Sporting Goods Retail - Business Plan

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Sporting Goods Retail - Business Plan

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  • You might be familiar with this idea – big box, high variety. We’re applying it to sports. Mention 1 store.
  • Market, Execution, Customer
  • Tampa Roll Out (multi store market, lower cost advertising, strategic placement)
  • Most important metrics include - Sales/sqft; COGS%, Working Cap cycle
  • 11 primary analogs across multiple retail “types”
  • Product mix; Leasing model; Brand names (inventory mgt)  Key to relationship
  • All 11 exhibit these characterisitcs
  • 5 from Sports; 1 department store, 1 merchandiser, 1 apparel, 3 big box
  • More than 55 analog companies, across 8 retail types. Median results presented.
  • Sales / Sq Ft ; COGS % ; Days/Inventory/Payable (“favorable”)
  • $.8M for leasing; $1.6M for inventory $2.2M
  • Increasing revenue per sqft b/c of 1) changing mix of soft line and hard lines, 2) brand name recognition.
  • COGS – Merchandise cost, distribution costSG&A – payroll expenses, marketing/ad expense
  • COGS is 66% of revenue – boom.
  • SG&A (AS A PERCENTAGE OF REVENUE!!) decreases from yr 1 to 10.
  • Goal here is to get in front of all possible customers via every media outlet AND build brand.
  • Keys to success – favorable working cap, asset light via leases, and scalable. Leads to a 10 year IRR - 37.5% / cash multiple - 4.8.
  • Cash flow CAGR is 11% - mo money! EBITDA as a percentage of revenue goes up
  • These are the numbers.
  • The peak cash need is in year one of $3.3M. After that business is self-sustaining.
  • 2nd year also great.
  • Map of our 10 year expansion plan.
  • Roll out in the same state, then expand within the SouthEast. 45 stores in total at year 10.
  • 2 yr peak cash need - $3.3M. 7 yr peak cash need - $7.5M.
  • It’s focused, a proven concept, with lots of exit options for your investment.
  • Sporting Goods Retail - Business Plan

    1. 1. SPORTING GOODS –RETAIL BUSINESS PLANPhilippe BurrelleJustin LockeMegan KronbergSrini RaghavanKevin Schumm
    2. 2. Opportunity Idea • Big Box Sporting Goods Retailer Stage • Seed Stage • Brand Name Selection Business • Large Format (40,000 square feet) • Low Prices Description • Store for the Everyman 2
    3. 3. Key Factors Unit Type • Facility and Geographic Model Critical • Brand Name Acquisition/Supplier Relationships • Inventory Management Economic • Marketing Factors • Location • Peak Cash (24 Months): $3.3M Unit Model • Peak Cash (7 Years): $7.5M • 10 Year IRR: 37.5% Results • 10 Year Cash on Cash: 4.8X 3
    4. 4. S.U.C.C.E.S.S. • $40 billion in sales for Sporting Goods Size of segment per U.S. Census Bureau Annual Retail Trade SurveyA Market • Highly Fragmented Market - average store size of 5,000 to 10,000 square feet • Ability to acquire brand name merchandise • Ability to manage wide variety of inventoryC Uncertainty • Ability to find optimal rental properties • Ability to bring customers into the store • Recreational sporting goods customer looking for a wide selection of well-known brandA Customer name products at low prices • Men and Women, 25-44 years old, $30-60K • Specialty Sports RetailersB Competition • Mom and Pop Sports Retailers • General Merchandise Retailers 4
    5. 5. S.U.C.C.E.S.S. • Limited entry barriers in this industry Entry • Establishing relationships with suppliersB Barriers • Finding large facilities in key locations • Key Partner in Venture • Large number of sporting good suppliersB Suppliers • Co-op marketing/Market Dev Funds, suppliers help retailers market their products • Mom and Pop Stores – Service, Location • General Merchandise Retailers – LowC Substitutes Prices • Specialty Sports Retailers – Service, Some Brand Name Variety 5
    6. 6. M.M.M.M. • Tampa Metro population 4 million • Florida state population 20 millionA Market • $1,321 million Florida Sales for Sporting Good Stores per U.S. Census Bureau Annual Retail Trade Survey • First Unit in Tampa, FLA Model • Regional Roll Out within the state • Waterfall Roll Out to neighboring states • Unit Level Investment: $2.2MB Money • Peak Cash Need (24 Months): $3.3M • Peak Cash Need (7 Years): $7.5M • Currently inadequate management teamC Management • Suggestions following page 6
