New Northern Tool boss 'ready for the major leagues'

The parking lot of the Northern Tool + Equipment store in Burnsville is chockablock with pickup trucks, trailers, sturdy cargo vans and SUVs.

One visitor to the store — Northern Tool's chief executive Suresh Krishna — takes a read of who's walking the aisles and looking at the power tools, generators, pressure washers or specialty welding equipment.

"Most are contractors, landscapers, painters, electricians and auto body shop owners," said Krishna. "They need professional equipment they can rely on."

The retailer's customer profile hasn't changed all that much in the four decades since founder Don Kotula began building mechanical log splitters and selling them out of his Eagan garage.

Kotula, who named the company Northern Hydraulics, sold engines, parts and accessories through a catalogue with the tagline, "Serving industry and agriculture." The first retail store, opened in Burnsville in 1981, called itself a "Handyman's Headquarters."

Kotula's sons, Ryan and Wade, have now set an ambitious course for Northern Tool + Equipment. In the spring of 2020, they hired Krishna, a former executive at Polaris Industries and Sleep Number, to accelerate store openings and enter new cities.

"Because we've been so inwardly focused, I have to keep reminding my team we're now in the major leagues," said Krishna, who spent five years on the Northern Tool + Equipment advisory board before becoming CEO.

Northern Tool is by far the smallest team in the league, Krishna adds. The chain has 120 stores in 22 states, mostly in the eastern half of the United States, with clusters in Texas and the southeast, where contractors and landscapers can work outside year-round.

In the Twin Cities, where Northern Tool has 10 locations, Home Depot and Menards each have almost twice the number of stores. Northern also competes with Fleet Farm and other farm-and-ranch retailers as well as specialty equipment suppliers, such as McMaster-Carr and Granger.

"We're not a pure competitor to any of them," Krishna said. "We wrestle with that internally saying, we've had tremendous growth — 35% year-over-year. Is that because the market is up and all of our competition is up? Or are we all outperforming the competition?"

Northern Tool sets itself apart as a manufacturer of its own Made in USA equipment and as an in-store repair shop. Northern Tool technicians service any type of small gas-engine-based equipment, whether or not it sells them.

Most of the company's NorthStar line of tools, the largest brand in its portfolio, is designed, manufactured and tested at its facility in Faribault. Early in the pandemic, Northern Tool used technology for an existing agricultural sprayer to design a new line of cleaning and disinfecting sprayers. The result: Sales of NorthStar branded products rose 30% last year.

The coronavirus pandemic, tariffs on Chinese imports and supply-chain complications have defined Krishna's 18 months on the job.

With a strong housing market and consumers fixated on home improvement projects during the pandemic, Northern Tool's revenue jumped 35% to $1.95 billion for the fiscal year that ended in July, Krishna said.

The company diversified its supply base from China and set up sourcing offices in Vietnam and India, which helped avoid tariffs. Though Krishna declined to reveal profit and other financial details, he said gross margin rates were up on the year and operating expenses were down. "It validates a lot of the thinking I had about the potential of the company," he said.

The centerpiece of Krishna's growth strategy is stores — lots more of them, and coming online quickly. By the end of the decade, Northern Tool aims to have 300-plus stores.

"In our e-commerce business, we ship to all 50 states," Krishna said. "We have brand awareness broader than our retail presence."

While Northern Tool had settled into a pace of four to five new stores annually, Krishna plans to go deep into new markets, standing up eight to 10 stores in a year. On top of that, an equal number will open in strategic locations or in markets with an already-strong presence, such as Houston, Dallas, Atlanta and Miami.

The first expansion market is suburban Chicago, where Northern Tool will open a second store later this fall and continue its push through 2022.

Adding stores is a capital-intensive strategy that Krishna said will include acquisitions, squeezing efficiencies out of current operations and a renewed commitment to serving the needs of skilled tradesmen and serious do-it-yourselfers.

To that end, Northern Tool recently sold South St. Paul-based Sportsman's Guide and the Golf Warehouse, a mostly e-commerce business it bought in 2012 for $215 million. The sports-and-leisure division contributed about 25% to overall sales, but Krishna considered it a diversion.

In March, Northern Tool bought Maryland-based Jacks Small Engines, one of the nation's biggest online supplier of parts for lawnmowers, snow blowers and other power equipment.

Krishna is just the third CEO at Northern Tool, taking over after 36-year company veteran Chuck Albrecht retired. He majored in mechanical engineering in college in India and received an MBA from Northwestern University.

He spent decades in middle and upper management with publicly traded corporations, wearing expensive suits, managing P&L statements and overseeing supply chains across Asia, the Middle East, Europe and the United States.

But he's at ease without the tie. He said the job touches his own "blue-collar roots" growing up in Jamshedpur, in the eastern part of India. "This is coming back home in many ways," he said.

At least twice a month, Krishna visits stores and warehouses, stopping in regularly at the factory in Faribault. On those days he tries to go to three or four locations, starting in the morning, eating lunch with warehouse leaders and ending the day over dinner with the regional sales force.

"To me, breaking bread with people is critical," he said. "It's a sign of making personal connections."

Customers may have noticed a number of changes in the past year, the most obvious being a deeper assortment. Northern Tool stores went from having about 40,000 itemsbefore the pandemic, to about 100,000 now.

Krishna and his team worked with marquee national brands such as Milwaukee and Stihl to expand their offerings far beyond what can be found at most big-box stores.

Northern Tool also forged a new partnership with Rockler Woodworking and Hardware to sell more than 300 woodworking products in select stores and online. It was a way for Northern to team up with another Minnesota-based and family-run brand while adding customers who picked up new hobbies during the pandemic.

Northern also is developing its own non-gas engines, responding to rising consumer demand for electric-powered tools. In April, the retailer rolled out its first NorthStar industrial electric pressure washer for agriculture and lawn care use or in indoor spaces, such as restaurants and factories.

Another consumer trend on its radar: connected devices.

"When you are the owner of a landscaping company and you've got a crew in five different locations, you want to see how the equipment is performing and how it's being used," Krishna said.

But some challenges are emerging. The D.I.Y. pandemic boom has begun to cool. Inflation remains an issue and the tight labor market is a challenge, particularly because Northern relies on a well-trained sales force that understands specialized equipment.

Krishna said he and his executive team, a blend of veterans and new hires, intend to build on the entrepreneurial spirit Don Kotula established 40 years ago.

Though the company remains run by men for a mostly male customer, almost 100 women hold leadership roles at the store level.

"It's very much the case that the best years are still ahead of us," Krishna said. "We think we could double in size in next five to 10 years. We have room to grow."

+++

ABOUT SURESH KRISHNA

Northern Tool + Equipment: Chief executive officer (April 2020).

Sleep Number: Chief operating officer (2017-2020); senior vice-president and chief operations and supply chain officer (2016)

Polaris Industries: Vice-president Europe, Middle East, Africa (2014-2016); vice-president global operations and integration (2010-2014)

UTC Fire & Security/Kidde: Vice-president global operations, supply chain and IT (2007-2010)

Diageo spirits and beer: Vice-president supply chain in North America (2002-2007)

Education: MBA Kellogg School of Management; BS in Mechanical Engineering, National Institute of Technology, India