Harbor Freight Tools

Company information

• Date founded: 1977
• Industry: Retail; wholesale
• Corporate headquarters: Calabasas, California
• Type: Private

Overview

Harbor Freight Tools USA Inc. operates discount tool and equipment retail stores worldwide and is a major company in the hand tools industry. The company was founded in 1977 as a small mail-order business by Eric L. Smidt. Smidt, who as of 2023 remained chairman and chief executive officer of the company, opened the first retail location in 1980 and expanded over the years. By 2023, the company had 1,400 retail locations. Harbor Freight sells its own line of tools that are manufactured in factories that supply other brands and are tested in the company’s labs and factories. It also sells related goods, including generators, shop equipment, lawn and garden equipment, and home improvement items such as television mounts, string lights, and flag pole kits. The company buys directly from the manufacturers and sells to consumers, allowing it to keep prices low.

The home improvement and do-it-yourself retail sector has increased since the late-2010s as home ownership has increased. In 2020, the global COVID-19 pandemic boosted activity in this sector even more as people spent significantly more time at home and began taking on new home improvement projects. Harbor Freight Tools reported 2022 revenue of over $5 billion.

History

Eric Smidt began selling tools by mail when he was seventeen years old. He started the business in 1977 by taking over a phone sales business his father, Allan, had founded in 1968. The father and son had a background in peddling various goods from a van in the San Fernando Valley of California. Allan’s wife, Dorothy, had been diagnosed with multiple sclerosis and the elder Smidt took his son on his peddling rounds.

When Eric Smidt was nine, his mother’s illness became worse, and his father placed him in an orphanage. He returned home two years later but was soon sent to live with a paternal aunt in Tennessee until he was nearly sixteen. On his sixteenth birthday, his father took him to get his driver’s license in the morning and, by the afternoon, had helped him sign a lease on an apartment more than a mile from his parents’ home. When he was not attending high school, he worked at the phone sales company his father had set up.

Father and son began importing tools and selling them in 1977 under the business name Harbor Freight Salvage. Eric Smidt flew to Japan when he was seventeen for meetings with suppliers. He then purchased the tools directly from the suppliers, cutting out the importers and boosting profits. Several years of phone sales allowed them to open their first retail location in Lexington, Kentucky, in 1980. Brick-and-mortar locations grew slowly while the company maintained a catalog sales business.

The pair were equal partners until the late 1990s when Smidt bought out his father. The elder Smidt remained involved until 2010, when he sued his son over management decisions. He accused his son of using company money for purchases of art and a Beverly Hills estate. The case was settled out of court. By that time, the company was opening its second distribution center and had more than three hundred retail stores. Smidt moved its headquarters from Camarillo to Calabasas, California. The one thousandth Harbor Freight retail location opened in 2019.

Impact

Consumers and consumer advocates have called out Harbor Freight Tools for multiple violations of consumer rights and unfair selling practices. In 2015, consumers filed a class-action lawsuit claiming Harbor Freight engaged in deceptive pricing practices. They said the company falsely advertised regular prices for products that were higher than prices Harbor Freight described as “sale” prices, but the items had never been offered at the higher “normal” prices. The company denied any wrongdoing but agreed to a settlement deal.

Several customers also filed lawsuits related to a 2018 recall of more than one million chainsaws sold by Harbor Freight. The plaintiffs alleged the chainsaws had defective power switches that caused the blade to continue to run until the user disconnected them from their power sources. While Harbor Freight recalled the chainsaws, the plaintiffs said the company did not go far enough in making replacements available or notifying customers. One case was withdrawn, while another was settled in 2021.

Eric Smidt founded the Smidt Foundation in 2017. The private grantmaking foundation has supported hospitals, charter schools, and other organizations. The Harbor Freight Tools Foundation, which is part of the Smidt Foundation, supports nonprofit organizations in three categories: K-12 public education, veterans, and fire and police departments. The company has donated tools to classrooms across the country and other products, such as greenhouses, to schools. Tools for Schools supports trades education and awards annual prizes for excellence to skilled trades teachers and schools. The foundation has contributed to the National Coalition for Homeless Veterans, which recognized the Harbor Freight company with an Outstanding Corporate Partner Award and other organizations serving veterans. It also has provided toiletries and other supplies to patients in a Veterans Administration hospital. Harbor Freight donates tools to police and fire stations and gift cards for their fundraisers.

