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NEWS & INFORMATION FOR THE RUNNING & TRIATHLON MARKET
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ISSUE 1137 SEPTEMBER 12, 2011
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NEWS & INFORMATION FOR THE RUNNING & TRIATHLON MARKET
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UGG AUSTRALIA Launches Campaign Targeting Men SMITH & WESSON Fiscal Q1 Profit Shrinks Despite Continued Firearms Strength UNDER ARMOUR'S Wayne Marino to Retire, Kip Fulks Becomes COO GOVERNOR BROWN Vetoes California's Snowsports Helmet Law MOVERS & SHAKERS THE LULULEMON Juggernaut Continues in Q2 THE SPORTING GOODS INDUSTRY Hall of Fame Committee Announces the Class of 2012 NIKE Admits to False Advertising in China
12 FINISH LINE Returns To Running Specialty Roots
18 I AM...SGB PERFORMANCE Ted Kushion, Merchandise Manager, Gazelle Sports, Grand Rapids, MI SportsOneSource, LLC 2151 Hawkins Street • Suite 200 • Charlotte • NC • 28203 t. 704-987-3450 • f. 704-987-3455 www.SportsOneSource.com
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WEEK 1137 | SGBweekly.com
SMITH & WESSON FISCAL Q1 PROFIT SHRINKS DESPITE CONTINUED FIREARMS STRENGTH
UGG AUSTRALIA LAUNCHES CAMPAIGN TARGETING MEN
Looking to remove its stigma of being a female brand, Ugg launched its first-ever broadcast commercial on Monday Night Football on ESPN on September 12. The commercial stars New England Patriot's quarterback Tom Brady and his dog, Lua. The men's campaign will also extend to online digital, national print and outdoor media. "Launching our men's campaign with TV illustrates the commitment we have to this initiative and to our partnership with Tom Brady," said UGG Australia president Constance X. Rishwain. "Working with Tom allows us to celebrate the heritage of UGG and at the same time introduce it to a new generation of modern men like him who appreciate great design paired with the UGG 'inside' experience." The two-time NFL Most Valuable Player also stars in a 30 second spot called "Steps" with music by hip hop artist Mos Def also launched across online digital media platforms including ESPN.com, CBS.com, Pandora, Hulu and Brightroll on September 7. The "Steps" spot follows Brady through the steps of his life. Wearing a variety of UGG Men's footwear, viewers follow him on his journey through changing seasons and environments that ultimately lead to the stadium. National print featuring Brady includes GQ, Esquire, Details, ESPN the Magazine and Men's Journal, while outdoor media can be seen in New York, Boston and Los Angeles. Three other campaign spots -"Drums", "1000 CCs" and "New York City", will air online and focus on the featured Fall/Winter 2011 product in the collection. The campaign features five of Brady's favorite Ugg styles: the Roxford twinface sneaker, the Rockville motorcycle inspired boot, the cold weather Butte boot, the rugged Stoneman boot and the Ascot slipper. "Our goal is to introduce men to the Ugg experience through this campaign by pairing the rugged, masculine design sensibility of our collection with the unique comfort you get only when you put your foot inside our shoes and take a few steps," said Rishwain. Brady is aligned with only two companies, Under Armour, in which he owns equity, and UGG. 4
SGB PERFORMANCE l SEPTEMBER 12, 2011
Smith & Wesson Holding Corporation management said last week that the company’s fiscal first quarter results demonstrated that consumer demand for their firearms remained strong, evidenced by the increased sales in its Smith & Wesson brand pistols and modern sporting rifles. But the company saw a weaker Security Solutions business, tighter margins and lower prices impact the bottom line for the three-month period ended July 31. Fiscal first quarter revenues were up 4.5 percent to $99.2 million, with Firearm division revenues increasing 18.0 percent to $91.7 million, with strength across “nearly all product lines.” Security Solutions division revenue fell 56.4 percent to $7.5 million for the first quarter. The Smith & Wesson brand handgun business posted a 26.6 percent year-over-year revenue increase for the quarter to $53.8 million. Management said the trend today continued to be toward smaller firearms designed for conceal/carry and personal protection. “As we've introduced new products that are aligned with this trend and modified our manufacturing capability accordingly, we have experienced the anticipated reduction in our overall average selling price,” said James Debney, president of the Firearms division. Net income was $791,000, or a penny per share, in the fiscal first quarter, compared with net income of $3.7 million, or 6 cents per share last year, excluding a one-time benefit of four cents per share related to the acquisition of the Security Solutions business.
