St. Louis-based Central Hardware was one of the first big-box home improvement chains. It peaked in 1993 at 39 stores in six states in the midwest, employing 3,700 people. It was once the 19th largest hardware retailer in the United States.
Central Hardware’s motto was “everything from scoop to nuts,” a play on the English idiom “soup to nuts,” which means beginning to end. Their inventory was over 40,000 SKUs, comparable to today’s home improvement stores. Its stores regularly exceeded 50,000 square feet. That’s about half the size of a typical home improvement store today, but it was large for the 1970s and 1980s. Traditional hardware stores ranged in size from 2,000 to 10,000 square feet. Its employees wore orange vests so customers knew who to ask for help.
Central Hardware’s history
Morris Cohen immigrated from Poland to St. Louis in 1903. He or his descendants ran the company for nearly 90 years. Retiring early became a family tradition.
The elder Cohen opened a tool repair and resale shop at 811 N. 6th Street and brought the rest of his family over as finances permitted. His five sons, Isidor, Meyer, Reuben, Julius, and Louis, pushed him to start selling new tools rather than used tools. By 1908, they were selling new tools.
In 1912, Cohen and his sons chartered Central Hardware, putting up $15,000 in capital. In 1926, Morris retired, moved to Israel to study religion, and turned the company over to his fourth son, Julius.
Julius Cohen pioneered the concept of allowing people to pick out their own merchandise, including plumbing supplies. Previously, it had been nearly impossible to buy plumbing equipment from anyone but a plumber. Central Hardware weathered the Depression by selling no-frills hardware to cash-strapped homeowners. During the Depression, he also built a vertically integrated supply chain, taking over Witte, a distribution company. Vertical integration is a hallmark of today’s big-box home centers.
Julius Cohen also experimented with other concepts familiar to big-box home improvement stores today. Cohen purchased a dilapidated stove factory complex. The vast expansive space allowed him to open an indoor lumberyard, so he opened the first indoor lumberyard in the country. In 1958, Julius turned the company over to his nephew Stanley, one of 14 cousins who wanted the job. One of the reasons he cited for stepping aside was the need to expand.
Julius Cohen died in 1970, aged 72.
The hardware and DIY business boomed in the postwar era. Stanley Cohen took advantage. He expanded Central Hardware from six stores to 38. He developed a model of expanding to large metro areas within 350 miles of a St. Louis-based distribution center. It worked for them.
In 1953, he installed supermarket-style checkouts in the stores, a novel concept at the time. With the indoor lumberyard, vertical integration, large inventory of hardware, and checkout lines, all of the elements of the modern home improvement center came together under Stanley Cohen’s leadership. At the time, Lowe’s was just a chain of conventional hardware stores in North Carolina and Home Depot was a quarter century from its founding.
In 1966, he sold the company to Interco, a St. Louis-based apparel and furniture conglomerate, for $16.7 million in stock. Interco did $3 billion a year in business at its peak. Originally a shoe company, Interco wanted to diversify. Interco ran Central Hardware as a subsidiary and retained eight members of the Cohen family as management. Becoming part of the Interco conglomerate provided the needed financial resources to continue expanding.
In 1989, Stanley Cohen received the Pioneer Recognition Award from the National Home Center Hall of Fame. He died in May 1991, aged 69.
In 1987, Jim Cohen succeeded his father Stanley in running the chain. National Home Center News estimated their sales at $270 million that year. He left in April 1992, approximately three years after Interco sold Central Hardware. Neil Marglous, another great grandson of Morris Cohen, succeeded him. Cohen collected $750,000 in severance.
Central Hardware commercials
I located two Central Hardware commercials on Youtube. These 30-second spots feature two versions of the company logo and the company jingle.
Here’s a Central Hardware commercial from 1990, advertising paint.
The prices were competitive. In 2017 dollars, the interior paint was $19.19 a gallon and exterior paint was $21.12 a gallon. That’s close to what the large chain stores charge today for a comparable interior paint. Their price on exterior paint was quite a bit better than what I can find today. Unfortunately, if you’d bought that paint in 1990, the paint’s warranty period outlasted the store.
Here’s a Central Hardware commercial advertising its 1986 Learn-to-Tinker show. It was a three-day event at St. Louis’ large downtown convention center.
