Sports Unlimited sells stock to pay debt, fund expansion - initial public offering - Two More Discounters File IPO

Discount Store News, August 17, 1992 by Richard Halverson

TAMPA, Fla. -- Sports Unlimited, a sporting goods megastore chain, has filed to go public, hoping to raise $86.5 million to pay off virtually all debt and fund store expansion.

Owned by Investcorp, the same Arab World holding company that bought Sak's Fifth Avenue for $1.5 billion, Sports Unlimited operates 20 sporting goods megastores averaging 41,000 sq. ft., and plans to open 15 to 20 more over the next two years.

Under terms of the public offering, Investcorp would sell 4.18 million shares, or a 35.6% minority interest, at a price of $18 a share.

Investcorp bought the chain from founder Jim Bradke for $60 million in 1990. Bradke continues to operate the chain as chairman and chief executive officer under a management contract that runs through 1995.

Bradke founded the chain in 1979 when he was vice president of Brunswick and led a management buyout from Brunswick in 1982 when the chain ran three Florida stores.

Sports Unlimited is expanding out of its Sunbelt base as far afield as Tulsa, Okla., Cincinnati, Ohio, and Harrisburg, Pa. The last two are expected to open during the third quarter.

Charleston, S. C. was the most recent opening in July, 1992.

In the fourth quarter, Sports Unlimited will enter three new markets when it opens in Birmingham, Ala., Memphis, Tenn.; and San Antonio, Texas.

For 1993, it disclosed plans to open a new store in Richmond Va., during the first quarter.

If the IPO goes through despite cooling investor interest in new issues, Sports Unlimited would be the second sporting goods chain to go public this year. In the spring, SportsTown, Atlanta, raised some $12 million in an IPO.

In 1991, Sports Unlimited, the store name for Sports and Recreation, Inc., earned $8.9 million in operating profits on sales of $138.9 million. Comparable stores sales went up 8% for the year.

For the first quarter of 1992, comparable store sales rose 13.9%, notes the stock registration filed with the Securities & Exchange Commission.

Hard lines accounted for 52% of sales last year, soft lines, 46%. Stores carry 125,000 skus. Nike, its largest vendor, accounted for 10% of 1991 sales.

Of the expected net proceeds of $65 million, the company would use $40.7 million to pay off long-term and revolving credit debt. That would leave it with long-term debt for $3.9 million, compared to total stockholders equity of $102.4 million, including $2.7 million in retained earnings.

Its operating expense ratio, as a percentage of sales, dipped to 17.9% in 1991 from 19.5% in 1990 and 19.3% in 1989.

Operating income equaled 6.4% of sales in 1991, up from 5.7% in 1990 but down from 6.7% in 1989.

Gross profit margins slipped to 24.3% in 1991 from 25.2% in 1990 and 26.0% in 1989.

Advertising outlays in 1991 equaled 2.4% of sales.

Sports Unlimited deals with more than 1,000 vendors, who ship 95% of purchases directly to stores. To process bulk shipments, mostly from the Far East, Sports Unlimited maintains a 10,000-sq.-ft. distribution center in Tampa.

Storage area amounts to about 20% of total square footage in each store.

Of the 20 stores, the company owns six, leases two others on capital leases and 12 on operating leases.

The chain employs 1,255 at the store level and 87 at headquarters. Of the total, 806 are full time employees and 563 part-time workers.