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UNDER ARMOUR'S WAYNE MARINO TO RETIRE, KIP FULKS BECOMES COO
Under Armour, Inc. announced that Wayne Marino is retiring as chief operating officer of the company. Marino will transition his areas of responsibility over the next six months and will remain on the executive team. Kip Fulks has assumed additional responsibilities and has been appointed chief operating officer, effective immediately. Fulks was most recently executive vice president of product, overseeing the company's apparel, footwear and accessories products. As COO, Fulks will continue to oversee the design and development of the company's products, and will add to his responsibilities the oversight of the company's sourcing and information technology areas. Marino has been with Under Armour for nearly eight years, starting as CFO. "Wayne has made significant contributions to the Under Armour Brand and has been a true leader in the development of an operational platform to support a multi-billion dollar global business. I value our friendship and partnership over the years and thank him for his Under Armour Chief Operating Officer, Kip Fulks unwavering commitment and service to the brand," said Kevin Plank, CEO and founder of Under Armour. Plank continued, "I have asked Kip, a tested leader at our company with great instincts and proven results in managing growth in product and supply chain, to take on additional responsibility and further align our product and sourcing areas to take the brand and our business to the next level." Fulks will initiate the search for additional senior management personnel, beginning with the newly created chief supply chain officer position. Under Armour also has established the role of chief performance officer, appointing Under Armour board member and founder of Rosewood Capital, Chip Adams, to this new executive position with primary responsibility for the development of company-wide business strategy and organizational alignment and processes. Finally, Adam Peake, who has served in various sales roles with Under Armour, was promoted to SVP of U.S. sales. "The new leadership positions and alignment of our business solidify Under Armour's foundation for long-term success and demonstrate our commitment to delivering best-in-class product as we strive to empower athletes everywhere," said Plank.
GOVERNOR BROWN VETOES CALIFORNIA'S SNOWSPORTS HELMET LAW 6
SGB PERFORMANCE l SEPTEMBER 12, 2011
California Governor Jerry Brown vetoed a bill last week that would have required children to wear helmets on ski slopes. The bill would have imposed criminal penalties on a child under the age of 18 and their parents if the child skied or was snowboarding without a helmet. â€œWhile I appreciate the value of wearing a ski helmet, I am concerned about the continuing and seemingly inexorable transfer of authority from parents to the state. Not every human problem deserves a law," Brown wrote in a veto message letter to the California State Senate. "I believe parents have the ability and responsibility to make good choices for their children." Close to 1.3 million helmets, worth an estimated $111.7 million, were sold by specialty ski and snowboard shops in the 2010-11 season, according to the SIA 2011 Intelligence Report which represented 7 percent unit growth and 18 percent dollar growth from the prior season.
WHERE STRATEGIC DECISIONS BEGIN
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NIKE ADMITS TO FALSE ADVERTISING IN CHINA
THE LULULEMON JUGGERNAUT CONTINUES IN Q2
Nike China released a statement last week admitting to false advertising, Caixin.com reported. The advertisement was for Nike Zoom Hyperdunk 2011, which has been on sale since end-July. Nike said in a statement that an initial round of investigations found that the advertisement wrongfully stated that there are two Zoom Air cushions in the Nike Zoom Hyperdunk 2011 footwear. The statement also said that customers will be refunded if they purchased the shoes with an original receipt before September 9, 2011.