Central Hardware found these events improved business by increasing its potential customer base. They did in-store workshops too, similar to how modern home improvement stores do.
It wasn’t just TV. Central Hardware also advertised heavily in newspapers, and ran a cross promotion with Luigi’s, which was then a popular pizza chain in St. Louis, offering dinner at Luigi’s with the purchase of a major appliance.
It seems like the chain did everything right. They had the inventory and store size necessary to succeed. Their prices were competitive. They had staff who didn’t run away from customers as the theme from Chariots of Fire played. So what happened to Central Hardware?
What happened to Central Hardware in the late 1980s and early 1990s is complicated. If you’ve ever seen the Julia Roberts/Richard Gere movie Pretty Woman, it’s a bit like that. In that movie, Richard Gere’s character says he makes his living by buying companies and breaking them apart. People really do make their living that way, and sometimes the consequences for the companies they break apart aren’t ideal. Central Hardware is a case story. It’s called corporate raiding. It’s the takeover of a company to sell off its assets piece by piece for a profit, and it was extremely common in the late 1980s.
In October 1988, the Rales Brothers of Washington attempted a hostile takeover of Interco at $70 per share. Interco held off the bid, but sold Central Hardware and one other subsidiary, Londontown Corporation, to raise needed funds.
In May 1989, the parent company of Chicago-based Handy Andy purchased Central Hardware from Interco for $245 million. Handy Andy was owned by a holding company owned in part by Salomon Brothers and by GIB Group, a Belgian conglomerate. Central Hardware ended up in a related holding company named Spirit Holding.
The decline under new ownership
Under its new ownership, Central Hardware struggled to compete and never recovered from the debt from the acquisition. It lost an estimated $10 million a year from 1989 to 1993. Handy Andy’s executives forced Jim Cohen out in 1992. Spirit Holding filed for Chapter 11 bankruptcy in 1993. Central Hardware and its distributor, Witte, soon followed.
Central Hardware closed 19 stores in 1993, reducing its footprint to the St. Louis, Columbus, and Memphis markets.
A-OK of Delaware, the parent company of Handy Andy, bought Central Hardware back out of bankruptcy later in 1993 for $79 million. This was an odd situation, as A-OK previously held a 45 percent share in Spirit Holding.
But by October 1995, Handy Andy was also bankrupt. The remaining Central Hardware stores closed by 1996. Central Hardware went out of business in 1996, but it was a long goodbye.
Why did Central Hardware fail?
Broadly speaking, companies like Central Hardware ultimately failed because the rules changed. There was a time when it wasn’t unusual for regional chains to succeed. It was even possible for two cities in the same state, 240 miles apart, to each have its own dominant home improvement chain. Kansas City had Payless Cashways. St. Louis had Central Hardware. Today this seems strange. It didn’t in 1982.
This situation existed partly due to regulation.
The Robinson-Patman Act of 1936 prohibited manufacturers from giving larger discounts to chain stores. The Miller-Tydings Act of 1937 permitted manufacturers to set a minimum price at which their goods could be sold. These two acts protected local retailers. An out of state giant could come in, but it couldn’t come in and buy market share just by undercutting the locals’ prices.
The Consumer Goods Pricing Act of 1975 overturned the Miller-Tydings Act of 1937, and led to the end of most “fair trade” laws. The Robinson-Patman Act didn’t go away, but in the 1980s the Justice Department and FTC stopped enforcing it.
A botched consolidation
I’ve seen analysis that blames Central Hardware’s demise on deregulation, specifically, those two acts. But that suggests it was a price war that did them in. The bigger issue was the indirect problem of consolidation. The deregulation made consolidation make more sense. Its competitors got bigger. Meanwhile, Central Hardware’s new owners flubbed their efforts at consolidation.
As Central Hardware was in its death throes, larger home improvement chains were moving in. First came Builder’s Square and Home Quarters. After them came Home Depot and Lowe’s.
Consolidation provided smaller regional chains like Central Hardware a better chance of survival. Consolidation made it harder for larger competitors undercut prices. So merging with someone else, not under duress, probably would have been good for the company. Any consolidation involving Central Hardware would have needed to happen with more cash and less financing, so the combined venture could have continued to expand. Such a tie-up might have had a chance. True Value Hardware is an example of a successful consolidation of this type. True Value is the result of three legacy chains merging over the years: True Value, Servistar, and Coast to Coast.