    7. 7. Management  Corporate OfficersPotential  CEO - Steven G. Miller, CEO Big 5Manageme  CFO - Mike Newman, CFO Office DepotntPersonnel  COO - Mark Holifield, VP Supply Chain Home Depot  VP Marketing - Shawn Gensh, SVP Marketing Gap  VP Purchasing - Rebecca A. Jones, SVP Merchandising Hibbett  Board of Directors  Rick McAllister, President & CEO Florida Retail Federation  Steve Knopik, CEO Bealls 7
    8. 8. Analogs 8
    9. 9. Quantitative FactorsFactor Why Important?Sales/Square Feet Determine revenue based on store sizeSame Store Insight into growth of a single storeGrowthCOGS Understand marginsS&M Determine spend baseG&A Understand margins, normalized SG&AA/R Turnover Determine A/R daysDays Payable Determine A/P daysInventory Turnover Determine how fast inventory turnsCapex Insight into cash needed to maintain store 9
    10. 10. Quantitative MatrixFactor Big Hibbe Golf Cabela Gande Kohl Targe Gap PetSma Staple Best 5 tt s r s t rt s BuySales/Squar $21 $162 $234 $321 $168 $233 $295 $365 $214 $317 $805e Feet 6Same Store 8% 3.6% 0.3% 1.6% -5.6% 4.4% 2.1% 1.0% 4.8% -1.0% -1.8%GrowthCOGS % 67% 66% 66% 60% 75% 62% 69% 61% 66% 73% 75%S&M % 5% 1% 3% 7% 1% 5% 2% 3% 1% 1% 2%G&A % 22% 19% 28% 24% 23% 14% 14% 19% 21% 18% 17%A/R 6 2 2 6 4 1 39 3 3 26 16TurnoverDays 55 62 53 39 33 36 52 42 16 44 50PayableInventory 2 2 3 3 2 4 6 6 6 7 7TurnoverCapex 2% 2% 3% 3% 3.5% 5% 4% 3% 3% 2% 2% 10
    11. 11. Qualitative FactorsFactor Why Important?Growth Stage Insight into growth and investmentsLarge Format Match store size factorsSporting Goods Industry Similar cost and revenue modelsHard and Soft Sporting Same product mix and marginsGoodsLeasing Model Expenses, different initial investmentLow Price Same customer target, marginsLimited Service Focus Cost of laborLarge Selection Inventory management needs, costsBrand Names Inventory management needs, costsB2C Same economic modelRegional Growth Roll out modelInventory Management Costs 11
    12. 12. Qualitative MatrixFactor Big 5 Hibbe Golf Cabel Gande Kohl Target Gap PetSma Staple Bes tt a r s rt s t BuyMature x x x x x x x x x x xLarge Format x x x x x x x xSporting x x x x xHard/Soft Mix x x x x x x xLeasing Model x x x x x x x x xLow Price x x x x x x x xLimited Service x x x x x xLarge Selection x x x x x xBrand Names x x x x x x x x xB2C x x x x x x x x x x xInventory Mgmt. x x x x x x x x x x x 12
    13. 13. Analog Selection Justification Pros Cons Applies to… Sports retail Smaller store format Leasehold, FFE, Similar target market Preopening costs, Regional footprint Inventory, COGS, (NW/SW) SG&A, SSS growth Leasing model Sports retail Smaller store format Leasehold, FFE, Similar target market Near national footprint COGS, SG&A, SSS Leasing model growth Sports retail Near national footprint COGS Leasing model Specialized target Inventory Turnover market Days Payable Sports retail Superstore format COGS Specialized target Revenue market US/Canada footprint Corporate built and owned 13
    14. 14. Analog Selection Justification Pros Cons Applies to… Sports retail Larger store format Preopening costs Similar target market Inventory, COGS, Regional footprint SG&A, SSS growth, (MW/S) Leasing model Rollout Similar target market Department store model Preopening Costs Seasonal sales cycle Some corporate COGS ownership SG&A Larger store format SSS growth Heavy soft goods/apparel Similar target market General Merchandiser Revenue Heavy urban presence Corporate built and owned SG&A Effective marketing Larger store format SSS growth Large inventory National footprint Seasonal sales cycle Smaller store format Revenue Strong apparel analog National footprint SG&A Effective marketing SSS growth 14
    15. 15. Analog Selection Justification Pros Cons Applies to… Similar target market Specialty pet retailer Initial investment Heavy urban presence Smaller stores Inventory, COGS, Leasing model National footprint SG&A, SSS growth, rollout Similar target market Specialty business retailer Initial investment Heavy urban presence Smaller stores COGS, SG&A Leasing model International footprint Heavy urban presence Electronics Merchandiser Inventory Turnover Large Inventory International footprint Days Payable Leasing Model 15