Lululemon Athletica, Inc. reported another blow-out quarter and again raised its guidance for the year, but the yoga-themed retailer continued to offer a conservative outlook due to both challenging year-ago comparisons and the uncertain economy. The company anticipates fiscal third quarter comp increases in the low- to mid-teens in percentage terms, representing a pull-back from the 20 percent gain for the fiscal second quarter ended July 31. "As always our guidance, our outlook, is influenced by what is going on in the macro economy - we all read the headlines," said company Chief Financial Officer John Currie during a conference call with analysts. "Having said that, we're not saying that we are seeing that in our business, but we are just being cautious." In the second quarter, earnings soared 76.1 percent to $38.4 million, or 26 cents a share, while revenues jumped 39.5 percent to $212.3 million. Results exceeded their previous forecast delivered during first quarter results calling for EPS ranging between 21 and 22 cents a share on sales ranging between $200 million and $205 million. Beside the 20 percent comp gain, top-line growth was driven by the addition of 18 net new corporate-owned stores in North America, three stores in Australia, and a stronger Canadian and Australian dollar, which had the effect of increasing revenues by $8.3 million or 4.1 percent. Direct-to-consumer sales doubled to $18.6 million from $9.6 million, driven by increased traffic and conversion. Other revenue - including franchise, wholesale, showrooms and outlets – grew to $15.5 million from $13.1 million in the second quarter last year. "Our business remained very healthy through the second quarter," said Christine Day, CEO, on a conference call with analysts. "Importantly, our success continues to be based on running a healthy, brand-focused business that consistently delivers product quality and innovation along with a great guest experience." Revenues continue to be driven by its core yoga and running lines, helped by new seamless technologies and its Light As Air product, exemplified by ultralight jackets, run skirts, and run tops. Management said the men's business, which accounts for 15 percent of sales, has been strengthening, driven by technical shirts and shorts. A new cycling collection "did very well" and will be expanded to a fuller line. Outerwear is "on fire," said Sheree Waterson, EVP and chief product officer, and will likewise be broadened.
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THE SPORTING GOODS INDUSTRY HALL OF FAME COMMITTEE ANNOUNCES THE CLASS OF 2012 The Sporting Goods Industry Hall of Fame Committee elected four industry leaders to join its 2012 Class. The inductees, who will officially be inducted at the NSGA Management Conference & Team Dealer Summit next May, include Don Lucas, Luke's Locker; Randy Ruch, Schuylkill Valley Sports; Neil Stillwell, The Game; and the late Cliff Keen, Cliff Keen Athletic. According to Committee Chairman Bob Dickman, Senior Vice President of Purchasing for BSN Sports, "These four inductees have done extraordinary things in their careers to move the sporting goods industry forward. They are all truly leaders, innovators, and industry icons, and I am looking forward to the opportunity to induct them at the 2012 NSGA Management Conference & Team Dealer Summit." With the induction of these honorees, the Sporting Goods Industry Hall of Fame will have inducted 154 of the industry's pioneers and leaders since 1956.
Cliff Keen, Cliff Keen Athletic The late Cliff Keen’s accomplishments in wrestling are numerous. As the head wrestling coach at the University of Michigan for 45 years from 10
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1925-1970, Keen's teams went an amazing 268-91-9, won 13 Big Ten team Championships, and had 68 All-Americans. Individual wrestlers he coached won 11 National Championships and 81 individual Big Ten Championships. He also coached the 1948 U.S. Olympic wrestling team, served on the U.S. Olympic Committee, and wrote a book on the fundamentals of amateur wrestling, Championship Wrestling. One of his biggest accomplishments, however, was inventing the first wrestling ear guard to protect wrestlers from "cauliflower ear", a deformation caused from repeated blows to the ear. This invention has become mandatory for wrestlers to wear in practice and matches today. In 1958, Keen and his son, Jim, started Cliff Keen Athletic. Today the company provides protective equipment, uniforms and workout gear for wrestlers across the world. According to his grandson, Tom Keen, "He was a builder of men. He influenced so many people throughout his life that have had lasting impacts on not only the sport of wrestling, but society as a whole." Don Lucas, Founder/Owner, Luke's Locker Even while having a successful career as a commercial real estate attorney in the 1960s, Don Lucas had a passion for running but was frustrated by the lack of running shoe options for his small running community in Dallas, TX. Becoming one of the pioneers of specialty running, Lucas created Luke's Locker in 1970 to meet those needs. Today, Luke's Locker has nine locations throughout Texas, and the company is seen as one of the top specialty running retailers in the country. Run by members of his family, including his wife and three sons, the company is responsible for hundreds of run-
