Archive for Wednesday, November 14, 2001

Economic downturn strains companies

Firms began feeling pinch after Sept. 11

November 14, 2001

Across the country, businesses are feeling recession's pinch. And firms in Leavenworth County are not immune to the pain.

"I think that the recession which is just now being admitted by economists has been going on since the beginning of the year," said Kathy Graveman, a co-owner of Magnatech.

Magnatech is a 14-year-old Tonganoxie firm that manufactures equipment used to grind steel, aluminum, paper products and municipal waste for recycling. The company has 30 to 40 employees and ships its product throughout the United States and to other countries.

Were Magnatech not diversified with the products their equipment can prepare for recycling, Graveman said, the slowdown in the steel industry, topped by the recession, would likely have trimmed sales at the Tonganoxie firm.

"You have to be diversified," she said.

Biddy Hurlbut, co-owner of Peruvian Connection, a Tonganoxie-based retailer of upscale clothing, said business this year hasn't met company expectations. Peruvian Connection's products are sold through mailed catalogs, on the Internet and at outlet stores. From 70 to 100 people work at the company's Tonganoxie home.

"We felt a little of the recession prior to the eleventh of September," Hurlbut said. "But we were still above budget."

Then, Sept. 11 dealt the company a blow.

"Unfortunately, we mailed right into the twin tower disaster," Hurlbut said.

"We had a very sharp cutback of orders in the United States, as well as in Germany," Hurlbut said.

Peruvian Connection also has an operation in England that focuses on sales in the United Kingdom and Germany, where, Hurlbut noted, terrorist cells have been discovered.

"Germany seems to be more concerned than the Brits," Hurlbut said. "Sales in the UK have held up pretty well."

Then, when it was time to mail the next catalog, the company hit another roadblock.

"We mailed into the anthrax scare," Hurlbut said.

Few mail order companies have survived the aftermath of Sept. 11 unscathed, Hurlbut said.

"People just weren't interested in ordering," she said. "They were distracted, fearful, about the economy and the job cuts."

Surprisingly, Hurlbut said, Internet sales, which account for about 18 percent of Peruvian's business, jumped after Sept. 11.

Overall, Hurlbut is optimistic.

"We have in a small way felt the recession pullback," she said. "I think we will weather it all right."

Tucked away at the edge of Linwood is a company that employees 160 people Alex R. Masson Inc. At a 10-acre site, of which six acres are indoor greenhouses, the business cultivates blooming plants and tropical foliage that it sells to stores in 15 states. The corporation also has an operation in New Mexico.

Dennis Shrewsbury, Masson president, said sales will show a decrease this year, but he said that's not because of the national economy. It has more to do with the strategic plans of the different companies that Masson does business with, he said.

Shrewsbury said recessions typically don't have much of a negative impact on companies that cultivate flowers.

"Because during hard times, people tend to stay home," he said.

While they might not splurge for a vacation, they might splurge on a plant for themselves or for a friend.

Masson, which has operated at the Linwood location since 1972 and prior to that in Kansas City, Kan., since 1919, has long tracked the effect of the economy on the plant business.

"During hard times, we don't see much of a drop-off typically," Shrewsbury said. "We'll see how long and deep this goes, if there is an impact."

A 14-year-old Tonganox-ie business founded by Jim Bennett and Steve LaForge caters to florists, hobby businesses, crafters, decorators and individuals.

Everlasting Specialties sells dried flowers, wreaths and related products through its catalog and on the company's Website.

"Business was up last month," LaForge said. "But not as much as normal because of the economy. People are cautious."

Even though the company's fall catalog arrived in east coast mailboxes on Sept. 11, sales, both through the catalog and the company's Website, have remained strong.

"The east coast business is just like it always is," LaForge said. "Just like it never happened. Or maybe it actually caused more demand for flowers."

Internet sales have remained strong, he said.

While business is good, LaForge said he had expected a stronger increase in sales this year.

"But it wasn't as much as normal because of the economy," LaForge said. "People are cautious. People are uncertain about the layoff situation. When people start getting laid off, even those who still have jobs stop buying, they're cautious."

Even so, he's optimistic.

"I think in the next six months the economy will stabilize," LaForge said. "By the second quarter of next year I think we'll start to see an increase."

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