    16. 16. Analog Aggregation Sports Specialty Electronics Department Home General Apparel Footwear MedianIncome StatementSales Growth (CAGR) 2% 3% 4% 0.4% (1%) 3% 3% 5% 3%% of RevenueCOGS 66% 72% 74% 62% 66% 65% 60% 56% 62%Gross Profit 34% 28% 26% 38% 34% 35% 40% 44% 38%G&A 22% 21% 17% 20% 19% 22% 23% 29% 22%R&D 0% 0% 0% 0% 0% 0% 0% 0% 0%Selling and Marketing 4% 2% 2% 5% 1% 1% 2% 11% 3% EBITDA 8% 7% 11% 11% 14% 10% 13% 5% 10%D&A 2% 3% 2% 4% 3% 2% 3% 2% 3% EBIT 6% 4% 9% 8% 11% 8% 10% 2% 7%Capex (3%) (2%) (2%) (4%) (3%) (3%) (4%) (3%) (3%)Balance SheetDays Receivable 4 21 5 6 3 1 3 45 4Inventory Turnover 3 5 6 4 4 5 5 3 4Days Payable 53 34 50 39 44 36 34 42 39  More than 55 analog companies 16
    17. 17. Analog Applied Rates Metric Rate SourcesSales/SF (mature) $233 Big 5, Hibbett, Cabela’s, Gander, Target, Kohl’s, GapSame Store 3% Big 5, Hibbett, Cabela’s, Gander, Target, Kohl’s, Gap,Growth PrimaryCOGS 66.5% Big 5, Hibbett, Golfsmith, PrimaryG&A 17% Big 5, Hibbett, Petsmart, Kohl’s, PrimaryS&M 3% Big 5, Hibbett, Petsmart, Kohl’s, PrimaryD&A 2.5% Big 5, Hibbett, Petsmart, Kohl’s, GapCapex .75% Big 5, Hibbett, Petsmart, Kohl’s, Gap, PrimaryDays Receivable 3.6 Big 5, Hibbett, Petsmart, Kohl’s, Gap, PrimaryInventory 2.9 Big 5, Hibbett, Golfsmith, Best Buy, GapTurnoverDays Payable 55.2 Big 5, Hibbett, Golfsmith, Best Buy, Gap, Primary 17
    18. 18. Unit Model 18
    19. 19. Unit Model - Initial Investment $1.2M • Leaseholds ($.8M) - Build out and improvements • FFE ($.4M) - Furniture, fixtures, software and equipment $1.6M • Inventory - 50,000 SKUs; $40/sq. ft. x 40,000; split between hard goods/soft goods 55/45($ .8M) • Accounts Payable - 50% of inventory; 45-60 days yr. 1 $ .2M • Marketing ($.15M) - Initial 2 month blanket area blitz • Recruiting/Training ($.05M) - Initial payroll $2.2M 19
    20. 20. Unit Model - Revenue Assumptions Revenue Per Sq Ft Revenue Per Store ($ in millions) $310 $290 $279 $12.00 $11.49 $10.82 $270 $262 $287 $11.00 $10.19 $247 $11.15 $250 $233 $270 $10.00 $9.31 $9.60 $10.50 $222 $255 $230 $9.00 $9.89 $240 $210 Revenue Per Sq Ft $8.87 Revenue Per Store $8.00 $190 $170 $7.00 $164 $6.57 $150 $6.00 Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 Total Revenue $6.57 $8.87 $9.31 $9.60 $9.89 $10.19 $10.50 $10.82 $11.15 $11.49 Revenue Growth 35.0% 5.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%Revenue AssumptionsStore Size (sf)Average Sales/sf (at maturity) 40,000 Case assumptions; Primary Roy Cohen SVP GMM Sports Authority 233 Median Big 5, Cabelas, Gander, Hibbett, Target, Kohls, Gap Key Unit Revenue Growth DriversAverage Sales/sf (initial) 164 Worked back from Mature Same Store Sales/sf • Change in mix of Hard Lines and SoftSales Growth RateYear 2 Primary Roy Cohen SVP GMM Sports Authority, Troy Mundahl 35.0% Eriks, Christopher Perrigo Target LinesYear 3 Primary Roy Cohen SVP GMM Sports Authority, Troy Mundahl 5.0% Eriks, Christopher Perrigo Target • Adding new categories Average Big 5, Cabelas, Gander, Hibbett, Target, Kohls, Gap; • Increased Sales per Sq ftMature Same Store 3.0% Primary Roy Cohen SVP GMM Sports Authority 20
    21. 21. Unit Model - Expenses Admin Expenses: 10% Inventory Shrinkage: 5% Normalized Store Occupancy Cost: 5% SG&A: 21% Freight: 7% Store Operating Cost: 3% Distribution: Distribution Expenses: 3%Percent of COGS 15% Percent of SG&A Marketing and Advertising: 34% Cost of Merchandise: 58% Payroll Expenses: 39% 21
    22. 22. Unit Model - COGS Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Direct expenseassumptionsCOGS as % of revenue % of Rev 66.5% 66.5% 66.5% 66.5% 66.5% 66.5% 66.5% 66.5% 66.5% 66.5%Cost of merchandise 38.6% $2.53 $3.42 $3.59 $3.70 $3.81 $3.93 $4.05 $4.17 $4.30 $4.43Distribution 10.0% 0.66 0.88 0.93 0.96 0.99 1.02 1.05 1.08 1.11 1.15Freight 4.7% 0.31 0.41 0.43 0.45 0.46 0.47 0.49 0.50 0.52 0.53Store occupancy cost 3.3% 0.22 0.29 0.31 0.32 0.33 0.34 0.35 0.36 0.37 0.38Inventory shrinkage 3.3% 0.22 0.29 0.31 0.32 0.33 0.34 0.35 0.36 0.37 0.38Other expenses 6.6% 0.44 0.59 0.62 0.64 0.66 0.68 0.70 0.72 0.74 0.76Total COGS $4.4 $5.9 $6.2 $6.4 $6.6 $6.8 $7.0 $7.2 $7.4 $7.6 Source – Primary research with Roy Cohen, SVP & General Merchandise Manager at The Sports Authority (1980s), Big Five Sporting S-1, and primary research with Troy Mundahl, Manager at Erik’s Bike Shop. 22
