Racing over the speed bumps
Despite the changes, Galyan’s still faces challenges.
"Our biggest operational challenge is managing our growth," Mang says.
The company opened three stores in October — in Illinois, Ohio and New York — bringing its total to 43, up from just stores in July 1999.
"Our goal is to open nine stores a year," Mang says. "It’s an operational challenge we’ve just had to grind through. We’ve hit our speed bumps and glitches; we’ve had our share of growing pains."
One was the company’s new merchandising and warehousing system.
"Any time you have a new system that is integral to the business, there is an adjustment period," Mang says. "There was nothing fatally flawed, no big issues that caused us to crash and burn, just management difficulties."
The company faces financial challenges as well. This year’s second quarter sales were good, but expenses have increased and margins are down. So although sales were higher, general and administrative expenses were, as well. And margins were impacted by discounts and bad weather in the company’s East and Midwest markets.
But William Blair & Co. analyst Ellen Schlossberg Zickman is not worried about Galyan’s financial future.
"Fifty percent of the new stores are financed through the landlord," says Zickman, whose firm also provides investment banking services for Galyan’s. "And the company has a newly negotiated line of credit. I’m not concerned that the company can’t fund its growth."
Mang says the company will continue to look for new store locations in the Northeast and Midwest.
"We look for areas that experience a lot of seasonality," he says. "Eighty percent of our football business is done in six weeks. Seventy-five percent of baseball is completed in eight weeks. There’s always a season being kicked off and one dying down."
Galyan’s chooses its locations based on the percent of affluent families with young children in the area, among other factors.
"If 20 percent of the families in the area have annual incomes of $75,000 or more, that will support the store," he says. "We also look at the number of hunting and fishing licenses that are issued. That gives us a sense of our outdoor market penetration."
The company is also testing the waters for going into smaller markets or supplementing larger ones with a smaller store. Two cities — Peoria, Ill., and Madison, Wis. — operate 65,000-square-foot stores, smaller than the average Galyan’s.
"Instead of two levels, these stores have one," Mang says. "They carry the same product lines but (with) less breadth and depth."
So far the stores are doing well, he says.
Mang feels that if Galyan’s is successful in changing the consumer’s perception that price is an issue at the chain, it will be smooth sailing.
Zickman agrees.
"Customers understand they can go to Galyan’s for the best selection and service," she says. "But the perception is that they are high-priced. Our research shows on like items Galyan’s prices are actually the same or lower. Galyan’s needs to do a better job educating the customer."
How will it do that? Mang says the company prints its 110 percent price guarantee on all its marketing material and has it prominently displayed on signs throughout the store.
With 28 years of retail experience that includes department store management and a job as a supplier of product to stores, Mang is ready to meet the challenge.
"There’s never a day when you don’t have a challenge," he says. "In other industries, you have to wait months to receive numbers to know how you’re doing. We receive a sales sheet every day.
"You have to learn to shuck and jive. The minute you think you have the consumer figured out, he changes his mind."
HOW TO REACH: Galyan’s, (317) 532-0200 or www.galyans.com
