Sport/22/dt1st/mark2nd By JENNIFER NETHERBY Staff Reporter Considering recent history, it seems an odd time for a sporting-goods chain to go on an expansion drive in Southern California. But that isn’t stopping Sport Chalet. Anxious to capture the local outdoor market, chains from all over the country moved in and built big-box stores in Southern California during the mid-1990s. The result, predictably, was over-saturation, forcing many of the newcomers to close locations by 1997. But La Canada-based Sport Chalet is hoping to go against that trend, opening four new Southern California stores this year and launching an e-commerce site to debut in time for the Christmas shopping season. “We don’t think we’re over-saturated,” said Craig Levra, chief operating officer. “If anything, we’re concerned we’re not serving enough of the population.” This week, the company will open a store in Porter Ranch, its fifth in the Valley. With 20 stores now open in Southern California, the company is celebrating its 40th year with a rebound in its stock price and three consecutive years of increases in sales and net income. For the year ended March 31, the company reported net income of $5.4 million (80 cents per share), compared with $3.2 million (49 cents) a year earlier. It managed a 3 percent net profit margin for the year, double the industry average of 1.6 percent. Despite such successes, Sport Chalet has been largely ignored by Wall Street. Its stock, which trades on the Nasdaq, has hovered around $6, with a price-earnings ratio last week of only 7.2. The company’s rebound follows some rocky times in the 1990s that included heavy losses, massive debt and a couple of high-profile management shake-ups. Trouble started in the early 1990s when Norbert Olberz, who started the company with his wife in a La Canada storefront in 1959, announced he would retire. He appointed a chief executive to replace himself, and the company took a dive. Olberz said the only way out of the heavy debt the chain accumulated during this period was to go public. In 1992, Sport Chalet launched its initial public offering and the price hit $9.50 the day after the IPO, a high it has yet to recover. Sales continued to drop through the mid-1990s. Olberz blames management problems for heavy losses the company suffered through 1996. The recession also took its toll, and plans for the chain’s expansion to 25 stores were called off. In 1995, Olberz returned to head the company. The chain scaled back operations and refocused on customers. “We’ve taken pride in seeing things through the eyes of customers,” Levra said. Like other retailers, Sport Chalet was also being hurt by an overbuilt market, said John Horan, publisher of Sporting Goods Intelligence, a trade publication. Some of that added competition disappeared last year when Oshman’s and Sports Authority closed Southern California stores, allowing the market to correct itself, Horan said. Levra said Sport Chalet was able to withstand the effects of a shrinking sports market in the last few years because of the fact that it is more of a specialty-type store. The store offers things many of the bigger chains don’t, such as equipment rentals, scuba lessons and repairs. “Sport Chalet was always slightly different,” said Horan. “Their customers are more specialty-oriented.” Still, the competition remains fierce. “It’s an industry that still can be described as too few dollars chasing too many products,” said Michael May, spokesman for the Sporting Goods Manufacturers Association. “Sporting-goods stores are not the only place you can go to buy sporting goods.” Big-box stores like Sports Chalet have an advantage in selection, May said. But they still face competition from a flood of other retailers, from the Internet to K-mart. The industry as a whole has been unable to grasp the correct way to market itself, part of the reason May said no chains have been able to go national. “What you have to do is get consumers thinking about your store it’s not always the price, not always availability,” May said. May said Sport Chalet’s strength is in its name, and that will be a bonus when it launches an e-commerce site this fall. The online site will be run by Global Sports Interactive, an e-commerce company based in Pennsylvania that will keep most of the e-commerce sales and pay Sport Chalet a licensing fee. “You can’t stay still,” Olberz said. “You have to keep up with the Joneses.” Levra said by partnering with Global Sports, Sport Chalet won’t have to invest capital in launching the online site, something Wall Street has punished other land-based retailers for doing. While business is booming, closer to home, the company has run into fierce opposition over plans to build a new corporate headquarters in La Canada. For the last 15 years, neighbors have protested the planned expansion and design, complaining that it doesn’t fit with the “village” design they want for the city. Olberz said that after investing several million dollars to move the plan forward, he’s given up on the expansion in La Canada for this year, and may instead look elsewhere. “It’s dead,” he said. “What the future brings, I don’t know.”