    23. 23. Unit Model - SG&A Initial(Dollars) Assumption Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Operating expense assumptions % of revenue In store manager Wage 50,000 50,461 51,479 52,509 53,559 54,630 55,723 56,837 57,974 59,134 60,316 Percent annual raise 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% FTEs 2.0 2.0 2.0 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 Wage for managers 100,922 102,959 131,272 133,898 136,576 139,307 142,094 144,935 147,834 150,791 Sales Associates Wage 18,000 18,141 18,502 18,872 19,249 19,634 20,027 20,427 20,836 21,253 21,678 Percent annual raise 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% FTEs 16.0 17.2 19.5 20.5 20.8 21.1 21.4 21.6 21.8 21.9 22.1 Wage for salespeople 311,497 360,830 386,400 400,124 414,336 429,053 440,963 453,204 465,784 478,714 Total Payroll Expenses (Managers + Salespeople) 412,419 463,789 517,672 534,022 550,912 568,360 583,056 598,139 613,618 629,505 Marketing and advertising 2.0% 588,606 441,455 463,528 477,632 492,166 507,142 522,573 538,474 554,859 571,743 Distribution expenses 1% 32,853 44,342 46,559 47,976 49,436 50,940 52,490 54,087 55,733 57,429Store operating expense (CAM, utilities, tax) 0.5% 32,853 44,342 46,559 47,976 49,436 50,940 52,490 54,087 55,733 57,429 Normalized SG&A 3.0% 197,118 266,052 279,354 287,855 296,614 305,639 314,939 324,522 334,397 344,572Total SG&A 1,263,850 1,259,979 1,353,672 1,395,460 1,438,562 1,483,020 1,525,549 1,569,310 1,614,341 1,660,678 19% 14% 15% 15% 15% 15% 15% 15% 14% 14% Source – Primary research with Roy Cohen, SVP & General Merchandise Manager at The Sports Authority (1980s), Big Five Sporting S-1, and primary research with Troy Mundahl, Manager at Erik’s Bike Shop. 23
    24. 24. Unit Model - Advertising Sample Market SpendMedium Spot Type Optimum Mix Spend ($)Local Newspaper Half Page 18% $ 105,949Local TV Spot 30 Sec 17% $ 100,063Cable TV 30 Sec 15% $ 88,291Local Magazine 1 Page 10% $ 58,861Web based advertising Banner Ads 10% $ 58,861Billboards Bulletin 10% $ 58,861Local Radio Spot Spot Type 9% $ 52,975Industry and special interest publications 1 Page 3% $ 17,658Local Yellow Pages (online+print) 1/2 page 3% $ 17,658Grand opening Expenses Onsite & Event 3% $ 17,658Information seminars Local Clubs/Events 1% $ 5,886Mail-in Information Direct Mail 1% $ 5,886 Total 100% $ 588,606 24
    25. 25. Unit Model – Cash Flow(Dollars) InitialCash flow assumptions Assumption Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Total Revenue 6,570,613 8,868,387 9,311,806 9,595,151 9,887,118 10,187,968 10,497,974 10,817,412 11,146,570 11,485,745Accounts receivable 63,957 86,324 90,640 93,398 96,240 99,168 102,186 105,295 108,499 111,801 Collection days 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 % of revenue 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%Unit COGS 4,368,025 5,895,543 6,190,320 6,378,682 6,572,777 6,772,777 6,978,863 7,191,220 7,410,038 7,635,515Inventory 1,506,215 2,032,946 2,134,593 2,199,546 2,266,475 2,335,440 2,406,504 2,479,731 2,555,186 2,632,936 Inventory turnover 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 % of revenue 22.9% 22.9% 22.9% 22.9% 22.9% 22.9% 22.9% 22.9% 22.9% 22.9%Accounts payable 661,170 892,384 937,003 965,515 994,894 1,025,167 1,056,362 1,088,505 1,121,627 1,155,756 Days payable 55.2 55.2 55.2 55.2 55.2 55.2 55.2 55.2 55.2 55.2 55.2 % of revenueNet working capital 800,140 909,003 1,226,885 1,288,230 1,327,429 1,367,820 1,409,441 1,452,329 1,496,521 1,542,058 1,588,980 change in NWC (108,863) (317,882) (61,344) (39,199) (40,392) (41,621) (42,887) (44,192) (45,537) (46,923)Fixed assetsBeginning balance 1,196,764 1,196,764 859,073 688,362 517,078 350,652 189,233 32,973 (117,971) (263,438) (403,260) Additions: Maintenance cap ex -0.8% (49,280) (66,513) (69,839) (71,964) (74,153) (76,410) (78,735) (81,131) (83,599) (86,143) Subtractions: Depreciation 0 117,700 104,198 101,446 94,462 87,266 79,850 72,209 64,336 56,223 47,863Ending balance 1,196,764 1,029,785 688,362 517,078 350,652 189,233 32,973 (117,971) (263,438) (403,260) (537,266)Depreciation life 10 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Unit cash flow Net income 533,675 1,045,633 1,083,139 1,122,255 1,162,533 1,204,009 1,248,880 1,295,155 1,342,880 1,392,098 Depreciation 117,700 104,198 101,446 94,462 87,266 79,850 72,209 64,336 56,223 47,863 Capital expenditures (49,280) (66,513) (69,839) (71,964) (74,153) (76,410) (78,735) (81,131) (83,599) (86,143) Change in Working capital (108,863) (317,882) (61,344) (39,199) (40,392) (41,621) (42,887) (44,192) (45,537) (46,923)Unit cash flow 493,233 765,436 1,053,402 1,105,554 1,135,254 1,165,828 1,199,467 1,234,168 1,269,966 1,306,895 5-year 10-yearIRR 25.3% 37.5% 25Cash-on-cash 2.0x 4.8x
    26. 26. Unit Model - PerformanceRevenue $6,570,613 $8,868,387 $9,311,806 $9,684,278 $10,071,649 $10,474,515 $10,893,496 $11,329,236 $11,782,405 $12,253,701COGS 66.5% 66.5% 66.5% 66.5% 66.5% 66.5% 66.5% 66.5% 66.5% 66.5%SG&A 19.2% 14.2% 14.5% 14.5% 14.5% 14.5% 14.4% 14.3% 14.3% 14.2%EBITDA 14.3% 19.3% 19.0% 19.0% 19.0% 19.1% 19.1% 19.2% 19.3% 19.3%Unit Cash Flow 7.5% 8.6% 11.3% 11.4% 11.4% 11.4% 11.4% 11.4% 11.4% 11.4% 26
    27. 27. Unit Model - Performance(Dollars) Projected Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Revenue $6,570,613 $8,868,387 $9,311,806 $9,595,151 $9,887,118 $10,187,968 $10,497,974 $10,817,412 $11,146,570 $11,485,745COGS 4,368,025 5,895,543 6,190,320 6,378,682 6,572,777 6,772,777 6,978,863 7,191,220 7,410,038 7,635,515Gross profit 2,202,589 2,972,844 3,121,486 3,216,468 3,314,341 3,415,192 3,519,111 3,626,192 3,736,532 3,850,230 Normalized SG&A 3.0% 197,118 266,052 279,354 287,855 296,614 305,639 314,939 324,522 334,397 344,572 Operating Expenses 1,066,732 993,928 1,074,318 1,107,606 1,141,949 1,177,381 1,210,609 1,244,788 1,279,943 1,316,105Total SG&A 19% 1,263,850 1,259,979 1,353,672 1,395,460 1,438,562 1,483,020 1,525,549 1,569,310 1,614,341 1,660,678EBITDA 938,738 1,712,864 1,767,814 1,821,008 1,875,779 1,932,171 1,993,562 2,056,883 2,122,192 2,189,552% margin 14.3% 19.3% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.1% Depreciation & Amortization 117,700 104,198 101,446 94,462 87,266 79,850 72,209 64,336 56,223 47,863EBIT 821,039 1,608,666 1,666,368 1,726,546 1,788,513 1,852,321 1,921,353 1,992,547 2,065,969 2,141,689% margin 12.5% 18.1% 17.9% 18.0% 18.1% 18.2% 18.3% 18.4% 18.5% 18.6% Taxes 35.0% 287,364 563,033 583,229 604,291 625,980 648,312 672,474 697,391 723,089 749,591Net income 533,675 1,045,633 1,083,139 1,122,255 1,162,533 1,204,009 1,248,880 1,295,155 1,342,880 1,392,098Memo:Unit profit contribution 2,005,470 2,706,792 2,842,132 2,928,614 3,017,727 3,109,552 3,204,172 3,301,670 3,402,135 3,505,657% margin 30.5% 30.5% 30.5% 30.5% 30.5% 30.5% 30.5% 30.5% 30.5% 30.5% 27
    28. 28. Unit Model – 1st Year Month 0 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Selling Sq Footage 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 Average Sales Per Square Foot $110 $118 $126 $135 $144 $164 $187 $194 $196 $197 $199 $201Total Revenue $366,667 $392,333 $419,797 $449,182 $480,625 $547,913 $624,621 $646,482 $652,139 $657,845 $663,601 $669,408 Cost of merchandise $141,377 $151,273 $161,862 $173,193 $185,316 $211,261 $240,837 $249,266 $251,447 $253,648 $255,867 $258,106 Distribution $36,563 $39,122 $41,861 $44,791 $47,927 $54,636 $62,285 $64,465 $65,030 $65,599 $66,173 $66,752 Freight $17,063 $18,257 $19,535 $20,903 $22,366 $25,497 $29,067 $30,084 $30,347 $30,613 $30,881 $31,151 Store occupancy cost $12,188 $13,041 $13,954 $14,930 $15,976 $18,212 $20,762 $21,488 $21,677 $21,866 $22,058 $22,251 Inventory shrinkage $12,188 $13,041 $13,954 $14,930 $15,976 $18,212 $20,762 $21,488 $21,677 $21,866 $22,058 $22,251 Other expenses $24,375 $26,082 $27,907 $29,861 $31,951 $36,424 $41,524 $42,977 $43,353 $43,732 $44,115 $44,501Total COGS $243,753 $260,816 $279,073 $298,608 $319,511 $364,242 $415,236 $429,770 $433,530 $437,324 $441,150 $445,010 In store manager Wage $4,167 $4,174 $4,181 $4,188 $4,195 $4,202 $4,209 $4,216 $4,223 $4,230 $4,237 $4,244 Percent annual raise 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% FTEs 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Wage for managers 8,333 8,347 8,361 8,375 8,389 8,403 8,417 8,431 8,445 8,459 8,473 8,487 Sales Associates Wage 1500 1503 1503 1505 1508 1510 1513 1515 1518 1520 1523 1525 Percent annual raise 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% FTEs 16 16 16 16 16 18 18 18 18 18 18 18 Wage for salespeople 24,000 24,040 24,040 24,080 24,120 27,180 27,226 27,271 27,317 27,362 27,408 27,453 Total Payroll Expenses (Managers + Salespeople) 32,333 32,387 32,401 32,455 32,509 35,583 35,643 35,702 35,762 35,821 35,881 35,941 Marketing and advertising $ 196,202 49,051 49,051 49,051 49,051 49,051 24,525 24,525 24,525 24,525 24,525 24,525 Distribution expenses 2,738 2,738 2,738 2,738 2,738 2,738 2,738 2,738 2,738 2,738 2,738 2,738 Store operating expense (CAM, utilities, tax) 5,476 5,476 5,476 5,476 5,476 5,476 5,476 5,476 5,476 5,476 5,476 5,476 Corporate Executive Salaries 109,375 109,375 109,375 109,375 109,375 109,375 109,375 109,375 109,375 109,375 109,375 109,375 Corporate Selling and Marketing 8,213 8,213 8,213 8,213 8,213 8,213 8,213 8,213 8,213 8,213 8,213 8,213 National Headquarters rent and other 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333Total SG&A 362,670 215,573 215,587 215,641 215,695 218,769 194,303 194,362 194,422 194,481 194,541 194,601 Operating Profit (239,757) (84,055) (74,863) (65,066) (54,580) (35,099) 15,081 22,350 24,187 26,040 27,910 29,797 Cash Taxes 0 0 0 0 0 0 5,278 7,823 8,465 9,114 9,769 10,429 Net Income (239,757) (84,055) (74,863) (65,066) (54,580) (35,099) 9,803 14,528 15,722 16,926 18,142 19,368 + Depreciation 9,973 9,950 9,926 9,899 9,871 9,841 9,807 9,768 9,728 9,687 9,646 9,604 -Capital Expenditure (2,933) (3,139) (3,358) (3,593) (3,845) (4,383) (4,997) (5,172) (5,217) (5,263) (5,309) (5,355) Change in Net Working Capital (3,551) (3,799) (4,065) (4,350) (9,309) (10,612) (3,024) (783) (789) (796) (803) Initial Investment (2,231,841) 0 0 0 0 0 0 0 0 0 0 0 0 Free Cash Flow (472,474) (164,850) (146,958) (127,892) (107,484) (74,048) 24,360 46,272 52,102 55,715 59,361 63,039 Cumulative Free Cash Flow (2,704,316) (2,869,166) (3,016,124) (3,144,016) (3,251,501) (3,325,549) (3,301,188) (3,254,916) (3,202,814) (3,147,099) (3,087,738) (3,024,699) 28
    29. 29. Unit Model – 2nd Year Month 13 Month 14 Month 15 Month 16 Month 17 Month 18 Month 19 Month 20 Month 21 Month 22 Month 23 Month 24 Selling Sq Footage 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 Average Sales Per Square Foot $208 $211 $215 $219 $221 $223 $225 $226 $227 $228 $229 $230Total Revenue $692,837 $704,962 $717,299 $729,851 $736,238 $742,680 $749,178 $752,456 $755,748 $759,054 $762,375 $765,710 Cost of merchandise $267,140 $271,815 $276,571 $281,411 $283,874 $286,358 $288,863 $290,127 $291,396 $292,671 $293,952 $295,238 Distribution $69,088 $70,297 $71,527 $72,779 $73,416 $74,058 $74,706 $75,033 $75,361 $75,691 $76,022 $76,355 Freight $32,241 $32,805 $33,379 $33,963 $34,261 $34,560 $34,863 $35,015 $35,169 $35,322 $35,477 $35,632 Store occupancy cost $23,029 $23,432 $23,842 $24,260 $24,472 $24,686 $24,902 $25,011 $25,120 $25,230 $25,341 $25,452 Inventory shrinkage $23,029 $23,432 $23,842 $24,260 $24,472 $24,686 $24,902 $25,011 $25,120 $25,230 $25,341 $25,452 Other expenses $46,059 $46,865 $47,685 $48,519 $48,944 $49,372 $49,804 $50,022 $50,241 $50,461 $50,681 $50,903Total COGS $460,586 $468,646 $476,847 $485,192 $489,437 $493,720 $498,040 $500,219 $502,407 $504,605 $506,813 $509,030 In store manager Wage $4,251 $4,258 $4,265 $4,272 $4,279 $4,286 $4,293 $4,301 $4,308 $4,315 $4,322 $4,329 Percent annual raise 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% FTEs 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Wage for managers 8,502 8,516 8,530 8,544 8,558 8,573 8,587 8,601 8,616 8,630 8,644 8,659 Sales Associates Wage 1528 1530 1533 1535 1538 1541 1543 1546 1548 1551 1553 1556 Percent annual raise 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% FTEs 19 19 19 19 19 19 20 20 20 20 20 20 Wage for salespeople 29,027 29,075 29,124 29,172 