ning fundraisers that give back thousands of dollars to their local communities. According to Charlie Wright, partner at Bob Wood & Associates, "We all owe Don Lucas a debt of gratitude for his passion and persistence in bringing better running shoes and creating better running events for the professional and weekend runner." Randy Ruch, Founder/Retired CEO, Schuylkill Valley Sports Randy Ruch is the founder, and retired CEO of Schuylkill Valley Sports, a 19-store retail chain based in Pottstown, PA. After earning a bachelor's degree in mathematics education from Villanova University, Ruch founded Schuylkill Valley Sports in 1971, building the company from a one-store company to a well established 19-store regional chain with a thriving team business, serving Eastern Pennsylvania and New Jersey. He was very active in supporting the sporting goods industry, including serving with distinction on NSGA's Board of Directors for six years but was also dedicated to his community, serving on various boards and committees. For over 20 years, Ruch served on the Board of the Phoenixville Area YMCA, and as its chairman in 2005-06. Neil Stillwell, Founder, The Game Headwear Neil Stillwell began his career by opening Neil's Sport Shop in Pheonix City, AL, which grew to include nine retail stores across two states. As a pioneer in the collegiate licensed product and souvenir concession businesses, he became the first football merchandise souvenir concessionaire at Auburn University, taking over the football stadium merchandise sales at the University of Alabama, University of Georgia, Florida State University, University of Florida, and Clemson University. In 1985, Stillwell founded The Game Headwear Co., which has been instrumental in expanding the collegiate headwear business in the U.S. due to its innovative designs and quality manufacturing. The Game was the first branded headwear company to place its logo on the outside of caps, a practice that has become the industry standard, and Stillwell and his company were the first to sign endorsement contracts with college football coaches to wear their caps on the sidelines.
MOVERS & SHAKERS Performance Bicycle appointed Mark Leydecker as SVP of merchandising. He had worked for the cycling retailer from 1995 to 2005 but most recently served as the managing director for Mavic USA and led its U.S. division. Former Mizuno Corporation Chairman of the Board and Representative Director, Masato Mizuno has been appointed to the position of CEO of the Tokyo 2020 Bid Committee by the Japanese Olympic Committee (JOC) Executive Board. As a result, Mizuno resigned from his position with Mizuno Corporation on September 5 to avoid a conflict of interest. Easton Sports, Inc. has named John Graham SVP commerce, effective mid-September. Graham's most recent role was Nike's commercial director of action sports. Mountain Hardwear, Inc. has appointed Matt Page as VP, global apparel and Ted Ganio was promoted to VP, global equipment & innovation. Page was most recently at The North Face, where he led the brand's global actions sports business. Ganio has been with Mountain Hardwear, a division of Columbia Sportswear, since 2004. REI promoted Rick Bingle to the position of VP, supply chain. Everlast Worldwide signed former college football player of the year and Super Bowl champion Reggie Bush, along with former Biggest Loser trainer and two-time Golden Gloves Champion, Cara Castronuova, to endorsement deals. Legendary softball pitcher Jennie Finch has been hired as an endorser for Timex and will wear a GPS-enabled Timex watch when she runs the ING New York City Marathon 2011, on Sunday, November 6. WEEK 1137 | SGBweekly.com
FINISH LINE RETURNS TO RUNNING SPECIALTY ROOTS In what promises to shake-up - or wake-up - the running specialty community, The Finish Line, Inc. has invested $8.5 million to acquire the assets of and assume certain liabilities of The Running Company. Key members of the 18-store chain, including general manager Ben Cooke, are expected to remain in place following the acquisition. A Finish Line spokesperson founder, Gene Mitchell, is helping through the transition and is having conversations regarding longerterm opportunities. Mitchell, a competitive runner who opened the first store in 1996, revealed to SGB Weekly that he had owned cumulatively more than 80 percent of the business. Some locations were owned in partnership. The stores, with consolidated annual sales of approximately $19 million, operate across several states. A few of the core banners in12
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clude Greater Boston Running Company, Texas Running Company, Georgetown Running Company, Princeton Running Company, and New York Running Company. In all, the company has five stores in New Jersey; three each in New York, Massachusetts, and Texas; two in the Washington, D.C. area; and one each in Connecticut and Florida. Many running specialty veterans feel a larger player entering the space was inevitable given the recent success seen by the channel as well as strength in the lightweight running and tech running categories. "I think our business is strong right now and it looks like it will continue to be strong into the future," said Curt Munson, owner of Playmakers in Okemos, MI. "That basically drives more people to get into the market so there's no surprise you're going to see more competition, whether its Foot Locker doing their thing, or Finish Line, Zappos or Dick's."
