Trouble at Foster & Gallagher
The recent executive departures at Foster & Gallagher have led observers to think what was once unthinkable: that the horticultural cataloger is in trouble. And assorted evidence shows that they would be right.
For example, an internal memo indicates that the employee-owned firm’s annual sales fell from $476 million in 1997 to $337 million last year, resulting in a $7.7 million loss.
And a resignation letter written by departing CEO Robert Ostertag states that the board and managers believe that “an infusion of capital is necessary to sustain the company,” according to the Peoria Journal Star.
Finally, the company and several executives are fighting a lawsuit over an alleged 91% drop in the value of the employee stock option plan (ESOP).
The speculation started on June 13 when Foster & Gallagher announced that Ostertag had resigned as CEO. (DIRECT Newsline, June 13). That was followed less than a week later by the resignation of Dave Grim, president of the firm’s Spring Hill Nurseries group in Tripp City, OH.
And last Friday, the firm reported that three board members had resigned. They were Melvyn R. Regal, chairman; Joseph Z. Sudow, and Ellen D. Foster, the widow of founder Tom Foster.
Ostertag was unavailable for comment, and DIRECT Newsline was unable to reach Foster and Regal. Sudow, contacted at home, had no comment.
But according to the Peoria Journal Star, Ostertag wrote in his letter that the firm had suffered “irreparable damage due to the inordinate negative attention placed on sweepstakes marketing in 1998.”
Foster & Gallagher’s Michigan Bulb subsidiary relied heavily on direct mail sweepstakes to generate revenue before twice coming under fire from the Michigan Attorney
