Tandycrafts, Inc.
Address:
1400 Everman Parkway
Fort Worth, Texas 76140
U.S.A.
Telephone: (817) 551-9600
Fax: (817) 551-9795
http://www.tandycrafts.com
Statistics:
Public Company
Incorporated: 1975
Employees: 2,800
Sales: $194.7 million (1999)
Stock Exchanges: New York
Ticker Symbol: TAC
NAIC: 315223 Men's & Boys' Cut and Sew Shirt Manufacturing; 323113 Commercial Screen Printing; 339999 All Other Miscellaneous Manufacturing; 421920 Toy and Hobby Goods and Supplies Wholesalers; 422110 Furniture Stores; 453210 Office Supply and Stationery Stores; 455110 Electronic Shopping and Mail-Order Houses; 511191 Greeting Card Publishers
Key Dates:
1919: Hinckley-Tandy Leather Company founded.
1947: Charles Tandy joins company.
1950: Dave and Charles Tandy form Tandy Leather Company.
1955: Merger with American Hide and Leather Company.
1960: Company renamed The Tandy Corporation.
1975: Tandycrafts, Inc. established as a separate company.
1999: Tandy Leather stores close.
Company History:
Tandycrafts, Inc. manufactures and distributes consumer goods in four distinctive areas. Frames and Wall Decor, Tandycrafts' largest and most profitable division, manufactures picture and art frames, mirrors, and wall art as well as greeting cards and inspirational gift items. The Novelties and Promotional division produces a number of promotional goods for political campaigns, nonprofit organizations, national sports teams, and tourist businesses. The Office Supplies division includes the Save-On Office Supplies chain of retail stores. The leathercraft business endures under the Leather and Crafts division, now a direct-to-customer business that is conducted by mail order catalog and an Internet site.
A Small 'Shoe-findings' Storefront Established in 1919
Tandycrafts, Inc. started in a small storefront in downtown Forth Worth, Texas as Hinckley-Tandy Leather Company. The company sold 'shoe-findings,' leather shoe laces, shoe soles, and leather and rubber heels, and other items to shoe repair shops. Company founders Dave Tandy and Norton Hinckley met while working in the shoe-findings department of a Dallas leather company. When the two started their own business in 1919 they discovered that they had complementary talents. Tandy, being more outgoing, sold to shops outside the Forth Worth area, while Hinckley focused on local sales. As business grew, Tandy supervised the sales and marketing area of the business and Hinckley managed internal business such as buying inventory. With a Texas oil boom in progress, the Hinckley-Tandy Leather Company did well in its first decade, moving to a larger storefront in 1923 and opening a branch in Beaumont in 1927.
The historical events of the following decades proved to be both difficult and beneficial to the company. The Depression forced the closure of the Beaumont branch, but negotiations with suppliers to extend payment of invoices over a year's time saved the company. During this period Dave Tandy spoke to business groups on optimism in sales and psychology in marketing. To shoe repair shops he recommended that signs reading, 'Shoes Repaired While You Wait,' be changed to, 'Shoes Repaired While You Rest.'
The oversupply of inventory during the Depression gave way to a shortage of supplies during World War II when the military used most of the leather available, creating a shortage of leather for civilian use. Dave Tandy pursued leathercraft supply business as a sideline when his son Charles reported that military hospitals provided leathercraft programs for the recreation and rehabilitation of injured military personnel. The hospitals required specialty leathers for crafting belts, billfolds, and purses.
When Charles Tandy joined the company after the war, he brought great ambitions. He already had experience producing and selling products in a variety of leather-related businesses from the age of ten, when Charles taught school friends how to make belts from the leather scraps he sold them from his father's business. Charles assisted in expansion of Hinckley-Tandy to branches in Amarillo, Dallas, Houston, Albuquerque, and southern Oklahoma. In addition to shoe-findings, the company sold leather uppers to custom boot makers and began a mail order business, issuing catalogs to individuals as well as shoe repair shops. Charles Tandy's ambitions went beyond these improvements, however; Charles envisioned a national chain of retail leathercraft stores.