29,221 29,270 30,861 30,913 30,964 31,016 31,068 31,119 Total Payroll Expenses (Managers + Salespeople) 37,528 37,591 37,654 37,716 37,779 37,842 39,448 39,514 39,580 39,646 39,712 39,778 Marketing and advertising 147,152 36,788 36,788 36,788 36,788 36,788 18,394 18,394 18,394 18,394 18,394 18,394 Distribution expenses 3,695 3,695 3,695 3,695 3,695 3,695 3,695 3,695 3,695 3,695 3,695 3,695 Store operating expense (CAM, utilities, tax) 7,390 7,390 7,390 7,390 7,390 7,390 7,390 7,390 7,390 7,390 7,390 7,390 Corporate Executive Salaries 112,656 112,656 112,656 112,656 112,656 112,656 112,656 112,656 112,656 112,656 112,656 112,656 Corporate Selling and Marketing 19,299 19,299 19,299 19,299 19,299 19,299 19,299 19,299 19,299 19,299 19,299 19,299 National Headquarters rent and other 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333Total SG&A 336,054 225,753 225,815 225,878 225,941 226,004 209,216 209,282 209,348 209,414 209,480 209,546 Operating Profit (103,802) 10,563 14,636 18,781 20,859 22,956 41,922 42,955 43,993 45,035 46,082 47,134 Cash Taxes 0 3,697 5,123 6,573 7,301 8,035 14,673 15,034 15,397 15,762 16,129 16,497 Net Income (103,802) 6,866 9,513 12,208 13,558 14,921 27,249 27,921 28,595 29,273 29,953 30,637 + Depreciation 9,519 9,064 8,976 8,887 8,796 8,704 8,611 8,517 8,423 8,329 8,234 8,139 -Capital Expenditure (5,543) (5,640) (5,738) (5,839) (5,890) (5,941) (5,993) (6,020) (6,046) (6,072) (6,099) (6,126) Change in Net Working Capital (3,241) (1,677) (1,707) (1,737) (883) (891) (899) (453) (455) (457) (459) (461) Initial Investment 0 0 0 0 0 0 0 0 0 0 0 0 Free Cash Flow (206,869) 22,874 30,803 38,874 43,741 47,782 85,562 87,954 89,907 91,869 93,840 95,820 Cumulative Free Cash Flow (3,231,569) 22,874 (3,200,765) 61,748 (3,157,025) 109,530 (3,071,462) 197,484 (2,981,555) 289,353 (2,887,716) 385,173 29
    30. 30. Roll Out – 10 Year Footprint 30
    31. 31. Roll Out – By Store Year 1 2 3 4 Year 4 5 6 7 8 9 10 Florida - Southern/Central Georgia 3 4 TampaCentral 1 South Carolina 2 3 TampaLakeland 1 Alabama 2 3 TampaSarasota 1 North Carolina 2 3 MiamiCape Coral 1 Tennessee 1 3 MiamiCentral 1 Total 3 4 2 5 5 4 3 MiamiFort Lauderdale 1 Fort Myers 1 Gainesville 1 Total Stores Added: Ocala 1 Years 1 to 5 26 OrlandoNorth Central 1 Years 6 to 10 19 OrlandoTitusville 1 Cumulative Stores by Yr 10 45 OrlandoDaytona Beach 1 OrlandoSouth 1 West Palm Beach 1 Florida - Northern Jacksonville 1 Tallahassee 1 Panama City 1 Mobile-Pensacola 1 Mobile-Fort Walton 1 Total 1 3 10 5 31
    32. 32. Roll Up(Dollars) ProjectedOperational Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7Total revenue 6,570,613 28,580,226 101,623,096 178,779,338 242,161,399 296,358,660 349,760,093Unit profit contribution 2,005,470 8,723,203 31,017,210 54,566,692 73,912,045 90,454,031 106,753,116 % marginCorporate Expenses CEO/President 450,000 463,500 477,405 491,727 506,479 521,673 537,324 CFO 262,500 270,375 278,486 286,841 295,446 304,309 313,439 VPs 300,000 309,000 318,270 327,818 337,653 347,782 358,216 VPs 300,000 309,000 318,270 300,000 309,000 318,270 327,818 Pre-opening Expenses 234,937 704,811 2,349,369 1,879,495 1,409,621 1,174,685 1,174,685 Corporate Selling and Marketing 98,559 428,703 1,524,346 2,681,690 3,632,421 4,445,380 5,246,401 National Headquarters rent and other 100,000 100,000 300,000 300,000 500,000 500,000 500,000Total Corporate Expenses 1,745,996 2,585,389 5,566,147 6,267,571 6,990,620 7,612,099 8,457,882EBITDA 259,474 6,137,813 25,451,063 48,299,121 66,921,425 82,841,932 98,295,234 % margin Depreciation 117,700 457,298 1,591,040 2,382,383 2,924,898 3,311,525 3,658,280EBIT 141,774 5,680,515 23,860,023 45,916,737 63,996,528 79,530,407 94,636,954 Taxes 35.0% 49,621 1,988,180 8,351,008 16,070,858 22,398,785 27,835,642 33,122,934Net income 92,153 3,692,335 15,509,015 29,845,879 41,597,743 51,694,764 61,514,020Free cash flow Net income 92,153 3,692,335 15,509,015 29,845,879 41,597,743 51,694,764 61,514,020 Depreciation 117,700 457,298 1,591,040 2,382,383 2,924,898 3,311,525 3,658,280 Capital expenditures (1,147,485) (3,375,941) (11,205,468) (8,233,268) (5,364,374) (3,761,131) (3,360,620) Working capital (108,863) (3,044,891) (10,105,021) (10,674,080) (8,768,509) (7,497,850) (7,387,752)Free cash flow (1,046,494) (2,271,199) (4,210,434) 13,320,915 30,389,757 43,747,309 54,423,928Cumulative cash flow (1,046,494) (3,317,693) (7,528,128) 5,792,787 36,182,544 79,929,853 134,353,781Peak Cash Need (2 Years) 3,317,693 32Peak Cash Need (7 Years) 7,528,128
