MC Sports gets back to retailing basics - Company Profile

Discount Store News, Nov 7, 1994 by Richard Halverson

GRAND RAPIDS, MICH. -- Turning around a money-losing retail chain is simple, said Jim Minton, president, chief executive and chairman of MC Sports.

"It's Retailing Management 101: develop a hands-on management style, draft a good business plan, communicate that plan to associates, and execute and follow through," Minton said.

"Retailing hasn't changed since the beginning of time. How many secrets are out there?" he asked rhetorically. "Retailing isn't a rocket science business. Trouble comes when egos take over and people try to revolutionize the business and stray from basics."

His 38-year career in retailing included turning around the Pay 'n Save Drug store chain in Honolulu, now part of PayLess Drug--recently acquired by Leonard Green from Kmart--and serving as president of Allied Stores, a department store chain based in Savannah, Ga. (not associated with Allied Stores Corporation).

By sticking to the tried and true, in 18 months Minton has turned around a moneylosing chain once owned by Thrifty Corp. Thrifty in turn was owned by Pacific Enterprises, a holding company whose main interests are oil and gas.

It didn't hurt Minton's task that Pacific sold Thrifty, comprised of MC Sports, Gart Bros. Sports, Big-5 Sporting Goods, Thrifty Drug stores and Bi-Mart, at a fire-sale price to Leonard Green Partners, a Los Angelesbased investment group. Accordingly, inventories and stores were marked down when Pacific cut its $1 billion loss from an ill-fated diversification into retailing.

MC Sports' sales last year were an estimated $175 million.

To date, comp store sales gains are double digit, Minton said.

With a debt-free balance sheet, Minton is now ready to expand in a major way on his base of 63 stores, and plans to open 12 next year compared to just four this year. In addition, he plans to increase the number of remodels-to-prototype to eight, compared to four this year.

"We will leverage our balance sheet conservatively," Minton said.

To date, expansion cash has come from operational income. The Green family of companies each must pay its own way.

During the turnaround, Minton turned his back on the big box, such as the 40,000-sq.-ft. stores that The Sports Authority is building and the 75,000-sq.-ft. to 85,000-sq.-ft. SuperSports USA stores on which Oshman's is staking its future.

Minton sold the three big boxes that MC Sports had acquired, including a 75,000-sq.-ft. store on seven floors in downtown Chicago. It was sold to Sportmart in a bidding match between it and The Sports Authority.

Instead, Minton is staking MC Sports' growth on an ideal store size of 17,500 sq. ft. The largest store in the chain is its flagship store in Kentwood, Mich., outside Grand Rapids, while the chainwide average runs 13,000 sq. ft.

"You don't need a 40,000-sq.-ft. store to carry 120,000 skus," Minton said. By limiting the number of facings and making deliveries from its Grand Rapids distribution center two or three times a week, MC Sports carries that many skus in its larger stores, while smaller units carry 80,000 skus.

"Stock rooms are the most expensive real estate you can own," he said.

In seeking out store sites, MC Sports looks for second- or thirdtier markets from 150,000 to 300,000 population, Minton said, markets too small for category killer chains.

At the same time, MC Sports successfully competes with big box stores in Chicago, where it plans to build six new stores on top of 14. "I'm not afraid of the big boxes," Minton said. "There's room for both formats. Supermarkets and convenience stores get along in the same markets."

But MC Sports limits the categories it carries, such as declining to sell guns. "We sell fun, not guns," Minton said. The paperwork and liability associated with firearms is enormous, he said.

MC Sports dropped bowling, for example, but carries bowling shoes. And fishing is limited to just a few stores. "Fishing has been declining nationally," according to Minton.

In its marketing, MC Sports targets middle- to upper-income families with incomes of more than $40,000 and schedules its 35 annual circulars for zoned dailies and weeklies delivered to more affluent zip codes.

To check on how well its inserts are drawing, MC Sports cashiers ask customers for their zip codes.

In its merchandising, MC Sports shoots for upscale customers, carrying such apparel brands as Nike, Columbia, Russell and OshKosh B'Gosh

In a belated technology advance, "scanning is coming next year," Minton said. "We have to get into EDI," he added.

Its priority now is integrating a new IBM AS 400 minicomputer system, along with a JDA software program. Thrifty Corp., its previous owner, had been providing data processing service, but served notice that MC Sports must go it alone starting next year.

Although the chain spends less than the retail average of 0.8% of sales on technology, it does spend big on advertising: 5.0% of sales.

"You have to continually drive the business," Minton said. "There's nothing we carry that people have to have."

In another major move to "drive the business," Minton unleashed last summer his secret marketing weapon: the MC Teammates program.