Distribution firm Navarre leaving Minnesota for Texas after 30 years

Software distribution firm Navarre Corp. has quietly announced plans to move its corporate headquarters from New Hope to Dallas this year.

The company this week named Terry Tuttle to be its new chief financial officer, replacing CFO Diane Lapp, "who is resigning due to the upcoming relocation of Navarre's corporate headquarters from Minneapolis to Dallas."

That was the first time the 30-year-old Minnesota firm had said publicly that it planned to move not just some of its warehousing operations but also its headquarters to the site of its recently acquired Speed FC e-commerce operation based in Texas. Navarre acquired Speed FC Inc. last November for $50 million in cash and stock.

Navarre officials did not respond to telephone calls on Wednesday and Thursday.

Greater MSP, a nonprofit devoted to attracting and retaining businesses in the Twin Cities, said it had no information about Navarre's move to Dallas.

In previous statements, Navarre officials underplayed their relocation plans, saying in the fourth-quarter earnings announcement in May that the company would relocate "a significant portion" of the New Hope operations to Dallas.

In April, the company filed a "warn" notice of pending layoffs with the state, saying that 148 people in its warehousing and storage operations in New Hope would lose their jobs. But that did not represent all of its 238 employees in Minnesota. Navarre currently has 819 employees.

In May, Navarre ranked No. 45 on the Star Tribune 100, the newspaper's annual list of Minnesota's largest public companies. In 2012, Navarre reported a loss of $11.8 million on revenue of $485.3 million.

The move does not surprise the financial community, which has tracked the revenue decline of Navarre's traditional software and electronics distribution business over the past four years. They said moving corporate headquarters to the Speed FC operations in Dallas represents Navarre's shift toward the e-commerce portion of the distribution business, which has the most growth potential.

Speed FC runs an "end-to-end" e-commerce business, said Mark Argento, an analyst with Lake Street Capital Markets in Minneapolis. Speed FC designs and operates e-commerce websites for companies with less than $150 million in annual sales, runs the warehouses holding the products and ships the products directly to consumers.

"End-to-end e-commerce is expected to grow at 15 to 20 percent a year for the next five-plus years," Argento said. "That's where the growth in the distribution business is." In addition, the profit margins in e-commerce are about three times larger than they are in the traditional distribution business, he said.

Argento thinks it's probably just a coincidence that Navarre is moving its warehouse operations to Texas in the wake of the pending new state sales tax on commercial warehousing that was passed by the Minnesota Legislature in May. That tax is scheduled to take effect in April 2014.

Navarre already had strong business reasons to make the move, he said. In addition, Navarre said in late May — during its fourth-quarter conference call with analysts — that the decision to move the New Hope distribution center to Dallas this year was made sometime in April, a month before the Legislature passed the warehouse taxation law.

In addition, Navarre CEO Richard Willis, who was named to the job in September 2011, has ties to Texas, where he is an alumnus and chairman of the board of regents of Baylor University in Waco.

E-commerce is much different from Navarre's traditional distribution business, which ships packaged software and electronics to nearly 31,000 retail stores and their warehouses in the U.S. and Canada. Its customer list includes Best Buy, Target, Wal-Mart, Apple, Costco, Office Depot and OfficeMax.

Steve Alexander • 612-673-4553