Michigan Sporting Goods Distributors, Inc.

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Michigan Sporting Goods Distributors, Inc.

3070 Shaffer S.E.
Grand Rapids, Michigan 49512
U.S.A.
Telephone: (616) 942-2600
Toll Free: (800) 626-1762
Fax: (616) 942-2312
Web site: http://www.mcsports.com

Private Company
Incorporated: 1946 as Michigan Clothiers
Employees: 1,300 (est.)
Sales: $148 million (2003 est.)
NAIC: 451110 Sporting Goods Stores

Michigan Sporting Goods Distributors, Inc. operates a chain of nearly 70 MC Sports stores, which are located in seven states in the Midwest. Most of the firm's outlets are about 15,000 square feet in size and carry a full line of sporting goods and clothing, while a handful are twice as large and incorporate an outdoor center that features camping, hunting, and fishing gear. The company is owned by members of senior management.

Early Years

MC Sporting Goods traces its origins to 1946, when Jack Finklestein founded a store in Grand Rapids, Michigan, called Michigan Clothiers. Finklestein had previously managed a local store called Sterling Clothing Company, which had later become known as Fink Clothing. In 1946, he renamed the business Michigan Clothiers and began to focus on selling menswear, war surplus items, and recreational products. Finklestein's wife Genevieve, who had received a business degree from the University of Chicago, also participated in running the business, while helping raise their sons Morton, Edward, and Raleigh.

As sales of sports-related products grew during the 1950s, the company gradually shifted its inventory in this direction. In 1961, now under the control of Morton, Edward, and Raleigh Finklestein, the store was renamed MC Sporting Goods, and its inventory updated to include only sports equipment, clothing, and shoes.

The new concept was a success, and during the next two decades additional stores were opened in western Michigan, and then in other parts of the state and in neighboring Ohio and Illinois. By 1986, the company, which had become known as MC Sporting Goods, was operating a total of 23 stores.

Sporting goods retailers were now seeing a massive consolidation in which a few players sought to create national chains by purchasing strong regional operators. In 1986, the Finklestein brothers decided to sell their firm to Thrifty Corp., a California-based company with $1.6 billion in annual sales that owned several sporting goods and drugstore chains. The brothers would remain in charge of the business following the sale.

Thrifty's other sporting goods chains included Big 5, with 94 West Coast stores; and Gart Brothers, a Denver-based chain of 16. Thrifty itself had recently been acquired by Pacific Lighting Corp., a Los Angeles-based holding company that owned Southern California Gas Co., the largest natural gas utility in the United States.

Expansion in the Late 1980s

Taking advantage of Thrifty's deep pockets, MC Sporting Goods soon began to expand. Shortly after the ownership change was finalized, the company opened three new stores in Ohio, and the following summer it purchased three Chicago-area sporting goods stores owned by Morrie Mages, a well-known local entrepreneur, which were subsequently renamed MC Mages.

Within a year, 20 new stores had been added, including additional ones in Iowa and Illinois. In the fall of 1988, the company also bought Brown's Sporting Goods, which operated a chain of 18 stores in Illinois and Indiana.

By 1990, MC Sporting Goods was ranked the 13th-largest sporting goods chain in the United States by Sports Trend magazine, which estimated its annual sales at $150 million. Late in that year, the Finklestein brothers' four-year contract ended, and they gave up control of the firm their father had founded. They would go on to other business ventures in the Grand Rapids area, including opening several Kenny Rogers Roasters chicken restaurants.

The company soon named B. Chris Schwartz president and CEO. Schwartz had previously headed Bata Shoe Co. and Cevaxs Corp. and served as chief operating officer of BiWay Stores. By this time, the firm was operating 62 outlets in Michigan and four other states. Sales were split evenly between clothing and sports equipment.

In 1991, Thrifty shifted control of 20 Gart Brothers and Casey's Sports stores in Missouri and Kansas to MC Sporting Goods, which reopened them as MC Sports stores. The firm subsequently added a 100,000-square-foot warehouse space in Grand Rapids to handle the larger inventory its new stores required. By the start of 1992, the firm had a total of 77 outlets.

Sale to Leonard Green & Partners in 1992

In the years since its 1986 acquisition by Pacific Lighting, many of Thrifty's divisions had seen revenues decline, and in early 1992 that firm announced that its retail chains, including all 266 of its sporting goods stores, were for sale. In the spring, a deal was reached with buy-out specialists Leonard Green & Partners of Los Angeles to acquire most of Thrifty's operations, with its Pay 'N Save unit to be purchased by Kmart's PayLess Drug Stores subsidiary. The total price of both deals was put at $275 million, about a fourth of the $1.1 billion Pacific Lighting had originally paid.

With competition now fierce in the sporting goods marketplace, MC Sporting Goods began to shift its focus toward improving customer service, rather than emulating big-box chains like The Sports Authority or mass-merchandisers like Wal-Mart and Sears. In July, CEO Schwartz, who had unsuccessfully attempted to buy MC Sporting Goods himself, quit the firm. He was replaced by John Chase on an interim basis until James Minton took the top job in October. Minton had formerly headed Thrifty's Pay 'N Save operation. For 1992, the company's sales were estimated at $155 million.

In October 1993, MC Sporting Goods announced it was closing nine stores in the St. Louis area, all of which had formerly been Casey's Sports outlets. The firm also opened three new stores in Chicago during the year, which left it with a total of 62 by year's end.

In 1994, MC Sporting Goods began a major overhaul of its image. The firm's flagship store in Grand Rapids was remodeled at a cost of $500,000, with video demonstration displays, an in-store workout center, and expanded product lines added. Its name was also changed from MC Sporting Goods to MC Sports. The renovation was a success, and future stores were built in this mold, with existing ones upgraded over time.