“The acquisition of The Running Company by Finish Line is a positive validation that the specialty run channel consumer experience is one that will be more relevant in the future," said Jim Weber, president and CEO of Brooks Sports. "The best stores are the center of the running community where they operate, focus on only the best runable shoes and present them with a focus on biomechanics and fit. The investment also reinforces the current and anticipated growth of the sport.” John Rogers, owner of Maine Running Company in Portland, ME, was among the many wondering whether a larger player will be able to meet the needs of the specialty consumer. "In what has been a difficult model for chain stores to execute, it will be interesting how Finish Line executes a model which traditionally has a vested community entrenched owner, a culturally connected and well-educated staff and a high level service environment," said Rogers. Finish Line plans to keep the stores operating under their current banners and "will retain the culture and outstanding customer service that has made them successful." The company noted that the stores have earned a loyal following of serious runners who demand expert advice and precision-fitted running shoes and apparel. "This acquisition is an important step in our strategic plan to drive growth outside of our core Finish Line business," said The Finish Line Chairman and CEO Glenn Lyon, in a statement. "We have a tremendous growth opportunity within the specialty running business with this acquisition as the foundation of that growth. We plan to expand the number of stores and develop the chain's first e-commerce capability as well as pursue other potential acquisitions in the specialty running business. The dedicated team we have in place to drive growth outside of our core business will focus on maximizing this opportunity which clearly leverages our company's strengths and core competencies." Mitchell said the company decided to sell to Finish Line "to reach as many running enthusiasts as possible and this will accelerate that goal." Finish Line is expected to assist with back office functions, inventory replenishment and operating systems. "The operational expertise and knowledge that Finish Line can provide will enhance our business operations and allow for accelerated growth without damaging the culture which is essential for us," said Mitchell. "This is not about changing our product mix or culture. It is about two teams joining together to make a stronger business unit and we think this was accomplished." He stressed that the vendor community as well as consumers will not see a change. "Running specialty is unique and the relationships that we have with our vendors is very important to us and those will remain intact," said Mitchell. "The consumers will see the same great service and familyoperated business they have always seen. We consider the 300 people that work at the Running Company all family and that family mindset, spirit and enthusiasm is part of our heritage and why we are great at what we do which is providing the best service for all our consumers."