    33. 33. F.A.C.E.S.A Focus • Targeted market and focusN/A Ash • Lack of adequate information • Specialty superstore concept has beenB Capability proven in other industries • Strategic mergers – Gander, HibbettB Exit • IPO – Staples, Home Depot, PetSmart • Sponsor purchase • Highly scalableA Scalability • Regional/National model 33
    34. 34. Discussion 34
    35. 35. Appendix 35
    36. 36. Primary Contacts • Former SVP and General Merchandise Manager, Roy Cohen The Sports Authority • Former VP, Target Global Operations and DeliveryChristopher Perrigo Services • Manager, Erik’s Bike and Board Shop Troy Mundahl Minnetonka, MN Location Ken LeSesne • Director of Sales, WJXX/WTLV Jacksonville, FL • Global Finance Manager, P&G Beauty and Mike Hewett Grooming 36
    37. 37. Primary Research (interviews):1 Roy Cohen SVP and General Merchandise Manager at The Sports Authority at start-up in 1980s. Transcript available upon request2 Christopher Perrigo Senior Executive Advisor at Booz & Co, formerly VP and Chairman at Target (India), VP Global Operations and Delivery services at Target. Transcript available upon request3 Troy Mundahl Store Manager at Eriks Bike Shop ($25M, 18 store, Minneapolis-based bike shop) Transcript available upon request4 Ken LeSesne Direct of Sales at WJXX (ABC, Jacksonville) Transcript available upon request5 Mike Hewett Global Finance Manager, P&G Transcript available upon requestCapital IQ - Company Overview Reports: Mintel Co - Consumer Research Reports: BestBuyCoIncNYSEBBY_PublicCompany Action & Extreme Sports - Mar-11 Big5SportingGoodsCorpNasdaqGSBGFV_PublicCompany Athletic Shoes - Jun-08 CabelasIncNYSECAB_PublicCompany Baby Boomers - US - Dec-11 CitySportsInc_CIQReportLandscape Clothing & Footwear - Trends Developments & Prospects FootLockerIncNYSEFL_PublicCompany Department Store Retailing - Aug-10 GolfsmithInternationalHoldingsIncNasdaqGMGOLF_PublicCompany Fitness Clothing - Sep-11 HenryModellCompanyInc_CIQReportLandscape Footwear US - Nov-10 HibbettSportsIncNasdaqGSHIBB_PublicCompany Marketing to Sports Enthusiasts - Jun-11 HRBlockIncNYSEHRB_PublicCompany Marketing_to_Sports_Enthusiasts__Infographic_Overview MichiganSportingGoodsDistributorsInc_CIQReportLandscape Sporting Goods - Team Sports - Aug-08 ScheelsAllSportsInc_CIQReportLandscape SportChaletIncNasdaqGMSPCHB_PublicCompany Industry Reports: WinmarkCorpNasdaqGMWINA_PublicCompany S&P - Apparel & Footwear - Retailers and Brands - Sep-11 ZumiezIncNasdaqGSZUMZ_PublicCompany S&P - Retailing General - Nov-11 S&P - Retailing Specialty - Nov-11 ESSN Big Box Report10Ks: S1s: Retail Brand - State of the Industry - 2011 Best Buy 2009, 2010 Cabelas 2004 Big Five Sporting Goods 2009, 2010 Finish Line 1996 Other Publications: Big Lots 2011 Gander Mountain004 2 Sporting Goods - Intel - 2005 Cabelas 2009, 2010 Gart Sport 1996 Sportswear as Cheap Chic Finish Line 2009, 2010 Hibbett Sports 1996 US Consumer in 2020 Gander Mountain 2007, 2008, 2009 Big Five 2001 The Future of Mall Stores Gart Sport 2003 Clear Channel Outdoor Rates Hibbett Sports 2008, 2009, 2010 Goldman Sachs Global Retail Conference Powerpoint - 2011 Home Depot 2010 Chain Store Age for Retail Executives - Magazine Lululemon 2011 2004, 2005, 2006, 2008, 2009, 2010, 2011 Office Depot 2009 Big Builders Survey - 2010 Office Max 2010 Big Five, Big Lots - DataMonitor Petsmart 2008, 2009, 2010 Big Box Retailer Properties - Pitfalls of Valuation The Sports Authority 2006 Buyers Guide - POS systems Sports Chalet 2011 Chain Store Age - Cost is Still Key - 2007 Staples 2010 Chainlinks Real Estate Advisors - 2012 Target 2009 Annual Store Construction and Survey - 2012 Walmart 2010 Big Box International - 2011 - Colliers International Tenant Improvement Issues in Retail Real Estate - International Council of Real Estate Centers 37

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