The Tandys' attraction to the leathercraft supply business led to a division in the Hinckley-Tandy Leather Company. After the company suffered a loss in 1949, despite higher sales than in 1948, the Board of Directors divided the business into two departments to determine where profit or loss originated. Each department had its own bookkeeping system, inventory, employees, and physical space. Hinckley oversaw the shoe-findings department, and the Tandys oversaw the leather uppers department. The official split in the company occurred in spring 1950. The Tandys purchased the Fort Worth, Houston, Amarillo, and Albuquerque operations from Hinckley, and Hinckley purchased the Dallas operations from the Tandys. The Tandy Leather Company (TLC) was established in May 1950 and moved to an uptown location.
Leathercraft Popularity in the 1950s
The Tandys quickly expanded their business. TLC's first catalog included eight pages of products. Most business came from institutions, such as prisons, youth summer camps, and youth organizations, but the number of individual leathercrafters grew as well. Leathercraft stores opened in El Paso and San Antonio, areas where a minimum of 1,000 catalog customers already existed. Acquisition of the Cardat Leather Goods company expanded the line of business to finished leather goods, such as purses, watchbands, and billfolds. The first year in business, TLC obtained a 100 percent return on investment.
The company grew based on the location of catalog sales customers. Stores that opened in North Carolina and Georgia in 1951 served nearby prisons where leathercraft programs offered inmates productive activity and income from sales to other inmates. New stores opened in Beaumont, Salt Lake City, Los Angeles, and Omaha. Each store also served the catalog customers in its area. Part of the Tandy strategy was to locate stores just off main business avenues, such as Mission Street in San Francisco and Olive Street in St. Louis. The company's product line expanded to prepackaged kits, hides, tools, instruction books, and a wider variety of precut leather.
Charles Tandy paid close attention to profitability and the potential for future growth. As a tax shelter, each store incorporated separately. To sustain sales incentive, the Tandys required store managers to own a 25 percent interest in the store and provided loans, averaging $2,500, toward that end. Dave Tandy also co-signed loans so that administrative staff in Forth Worth could invest in the stores. Charles was particularly adamant with employees to buy stock with their year-end bonus checks. As the company succeeded, no one regretted the inducement. With a bold and charismatic personality, Charles successfully employed a mix of humor and pressure to provoke store managers to improve sales.
TLC furthered expansion with the acquisition of New Jersey-based American Handicrafts Company. The company sold a variety of art supplies, and leathercraft supplies comprised 25 percent of the business. The business, which included two stores and a large mail order business, neared bankruptcy when TLC purchased it for $90,000 in 1952. By 1954 TLC began to open stores around the country.
The company's first big success involved a kit for baby moccasins, which included precut white lambskin. The kit sold for 50 cents a pair through two-inch advertisements in Ladies Home Journal, Good Housekeeping, and Work Basket magazines. With 50 to 100 of the advertisements running simultaneously, TLC sold more than three million pairs over five years. By 1954 the company catalog had grown to 68 pages and the mail order business reached one million customers. Four factories served 67 retail stores in 36 states and the territory of Hawaii.
1955: Risky Business Going Public
The death of Dave Tandy of a heart attack in 1954 resulted in financial challenges for TLC related in part to inheritance taxes. In addition, employee stock owners did not know the value of their ownership, especially given the different levels of ownership in different stores. Charles Tandy sought to resolve these issues and became determined to list the company on the New York Stock Exchange. TLC was too small, however. To resolve that problem, Charles sought a merger with a company already listed. Charles made an agreement with the insolvent American Hide and Leather Company (AHLC) of Boston.
TLC's agreement with AHLC risked control of the company. The agreement allowed AHLC to acquire TLC for $2.3 million in promissory notes with no interest and no cash up front. Basically, TLC gave AHLC the money to buy TLC, as AHLC could make payments to TLC based on TLC's earnings over a ten-year period. TLC stockholders had the option to buy 500,000 shares of stock at $4 per share during the first four years. After Charles obtained stockholder consent, the agreement was signed in October 1955, and TLC was renamed Tandy Industries, Inc. (TII), a wholly owned subsidiary of AHLC, with Charles as president.
