Sport Chalet, Inc.

views updated

Sport Chalet, Inc.

920 Foothill Boulevard
La Canada, California 91011
U.S.A.
(818) 790-2717
Fax: (818) 790-1134

Public Company
Incorporated: 1960
Employees: 1,303
Sales: $133.7 (1996)
Stock Exchanges: NASDAQ
SICs: 5941 Sporting Goods & Bicycle Shops

A leading operator of full service, specialty sporting goods superstores, Sport Chalet, Inc. operates exclusively in Southern California, where the 18 stores comprising the company’s retail chain in 1996 were located. A small business for decades, Sport Chalet began expanding rapidly during the late 1980s, quickly establishing its superstores throughout five counties in Southern California. The company’s stores stock a full line of traditional sporting goods, as well as thousands of products for nontraditional sports such as downhill skiing, bicycling, mountaineering, scuba diving, and kayaking. In 1996, seven of the company’s 18 stores featured swimming pools for scuba diving and kayaking instruction and promotion.

The Founder and Early Company History

No figure looms larger in Sport Chalet’s history than Norbert J. Olberz, the company’s founder, chairman, and guiding hand during its evolution from a one-store enterprise to an 18-unit chain of sporting goods superstores. Olberz superintended Sport Chalet’s development over a four-decade span and was still in command as his company entered the late 1990s and he was in his early 70s. Olberz’s tenure at Sport Chalet may be divided into two eras of the company’s history, the first consisting of 20 years during which Sport Chalet operated as a modestly-sized business, and the second consisting of another two-decade period during which Sport Chalet rapidly grew into a chain of sporting goods superstores, becoming one of the leading sporting goods chains in the United States. Through the slow years and the years of animated growth, Olberz held sway over Sport Chalet’s operation, guiding the company from his office in La Canada, California.

Olberz founded Sport Chalet in 1959 and opened the first Sport Chalet store in La Canada in June of the following year. From the company’s inaugural year forward, it would remain headquartered in La Canada, its geographical scope would be limited to Southern California, and Olberz would serve as chairman. However, little else would remain the same by the 1990s.

During these early years of Sport Chalet’s history, Olberz, then in his early 30s, lived in a small house several blocks away from the site of his original store, which was located along Foothill Boulevard as it passed through La Canada. The first store measured 2,000 square feet and focused on the sale of skiing gear, as the company’s name suggested. Merchandise moved quickly enough, however, to enable Olberz to expand the scope of his business not long after opening the first store.

Shortly after the grand opening of the first store, Olberz branched out and moved across the street to a 25,000 square-foot facility. Though the move represented a giant leap for the start-up, the expansion did not signal continued rapid growth. Rather, Olberz and his retail business assumed a stable position in the Southern California sporting goods retail community, not mounting any aggressive assault on neighboring sporting goods retailers until the 1980s.

Expansion Begins During the 1980s

Sport Chalet had already celebrated its 20th anniversary by the time it began to show intentions of capturing the lion’s share of the sporting goods retail sales in Southern California. In fact, the bid to become big began exactly 21 years after the first store was opened, when Olberz established a Sport Chalet in Huntington Beach in June 1981. Another Sport Chalet was opened in June 1983, followed by the August 1986 establishment of a Sport Chalet in Mission Viejo. Stores in Point Loma and Santa Clarita were opened in 1987, and the pace of expansion picked up considerably. Olberz spearheaded the establishment of two stores in 1989 (Beverly Hills and Marina del Rey), and another two in 1990 (Brea and Oxnard), none of which were smaller than 30,000 square feet, widely considered the minimum size for a superstore.

During the latter part of the decade in particular, Sport Chalet began to take on the trappings of a retail powerhouse. Aside from the ambitious store expansion, the company upgraded its accounting and inventory systems and opened a 116,000 square-foot warehouse in Montclair, part of which would later be devoted to retail space for another Sport Chalet store.

Going Public in the 1990s

Following the establishment of the stores in Brea and Oxnard in 1990, both of which featured indoor pools, Olberz opened the largest Sport Chalet at the time, a 44,000-square-foot store complete with indoor pool that opened in June 1991 in West Hills. A slightly larger store was opened a little more than a year later, when customers first walked through the 45,000-square-foot Sport Chalet in Burbank in August 1992.

