The Sports Authority to sport new owner - sports apparel and equipment warehouse store chain bought by K mart Corp

Discount Store News, March 12, 1990 by Richard C. Halverson

The Sports Authority To Sport New Owner

FT. LAUDERDALE, Fla. -- K mart has purchased The Sports Authority, the first retailer to venture into the warehouse-size sporting goods concept, which now operates eight Sun Belt megastores.

K mart's own Sports Giant sporting goods chain will be folded into Sports Authority, which will operate as an independent subsidiary under its original management.

A confidential industry source told DSN that K mart signed an agreement late last month to purchase Sports Authority. Although both sides declined comment about whether the sale had been consummated, at presstime, a release signed by both parties revealed that the transaction had been completed. Terms were not disclosed.

"We've talked to Woolworth, Montgomery Ward, K mart and offshore people," about selling the chain, Jack Smith, founder, told DSN prior to the announcement.

Under terms of the agreement, Smith and his top management sold their interests to K mart and will remain at the helm of Sports Authority. "If we leave, we won't get paid for our stock," Smith said.

"We're a hot property," Smith, who left the post of coo for Herman's to found Sports Authority three years ago, had said shortly before the announcement of the acquisition. "I'm excited about being the center of all the rumors. It means we must be doing something right."

Sports Authority originally explored plans to go public, but a retail industry analyst noted that 1990 is a poor year to make a public offering.

Smith long had planned to develop Sports Authority into a national chain but lacked the capital K mart could provide, said the analyst, who requested to remain nameless. Its 1990 expansion program of 10 stores includes four in the Philadelphia market, two more in the Washington, D.C., market, two in Baltimore and two more in Florida.

With K mart's backing, Sports Authority can open 15 stores a year, Smith said. He envisions a potential chain of 200 stores nationwide. In addition, the chain is looking at foreign markets such as Canada, Puerto Rico and perhaps Europe.

Funded by venture capitalists, who also sold their stock to K mart, Sports Authority opened its first store in October 1987. Those investors included Bain Capital, Boston and First Chicago Investments.

Smith objects to calling his stores warehouse units, even though the 200-foot by 200-foot stores are warehouse type buildings, with unfinished ceilings and warehouse racking on the sides and back for hard goods. But the centers of the stores also have carpeted apparel sections, with clothing merchandised on upscale, chrome waterfalls and rounders.

Sports Authority stocks about 40,000 sku's.

The word "warehouse" connotes heavy discounting, bare concrete floors, pipe rack apparel fixtures and narrow, but deep assortments, Smith said, none of which holds true for Sports Authority units.

Smith prefers the terms megastore or category killer.

By trying to avoid the warehouse tag, Smith also is attempting to avoid being labeled a discounter, and thereby avoiding problems with upscale vendors.

Sports Authority sets sharp prices but "it doesn't give the stuff away," an analyst said.

Smith was the first to launch the megastore concept and has done the best job of it, the analyst said. By acquiring Smith's operation, K mart is buying "the cream of the cream," he said.

Other entrants that followed Sports Authority were: Robert McNulty's now defunct SportsClub; Sports Town, Atlanta, founded by Tom Haas; Oshman's Super Sports; and K mart's own warehouse - style test, Sports Giant.

Last spring, K mart opened two Sports Giant units in Madison Heights and Livonia, Mich., close to its Troy headquarters.

K mart operated Sports Giant out of its Builders Square home center division in San Antonio, Texas.