Although Charles and two other TII executives became members of the Board of AHLC, majority control of TII's earnings remained in the hands of original AHLC directors. Charles willingly risked ownership of the company because TII earnings would not be taxable for five years because of tax regulations on net loss, which AHLC insolvency secured. Charles also believed that he could turn AHLC into a profitable company. Trouble ensued when AHLC began to use TII earnings to acquire poorly performing businesses in a variety of industries. AHLC changed its name to General American Industries (GAI) in December 1956 and two TII executives were replaced on the Board with people from two of those companies. Profits from TII and Tex Tan, a Western leather goods manufacturer acquired that year, covered the losses of the other companies in the conglomerate and prevented Charles from expanding the leathercraft business. Charles tried to stop the shifting of his company's earnings to insolvent companies.
As struggles for power among the Board's newest members intensified, Charles prepared for a stockholder proxy fight over Board membership. With GAI stock valued at $3.00 to $3.50 per share, lower than TII's stock option agreement, Charles exercised that option at a loss. He requested that all store managers maximize their credit line to purchase the stock and also received financial assistance from his wife and other family members. A business associate persuaded a foreign investor to remain neutral. With a win in the proxy vote assured, negotiations at the November 1959 Board meeting settled the matter and gave TII five of the nine Board seats.
Under the new Board the three recently acquired subsidiaries were sold at a loss, and GAI returned to the business of leather goods. In 1960 Charles relocated GAI to Fort Worth and renamed it the Tandy Corporation, with TAN as the exchange symbol. Stock sold at $4.00 per share, but by the end of 1961 stock rose to more than $11.00 per share. In 1961 Tandy acquired Cleveland Crafts Inc., which operated educational and craft supply stores in New York City, Los Angeles, and Nashville, as well as Cleveland. Other acquisitions included the May and Corral Sportswear of Oklahoma, Merribee Needlearts, the Electronic Crafts Division of Swieco Inc., and Toys for Men, Ltd. A successful new product at this time was a saddle kit sold to YMCA summer camps; the children put the saddle together for use at the camp.
Charles experimented with a new retail concept, the Tandy Craft and Hobby Mart, which opened in Fort Worth in November 1961. The 18,000-square-foot space sold a variety of hobby and craft products within 35 different shops, selling more than 50,000 different items for more than 50 crafts and hobbies, including Electronic Crafts, which sold do-it-yourself stereo kits. The Mart included pet, gourmet food, and record stores. The market was anchored by a Tandy Leather store and an American Handicraft store. Similar marts opened in Dallas in November 1962 and in San Antonio in September 1963. By that time the company had grown to more than 140 retail stores in 100 cities.
Diversification in the 1960s included a variety of retail businesses. Cost Plus, renamed Pier 1 Imports, an importer of household goods, required a different type of management than leathercraft, with a longer lead buying time. The company's employees purchased the company from Tandy in 1966. Charles was best known for turning Radio Shack, electronic equipment stores, into a household name. Although that company became a major focus of Charles's attention, Tandy Leather continued to grow to more than 350 retail stores in the mid-1970s.
Tandycrafts on Its Own in 1975
By 1975 it became clear that the Tandy Corporation would need to be divided into three separate companies. Two new companies formed were Tandy Brands and Tandycrafts, Inc. Tandycrafts encompassed the Tandy Leather Company, American Handicrafts, Decorating and Crafts magazine, Color Tile, Magee, Merribee Needlearts, Woodie Taylor Vending, Automated Custom Food Services, Stafford-Lowdon, and Bona Allen. Tandycrafts received $6 million from the Tandy Corporation and was listed on the stock exchange at $13.00 per share. John Wilson, former president of the Tandy Corporation, became president, CEO, and a Board Director of Tandycrafts.
As a separate company Tandycrafts redirected operations. Tandycrafts divided further when Stafford-Lowdon, a printing operation, and Color Tile became separate companies, in May 1976, and in March 1979, respectively. The company discontinued Merribee Needlearts and American Handicrafts in 1982 and eventually sold or discontinued other companies as well.
The market for leathercraft goods began to shrink by the 1980s. The lower birth rate meant than the size of a primary customer base--youth groups and summer camp programs--folded. In addition, schools no longer taught handicrafts at previous levels. By May 1991, Tandy Leather Company operated 187 retail stores. The company continued to pursue the wholesale leather goods business with the purchase of western apparel and accessory companies, the Nocona Belt Company and Two-Gether Leather in 1992, and Prestige Leather Creations in 1993.
