Hobby Lobby profits funded a variety of Christian ministry projects, including the publication of Christian literature distributed worldwide.

In 1999 Hobby Lobby opened 30 new stores in ten new states. Each new store typically created about 50 jobs, and each Hobby Lobby Creative Center held between 45,000 and 65,000-square-feet of retail space. The Dallas Business Journal reported in August 1999 that the company's growth projections included operating 1,100 stores by 2003, a figure that figure never materialized.

In 2000, the United Steelworkers of America tried to organize the Hobby Lobby warehouse as a union shop. Their efforts to convince employees to join, however, failed, with 83 percent voting against becoming unionized.

In 2001, Green launched Hemispheres, an upscale home furnishings store concept. The stores did not feature furniture but the furnishing accessories used in decorating, such as lamps, rugs, mirrors, garden fountains. Merchandise was imported from many European and Asian countries, offering customers items not widely available in the United States. Besides the Oklahoma City store, Hemispheres outlets were established in Dallas and St. Louis.

Green continued to serve as CEO, while his son Steve was company president. Green also acted as vice-president of merchandising. While the company retained eight merchandise managers that oversaw 36 buyers, Green remained the home accents merchandise manager and often the actual buyer because he found it the most interesting portion of his work.

By the early part of the 21st century Hobby Lobby was opening a new store almost every two weeks, and the average Hobby Lobby store had about $1.2 million worth of inventory at any given time. Rather than constructing new retail buildings, the company tended to purchase abandoned buildings or to lease existing retail space. By so doing, the company is "able to quickly enter the market, much quicker than had they started from ground zero," Mickey Ashmore, president and CEO of United Commercial Realty, told the Dallas Business Journal. The practice could also occasionally take credit for revitalizing a shopping center in dire need of an anchor retail presence. Hobby Lobby affiliate H. L. Construction was responsible for turning a store site into a Hobby Lobby Creative Center, as well as for expanding/remodeling existing centers.

Citing bar code technology as complicated, expensive, and not especially accurate, Hobby Lobby eschewed scanner technology at their checkouts. Instead, store personnel counted goods every week; when less than half of a basic stock was available, more was ordered. An added benefit of this system, according to Green, was that employees became more knowledgeable about their product offerings and better prepared to field customer questions.

KEY DATES

1972:

David Green opens the first Hobby Lobby store in Oklahoma City.

1997:

Hobby Lobby begins featuring full-page Christian message ads during Christmas and Easter seasons.

1998:

Hobby Lobby announces that it plans to expand into ten new states by the following year.

2000:

United Steelworkers of America fail to unionize Hobby Lobby warehouse.

Hobby Lobby prided itself on its shopping atmosphere, striving for orderliness, spaciousness, a helpful staff, and a pleasant overall ambience right down to the lighting and background music. Moreover, prices at Hobby Lobby were extremely competitive as much of the stores' product mix was imported from East Asia.

PRINCIPAL AFFILIATES

H. L. Realty; Bearing Fruit Entertainment; Mardel Christian & Educational Supply; Hemispheres; Crafts, Etc!; Hong Kong Connection; Every Tribe Entertainment; Greco Frame & Supply; Worldwood.

PRINCIPAL COMPETITORS

Michaels Stores Inc.; Jo-Ann Stores Inc.; Wal-Mart Stores, Inc.; Hancock Fabrics, Inc.

FURTHER READING

Green, David, More Than a Hobby, Nashville, Tenn.: Thomson Nelson, 2005.

Hemmer, Andy, "Hobby Lobby to Open Seven Stores in Tri-State," Cincinnati Business Courier, November 15, 1999.

Howell, Debbie, "Hobby Lobby's Heavenly Ascension," Discount Store News, January 24, 2000.

Karman, John R. III, "Hobby Lobby to Open Feb. 1 in Old Home Quarters Site," Business First of Louisville, December 1, 2003.

Nannie, Philip, "Idled Hospital Slated for Religious Revival," Nashville Business Journal, June 9, 2003.

Sorter, Amy, "Companies Reap Benefits of Leasing Surplus Properties," Dallas Business Journal, May 4, 1998.

Tanner, Lisa, "Hobby Lobby, Michaels Plan Metroplex Growth," Dallas Business Journal, August 6, 1999, p. 5.

Zganjar, Leslie, "Hobby Lobby Taking Former Wal-Mart Slot," Birmingham Business Journal, January 13, 2003.