The year 1994 also saw the company announce a program called TEAMMATES, through which it would donate goods valued at 5 percent of the total on store receipts collected by various organizations. The program was intended to benefit school athletic programs and charitable sports-related organizations such as the YMCA.

In the fall of 1994, MC Sports announced plans to open 18 new stores over the next year, including several each in Cleveland, Chicago, Detroit, and Kansas City. Sales of sporting goods were again on the upswing, and other chains, including Dick's Sporting Goods, Sports & Recreation, and Sportsmart, were also announcing aggressive new expansion plans. Sales for 1995 were estimated at $175 million, with MC Sports seeing particularly strong growth in sales of camping gear and women's sports apparel.

Senior Management Buys Firm in 1996

In the summer of 1996, a deal was reached for a group of the firm's senior management, including CEO Jim Minton and chief financial officer Bruce Ullery, to buy MC Sports from Leonard Green & Partners. The company was now operating a total of 78 stores.

The year 1996 also saw MC Sports sign on as a primary sponsor of the Great Lakes State Games, an Olympics-style event for Michigan athletes held in the state capital of Lansing. In addition to this and the TEAMMATES program, MC Sporting Goods participated in Miracle May, during which month a portion of sales was given to the Children's Miracle Network.

In the summer of 1997, the company acquired Traverse Bay Tackle Co. of Traverse City, Michigan, a large fishing-goods store, and merged it into a new MC Sports store opening in the area. Their combined operations would offer 44,000 square feet of retail space. It was one of the first examples of a new prototype, dubbed an Outdoor Center, which MC Sports would later begin to build in select markets. Most of its stores, which were typically located in strip and shopping malls, averaged 15,000 square feet.

The firm was also now looking at expanding to smaller markets where the competition was less intense. In 1998, MC Sports opened 20,000 square foot stores in Decatur, Illinois, and Toledo, Ohio, and announced ambitious plans to open 12 to 15 other outlets in Alabama, Georgia, Tennessee, and North Carolina, though this idea was soon scrapped. In September 1998, Jim Minton stepped down and Bruce Ullery was appointed president and CEO.

Fierce competition was just one source of difficulty for sporting goods retailers, who also faced a continuing decline in sports participation among young people. This was attributed in part to financially strapped school districts cutting athletics programs, as well as the growing popularity of stay-at-home activities like video games. Some chains, including one-time industry leader Herman's, had already gone belly-up, while others, like Jumbo Sports/Sports & Recreation, were in serious trouble.

Company Perspectives:

Our Goal at MC Sports is to create an environment of mutual respect, which allows success for both the employees and the company.

MC Sports itself began to close more underperforming outlets and by the spring of 1999 had slimmed down to a total of 65 stores. The company was also looking at the retail possibilities offered by the Internet, and in May announced an "e-tailing" partnership with Global Sports Interactive (GSI), which would operate the firm's online business, along with those of competitors like Sports Chalet, The Athlete's Foot, and Sports & Recreation. The plan called for GSI to design and operate each company's Web site and handle ordering, fulfillment, and customer service. MC Sports would receive 10 percent of revenues in exchange for putting the Web address in all of its marketing. The Web site began operating in November, in time for the holiday shopping season.

November 1999 also saw the firm open new stores in Bloomington, Indiana; Joplin, Missouri; and West Bend, Wisconsin. The first was a 30,000-square-foot Outdoor Center, while the Wisconsin and Missouri stores were the more typical 15,000 square foot size.

In 2000, MC Sports added new stores in Grandville, Michigan; Rockford, Illinois; and Madison, Wisconsin. All were Outdoor Centers. The firm expanded its warehouse capacity during the year by leasing part of a vacant Sam's Club store south of Grand Rapids, where it would also sell clearance items.

In 2001, MC Sports closed several stores and shrank to 64 outlets, with sales hitting an estimated $210 million. The year 2002 saw the firm receive a $40 million line of credit from LaSalle Retail Finance to help fund growth. Four more stores were added during the year, bringing the total up to 68. This number held steady for the next two years, even as estimated sales, according to industry newspaper Sporting Goods Business, declined to $148 million.

The nearly 60-year old MC Sports was working to adapt to a tough retail environment by building large Outdoor Centers in some markets and targeting smaller cities in others. Its continued survival was evidence of the skill and tenacity of its management.

Principal Competitors

The Sports Authority, Inc.; Dick's Sporting Goods, Inc.; Dunham's Sports; Winmark Corp.; Wal-Mart Stores, Inc.; Kmart Corp.; Target Corp.

Key Dates:

1946:: Jack Finklestein founds Michigan Clothiers in Grand Rapids, Michigan.
1961:: Finklestein's three sons take charge and rename the store MC Sporting Goods; 20 additional stores are opened in the 1960s, 1970s, and 1980s.
1986:: The company is sold to Thrifty Corp. of California.
1987:: Three Morrie Mages stores are bought in Chicago and renamed MC Mages.
1988:: Brown's Sporting Goods chain of 18 stores is acquired.
1990:: Finklestein family members exit the company.
1991:: The firm takes control of 20 Gart Brothers/Casey's stores in Missouri and Kansas.
1992:: Thrifty Corp. sells the company to Leonard Green & Partners of Los Angeles.
1996:: Senior management, led by CEO Jim Minton, buys the firm from Leonard Green.
1998:: Minton steps down; Bruce Ullery is named CEO.
1999:: Online sales begin through Global Sports Interactive.