Home Products International Inc. has decided to continue with its housewares businesses after reviewing alternatives. The Chicago firm began looking for ways to maximize shareholder value late last year and recently concluded that the goal "may be better served by continuing to reinvest our energies and resources into our own company," James Tennant, HPI chairman and chief executive officer, said in a May 9 news release. HPI had hired First Union Securities Inc. to help it review alternatives.
Tennant said in a telephone interview that HPI was unable to find a buyer with a price that would "unlock the intrinsic value" of HPI. The company decided its best course would be to continue as a housewares merchant to major retailers.
HPI started seeking alternatives when its stock sank to the low end of its then-52-week trading range of $7-$12 a share. After it and First Union began looking for potential buyers, HPI's stock climbed, eventually reaching the $13-a-share level by early February. It then gradually dipped to about $6 a share after HPI announced it was continuing the business.
Stock analysts, enamored with Internet and other new-wave communications companies, have orphaned many traditional companies, according to Tennant. HPI grew rapidly during three years to $300 million in annual sales and turned its losses into profit exceeding $10 million last year — "but shareholders didn't get an appreciation on their shares," he said.
Now is not the right time to pursue a sale of HPI, he added, but the firm might reconsider such a strategy in the future.
Tennant said a shakeout of the housewares industry is likely to continue, even though two major players, Euro United Corp. and Zeta Consumer Products Corp., are for sale. Companies can succeed in the market only if they have a strong commitment to serve mass merchandisers and are able to weather resin price spikes, he said.
Resin price hikes have hit HPI, but not as badly as other housewares producers because only about a third of HPI's sales relate to plastics-intensive products. HPI has been streamlining its product mix to improve efficiency, eliminating more than 1,600 units, many of them in its extensive plastic clothes-hanger line, in which it is a major player. HPI has done little trimming of its lines of plastic storage containers, for which markets remain strong.
HPI's sales grew only 0.4 percent in its first quarter, to $68.1 million, partly due to discontinued product lines. The firm recorded a $1.2 million loss in the quarter ended March 25 because of higher resin prices and set-up costs for its new El Paso, Texas, facility. Excluding resin price effects, HPI's gross margins improved because of a more profitable product mix.
Tennant said the first quarter built sales momentum to virtually all of HPI's customers. Its recently launched Homz brand-name promotion helped its profile among merchants, one of which generated $3 million in extra sales through a full-line, in-store Homz promotion.
Tennant predicts it would be difficult to sell Zeta and Euro United as complete companies, since they have lost customer goodwill during their financial problems. HPI was interested in buying the Tucker Housewares business four years ago when Mobil Chemical Co. put it up for sale, but HPI lost out to Alfred Teo, owner of film major Sigma Group, who combined Tucker with his Zeta business.