It has annual revenue of $350 million and designs on becoming a billion-dollar company within five years, yet educational supplies marketer School Specialty may be the biggest cataloger you’ve never heard of.
Until June, Appleton, WI-based School Specialty was a division of $2.6 billion U.S. Office Products (USOP), which had acquired it in May 1996. But as part of a restructuring, School Specialty and three other divisions were spun off into four separate public companies. School Specialty, which sells classroom materials, sports equipment, and other supplies to 108,000 public and private schools, produces six catalogs: School Specialty, Childcraft, Sax Arts & Crafts, Re-Print Teacher’s Direct, Education Access, and U.K.-based Gresswell.
Some observers wondered whether School Specialty, without the deep-pocketed support of USOP, would be able to continue its growth-through-acquisition strategy. (From January to June alone, it had bought nine companies.) But the cataloger satisfied observers’ curiosity early on: On July 1, it announced the acquisition of Fremont, NE-based Hammond & Stephens, which produces and markets printed educational materials; and Nashville, TN-based Teacher DeskTop, a manufacturer/marketer of planning software for teachers.
And School Specialty will continue to acquire other companies in the future, says chief financial officer Don Noskowiak. “We were on our own essentially with a growth plan in place before the USOP takeover,” he says, “although USOP allowed us to accelerate our acquisition plans through financing.”
School Specialty’s initial public offering in June brought in $34.2 million-enough for the company to expand into areas where it doesn’t yet have a physical presence. “We intend to fill out our geography by acquiring suppliers in California, Texas, and Florida and surrounding Southern states,” Noskowiak says.
Such acquisitions complement what president/chief operating officer Dave Vander Zanden describes as a “bottom-up/top-down” strategy. The “bottom-up” aspect targets teachers and curriculum specialists, primarily through the mailing of 7 million general and specialty catalogs; the “top-down” part relies on nearly 300 field sales reps who sell to school administrators using the catalogs as a tool.
Demographic assist The demographic “echo boom” should help School Specialty’s growth. According to the U.S. Department of Education, a record 51.7 million children were enrolled in school in 1997; in 2006, more than 54 million children will be attending school. And the Department of Education expects expenditures per pupil to increase from $5,961 in 1997 to $7,179 by 2001.
“School Specialty will be greatly served by the increasing emphasis on education, at least ona macro-level,” says Jeffrey Evans, an analyst with New York investment bank Credit Lyonnais. “The growth potential in the school supplies business is impressive.”