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Shopping Centers Today -> April 2003
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BIG 5 SPORTS TAPS SMALLER CENTERS FOR GROWTH
BY JON SPRINGER
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| Big 5 will have nearly 300 stores in 10 states by the end of this year. |
Forty years ago a small group of Army surplus stores near Los Angeles known as United Merchandising Corp. was renamed Big 5 Sporting Goods Corp. (the “Big 5” was a reference to each of the five stores then in the chain).
That name lives on today, but “Little 275” might be a better description.
The El Segundo, Calif.-based sporting goods chain is, after all, one of the biggest little stores in its industry. Defying the trend among sporting goods dealers to open massive superstores dealing in apparel, Big 5 has grown behind its strategy of opening relatively small stores (average size: 11,000 square feet) that mostly sell sports equipment in smaller shopping centers and Main Street locations. Branching out in recent years from its Los Angeles base, Big 5 at press time operated 275 stores in 10 states and was actively searching out new locations throughout the West.
Big 5 plans to open between 15 and 20 new stores in 2003, according to Dorm Leighty, vice president of real estate, and recently surpassed nationwide competitor The Sports Authority in the number of stores it operates. (That’s set to change again, though: In late February Sports Authority, Fort Lauderdale, Fla., and Gart Sports Co., Englewood, Colo., agreed to merge. The merger would create a nationwide chain of 385 sporting goods stores.)
“You don’t think of Big 5 as being a large chain until you realize how many stores they operate,” said Thomas Doyle, vice president of research and information for the National Sporting Goods Association, or NSGA. “If you figure that around four of their stores equals one big box, they probably have the equivalent of 60 or 70 big-box stores.”
Big 5 packs a lot of goods into — and generates significant sales out of — its 11,000-square-foot box. According to the company, stores carry about 25,000 stock-keeping units. Big 5 recorded sales-per-square-foot of $226 for the 12 months ended last March 31, among the highest in the sporting goods industry. Big 5 also differs from many of its competitors in that it generates a majority of sales (53 percent) from hard goods as opposed to apparel and footwear.
The chain does that by focusing on the general sports enthusiast (and his kids) as opposed to the elite athlete, observers say.
“I don’t believe they really go after the aficionado, the guy who’s going to spend $10,000 on ski equipment,” Doyle said. “They try to be very center-of-the-market in their focus, and they are very good at delivering on that.”
Big 5’s marketing strategy is limited almost exclusively to weekly newspaper inserts and Internet coupon specials. The chain believes that the fliers drive traffic and sales, promote and reinforce its brand image, and reach more customers more effectively.
Like many of its strategies, Big 5’s customer focus, marketing and merchandising date back to its founding as an army surplus store in 1955. Co-founder Robert W. Miller is still with Big 5 as chairman emeritus, and his son Steven G. Miller is CEO and chairman. Over the years, the chain has gone through different ownership combinations (most recently, it did an IPO), but the company has remained remarkably stable throughout. Many of its buyers and key employees have been with the chain for more than 20 years.
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“They are really good operators,” said John Campbell, assistant vice president of The Macerich Co., Westcor region, and manager of Village Square II, a Phoenix community center in which Big 5 leases a 14,000-square-foot space. “When you walk into a Big 5 store, you realize they’re very well stocked, they have a wide range of inventory represented, they have good sale prices, and they have good help on hand. There’s a vitality about the store.”
Despite its steady growth, Big 5 has consistently kept a low profile. It generally prefers not to discuss its plans or strategy with the press and, according to Doyle, is not particularly active with the NSGA. “They’ve always been very quiet,” he said.
Big 5 did, however, make a little noise last summer by raising about $77 million in its IPO, some of which was targeted for new store openings. Analysts like Big 5’s potential. Bent R. Rystrom, a senior research analyst at U.S. Bancorp Piper Jaffray, noted in a January research brief that “non-ski merchandise continued to comp nicely” and predicted a same-store sales jump of 3 percent for the year.
On the real estate front, Big 5 generally seeks freestanding stores, but is flexible on the building type, according to Leighty. About a dozen Big 5 stores are located in regional malls, with the rest split evenly between in-line and freestanding boxes in neighborhood centers, community centers and Main Street locations.
“We’re looking at a lot of freestanding stores now,” Leighty said, “but we don’t have a set store prototype. The important thing to us is to know the market and know our customers.”
Big 5 seeks markets that are accessible to middle- and upper-income families with children, Leighty said. Though some 60 percent of its stores are in California, Big 5 also has stores in Arizona, Idaho, Nevada, New Mexico, Oregon and Washington, and it has most recently expanded into Colorado, Texas and Utah. Big 5 generates strong returns on new store openings, the company says, with new stores in existing markets achieving store-level returns of approximately 35 percent in their first full year of operation.
Its flexibility and small store size afford Big 5 plenty of opportunity to find locations once a market is chosen, Leighty said. Many of its stores were formerly occupied by retailers who left seeking more space. Big 5 can be creative in reusing space if necessary.
“We’ve seen a lot of retailers, like drugstores, going to larger locations, and that’s helped us,” Leighty said. “We’ve also run into a number of the older, 35,000 to 40,000-square-foot food stores. We found with a few of our developers that we can chop up some larger spaces and create a spot for us.”
Campbell says he knows of one Big 5 store in the Phoenix area that continues to thrive despite a less than ideal site. “It’s not a hot retail location — a lot of other retailers have come and gone — but they’ve been there forever and are still doing good business. To do that, you’ve got to be a good operator.”
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