The news left several questions for the running specialty community. Finish Line declined further comment but is expected to provide more details during its fiscal second quarter conference call on September 23. One question concerned the financial details. A few thought paying $8.5 million for an 18-store chain doing $19 million annually seemed low and a sign that the business was struggling, perhaps due to recent expansion efforts. The sales level to some was also thought to be lower than expected considering that some locations, such as a New York Running Company store at Columbus Circle in New York City, had to be doing well above industry average. The average running store is believed to make around $1 million a year. Others noted that if stores are more concentrated in certain areas to offer greater convenience for consumers, sales-per-store could come in at a much lower rate. Mitchell further noted that the top-line performance may appear WEEK 1137 | SGBweekly.com
skewed because five stores are a year old or less and felt "by standards they were above the average." He added, "I think the price was fair. Not killer for either side. I think that is what we both wanted. Post closing everyone felt good as we move forward." The other issue to a few was that Finish Line brought a retailer with different store names, albeit all linked to the "Running Company." Even though Finish Line stated that it planned to keep the individual banners intact, many felt Finish Line would still use one name for marketing purposes as well as for economies of scale. Also, the country is filled with similar "Running Company" banners including Naperville Running Company, Portland Running Company, Colorado Running Company, etc. - that may cause confusion. Matt Powell, chief retail analyst at The SportsOneSource Group, sees the opportunity for Finish Line to expand with the existing concept. "There are plenty of cities without a “hometown” running shop,” he said. “The few that have them will be a minor problem. Why not "Chicago Running Company" instead of Naperville?" Nonetheless, Powell is not as convinced of the outsized growth potential for retailers reaching the serious run enthusiast. He estimates that the entire running specialty market is currently doing only $700 million with 600+ doors. Although some regions still have room for running shops, most have adequate coverage in place. Powell suspects if expansion efforts prove successful, Finish Line will look to buy other locations to enter crowded markets instead of building new stores. Powell also said that while this may impact and perhaps speed up expansion plans by Fleet Feet and Road Runner Sports, he was not confident that this would encourage larger players to switch current strategies. Foot Locker, Finish Line's closest competitor, in early 2010 opened two Foot Locker Run specialty stores in New York City and Edison, NJ, but showed little sign of rolling it out further. The Sports Authority is slowly expanding its S.A. Elite specialty concept, with plans to open three locations in Chicago this fall following a few locations opening last year in Denver and San Francisco. Other sporting goods chains such as Dick's Sporting Goods appear content to pursue the technical and lightweight running opportunity from existing big box locations. Paul Carrozza, owner of RunTex in Austin, TX, was enthused that a major player may help drive running participation. "It's great news if they're going to put the right effort behind it," he said. "If they're going to truly support the community, it will get people moving." Carrozza said he's "an athlete by heart and competition is good." He also met with Finish Line officials "while they were fishing around" for a new retail business venture and came away impressed. But he said Finish Line had to understand that running specialty is more of a "lifestyle business" than a retail business. "Getting into the business of selling running shoes is one thing, but I think the people who are effective and doing great in run specialty are those who are attending events, emphasizing training, and taking care 14
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RUNNING COMPANY LOCATIONS Bronxville Running Company, Bronxville, NY Florida Running Company, Coconut Grove, FL Georgetown Running Company, Washington, DC Georgetown Running Company, Chevy Chase, MD Greater Boston Running Company, Lexington, MA Greater Boston Running Company , Hingham, MA Greater Running Company, Newburyport, MA Greenwich Running Company, Greenwich, CT Morristown Running Company, Morristown, NJ New York Running Company, NYC (Time Warner Cntr.) New York Running Company, NYC (1059 3rd Ave) Princeton Running Company Princeton, NJ Ridgewood Running Company, Ridgewood, NJ Summit Running Company, Summit, NJ Texas Running Company, Sugar Land, TX Texas Running Company, Austin, TX (Downtown) Texas Running Company, Austin, TX (Gateway) Westfield Running Company, Westfield, NJ of gear. That's the business we're in. This is not about how many shoes you can sell; it's about how many lives you can affect." Playmaker's Munson in the same vein believes that while a bigger player will loom as a competitive threat, they can also energize a community. He pointed to how Lululemon has inspired yoga and fitness enthusiasts with their commitment to education and community involvement. Said Munson, "You want to be in business but you want to see more runners and more people involved in sports. Successful stores make that happen. They may take market share but they may also build market share." Munson agreed that specialty run "can be a tricky business" as it takes a different selling mindset. "They certainly have a lot of resources and they have been good at doing a lot of things so it would not surprise me if they were successful," he added. "Being successful in run specialty comes down to service, education and community involvement. It comes down to how well we can execute and how well we do as independents as we grow our business." Recalling his own troubles when Playmakers over-expanded in the past, he also noted that expansion is always a challenge. Finish Line has stumbled moving away from its core mall specialty concept in the past. In 2005, the company bought Man Alive and expanded the chain to approximately 100 stores, but was forced to sell the chain after the trend toward urban fashion cooled. It also launched and closed in the last decade, Paiva, a concept targeting active women. Acquiring the Running Company locations and retaining key
