Henry Modell & Company Inc.

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Henry Modell & Company Inc.

498 Seventh Avenue
New York, New York 10018
U.S.A.
Telephone: (212) 822-1000
Toll Free: (800) 275-6633
Fax: (212) 822-1051
Web site: http://www.modells.com

Private Company
Founded: 1889
Employees: 3,200
Sales: $360 million (1998 est.)
NAIC: 45111 Sporting Goods Stores

Henry Modell & Company Inc. is the owner and operator of Modell’s Sporting Goods, a retail chain consisting of 84 stores in Delaware, Maryland, New Jersey, New York, Pennsylvania, Virginia, and Washington, D.C. Founded in 1889 by Morris Modell in New York City, the company has grown by offering exceptional value to its customers, based on tough bargaining with suppliers and low overhead. Its expansion has, since the 1960s, been largely due to the purchase of store locations from bankrupt rivals. The firm remains a family-run concern, with the fourth generation of Modells serving as co-presidents. The eighth largest sporting goods retailer in the United States, Modell’s Sporting Goods sells athletic apparel, accessories, and footwear as well as sports equipment.

Early History: Thriving on Army Surplus Goods

Morris A. Modell was a Hungarian immigrant who arrived in New York City in the early 1880s, finding work selling clothes to sailors on shore leave. He established his store on a lower Manhattan site (later cleared for the World Trade Center) and founded a company in 1889. Modell supplied outfits for Theodore Roosevelt’s Rough Riders during the Spanish-American War and bought surplus army clothing after the war. All of his seven sons worked in the store, but it was Henry who inherited the business after World War I service. He became the company’s president in 1920 and chairman in 1937; during this time the business became known as Henry Modell Company, Inc. (and later as Henry Modell & Company Inc.). Modell’s, which had stocked up on army surplus merchandise again after World War I, enjoyed record growth during the Great Depression because of its cut-rate prices.

Modell’s business also boomed during World War II, when the firm again outfitted soldiers. Its chairman, who was commander of an American Legion post, announced shortly after the end of the war that he would sell the company’s entire stock of menswear—which was then in short supply—to war veterans exclusively. In March 1946 the firm opened the Modell Veteran Training Center on lower Broadway. Stocked with surplus war merchandise, this outlet also offered six months of on-the-job paid training to veterans.

When Henry Modell opened the largest of his five stores eight months later in Brooklyn, 15 company-trained veterans constituted the sales staff.

Modell’s was creatively combating the peacetime shortage of civilian goods by recycling shell cases into lamp bases, protective covering against attacks into low-priced emergency raincoats, helmets into toys, surplus khaki blankets into children’s snow suits, and Air Force trousers into slippers. In 1947 Modell urged merchants to reduce their prices. “Our stores sold 1,000 dozen of white shirts at $1.95 which cost us $18 per dozen,” he was quoted as saying in a New York Times story, “and in normal times such merchandising policies are considered unsound. The fact remains that these are not normal times. Merchants owe it to themselves to offer goods at a lower figure, particularly in view of the fact that they themselves are being offered better buys which should be passed on to the public.” By this time Modell’s had sold more than one million pairs of cotton socks at 17 cents each.

When Jackie Robinson made history in 1947 by joining the Brooklyn Dodgers major league baseball team, after a long ban on hiring African American players, Modell’s placed Robinson’s likeness in the company’s advertisements. “As Jews, we knew what it meant to be outsiders,” Henry’s son, William, later told Ylonda Gault of Crain’s New York Business. “Nothing is more important than a sense of community and harmony. My Dad taught me that,” he added.

Growing in Good and Bad Times: 1963–86

By 1963 Henry Modell Company, Inc. consisted of six stores, including two Modell’s Shoppers World outlets in East Meadow, Long Island, and Paramus, New Jersey, which functioned as discount department stores. In that year the company purchased the bankrupt eight-store Davega Stores Corp. sporting goods chain for $311,100. Modell’s closed two Davega locations and restaffed the retained stores with young veterans. In 1975 the Modell’s chain, now chiefly run by William Modell, consisted of ten stores in New York City and Long Island with sales, in 1974, of $10.5 million and record profits, despite a national recession that struck the metropolitan area particularly hard.

“We are a depression-proof business,” William Modell told Michael Stern of the New York Times at this time. He continued: “In times like these, we don’t have to look hard for [bargain] goods. They are offered to us by the big chains and the manufacturers who want to lighten their inventories for ready cash, and we pass the savings on to our customers.” The company’s forte was high-volume sales of a relatively narrow range of staple items, such as jeans, casual shoes, and work clothing, as well as sporting goods. Stores were plain but often strategically placed in high-traffic locations, such as midtown Manhattan’s 42nd Street and downtown Brooklyn’s Fulton Street.

By 1986 Henry Modell & Co. was operating 20 stores in the metropolitan area, including one in New Jersey. Sales of its sporting goods and apparel, menswear, athletic footwear, and luggage exceeded $50 million in 1985. By this time William Modell’s sons, Michael and Mitchell, were vice-presidents in the firm. Interviewed by Carol R. Riggs for D & B Reports, Michael Modell described the company’s traditions as the key to its success. “We’re very paternal,” he said, adding “The people who work with Modell’s are part of the so-called Modell family. Our relationship with our customers is based on two things: Never lose sight of who our customer is and always give him good value. And our relationship with our suppliers is based on loyalty. Our vendors know that although we may negotiate hard on the price, once we agree to pay, that’s as good as gold.”

