Industry Description
The nursery & garden stores industry retails a broad range of nursery and garden products to households and the farming community (NAICS 444200). Retailed products include trees, shrubs, plants, seeds, bulbs and sod. This industry also retails farm supplies such as animal feed, excluding pet food.
The following are some basic characteristics of the nursery & garden stores industry:
- Nursery & garden stores industry has a combined revenue of $42.3 billion, with a growth rate of 1.2% in 2017-2022
- There are approximately 19,000 businesses as of 2022
- The nursery & garden stores industry employs approximately 192,000
Industry Trends
The industry is highly fragmented and has low levels of market share concentration, with the top four industry players comprising approximately 21% of revenue in 2022. The largest operators typically have stores in multiple states with paid employees, while small players own and operate independently in one or two states with no paid employees. Some key industry trends influencing the industry are (i) the COVID-19 pandemic, (ii) emphasis on sustainability, (iii) e-commerce and online sales, and (iv) diversification. Each of these is discussed in further detail below.
There has been a rise in the number of people interested in gardening due to the COVID-19 epidemic. The growth in gardening is attributed to more people staying home because of the pandemic. During the height of the pandemic because of being home more, 34% of people planted a garden because of being at home. This trend continued in 2021 where 42% of people increased their gardening because of the COVID-19 pandemic. Consequently, there has been a growth in the demand for nurseries and garden shops as more people desire to begin or develop their own gardens.
The increase in the number of consumers concerned about the environment has increased. As a result, consumers have emphasized sustainability. This emphasis has led to an increase in demand for ecologically responsible products and techniques. In response to this trend, industry players have stocked their shelves with organic fertilizers, natural pest control remedies, and other environmentally friendly gardening materials. The need for sustainability is also attributed to the increased need for collective environmental conservation to mitigate looming dangers.
The industry is seeing an increase in e-commerce and online sales. Even though most customers choose to buy their plants and gardening materials in physical stores, the number of transactions conducted over the internet has been expanding over the last several years. Online sales in this industry have increased by 55% year-over-year. The response of industry players to this trend has been expanding their online presence and introducing online buying and delivery alternatives. This trend requires all industry players to align their transactions with fast-advancing technology.
There has been an increase in diversification among industry products and services. In addition to selling traditional gardening supplies, many industry players are diversifying their inventories to include items such as pet products, beekeeping supplies, and garden decorations. Having these products or diversifying your offerings to include these products are necessary for today’s more sophisticated and demanding consumers. Diversifying products and services are part of the ongoing trend in the industry to weather market risks and uncertainties. Several industry players are now providing consumers with landscaping and design services to assist them in developing their ideal gardening area.
The industry is impacted by external forces like the COVID-19 pandemic, an emphasis on sustainability, e-commerce and online sales, and diversification. The COVID-19 pandemic has increased the number of people gardening which is increasing industry demand. Consumers have become more environment conscious, increasing the demand for sustainable products and techniques. E-commerce and online sales are expanding into this industry and rapidly growing. Having diversified products and services are necessary because consumer’s demands are always shifting and diversifying accommodates this. This industry constantly faces changing trends and industry players need to respond to consumers’ shifting their preferences and requirements because of these trend changes to continue being successful.
Key Performance Metrics
In evaluating nursery & garden stores, the following metrics can provide useful information in comparing a subject company to guideline companies and transactions:
- Sales per square foot
- Inventory turnover rate
- Revenue growth
- Daily average customer
- Average spent per customer
- Client satisfaction and retention
Industry Organizations & Publications
The following organizations publish useful information:
- AmericanHort
- American Community Garden Association
- American Horticultural Society
- National Garden Clubs, Inc.
- National Gardening Association
- Garden Centers of America
Guideline Information: Private Purchase Transactions
Most nursery & garden stores are privately owned. While there are publicly traded companies, data regarding the sale of 100% of closely held nursery & garden stores is generally the best source of information to appraise a subject company.
The following are typical appraisal multiples from sale of nursery & garden stores:
- Revenue multiple between 0.25 and 1.01 times
- Gross profit multiples between 0.50 and 2.72 times
- EBITDA multiples between 1.5 and 12.9 times
In selecting guideline transactions, it is of critical importance to select transactions that are similar to the subject company. Unique factors for any subject company must be considered to yield credible results. Additionally, industry economic conditions also vary over time, which must also be considered.
Guideline Information: Publicly Traded Companies
Most nursery & garden stores are privately owned; however, there are a few that are publicly traded, meaning it is possible to compare a subject company based on industry metrics and appraise using industry multiples. However, as with the guideline transactions described above, it is of critical importance to select publicly traded companies that are similar to the subject company. Also be aware that multiples of certain publicly traded companies may not accurately reflect a subject company.
The largest publicly traded US nursery & garden stores are:
- Nutrien Ltd. (NTR) – $51.0 billion market capitalization
- Tractor Supply Company (TSCO) – $25.5 billion market capitalization
- FMC Corporation (FMC) – $16.0 billion market capitalization
- The Scotts Miracle-Gro Company (SMG) – $4.2 billion market capitalization
The Price-to-Earnings (P/E) ratios of these four companies range between 3.8 times and 24.0 times.
Appraisal Rules of Thumb
Please note you should never use a Rule of Thumb in place of a professional appraisal. You will never see a competent professional appraiser do their work using a Rule of Thumb. The professional standards that govern professional appraisal practice, which all professional appraisers should follow, specifically prohibit the use of Rules of Thumb.
Nursery & garden stores are businesses sold based on sound economics. These economic considerations can be measured using the key performance indicators described above, but such economics cannot be accurately summarized in these simple formulae.