Maybe Handy Andy was the wrong partner. Maybe it was the wrong time. Or maybe it was both.
Then again, the book Surviving in Spite of Everything: A Postwar History of the Hardware Industry by Bob Vereen points out that the hardware/home improvement/DIY industry was more resilient against consolidation than other retail segments, such as pharmacies. Perhaps Central Hardware could have survived as a regional chain. Many similar companies, such as Payless Cashways, disappeared in the 1990s and early 2000s. But not all did.
The Rales brothers certainly accelerated Central Hardware’s fall. Perhaps it only sped the inevitable. But we’ll never know for certain.
The leveraged buyout model
Although I’ve never seen anyone call the Central Hardware deal a leveraged buyout, it resembles one. In this model, investors buy a company, then the company ends up with the debt used to buy the company. The new owners paid $248 million, and then Central Hardware ended up in a holding company with $190 million in debt.
In essence, in 1989, the chain ended up with $190 million in debt sprung on it, but with nothing tangible to show for it. None of this liability was actually producing any income. When a healthy enterprise takes on debt, two things are present. First, there’s a long term benefit that provides a means to repay the debt. Second, after repaying the debt, the enterprise has a new income stream. It’s similar to the situation that brought down K-B Toys, the old mall-based toy store chain.
Jim Cohen blames Central Hardware’s demise on the amount of debt involved. There seems to be something to that. When Spirit Holding filed for bankruptcy, it listed $249.2 million in liabilities. That was more than the purchase price. Losing $10 million a year meant the assets didn’t produce enough income to pay both operating expenses and service the debt.
The only way this model could have worked would have been if Central Hardware’s new association with Handy Andy had allowed it to reduce operating costs. If it did, it wasn’t enough.
Under different circumstances, Central Hardware could have been part of the wave of national home-improvement centers. Unfortunately that movement happened when it was least equipped to participate in it.
Central Hardware and the American Dream
The Cohen story is a good example of the American dream. A Polish Jew came over to the United States with some of his family to start a new life. He opened a small business with his sons. Then as money permitted, they brought over the rest of the family.
And for four generations, the business prospered and helped the community. In the 1930s, the Cohens helped St. Louisans save money and get through the Depression. Their warehouses full of strategic materials supported the war effort during World War II. Then in the 1950s, they supported the postwar housing boom. Each generation expanded Central Hardware. Then the wheels came off in the late 1980s.
But for a time, it worked well. It provided a source of pride for St. Louis, and employment for 3,700 people. Another St. Louis immigrant-founded business that boomed into an empire was Velvet Freeze. Unfortunately, it, too, faded away.
Central Hardware’s legacy
Today, Central Hardware is mostly a memory. One abandoned storefront still exists in Columbus, Ohio. Its building letters are still mostly intact after more than 20 years. In St. Louis, sometimes an old Central Hardware delivery trailer shows up in a random place, either abandoned or used for storage. The former 11 St. Louis locations were all demolished or redeveloped in the late 1990s.
Interco, the company who owned Central Hardware from 1966 to 1989, went bankrupt in 1990. At the time, it was the largest corporate bankruptcy in St. Louis history. It divested its apparel holdings in the early 1990s. Then it changed its name to Furniture Brands in 1996 to reflect its new focus. Furniture Brands went bankrupt again in 2013. A new company, Heritage Home Group, purchased most of its assets and relocated from St. Louis to North Carolina in 2014. Furniture Brands was a publicly traded company. In contrast, Heritage Home Group is private.
Jim Cohen bought a Sears franchise in 2012 and opened a store in the St. Louis suburb of Overland, getting himself back into the hardware business after 20 years. At the time he spoke of potentially opening more stores. But that didn’t materialize and the store closed in July 2017.
Perhaps the most enduring reminder is a shopping center at New Halls Ferry Road and I-270 in northern St. Louis County. Central City is its name. When it opened, the anchors were Central Hardware and a Kroger grocery store. Shop ‘n’ Save replaced Kroger, and Home Depot eventually replaced Central Hardware. But “Home Depot City” just doesn’t have the same ring to it, does it?