During the early months of the global COVID-19 pandemic in 2020, personal protective equipment (PPE) for medical personnel was in short supply. Harbor Freight Tools donated more than $10 million worth of PPE to one thousand US hospitals. The Smidt Foundation also donated more than $3 million in grants to help families in need with food and other emergency aid.

In 2018, Eric and Susan Smidt and the Smidt Foundation made the largest single gift the Heart Institute at Cedars-Sinai Medical Center in Los Angeles had ever received. It was renamed the Smidt Heart Institute in their honor.

The company has published a supplier code of conduct addressing social and environmental responsibility (SER). The document indicates the company was working to ensure goods were produced ethically and with the health and safety of workers and society in mind. The company followed International Labour Organization standards that promoted safe and fair working conditions and opportunities for women and men.

The company has landed spots on many Forbes lists. Among these, it was number one among Best Employers for Veterans in 2020. In 2021, Harbor Freight was ranked 192nd among Best Employers for Women, 343rd among the Best Employers for Diversity, and 234th in America’s Best Employers. In 2023, Forbes named Harbor Freight one of America’s Best Large Employers for the third consecutive year.

Bibliography

“About Us.” Harbor Freight Tools, 2023, www.harborfreight.com/about-us. Accessed 1 May 2023.

“Founder of Harbor Freight Tools Sues CEO Son.” The San Diego Union-Tribune, 21 July 2010, www.sandiegouniontribune.com/sdut-founder-of-harbor-freight-tools-sues-ceo-son-2010jul21-story.html. Accessed 4 Aug. 2021.

Baxter, Brian. “Harbor Freight Tools Hires Skadden’s L.A. Real Estate Head.” Bloomberg Law, 3 Feb. 2021, news.bloomberglaw.com/us-law-week/harbor-freight-tools-hires-skaddens-l-a-real-estate-head. Accessed 4 Aug. 2021.

Fleishman, Jeffrey. “The Man Behind the $25-Million Gift to LACMA Once Spent Years in an Orphanage.” Los Angeles Times, 28 Oct. 2016, www.latimes.com/entertainment/movies/la-et-cm-lacma-smidt-gift-20161028-story.html. Accessed 4 Aug. 2021.

“Giving Back.” Harbor Freight Tools, www.harborfreightgivingback.com/. Accessed 4 Aug. 2021.

"Harbor Freight Chainsaw Settlement." Top Class Actions, 2023, topclassactions.com/lawsuit-settlements/closed-settlements/harbor-freight-chainsaw-settlement-2. Accessed 1 May 2023.

“Harbor Freight Tools.” Forbes, 2021, www.forbes.com/companies/harbor-freight-tools/?sh=77a4fb2c1ee0. Accessed 4 Aug. 2021.

“Harbor Freight Tools Named to Forbes List of the Best Large Employers for Third Consecutive Year.” Harbor Freight Newsroom, 15 Feb. 2023, newsroom.harborfreight.com/corporate/corporate-news/2023/02/harbor-freight-tools-named-to-forbes-list-of-the-best-large-employers-for-third-consecutive-year. Accessed 1 May 2023.

“Harbor Freight Tools USA Inc.” Bloomberg, 2021, www.bloomberg.com/profile/company/3475870Z:US. Accessed 4 Aug. 2021.

Sortor, Emily. “Harbor Freight Fake Sale Class Action Settlement Checks Mailed.” Top Class Actions, 17 May 2018, topclassactions.com/lawsuit-settlements/lawsuit-news/846170-harbor-freight-fake-sale-class-action-settlement-checks-mailed/. Accessed 4 Aug. 2021.

Young, Erica. “Harbor Freight’s New Stores: A Sign of Home Improvement Market Health.” Family Handyman, 1 Oct. 2020, www.familyhandyman.com/article/harbor-freights-new-stores-a-sign-of-market-health/. Accessed 4 Aug. 2021.