Gardener’s Supply Company in Williston on Monday, June 23. Photo by Glenn Russell/VTDigger
Court filings in Gardener’s Supply Co.’s Chapter 11 bankruptcy case reveal how a combination of its employee-ownership model and ill-timed investments following a surge in Covid-19-era profits ultimately led to the company’s financial collapse. They also paint an uncertain picture for the future of its employee ownership and ability to repay mounting debts.
The documents trace the decline of Gardener’s to what had once been a banner period for the Vermont-based gardening company — the pandemic. Like many companies in the home and garden sector, Gardener’s saw a dramatic boost in sales as Americans took up gardening during lockdown. The company reported “significant sales and growth” in 2020, 2021 and 2022, with revenues hitting $110.3 million in 2021 and $105.4 million in 2022. The boom benefited the business and employees, whose stock values “skyrocketed,” according to the court filings.
However, Gardener’s was unable to maintain this financial bloom. The company’s revenue dropped to $89.6 million in 2023 and $71.5 million in 2024 as the gardening trend wilted. These losses in revenue were compounded by several factors.
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Firstly, longtime employees who had enjoyed lengthy tenures at Gardener’s retired and cashed out their employee stock. This meant the company had to pay out a five-year retirement plan for the employees who had left when stock values hit record highs, causing “significant liquidity issues” and damaging its “future projections to pay out the retirement obligations in coming years,” the filings stated. Gardener’s employee stock ownership plan is also expensive to maintain — it’s managed by an outside trust, and incurs “higher than typical annual reporting, compliance, valuation and audit costs.”
Secondly, the company made a series of poor investments. Gardener’s spent heavily on “numerous one-time systems and process improvement[s],” including a $500,000 enterprise resource system — a software suite designed to streamline business operations. But the implementation did “not go smoothly,” court records indicate. Issues with the system ended up costing the company between $5 million and $10 million in revenue.
Gardener’s also invested in a new Warehouse Management System that led to significantly delayed deliveries during the company’s peak spring season. More than 60% of customer orders in May 2024 were delayed by 15 to 30 days, according to the filings.
These problems lead to Gardener’s falling out of compliance with its lender, Bank of America, which provided the company’s credit line. Gardener’s entered an agreement with the bank to delay loan payments until the second quarter of 2024, and reshuffled leadership in an effort to stay afloat.
But the changes were unsuccessful. Bank of America offered a final loan extension set to expire on June 29, and ultimately ended its relationship with the company. According to court documents, the bank’s analysts noted that “cash generated during the Pandemic surge—when AGR’s [America’s Gardening Resource] ESOP-fueled share price tripled—was primarily paid out as equity to shareholders,” in reference to Gardener’s employee stock ownership plan.
The company then launched a “series of strategic actions” to stabilize operations, including staff layoffs, hiring a new marketing firm and making changes to its shipping partnerships. These actions failed as well, and it “became clear” to Gardener’s leadership that the way forward “was to engage in a sale process,” the bankruptcy filing states. Gardener’s engaged the investment bank Tower Partners, which reached out to 1,115 potential buyers.
Competitor Gardens Alive Inc. is now poised to purchase the Gardener’s assets for $9 million. Notably absent from the deal, however, is the employee stock ownership plan.
Gardener’s ESOP trust owns the company’s stock, with employees as the beneficiaries. Since filing for bankruptcy, Gardener’s has stopped making contributions to the trust, citing its “current financial condition.” It remains unclear whether there will be any money left in the trust for current or retired employees after the deal closes.
“If the company is sold … [the ESOP] is basically a plan that has no assets and gets wound down,” said Matt Cropp, executive director of the Vermont Employee Ownership Center.
It’s also unclear whether Gardener’s has the money to repay most of its creditors. As it stands, the company owes over $4.5 million to 30 unsecured creditors — creditors without collateral — including four Vermont vendors.
A Gardener’s spokesperson declined to comment Thursday on the future of the ESOP and whether the company would be able to pay back its creditors.
“It goes secured debt, administrative debt, and then unsecured debt. So, [unsecured creditors] get whatever’s left over,” said Christopher M. Condon, an adjunct bankruptcy and corporate law professor at Vermont Law and Graduate School.
Gardener’s currently has just $4.2 million on hand and owes $8.2 million to banks, according to court documents.
Condon said there’s a chance the unsecured creditors could recoup their money if it is found Gardener’s owes less than anticipated as the bankruptcy case continues.
“The numbers aren’t necessarily accurate on day one because the books and records change all the time. It depends on when you get the invoice, what the billing cycle is, all that stuff,” he said.
Another buyer could also emerge and submit a higher bid for the company’s assets, increasing the pool of money available to pay back creditors.
“It’s theoretically possible that somebody else bids and the purchase price goes up,” Condon said.
However, bankruptcy documents indicate that Gardener’s wants to expedite the sale process, which may limit other bids.
“[Gardener’s Supply Co.] believe that expediting approval of the Bid Procedures is unlikely to prejudice any party in interest or impair the competitiveness of the sale process,” Gardener’s lawyers wrote.
“They don’t really wanna get into a bidding war… The buyers want to be in as much control as possible,” Condon said.