Farm equipment dealers who cater to row-crop operations with large ag machinery and implements have been particularly affected by the downturn in the ag economy. And the beat down goes on. In January, U.S. sales of large tractor and com­bines fell by 34% and Canadian sales were down by 18%. This marked the 36th consecutive month of year-over-year declines.

In response to this ongoing trend and to position itself to emerge from the downturn stronger with stream­lined operations, Titan Machinery announced it is closing several retail locations and introducing a new oper­ating model that refocuses its local operations on parts and service sales.

On Feb. 9, Titan said it would be consolidating more than a dozen of its ag equipment locations during the first half of 2017. Lost in the reporting of the announcement was the fact that North America’s larg­est farm machinery dealer group is also completely restructuring operations at its remaining locations. The company is evolving the Strong Store Manager model that it used to expand to nearly 100 stores after going public in 2007 to what it calls, the Expert Team model.

“Reorganization of dealership man­agement will result in area managers with a focus on certain offerings (e.g., equipment sales, equipment rental, product support) rather than each location having a manager for the entire business,” said Mig Dobre, ana­lyst with RW Baird in a note to inves­tors. “Management expects this to have some cost savings but we under­stand the primary motive to be more focused with talented management in each business area.”

Store Closings 

The stores affected by the most recent announcement are many of the company’s smaller locations. They include:

  • Iowa — Anthon and Cherokee
  • Minnesota — Redwood Falls and Thief River Falls
  • Nebraska — Broken Bow and Wahoo
  • North Dakota — Arthur, Kintyre, Kulm and Mayville
  • South Dakota — Milbank and Redfield

In addition to these stores, one con­struction equipment store closed in Williston, N.D., in December of last year.

Before its announcement, Titan was operating 89 store locations in 11 states, as well as 20 European locations. Some of its retail loca­tions were focused on construc­tion equipment, but a large major­ity focus on farm machines. In terms of number of locations, Titan is believed to be the largest ag equipment retailer worldwide.

In an interview with Ag Equipment Intelligence, David Meyer, Titan’s chairman and CEO, said, “This is not a knee-jerk decision. This is something we’ve been analyzing for a long time; how to really optimize our footprint for long term success.”

“Farms are getting fewer and larger and experiencing their own consoli­dation. At the same time, equipment keeps getting larger, more productive and increasingly complex, and it is our job to provide better solutions. So, what we do need, are experts at our stores to serve these customers. To have these experts, we need scale in the dealerships. We need highly trained technicians, as well as parts experts and a wide breadth of parts inventory. Our Expert Team model supports these efforts.”

Meyer added, “I want to empha­size that Titan is not abandoning customers in local markets who are impacted by the store closings. Some of these locations are within 20 miles of our other stores. Our sales and service will be consoli­dated into these neighboring stores and we will invest in field service trucks, parts drop-offs and other support in these communities.”

Strong to Expert

Titan’s restruc­turing will move the organization away from its Strong Store Manager structure, where one individu­al with only their local team was responsible for meeting increasing customer needs, to the Expert Team model. Under this new structure, Area Managers for both Sales and Product Support partner together to manage 2-4 store locations and pull upon the combined resources and expertise of the area to serve cus­tomers. There are 17 of these areas, which are divided into 4 regions (southwest, southeast, north­west, northeast). Local Parts and Service employees will report up through the Area Product Support Manager and the Equipment Sales Consultants will report up through the Area Sales Manager.

According to Jeff Bowman, Titan Machinery’s chief marketing officer, Precision Specialists will work closely with both area sales and product sup­port teams to deliver precision farm­ing and support solutions. “This oper­ating shift allows us to bring the full resources of Titan for a customer as opposed to putting all the responsibil­ity for meeting his need on the back of one store manager working with only the expertise available at one store. Our customers will get the benefit of the complete Titan team effort.”

“This restructuring will also shift more resources toward our product support business,” said Meyer. “We’re seeing a lot more complexity in the equipment that requires a higher level of expertise in both parts and service. The new structure empha­sizes the growing importance of these areas and this requires a dedicated segment of the compa­ny. This also opens up new career paths for some of our most tal­ented employees, who can grow from our front line service techni­cian and parts counter roles into senior leaders.”

Financial Perspective

Titan also expects to reduce overall expenses after the restructur­ing. “Titan aims to mitigate the revenue impact of the store clo­sures by strategically reducing store density in selected mar­kets and serving affected customers through adjacent locations,” Rick Nelson, analyst for Stephens Inc., said in a note.

According to Nelson, the store clos­ings are expected to reduce reve­nue by $40 million on an annualized basis, or about 3.5% of total company revenue. The impact to fiscal 2018 revenues is expected to be a reduc­tion of $30 million. However, with expected cost savings, Titan’s pre-tax income is expected to increase by approximately $16 million (or $0.44 per diluted share) on an annual basis and $13 million (or $0.37 per diluted share) for fiscal 2018.

— Ag Equipment Intelligence, February 2017