Sports Authority Wants to Attract
More Women and Children
By ANDREA ISABEL FLORES
Staff Reporter of THE WALL STREET JOURNAL
8/3/99
Sports Authority Inc., one of the nation's biggest sports-equipment retailers, is starting to slim down and cultivate its feminine side.
The Fort Lauderdale, Fla., chain is redesigning stores on a smaller scale and offering more merchandise for women and children. It is also putting more stress on "everyday low prices" as part of a turnaround strategy.
One of the company's goals, said Marty Hanaka, Sports Authority's chief executive, in an interview, is to create a store that appeals to today's children rather than aging baby boomers whose desire for sporting gear is fading.
In the past two years, Sports Authority has repeatedly fallen short of earnings expectations, and its stock recently has languished at between $3 and $4, far below its peak of $29 in late 1996. But there are signs that some investors think the company will finally get itself back into shape, or else end up being acquired. The stock jumped about 24% on July 23 on news that Joseph Harrosh, chairman of closely held Tri-City Sporting Goods, Fremont, Calif., had bought a 7% stake in Sports Authority. Monday, Sports Authority shares closed at $3.81, unchanged, in New York Stock Exchange composite trading.
Mr. Hanaka says Sports Authority isn't for sale and that Mr. Harrosh seems to be a friendly investor. Mr. Harrosh declined to comment.
Focus on Fitness Apparel
Mr. Hanaka is touting Sports Authority as a store with "specialty service at everyday low prices." He says the company will boost sales by stocking more items such as fitness apparel and team-sports equipment for women and children. In addition, Mr. Hanaka plans to reduce the size of future stores to around 30,000 square feet, compared with the current average of 42,000, and to shrink some existing stores. The company also has closed some of its weaker outlets, bringing the store count down to 200 from a peak of 213.
Founded by Jack A. Smith, a former chief operating officer at Herman's World of Sporting Goods Inc., Sports Authority opened its first store in 1987 and had eight stores three years later, when Kmart Corp. bought the company. Under Kmart's ownership, Sports Authority went on a massive expansion drive, peppering metropolitan markets with warehouse-style stores.
After Kmart spun off Sports Authority in 1994, the company glided for a few years, but earnings began falling in the fiscal year ended January 1998. Anthony Crudele, chief financial officer, blames the company's problems on tougher competition, weak sales in such categories as sneakers and clothing with team logos, overstocking of some items, and expansion into some cities too small to support a warehouse store. Sports Authority and other full-line sporting-goods stores also face brutal price competition from WalMart Stores Inc. and other discounters.
Struggling Chains
Sports Authority has managed to hold onto the No. 4 spot among U.S. sporting goods retailers, behind Wal-Mart, Venator Group Inc.'s Foot Locker chain and Kmart, according to Sports Trend, an industry magazine. That's partly because other chains also have struggled in recent years. Gart Sports Co., for instance, digesting its 1998 acquisition of Sportmart Inc., posted a small loss for the quarter ended May 1.
Both Venator Group and Gart made bids to acquire Sports Authority last year, but Sports Authority's board rejected the Gart offer, and the Venator bid fizzled out when that company's stock price plunged.
Searching for a new growth formula, Sports Authority's board reached outside the industry last year and hired Mr. Hanaka, previously president and chief operating officer of Staples Inc., the big office supply chain. He joined Sports Authority as vice chairman in February 1998 and became chief executive seven months later, succeeding Mr. Smith.
The 50-year-old Mr. Hanaka, who played football at Cornell University in the 1970s, appears to be in his element at Sports Authority. His business card identifies him as "head coach."
Management Turmoil
So far, however, Coach Hanaka has had to deal with a lot of management turmoil. The month after he took over as CEO, Richard J. Lynch resigned as president, and two other senior executives also left. Mr. Hanaka drafted replacements from other retailers, notably William Cappiello, former head of Saks Inc.'s Parisian department-store chain, who became president of Sports Authority in December 1998. In July, Sports Authority announced that Mr. Cappiello had resigned by mutual agreement. Asked to explain the sudden departure, Mr. Hanaka says, "We felt that the difficult spadework wasn't being done." Mr. Cappiello couldn't be reached for comment.
In February and March of this year, things appeared to be looking up at Sports Authority, as sales at stores open more than a year began increasing again. Then came weaker sales in April, May and June. For the first five months of the fiscal year ending next Jan. 23, Sports Authority's same-store sales are down 2.6%.
While the company searches for a new president, Mr. Hanaka has assumed many of the duties that had been assigned to Mr. Cappiello. He is counting on redesigned stores to bring in more shoppers. In the new format, goods are no longer stacked as high, making it easier for customers to examine the merchandise. Television sets suspended from the ceilings display sporting events. At a new prototype store in Clifton, N.J., customers can test golf clubs or play a computer-simulation game that lets them shoot hockey pucks at Buffalo Sabres goalie Dominik Hasek.
"Now we've got a place where kids can drag their mom into the Sports Authority and try to counter a lot of those old male demographics that may not have been in our favor," Mr. Hanaka says.
He believes Sports Authority is on the right track and says he bought another 40,000 shares of the company's stock in July, bringing his total ownership to 190,000 shares, including 50,000 given to him by the company as a signing bonus.
"I'm betting my personal funds" on a rebound, he says. |
