Sears to buy 60 California hardware stores

HOFFMAN ESTATES, ILL. — HOFFMAN ESTATES, Ill. -- Sears, Roebuck & Co. said yesterday that it will buy Orchard Supply Hardware Stores Corp. for $415 million in cash and assumed debt to help expand its fast-growing chain of hardware stores.

Orchard Supply's 60 stores in California will help Sears carve a niche between Home Depot Inc.'s cavernous stores and mom-and-pop shops, analysts said.


The 115 Sears hardware stores and Orchard Supply focus on homeowners needing small repairs. The warehouse chains aim at complex jobs such as renovations.

The purchase, Sears' largest in at least five years, is part of Chairman Arthur Martinez's effort to shift goods such as tools and furniture into specialized chains from its department stores. That's created new avenues for growth.


"Orchard is right in the center of the target for us," said Martinez. "They have an identical customer and an identical strategy."

Shares in San Jose, Calif.-based Orchard yesterday closed up $5 -- 16.8 percent -- at $34.75 on trading of more than 3 million shares, 76 times its daily average.

Shares in the 19th-largest U.S. home-improvement retailer have more than doubled during the past year.

Sears shares rose 25 cents to 45.675 yesterday.

Sears will pay $35 a share in cash, or about $308 million, in the deal, and will assume Orchard Supply's debt of $107 million.

Sears said it plans to keep the Orchard Supply name. It will also sell its well-known Craftsman line of tools and DieHard batteries and other products at Orchard Supply stores.

Strong service and convenient supermarket-like locations near neighborhoods have helped Orchard Supply compete successfully with bigger warehouse-style chains.

About 75 percent of its stores are in markets with Home Depot and Waban's Inc.'s HomeBase stores.


Orchard Supply said its fiscal second-quarter earnings rose 5 percent while sales jumped 11 percent to $161.9 million. Some analysts had been looking for Orchard's earnings to grow as much as 32 percent annually over the next few years.

Pub Date: 8/16/96