Tandycrafts ventured into the business of Christian bookstores with the acquisition of the chain of 34 Joshua's Christian Bookstores in 1986. That business would be supplemented by the acquisition of J-Mar Associates, which produced inspirational gifts sold in Christian bookstores. The acquisitions of the Mustard Seed chain of five bookstores in Denver in December 1993; Lord's Vineyard, Inc., a 15,000-square-foot store in Colorado Springs, in April 1994; and the Christian Outlet of Phoenix in May 1995, added to the Joshua's Christian Bookstores chain. The stores sold an even mix of gifts, Christian music, and motivational books.
Realignment in the 1990s
In the 1990s Tandycrafts dabbled in a number of business ventures before it settled into four areas of vertically integrated manufacturing, wholesale, and retail concepts. Tandycrafts sought to build on the strength of its frames and wall art businesses. Magee Company, a manufacturer of steel and wood picture frames acquired by the Tandy Corporation in 1968, was one of the top suppliers of frames to retail stores with distribution to mass merchants such as Wal-Mart and Venture. In November 1993, Tandycrafts acquired Impulse Designs, a manufacturer of framed wall art that also distributed to mass merchants with a wider and higher price range, from $10 to $100 retail. Hermitage Fine Arts specialized in an upscale market of specialty and department stores.
Tandycrafts also pursued novelty and licensed product companies in the 1990s. David James Manufacturing and Brand Name Apparel were acquired in the fall of 1992. TAG Express, licensed by the NFL, NBA, NHL, Major League Baseball, U.S. Soccer League, and all major colleges to produce bumper stickers, key tags, pennants, and similar products, was purchased in September 1993. The acquisition of Birdlegs provided a similar product line in souvenir t-shirts, sweatshirts, and related products bearing screen-printed resort and location names for vacation travelers. Rivertown Button, acquired in April 1994, produced buttons, posters, and similar promotional items for political campaigns, nonprofit organizations, schools, and businesses. The company also purchased College Flags and Manufacturing Co. Inc. in September 1994.
Tandycrafts began to reorganize in 1995, to consolidate and prune company operations by forming four new operating divisions and selling unrelated or unprofitable businesses. The Novelties and Promotional division included Rivertown Button and Licensed Lifestyles, the latter being a consolidation of TAG Express, Birdlegs, and College Flags. Most assets of Brand Name Apparel were sold, and David James Manufacturing closed. The Leather and Crafts division included Tandy Leather and Crafts and Tandy Wholesale International. A slowdown in the sales of Western clothing led to the sale of Prestige Leather Creations in 1996 and Nocona Belt Company in 1999.
The Office Supplies division consisted of Save-On Office Supplies stores. The chain consisted of seven stores when it was purchased in 1991, and eight more stores opened within the first year. To improve sales, Tandycrafts added office furniture, facsimile machines, and computer-related products to its inventory and hired outside sales representatives to increase awareness of the stores. The chain had grown to more than 40 stores in 11 states, primarily in the South and Midwest, in 1999.
The Frames and Wall Decor division encompassed the three frame and art companies under Pinnacle Art and Frame and J-Mar Associates. Sales and marketing for Magee and Impulse Designs were combined because of their similar retail outlets. The Impulse Designs plant in Van Nuys, California relocated to Durango, in northern Mexico, where a new, state-of-the art factory opened in July 1999. Administration, design, and other office staff were transferred to Fort Worth. After intensive market research, J-Mar Associates launched a new product line of greeting cards and gift items designed for women. Trademarked, 'By the way,' packets of five products--a greeting card, sachet, note pad, refrigerator magnet, and bookmark--eased gift-giving. The relationship-oriented themes included Family, Friendship, and Encouragement.
Other actions to streamline the company included the sale of Cargo Furniture to management and employees in January 1997. The company was forced to buy back the company in June 1999 when Cargo defaulted on a loan guaranteed by Tandycrafts. The company planned to transform the unprofitable stores to the more successful Cargo Collection concept, which offered a wider variety of furniture styles and home accessories. Cargo products were available on the Internet at www.cargohome.com and through a national network of representatives to commercial accounts. The Joshua's Christian Bookstores chain was sold in April 1998.
