November 12, 2007

Mom’s Dream

Family Plans to Grow to 1,000 Anna’s Linens Stores

By Jennifer Bellantonio
Orange County Business Journal Staff

Moms have a way of keeping you motivated.

Alan Gladstone, chief executive of Costa Mesa-based Anna’s Linens, knows that well.

Right before his mother died five years ago, he promised her he’d grow the discount home furnishings chain he named after her to 1,000 stores.

Achieving that goal has become a family affair.

Gladstone and his son, Scott, who is chief operating officer, have been steering the chain’s growth and keeping a close eye on operations.

Alan’s daughter, Carie Gladstone Doll, senior vice president of merchandising, and his brother-in-law, Michael Harnetiaux, who oversees strategic planning, also are part of the push.

“We are all focused on growing our business in a disciplined manner that will provide stability and scalability for future generations,” Scott Gladstone said.

The company, founded in 1988, now has 251 stores in more than 20 states, including California, Arizona, Alabama, Florida and Georgia. That’s up from about 100 in 2002.

Anna’s Linens sales were about $320 million last year and are expected to hit $350 million in 2007, Scott Gladstone said. The company has 2,500 workers.

The company was recognized at the Nov. 1 Family Owned Business award luncheon put on at the Hyatt Regency Irvine by the Orange County Business Journal and California State University, Fullerton’s Family Business Council.

Despite its size, Anna’s Linens got the up and coming award for its bid to hit 1,000 stores.

The company’s growth stands to come from opening stores or buying bankrupt retailers, as with its purchase of 14 Plej’s Linen supermarkets about two years ago.

Merchandise

Anna’s Linens stores are filled with discounted merchandise that it buys from manufacturers after big retailers cancel their orders.

Products include bed sheets, pillow cases, mattress pads, comforters, bath towels, rugs, shower curtains and window curtains. Anna’s Linens also recently expanded into small appliances, including toasters and coffee makers.

In some cases, Anna’s Linens buys and sells stuff for 50% off, which helps lure shoppers who like low prices.

The company’s motto: “Sell steak cheap, not cheap steak.”

Anna’s Linens opens stores in neighborhoods that are home to African Americans and Hispanics with median household incomes of $35,000 to $75,000.

The company is “obsessed with passing on truly unbelievable values” to customers and gets the job done by operating lean and leveraging growth, Scott said.

Its strong work ethic comes directly from dad Alan, someone Scott refers to as the company’s “chief culture officer” and “heart and soul.”

“Family comes first (for Alan). Period,” Scott said. “There is no second place.”

Every person in the company is treated like family, Scott said.

Alan can walk into a store 2,000 miles away that he hasn’t been to in more than a year and will remember every person’s name and something unique about them, Scott said.

“We all share the responsibility of preserving that culture and passing it on to the next family member that we hire,” he said.

The company has lent more than $1 million to employees in interest-free loans to cover emergencies, such as funeral costs.

During the San Diego fires a few weeks ago, Anna’s Linens temporarily closed a few stores “to protect our associates and to allow them to take care of their families and their homes,” Scott said.

Anna’s Linens lost some business but all stores are open again, according to Scott.

The company also kept workers on the payroll after Hur-ricane Katrina in New Orleans two years ago despite losing 20 stores, four of which re-main permanently closed.

Those employees were deployed to other stores to keep business going.

The disaster also helped derail Anna’s Linens plans to go public. The company filed an initial public offering in 2005 and later withdrew it, citing unfavorable market conditions and “the devastating impact of the hurricanes along the Gulf Coast,” Scott said.

Since then, the company has used its own money to open more than 60 stores across the nation, including in areas along the East Coast.

The company has faced other challenges.

In 1993, falling housing prices pushed sales down, forcing Anna’s Linens to close more than half of its 52 stores at the time and led the company to file for bankruptcy protection.

It emerged from bankruptcy a year later.

Outside Executives

Now it is back to building up the business. It has recruited executives for its management team and launched a television advertising campaign to take its market wider.

Anna’s Linens expects to someday again pursue plans to go public, Scott said.

“We will do so when the macroeconomic conditions are more favorable and there is improved stability in the financial markets,” he said.

Taking things to Wall Street would change the “dynamics within the organization,” Scott said.

The company already has made changes to meet Securities and Exchange Commission requirements and Sarbanes-Oxley regulations for auditing, he said.

But a changing business won’t change the influence the family has on the company’s culture, Scott said.

“As a family owned and run business we are constantly reminded of the importance of investing in our people,” Scott Gladstone said. “Every person that walks through the door of one of our stores or through the front door at our support center in Costa Mesa is treated equally and with dignity and respect. That is not negotiable.”