MARKETING PLAN EXPLORER

Copyright 2002, Professor Jerome M. Katrichis

 

 

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Sports Authority Example

 

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B. Sales and Profit History

 

Sports Authority’s primary business is the retail sales of brand name sporting goods, and athletic footwear and apparel.  Currently, the company stands as the largest full-line sporting goods retailer in the United States, operating 198 U.S. stores and 28 stores in Japan, as noted in Financial Resources section.  

 

Merchandise at the Sports Authority consists of two lines: hard lines and soft lines constituting $1.5 billion in retail sales. Hard lines consist primarily of equipment for sporting activities; soft lines consist of athletic and active footwear and apparel.  During the past three years, hard lines constituted approximately 51% of the company’s sales; apparel approximately 22%; and footwear approximately 27%.

 

Exhibit 1.

 


All financial records are reported in late January or early February, which is the end of Sports Authority’s fiscal year.  Sales fluctuate throughout the year due to seasonal and holiday consumer spending.  (Note:  More detailed information regarding the seasonality patterns will be discussed in the external analysis “Seasonality” section of this document.)  In the year 2000, quarterly sales trends were as follows: 

 

1Q – 23.5%

2Q – 26.1%

3Q – 22.4%

4Q – 28.1%

 

The following chart depicts the number of Sports Authority stores in the U.S. by geographical region:

 

Exhibit 2.

Geographical Region

Number of Stores

Northeast

69

Southeast

71

Midwest

29

West

12

Northwest

4

Southwest

13

Total

198

 

 

 

 

Approximately 70% of Sports Authority’s stores are concentrated on the East Coast as depicted in the following chart: 

 Exhibit 3.


As a result, it is estimated that sales total $1.1 billion from the East Coast.  It is also estimated that the following cities or areas generate the most revenue for the company due to the number of stores within each area:

 

Exhibit 4.

City or Area

Number of Sports Authority Stores

New York

29

Washington, D.C.

14

Southeast Florida

16

Atlanta

11

Tampa

11

Chicago

14

 

 

 

Sales and profit data will be analyzed for the past five years. Below is a chart detailing the financial information for Sports Authority.[1] 

 

Exhibit 5.  Consolidated Financial Highlights

                                             (Thousands of dollars, except per share data)

 

Fiscal Year

 

2000

1999

1998

1997

1996

Sales

 

$1,498,844

$1,492,860

$1,599,660

$1,464,565

$1,271,296

Gross Margin

 

$400,891

$360,564

$390,959

$419,537

$365,373

Net Income (loss)

 

$25, 426

($160, 544)

($63, 791)

$22,193

$30,005

Long Term Debt

$205, 100

 

$126,029

$173,248

$157,439

$152,021

Diluted earnings (loss) per common share

 

$0.78

($5.02)

($2.01)

$0.70

$0.94

 

                                    Exhibit 6.  Consolidated Financial Highlights

       (Common statement reflects numbers as a percentage of sales)

 

Fiscal Year

 

2000

1999

1998

Gross Margin

 

26.7%

24.2%

24.4%

Operating Income (loss)

1.8%

(8.9%)

(5.6%)

Net Income (loss)

 

1.7%

(10.8%)

(4.0%)

 

[1] Data extracted from Edgar Scan

 

Sports Authority’s sales for the fiscal year 2000, were $1.5 billion.  This was a 0.4% increase from the previous year, $1.4 billion.  In 1999 and 2000, Sports Authority substantially decreased their expansion rate and closed 25 stores.  In addition, no new stores have opened in 2001 due to the weak consumer-spending environment.

In 1997, a new CEO, Martin Hanaka was appointed to lead Sports Authority in the upcoming years.  After his appointment, sales increased 26% between 1996 and 1998.  Noteworthy is the drop in sales of 6.6% from 1998 to 1999.

 


            Exhibit 7.

 

The increase in store sales for the year reflected the execution of a number of turnaround initiatives, including changes in the Company's advertising, pricing and buying strategies.  These initiatives, combined with high demand for trend items such as scooters and "ab rollers," spurred sales in the key categories of fitness, footwear and ladies activewear. Estimates of scooter sales in the U.S. last year ranged from 10 million to 14 million units sold. Increases in these categories were somewhat offset by continued declines in outdoor categories such as hunting and fishing.  Overall, sales slowed in the fourth quarter, and contributed to essentially flat sales compared to the prior year.
 
As seen in Exhibit 8, an estimation of the actual sales per product category at Sports Authority is as follows: In the footwear category, sales are estimated to be $405.0 million. (27% of $1.5 billion total sales in 2000); sales in apparel is estimated to be $330.0 million; and equipment is estimated to contribute $765.0 million.  In the entire sporting goods industry, total sales reached $45.5 billion. It is estimated that a breakdown of sales in the entire sporting goods industry is as follows: Footwear - $13.0 billion; Apparel – $11.0 billion; and Equipment – $21.4 billion. Sports Authority holds a 3.3% market share in the industry.  From this information, it is estimated that Sports Authority holds a 3.1% market share in footwear; a 3.0% market share in apparel; and a 3.6% market share in equipment.
 
Exhibit 8.

Merchandise Category

2000 Sales (in millions)

Market Share

Equipment

$765.00

3.60%

Footwear

$405.00

3.10%

Apparel

$330.00

3.00%

Sports Authority’s original concentration in product offerings was in the equipment category. Although the product mix has changed to include apparel and footwear, sales trends indicates that equipment continues to hold the largest percentage of company sales. 
 

As depicted in Exhibit 7, Sports Authority experienced a net loss for the fiscal years 1999 and 1998 of $160.5 million and $63.8 million, respectively.  A substantial increase occurred in the year 2000, with a $25.4 million net income primarily due to Sports Authority’s decision to close poorly performing stores.  Long term debt has increased 63% over the past year, succeeding a fluctuation in long term debt from 1997 through 2000.

 
Gross Margin for the fiscal year 2000 increased 11% from $360.5 million in 1999 to $400.9 million. This is due to the decrease in the costs of goods sold. Sports Authority’s business is characterized by low margins, due to lower prices, and higher turnover when compared with the rest of the industry.  Below are the consistent inventory turnover rates from 1996 through 2000:
 
Exhibit 9.
Fiscal Year
2000
 
1999
1998
1997
1996
Inventory Turnover Rate
2.8
2.9
3.1
3.1
3.2
 
 

 


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