management is designed to help Finish Line understand the nuances of run specialty faster than learning on their own. Lee Silverman, owner of Jack Rabbit Sports in New York City, said one difference is that most big retailers are driven by product and merchandising, and the store staff are there to execute the buying/merchandising plan. "In specialty, the staff are there to provide great service, and the buying/merchandising supports the staff by giving them the product they need to provide service," said Silverman. "It creates a very different culture within the organization." He also believes it’s tougher for a national brand to develop strong relationships with customers that's required for run specialty. "What makes run specialty special is the relationship that runners have with their shops," said Silverman. "What I expect to see is a large number of doors open in the next two years that runners feel no relationship with or loyalty to." A few specialty shops said one reason Fleet Feet appeared to be successful is that the franchise owners have a stake in their business. Said Bob Roncker, owner of the Running Spot chain in Ohio, regarding The Running Company sale, "Will the people now running the stores have the same passion as the former owner/operators? The passion and involvement in the local community has always been key for specialty run shops." Maine Running Company’s Rogers, which is not affiliated with the acquired company, added Finish Line "will have to find an effective way to find, retain and educate key employees who can transfer and communicate product knowledge, with a high level of customer service and in-store experience. They will need to figure out how to acquire and build consistent relationships within the running and medical community. And finally, they will have the big chain challenge of managing non-performing inventory." Rogers also added with increasing competition in their categories, independent running shops that were not focused on elevating their community outreach, employee retention, in-store experience and operational efficiencies would be increasingly vulnerable. Some obvious concerns would be whether the larger players expanding into or just selling more technical running shoes would gain pricing advantages. Mike Cosentino, owner, Big Peach Running Co., Atlanta, GA, believes that is already happening to some degree. "It has been a benefit to the running consumer and the manufacturing community that some of the best operators in our channel right now are those entities where the management team has retail acumen that far outpaces their running prowess," he said. "In that vein alone, Finish Line has to be given some prospects of being successful in this business. If you’re in a market to which this concept expands - and you’re busy talking split times from a morning workout while they’re in Indianapolis fine-tuning inventory management practices and the customer experience - you better take notice. If you’re already committed to being the best retailer in any segment in your marketplace, this new competition doesn’t really look any different than anything else that was bound to appear." Running Company's Mitchell expects Finish Line's entry will lead to increased competition in an already competitive marketplace. "Now you have what we believe as the best operator in the business with capital and knowledge on how to expand. Finish Line has done a tremendous job growing their own business. They can share those experiences with us to avoid mistakes along the way that would be inevitable in any growth mode." ■
THE FINISH LINE’S RUNNING ROOTS Finish Line's roots began in 1976, when three friends wanted to create a store with the latest and greatest styles in athletic footwear. Alan Cohen, David Klapper and John Domont - all runners - came up with a concept to bring athletic footwear to Indianapolis, IN. They quickly discovered their idea already existed in the form of The Athlete's Foot (TAF). They decided to purchase the franchise rights for TAF in the state of Indiana and in the greater Louisville, KY area. They opened the doors of TAF in downtown Indianapolis in 1976. In the beginning, Cohen practiced law and was involved on a part-time basis; Domont was a silent partner while Klapper ran the day-to-day operation. By 1981, Cohen left his law practice and came into the business full-time. They opened 12 TAF stores in Indiana and Louisville but wanted to continue to grow the business; however, all of the TAF franchise rights had been sold by that time. Fortunately, there was no provision in their agreement as a TAF franchisee preventing them from opening a competing concept. Finish Line was born. Early in 1982, Cohen, Klapper and Domont asked two others to join them as they expanded their business. Larry Sablosky, a friend from Indianapolis with a background in retail and Dave Fagin, their Puma sales rep. Both signed on as partners. The five owners opened their first Finish Line store on July 2, 1982. As the line between the two concepts blurred, the franchise rights for TAF expired. In 1986, all TAF stores were converted to Finish Line stores. By 1991, the company had grown to 105 stores located primarily in Midwestern and Southeastern states with annual sales of nearly $100 million. In order to expand nationally, Cohen, Klapper, Sablosky and Fagin took the company public in 1992 (Domont opted to be bought out before the IPO). In 1996, the company had grown to 220 stores and $300 million in sales. In 2005, The Finish Line, Inc. acquired Man Alive, a regional street fashion apparel chain with 37 stores in nine states. Finish Line exited the Man Alive business in 2009. Finish Line hit 600 stores and $1 billion in sales in 2005. Finish Line finished fiscal 2010 with 664 stores and $1.23 billion in sales. WEEK 1137 | SGBweekly.com
EVERY JOURNEY BEGINS WITH A GREAT JOB.
