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January 22, 2007
ST. CLOUD, MN. - Loren Eggert, vice president of operations at Fingerhut Fulfillment Inc., talks about the progress the company has made in recent years.
Five years ago, the St. Cloud community received news that its largest employer, Fingerhut Companies, planned to sell or liquidate its catalog business.
The news shook St. Cloud's foundation, leading to extensive layoffs and months of uncertainty. The St. Cloud operations employed 2,670.
By fall 2002, only a facilities manager and 40 credit workers remained.
The memories of empty buildings, layoff notices and the economic fallout remain five years after Federated Department Stores' announcement.
But the growth and stability of Fingerhut Direct Marketing Inc. today show St. Cloud native Tom Petters and former Fingerhut chief executive Ted Deikel fulfilled their promise to revive the operation.
Fingerhut currently employs 461 full-time workers in St. Cloud.
It shipped 30,000 packages in its peak season last year. It expects to reach more than $300 million in sales when it completes fiscal year 2006 this month.
The company plans to add a second shift in June to prepare for heightened sales during its peak season, from October to December.
"Most people don't realize we're back and we're healthy, and we're a large employer in the community," said Loren Eggert, vice president of operations for Fingerhut Fulfillment Inc. in St. Cloud, a subsidiary of Fingerhut Direct Marketing.
The employment growth would put Fingerhut just shy of the city's top 10 employers, based on the city assessor's report of employment in January 2006.
"Fingerhut is still a mere shadow of its former self, but it's a successful enterprise that's growing and prospering," said Tom Moore, president of St. Cloud Area Economic Development Partnership.
"I figured they could come back," he said. "This is just bigger and faster than I expected."
Petters and Deikel bought Fingerhut's name and Minnesota real estate in July 2002 from Federated after the company shut down Fingerhut operations and laid off 6,000 employees nationwide. Fingerhut had lost $14 million in 2001.
The revival started in late 2002, when Petters and Deikel formed marketing and order-filling companies and restarted the catalog distribution.
"It's almost like he has a golden touch," Moore said of Petters.
The duo hired a management team that includes Eggert and Brian Smith as president and chief executive.
"I knew we had a solid business model," said Eggert, who joined the first Fingerhut almost 22 years ago. "I knew we had a strong customer base."
Leaders started from scratch like any startup company would, developing plans, systems and a staff. They spent 2003 and 2004 investing in warehousing systems, creating a marketing strategy and evaluating their customer base.
Leaders learned their customers' demographics had shifted from women in their 40s to a younger generation, Eggert said. Those customers demanded more technology and preferred ordering online, not by phone.
The company made a major investment in equipment to improve accuracy, efficiency and quality.
Much of the capital to improve operations came from $63 million of equity provided in February 2004 by two venture capital firms, including a significant investment from Petters. The company also received a $100 million line of credit to help cover customer debt.
The company can process and ship an order at least two days faster than its best time before the sale, Eggert said. Customers receive their orders within three or four days on average now, compared to the almost two weeks they waited in the past, Smith said.
An emphasis on quality and technology has decreased the company's return rate from about 12 percent to 6.5 percent, Eggert said.
"We're trying to do things smarter and more productive," he said.
The company now has 1.6 million customers, 1 million of whom are active.
The stability and growth mark a rebirth of a company the St. Cloud community helped build more than four decades ago.
The nonprofit group St. Cloud Opportunities rallied around Fingerhut after a fire destroyed its Princeton operations and the company showed interest in moving to St. Cloud.
The group called on business and community members to raise the capital to construct a building in the newly created industrial park and lease it to the company, Moore said.
The company opened in 1960 in the building that now houses its call center.
Fingerhut is projected to grow at least 20 percent a year in the next five years.
"There is a lot of untapped demand out there that we plan on meeting," said Smith, a St. Cloud native who served as executive vice president of consumer banking for U.S. Bank in the Twin Cities before joining Fingerhut.
Eggert expects the company will take over its empty or leased-out space by the end of the year and double its staff in the next two to three years.
The company's inventory now occupies about 50 percent of its 1.2 million-square-foot facility. It leases about 20 percent of the space and performs third-party work in 15 percent.
The growth may call for an additional call center, Smith said, but the company has no plans for a facility at this time.
"We're really driven for intelligent growth," Eggert said.
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