When Alan Cohen and his partners, David Klapper, Larry Sablosky and Dave Fagin, started The Finish Line in 1981, the athletic footwear industry was in its infancy. There were no $100 million contracts with pro basketball players to peddle their products, and companies weren’t identified by which athletes wore their apparel.
Cohen and Klapper cut their teeth in 1976 as franchisees for The Athlete’s Foot. The pair had vision and ambition, and thrived on action. By 1980, they had 10 Athlete’s Foot stores and saw the exponential growth opportunities in athletic footwear stores. But they were limited by their franchising agreement with The Athlete’s Foot, which kept them within the Indiana state borders.
So Klapper and Cohen decided to launch The Finish line, offering full partnership opportunities to Sablosky, a childhood friend, and Fagin, a manufacturer’s rep who did business with Klapper and Cohen’s stores.
“We had all the same problems that any start-up company has,” says Cohen, The Finish Line’s chairman and CEO. “Did we have enough money? Did we have the right people in place? Did we have a concept that could work?”
Cohen and his partners did have one thing that few start-ups have — an established chain of stores generating revenue that they could tap into.
The Finish Line concept was simple — sell brand name athletic shoes and clothing at a competitive price. There was a high demand for the products, and competition was limited.
“The fact that business was strong allowed us to make mistakes and still be successful and grow,” Cohen says.
In 1986, the franchise agreement with The Athlete’s Foot expired and all 10 Athlete’s Foot stores were converted to The Finish Line stores. By 1991, the chain had expanded to 105 stores, primarily in the Midwest and Southeast, and annual sales were approximately $100 million. A year later, they took the company public.
Today, The Finish Line boasts more than 550 stores and annual revenue of nearly $1 billion. Cohen attributes the company’s success to the fact that its leaders constantly try to differentiate it from the rest of the pack.
“We’ve had very strong earnings and sales,” Cohen says, referring to the company’s last few years. “This is due to strategies we put in place two years ago. The competition focuses on lower prices, turning the product into a commodity. We were leading with products. We focused our inventory on premium products, newer footwear, and highlighted them in the stores.”
The strategy has proven successful. Year-end sales for 2003 were $985.9 million, up 30 percent from 2002’s $757.2 million. In 2001, before implementing its new focus, sales were $701.4 million.
But it’s not just top-line growth that Cohen has overseen. Company earnings have climbed steadily, from $18.4 million in 2001 to $25.04 million in 2002 to $47.27 million last year. The Finish Line also maintains a strong balance sheet, with $95.7 million in cash and securities and no interest-bearing debt.
Cohen’s tight grip on the company’s war chest has given The Finish Line high marks on Wall Street. Three years ago, its stock traded in the $10 to $12 range, and as recently as September 2002, it fell to close to $7. Today, it’s trading between $30 and $35, consistently rising while the bulk of the stock market’s offerings fell or remained stagnant during the recent recession.
Cohen says there’s still room for earnings growth, but warns the stock probably won’t continue to climb at the current rate.
“We expect a 3 to 4 percent increase in earnings this year,” he says. “Our strategy is to do more of the same — market and merchandise ourselves as a premier athletic retailer with the most unique, best products.”
Pacesetters
Part of The Finish Line’s success lies in Cohen’s abilities as a change agent.
“Everything has changed,” he says. “Nothing is as it was when we started, from A to Z.”
The Finish Line’s employees, its concept, the look of the stores and technology have all evolved as the company has grown, Cohen says. The stores are bigger and the caliber of employees continues to improve. But Cohen says technological advances have had the greatest impact on how The Finish Line operates.
“There was no technology when we started,” he says. “We used cash registers and manually tracked our inventory and sales. Now we are totally automated, and the information we receive is fantastic.”
Automating the entire process from start to finish provides Cohen and his senior management team with more accurate and up-to-date information that they can use to make better business decisions, allowing them to act more quickly when they see a trend establishing. The Finish Line has also improved its ability to appeal to a wider age range of customers than its competitors do.
“While our core group of customers hasn’t changed — they are 13- to 21-year-olds, male and female — we’ve built and designed our stores to appeal to a much broader range,” by stocking products for customers of any age and designing the store with that philosophy in mind, Cohen says.
“It’s not so much our marketing message that brings these additional customers into the store,” he says. “It is the look and feel of the store. Almost all of our stores are located in malls. As people walk by, we want the stores to be inviting to them, and have nothing to turn them off or be intimidating.”
It’s a marathon, not a sprint
Cohen refuses to be complacent as he looks to the company’s future.
“We will continue to try and improve on anything and everything,” he says. “That’s how you have to feel to get better.”
And that’s why he fosters an environment of continuous improvement.
“We can do better with our customers, buy better; in short, we can get better,” he says. “Those are not just words. We all believe them — it is a company philosophy.”
The company has opened nearly 60 stores a year the last few years, and Cohen says managing growth is a challenge, especially when it comes to finding prime locations.
“We’re already in 47 states, and now we’re filling in those states where we’re underdeveloped,” including in the Northeast, South Florida and the West Coast, especially California. “Finding acceptable real estate on acceptable terms is getting to be a bigger challenge.” he says. “It’s expensive, and it’s not easy getting good locations.”
To overcome that challenge, The Finish Line is targeting large, regional malls rather than smaller suburban ones.
“We work with the developer to ask him or her to consider one of our stores,” Cohen says. “We’ve proven we can perform.”
Another part of the strategy for growth is to develop the company’s people, The Finish Line’s greatest asset, Cohen says.
“In our business, obviously, people are critical, especially at the store level. We’ve done a great job getting better, making the store job easier and making it easier for those at the stores to succeed,” he says. “We want to continue that momentum.”
Cohen says that extends from those on the floor in the stores all the way up the corporate ladder.
“Right now, we have as good a management team as we’ve ever had,” he says. “The challenge is to keep all of these people focused and motivated through our culture and environment.”
That’s especially critical as the company continuously adapts to the marketplace.
“It’s been tough,” Cohen says. “They [the management team] understand, but still, change can be painful to go through. Keeping them in place and motivated is really a challenge.”
The bottom line, however, is keeping customers happy.
“Since we are a product-driven business, we spend a lot of time making certain we have what consumers are looking for and in their size and color,” Cohen says. “We have great buyers, great relationships with our dealers and good information from our systems, but we still have to work to improve.”
Because the company buys products nine months in advance, it can be difficult to forecast what the hottest products will be, especially when the dealers are manufacturing just the number ordered.
“If we order 10,000 of a style, that’s what we get,” Cohen says. “If those run out in three weeks, it’s tough.”
So as Cohen sets his sights on the next wave of adaptation, one priority is to improve The Finish Line’s ordering system.
“How good is anyone’s crystal ball?” Cohen jokes, recognizing the difficulties of predicting what consumers will buy.
But, he says, he’s confident that by keeping focused on winning the marathon as opposed to the sprint, The Finish Line will continue to grow.
“Our strategies are working very well,” he says “We’ve done a tremendous job in gaining market share.” How to reach: The Finish Line, (888) 777-3949 or www.finishline.com