The two months that followed the Burbank grand opening were the last months of Sport Chalet’s existence as a private company. Competition among Southern California sporting goods superstores was intensifying with each passing month, as mammoth retail outlets proliferated throughout the area. In 1992 alone, three sporting goods superstore retailers—Atlanta-based Sportstown; Tampa, Florida-based Sports & Recreation; and Niles, Illinois-based Sportmart—had completed initial public offerings to fund store expansion. By November 1992, its was Sport Chalet’s turn. Olberz at the time was hoping to open nine to 12 Sport Chalet stores during the ensuing three years, a plan that would require at least $2 million per store opening. Consequently, in November Olberz put roughly 25 percent of his 13-store company on the market, then used the money gained from the public offering to help finance the Sport Chalet’s expansion.

The conversion to public ownership led to the first disclosure of Sport Chalet’s financial figures in the company’s 32-year history. Between 1988 and 1992, as documents filed with the Securities and Exchange Commission revealed, Sport Chalet had recorded a robust 24.9 percent annually compounded growth rate, achieving enviable sales growth during its rise to superstore chain status. Fiscal 1991’s totals reached $79.2 million in sales and $344,000 in net income, figures easily eclipsed by the totals generated in fiscal 1992, when Sport Chalet collected $94.8 million in sales and $1.85 million in net income.

Propelled by the momentum of solid financial growth, Sport Chalet entered the public spotlight in November 1992, then proceeded to implement its ambitious expansion program that called for the establishment of three to four stores per year. Two stores were opened in November 1993, one in Torrance and another in Glendora, each of which measured 40,000 square feet. The addition of these two stores followed the announcement of 1993’s financial figures, which elevated Sport Chalet past the $100 million-in-sales plateau for the first time. For the year, the company generated $106.3 million in sales and earned more than $2 million in net income, fueling confidence that Sport Chalet had successfully withstood the deleterious affects of a national economic recession.

During the early 1990s, Sport Chalet stores stocked merchandise that the company categorized in nine product groups, giving each store a full spectrum of products. In addition to selling downhill skiing equipment and apparel, which had contributed the largest percentage of store sales since 1960, Sport Chalet stores stocked camping, backpacking, and mountaineering merchandise, including camping equipment rentals, and scuba gear, including air compressors to refill dive tanks. Rounding out the company’s merchandise lines were fishing gear, cycling gear, including bicycle repair service, general sporting goods, shoes and in-line skates, racquet sports, and water sports, including swimwear, water skis, and kayaks. Of the company’s total sales, winter-related merchandise represented Sport Chalet’s largest sporting goods category, accounting for nearly 30 percent of annual sales. In ranking order, general sporting goods and water sports represented the second-largest category, contributing nearly 25 percent of the company total sales, followed by the 15 percent derived from outdoor gear, the 13 percent grossed from the sale of shoes and in-line skates, and the nine percent contributed by scuba equipment.

The stores by this point were huge, generally containing more than 30,000 square feet each and one—the Sport Chalet in Marina del Rey—as large as 42,000 square feet. Despite their size, Sport Chalet stores avoided the trappings typically associated with massive retail stores, featuring carpeted floors and standard retail gondolas and fixtures instead of warehouse racking structures and concrete floors. Sport Chalet stores were upscale rather than spartan, and several of the company’s largest stores were outfitted with glass-walled pools for scuba and kayaking instruction and promotion.

Sport Chalet opened two more stores in 1994, one in June in Rancho Cucamonga and another in August in El Cajon, but the continued expansion of the company’s retail units was the only bright spot in an otherwise dismal year. For the first time in its history Sport Chalet lost money, generating $122.2 million in sales but posting a $111,127 loss. The recession was partly to blame, but Sport Chalet executives also attributed the loss to an earthquake that temporarily closed five of the company’s stores as well as below-average snowfall in Southern California. Sales of winter-related merchandise in Sport Chalet stores fell 8.7 percent during the year, while the company’s other merchandise categories registered a six percent increase, pinning Sport Chalet’ s anemic profitability on its dependence on skiing equipment and apparel sales.

The Mid-1990s and Beyond

In the wake of 1994’s loss, Sport Chalet intensified efforts to reduce its reliance on winter-related merchandise, striving to lessen its exposure to the vagaries of snowfall by expanding into other areas such as bicycling and in-line skating. In November 1995, when it opened a store in Irvine, Sport Chalet climbed out of the red and posted $292,000 in net income on $134.7 million in sales, but the return to profitability was short-lived.

In 1996, as Sport Chalet executives were charting the company’s course for the future, warm and dry weather contributed to another year of below average snowfall, causing the company’s winter-related merchandise sales to plummet 31 percent. As a result, total sales for the company fell .7 percent, slipping to $133.7 million, and net income plunged precipitously, cascading to a $1.3 million loss. With these financial totals hanging over company executives, Sport Chalet prepared for the late 1990s, hoping for steady snowfall in the years ahead and a revival of a sluggish California economy.