Quadrupling Its Outlets: 1987–99

Although the company sold three Modell’s Shoppers World stores to Home Depot Inc. in 1988—turning the business into a real-estate company serving as a landlord to the other stores—it had purchased bankrupt Philadelphia-based Polly Brothers the previous year, and it converted other Shoppers World outlets to sporting goods stores. The company began a major renovation of its no-frills stores and an expansion of its merchandise selection in 1991. By 1995 the chain, now known as Modell’s Sporting Goods, had 48 outlets, of which 32 were in the New York metropolitan area and 16 in and around Philadelphia. Annual sales were estimated at about $140 million.

Based in Long Island City, a neighborhood in New York City’s borough of Queens, Modell’s Sporting Goods Inc., a subsidiary, was being run by Michael Modell. Speaking to a workshop in 1994, he revealed that the chain was fending off mass marketers such as Wal-Mart Stores and The Sports Authority by guaranteeing not only to meet a competitor’s price but to rebate 25 percent of the difference between the two prices. Modell’s kept its prices low by such means as purchasing six-month-old sneaker styles for sale to customers willing to forgo the latest Air Jordan.

In 1996 Modell’s Sporting Goods expanded from 52 to 67 stores by purchasing, for about $2.5 million, 15 outlets in New Jersey and the Baltimore and Washington, D.C. metropolitan areas from bankrupt Herman’s World of Sporting Goods, which had been one of Modell’s larger competitors. A retail consultant told Gault the reason for the bargain price was that “They’re tough negotiators. They hammer away until the economics work for them. And if the numbers don’t add up, they just walk away.” Prior to the acquisition, Modell’s was the 26th largest sporting goods retailer in the United States, with $229 million in annual sales. Modell’s Sporting Goods was also planning to open at least five to ten new stores each year for the next five years. The now refurbished chain consisted of larger stores, averaging 15,000 to 20,000 square feet in size, and carried more merchandise, including 400 footwear styles and 200 popular brands and licensed apparel, including Nike and Reebok. Gault wrote that William Modell and his sons were “as tightfisted when it comes to store design as they are in their lease deals.” According to the consultant she interviewed, after they took over a Port Chester, New York, linen chain, “They were in there in three days. A public company would have done surveys, design drawings, construction and months of planning.”

While not turning its back on suburban mall and shopping center outlets, Modell’s Sporting Goods was also making inner-city locations profitable by stocking a streetwise eclectic merchandise mix that included trendy clothing and accessories as well as sporting goods and featuring a catchy “Gotta Go to Mo’s” jingle in radio and television commercials. Many of its stores paid tribute to appropriate sports heroes; the Brooklyn shopping center location bore Dodgers memorabilia and the East Meadow store celebrated hockey’s Long Island-based New York Islanders. “Concept stores,” such as three Manhattan outlets, carried what was described as in-store miniature boutiques. By this time the chain had found room for women’s apparel.

Corporate Perspectives:

Modell’s Sporting Goods strives for quality and excellence by listening, respecting and responding to the needs of our valued associates and customers. We pledge to continue to find innovative ways to deliver exceptional value and quality service.

Modell’s Sporting Goods opened five Washington, D.C.-area stores in 1996 in former Herman’s locations and opened four additional area outlets in 1997, including a Modell Team Stores in the MCI Center, a new downtown arena housing professional basketball’s Wizards and hockey’s Capitals. But William Modell told Gault that New York City represented the company’s “past, present and future.” Its warehouse remained in the city’s borough of The Bronx, despite what he called cheaper sites elsewhere, because, he said, “There’s more to life than saving a buck. We have a connection to New York. It’s the reason we are successful.”

In 1997 Modell’s paid New York’s Metropolitan Transportation Authority more than $100,000 to place its logo on Metrocards—good for fares on the city’s subway and buses—given out free to baseball fans attending the first regular season game between the Yankees and the Mets. The chain also offered a one-month 15 percent discount to customers carrying the card. Modell’s enhanced its ties to New York professional sports teams in 1998, when it opened a mini-store at the training camp of professional football’s New York Jets in Hempstead, New York.

By the late 1990s Modell’s was spending $20 million annually on advertising its wares on radio and television, in newspapers, and at ball parks such as Yankee Stadium, where its stadium and arena signs could be seen by television viewers as well as ticket holders. William Modell was chairman of the parent company, while sons Michael and Mitchell were co-presidents. To lessen any potential conflicts, Michael was in charge of real estate and finance, while Mitchell was responsible for merchandise and marketing. Each had children but maintained that no pressure would be put on the next generation to join the business. “You really have to love what you do and enjoy what you do,” Michael Modell told a CNN interviewer, adding “So that’s a choice only they could make.”

Principal Subsidiaries

Modell’s Sporting Goods Inc.

Principal Competitors

The Sports Authority, Inc.; Venator Group Inc.

Key Dates:

1889:: Morris Modell founds a New York City clothing store.
1946:: Modell’s opens its fifth store in Brooklyn.
1963:: The company purchases bankrupt Davega Stores Corp.
1987:: Modell’s enters the Philadelphia area through acquisition.
1988:: Sale of discount department stores makes Modell’s primarily a sporting goods chain.
1996:: Modell’s buys 15 stores from the bankrupt Herman’s chain.