HAVE YOU LANDED YOURS?
FOR INFORMATION CONTACT 704.987.3450 OR SPORTSJOBS@SPORTSONESOURCE.COM
I AM... SGB PERFORMANCE
Merchandise Manager, Gazelle Sports, Grand Rapids, MI
WHEN DID YOU CATCH THE "RUNNING" BUG? In middle school. Football players over 135 pounds had to be linemen. I wanted to be a receiver. To make sure I was below the weight limit, I began long distance running.
WHAT DID YOU WANT TO BE WHEN YOU GREW UP? Raised in Northern Michigan, I wanted to be a Department of Natural Resources officer. I thought it would be cool to buzz around the woods on four-wheelers writing tickets.
HOW DID YOU FIND YOUR WAY TO RUN SPECIALTY? In 2003, as an assistant track coach at Grand Valley State University, Allendale, MI, I wanted to find a part-time job in the running industry. Gazelle Sports was hiring.
DID SELLING FOOTWEAR COME NATURALLY? I’ve always been a shoe geek. As a
kid, I can remember being dragged to the mall an hour away and all I wanted to do was check out all the shoe stores.
WHAT WAS THE SHIFT LIKE FOR YOU FROM SELLING SHOES IN-STORE TO BECOMING A BUYER? Transitioning to an analytical role in managing inventory was an eye-opener. With several years under my belt and having completed my MBA, I feel like I have a good handle on a dynamic industry.
WHAT'S YOUR SYSTEM FOR TESTING SHOES? The first thing I do is measure the heel-to-toe offset to make sure it is as advertised. It used to be every company had their “2160," “Pegasus,” or “Beast”, but now it’s a blurry continuum of great product and it’s tough to judge them. About 60 percent of our running shoe business is women. I like to have the female staff try the shoes to see what they think.
BIGGEST VENDOR PET PEEVE? When I’m not notified that key product is going to be late.
WHAT DO YOU DO FOR FUN? My second daughter, Anna Claire was born two weeks ago. I’m changing a lot of diapers and enjoy being a dad.
WHAT SPORTS OR ACTIVITIES DO YOU PARTICIPATE IN TODAY? I try to run 3 to 4 times a week, and lift weights twice a week. The salmon are beginning to hit the Grand River. I’ll be fishing quite a bit over the next couple months.
WHAT BUSINESS PERSON DO YOU ADMIRE MOST? Steve Jobs. He’s done a great job with surrounding himself with talented people, listening to what people want, and marrying his ideas with innovation.
HOW WOULD YOUR FRIENDS DESCRIBE YOU? “Even keel.” It takes a lot to rattle my cage.
IF YOU COULD HAVE A DINNER WITH ANY THREE PEOPLE ALIVE OR DEAD, WHO WOULD THEY BE AND WHY? Warren Buffet because he seems like he would be one of those insightful grandpa types that could change your perspective on life in ten minutes and you would feel an obligation not to let him down. Stevie Ray Vaughn, although I’d have him go real slow and show me a few guitar licks. And, Phil Night. We could talk running and the early days of Nike. It would be a great meal.
WHAT WOULD BE YOUR ADVICE TO SOMEONE LOOKING TO GET INTO RUN SPECIALTY? Go out and see who your customers are and focus your efforts accordingly. Identify what you do best that adds value to the majority of your customers, and that’s where you need to stack your chips. Don’t spend time worrying about what the “Big-Box” down the street is doing. Right now they are promoting the hell out of running, and that’s good for everyone. Reach out to other owners and learn from their mistakes. 18
SGB PERFORMANCE l SEPTEMBER 12, 2011
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