The Sports Authority aims for $5B in sales, 500 stores by year 2000 - includes article on Nike Shops in Sports Authority stores - Company Profile

Discount Store News,  July 17, 1995  by Richard Halverson

Tags: Nike Inc., sales, Y2K

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In a variation on a distribution theme, The Sports Authority plans to start using commercial cross-stocking facilities to which vendors will send multi-store shipments. The cross-stocking operator will then break them down for shipment to individual stores.

But Smith is set against owning or operating warehouses. "We're not in the warehouse business."

Over the past three years, The Sports Authority has opened 71 stores and has set a target of 25 to 30 stores per year.

In its real estate strategy, The Sports Authority opens multiple store locations in each and advertising expenses, as well as to gain market penetration.

Smith has set a goal of 35% market share in each market and is willing to cannibalize existing store sales in order to gain market share.

In his scheme of things, Smith follows the example of The Home Depot, which will open additional stores in a market whenever customer traffic and store sales reach a point where the home center gets too jammed for its own good.

The Sports Authority expects to finance expansion this year, with a capital budget of $52 million, of which $37 million was cash on hand at the beginning of the year and the remaining $18 million from the sale of property, said Dick Lynch, cfo.

Operating profit margin has been creeping up for the past three years to 3.6% of sales in '94 from 3.4% in '93 and 2.5% in '92.

The chain lost money during its first four years but turned the corner in '92 when it earned an operating profit of $3.3 million, compared to an operating loss of $3.3 million in '91.

Last year, it earned $30.2 million on sales of $838.5 million, compared to a profit of $20.9 million on '93 sales of $606.9 million. Same store sales increased 5.5%, despite the cannibalization of sales at 11 units.

For the first quarter of '95, sales rose 27.4% to $221.6 million from $173.9 million in the same period in '93. Operating profits rose to $3.1 million from $2.1 million.

It has set a goal of increasing per share net profits by an average of 25% per year, and this year analysts are projecting net income of $1.04 per share, compared to 81 cents last year.

Its net income margin in '94 had dipped to 2.0% of sales from 2.1% in '93 and has increased one-tenth of a point to 1.3% in the first quarter of '95.

Improving inventory turns are helping to propel growth, though, increasing to 2.8 last year from 2.7 in '93 and 2.6 in '92.

The Sports Authority

Fort Lauderdale, Fla.

Sales Fiscal '95 proj., $1.1 billion, up 31% Fiscal '94: $838.5 million Operating Profits '94 $30.2 million Operating Profit Margin '94: 3.6% of sales Stores: 110 Prototype Size: Avg. 42,500 sq. ft.

Strategy: Stores are concentrated in metropolitan markets, and goal is to achieve a 35% market share in each market. The company is willing to cannibalize sales in any market to reach that figure.

Source: The Sports Authority

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