The leathercraft business had continued to shrink in the 1990s. By 1991 only 187 Tandy Leather stores remained open. A temporary surge in sales occurred in the late 1980s and early 1990s when clothing and home decorations in the Southwestern style became popular, but by 1995 a permanent decline in sales had begun. In October 1998 the company opened a Craft Your World store in Fort Worth as a pilot project for a new retail concept. The product line included home decorations, gift items, and a wide variety of craft supplies. A workshop area was designed to attract youth groups and individuals to a variety of weekly craft classes. After the new concept failed, in large part because of poor store locations, Tandycrafts decided to close the remaining Tandy Leather stores, 122 stores in 41 states, as well as its manufacturing plant.
The company shifted to direct-to-customer distribution through mail order catalog and Internet sales. Since stores filled catalog orders from nearby customers, a 70,000-square-foot facility opened in Fort Worth to stock inventory and fill customer orders. The company launched an Internet site at www.tandycrafts.com in March 1999, with 400 items available, including leathercrafting kits, tools, books, and patterns. More than 2,000 products would become available, as well as a chat room, and a craft resource guide would be implemented over time. The company continued to sell wholesale leather goods to existing craft stores as well as through more than 100 dealers around the world.
Principal Subsidiaries: Cargo Furniture and Accents, Inc.; J-Mar Associates, Inc.; Licensed Lifestyles Inc.; Pinnacle Art and Frame; Sav-On Discount Office Supplies; Tandy Leather Company; Tandy Wholesale International.
Principal Competitors: Office Depot; Interior, Inc.; National Picture and Frame.
Further Reading:
'Cargo Employees Paid $4.2 M To Acquire Chain from Parent,' Furniture-Today, March 10, 1997, p. 33.
'Change of Plans,' Chain Store Age Executive with Shopping Center Age, May 1999, p. 259.
Farman, Irvin, Tandy's Money Machine, Chicago: The Mobium Press, 1992.
Halkias, Maria, 'Fort Worth, Texas-Based Tandycrafts to Close Leather Stores,' Knight-Ridder/Tribune Business News, January 8, 1999.
Harris, Jim, 'Storming the Market: Magee Co. of Pocahontas a Division of Hot Stock Tandycrafts Inc.,' Arkansas Business, February 8, 1993, p. 22.
Kehoe, Ann-Margaret, 'Frame Fusion: Tandycrafts to Combine Divisions,' HFN--The Weekly Newspaper for the Home Furnishings Network, October 13, 1997, p. 77.
'Mexican President Zedillo Celebrates Opening of New Tandycrafts Frames Facility in Durango,' PR Newswire, July 9, 1999.
Milliot, Jim, 'Family Christian Stores to Acquire Joshua Stores,' Publishers Weekly, April 27, 1998, p. 11.
Netherly, Ross, 'Pruning Makes Tandycrafts Ready for Growth,' Dallas Business Journal, January 29, 1993, p. 37.
------, 'Tandycrafts Stock for the Thick-Skinned Only,' Dallas Business Journal, April 29, 1994, p. 37.
Reed, Dan, 'Fort Worth, Texas-Based Tandycrafts to Move Pinnacle Facility to Mexico,' Knight-Ridder/Tribune Business News, June 14, 1999.
Scott, Dave, 'Sleeper Stock Has Yet to Rouse Wall Street,' Dallas Business Journal, May 1, 1992, p. B1.
'Tandycrafts Acquires Wall Art Company,' HFD--The Weekly Home Furnishings Newspaper, January 17, 1994, p. 31.
'Tandycrafts Buys Christian Store Chain,' Publishers Weekly, January 10, 1994, p. 12.
'Tandycrafts Forms Division for Licensed Products,' Fort Worth Star-Telegram, June 8, 1996, p. C2.
'Tandycrafts, Inc. Approves $2 Million Stock Repurchase Program,' PR Newswire, September 2, 1998.
'Tandycrafts, Inc. Opens First Craft Your World Stores,' PR Newswire, October 19, 1998, p. 4148.
Wren, Worth, Jr., 'Fort Worth, Texas-Based Tandycrafts Buys Back Furniture Chain,' Knight-Ridder/Tribune Business News, June 23, 1999.
Source: International Directory of Company Histories, Vol. 31. St. James Press, 2000.
