A change in stride
Dominating equestrian market in direct sales, Littleton's Dover Saddlery pursues retail expansion
Littleton-based Dover Saddlery, the country's biggest direct marketer of equestrian products, went public in 2005 in part to kick-start the capital-intensive process of opening new stores.
In total, the company raised $27.5 million through its IPO. But it also got some headaches along with that capital.
After several quarters of profitability, Dover reported a net loss of $915,000 during the first quarter. And despite a second quarter profit, it still recorded a $539,000 loss for the first six months of the year. But company officials say the first quarter loss had little to do with its planned push toward retail. Spokeswoman Janet Nittmann said much of the loss was the result of settling a dispute with Goldsmith Agio Helms, an investment banking firm.
Goldsmith claimed Dover owed it $2.1 million for services it had provided leading up to Dover's public offering, according to the company's SEC filings.
Nittman said that Dover had been exploring raising funds through private equity channels with Goldsmith, but since it ended up going public instead, the company didn't owe the investment firm any money. Nittmann said the company settled the matter for $700,000 in the midst of arbitration proceedings on the dispute.
"We decided it just wasn't worth taking the risk," she said.
A spokesman for Goldsmith declined to comment on the settlement citing a nondisclosure agreement.
Along with the settlement, Nittman said a number of other factors conspired to cause trouble for Dover during the first quarter. Bad weather and a virus that spread through the east coast kept many riders from taking part in competitions, and national pet store chain PetSmart sold Dover competitor State Line Tack, liquidating the inventory at its stores.
"Quarter one was extremely disappointing," Nittmann said.
Galloping along
Despite the disappointing first quarter, the company is still proceeding with its aggressive expansion plans and bounced back somewhat in the second quarter.
Stephen Day, president of Dover, is hoping the same passion his employees have for horses and equestrian sports that has helped its direct mail business grow will work in retail sales. The company, which began in 1975 with a single store in Wellesley, is going back to its roots, adding new stores around the country to supplement its phone and internet-order business.
"We felt that we penetrated the market on the direct side," Day said.
He added that most customers prefer buying products in a brick-and-mortar store where they can see the merchandise for themselves and walk out with something in their hands.
In 2006, Dover bought Dominion Saddlery, a company serving English-style riders, gaining four mid-Atlantic stores. The company now operates nine stores, including a Texas location under the Smith Brothers brand, which Dover acquired in 2002 to sell products for Western-style riding. It will open its first Dover-branded store outside the East Coast this fall in Dallas.
When Dover bought the Smith Brothers brand of western equestrian equipment, it kept the company's Denton, Texas call center, along with their other centers in Massachusetts and New Hampshire. Part of the reason was to let the company route calls elsewhere in case of a blizzard or natural disaster in the northeast.
But, just as significant, company spokeswoman Nittmann said, was the ability to hire local Texan riders, who are more likely to ride in the western style - and far more likely to speak with a drawl.
"They ride western, they speak the lingo, and it works much better for the calls," she said.
Nittmann said many western-riding customers appreciate hearing the accent most associated with that style.
"It's something they can relate to," she said.
Buyer direct
Day said when Dover began expanding its retail operations, some people within the company were nervous that customers would simply switch over from buying direct to buying in person. The company studied the issue and found that it did lose a little in direct sales during the first 12 months of retail expansion, Day said.
But in the second 12 months, direct sales actually went up. He said the stores give customers who are uncertain about ordering products long-distance a chance to see them in person. After that, he said, they may be more likely to make their next purchase through the catalog.
"It builds their confidence in the brand," he said.
For now, Dover still does the majority of its business through a catalog. In fiscal year 2006, retail stores accounted for $12.8 million of the company's $73 million total revenue. And despite the growth of the internet, 60 percent of direct sales still come in over the phone.
Day said one of the company's biggest strengths is staffing its call centers - both in Littleton and in remote offices in New Hampshire and Texas - with experienced riders who can discuss the merits of different styles of riding breeches from personal experience.
"There's no way you're going to get that directly applicable information over the internet," he said.
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