Gart Sports Company

1000 Broadway
Denver, Colorado 80122
U.S.A.
(303) 861-1122
Fax: (303) 829-1511
Web site:http://www.gartsports.com

Public Company
Incorporated: 1946 as Gart Bros. Sporting Goods Co.
Employees: 2,391
Sales: $717 million (1997 est.)
Stock Exchanges: NASDAQ
Ticker Symbol: GRTS

SICs: 5941 Sporting Goods & Bicycle Shops

Appropriately headquartered in the recreation haven of Colorado, Gart Sports Company is the second largest sporting goods retailer in the United States, trailing only The Sports Authority. Thanks to its early 1998 merger with Sportmart, Inc., Gart includes more than 120 stores in its chain, which are located in 16 states in the West and Midwest and average around 35,000 square feet. About half of the stores operate under the Gart Sports name, in Colorado, New Mexico, Wyoming, Utah, Idaho, Montana, Washington, and Nevada; the other half use the Sportmart name, including stores in Illinois, Minnesota, Wisconsin, Iowa, Ohio, California, Oregon, and Washington. The Western-located Gart stores tend to generate a large percentage of their sales from winter sports equipment, rentals, and apparel. By comparison, Sportmans are primarily located in major metropolitan areas where many customers seek the latest athletic shoes and fashionable sporting apparel. This contrast provides Gart Sports with some protection against the cyclically of sporting goods sales. Approximately 60 percent of the company’s stock is held by Leonard Green & Partners LP, a Los Angeles-based private merchant banking firm.

Founded in 1928

The founding father of Gart Sports was Nathan Gart, the son of a house painter who had emigrated from Russia. Gart started out selling newspapers in downtown Denver, then used his profits to begin buying and selling rings and watches from his customers as a sort of alternative pawn shop. By 1928 he had saved enough money to buy a 12- by 17-foot store at 1643 Larimer Street in Denver for $500. Among the other stores on Larimer at the time were a hamburger stand, a fish and oyster house, and a saddle shop. With $33 in fishing equipment as his inventory and high hopes, he opened Gart Bros., a family sporting goods store specializing in hunting, fishing, and camping supplies. Gart was creative in his use of the cramped store; he, for example, lined boxes of ammunition on the floor, thereby creating both storage space and a new floor at the same time. His first sale was a pocket knife.

The store soon became a family store in another sense when Nathan was joined by his brother George in 1932, his brother Kibby in 1934, and his brother Melvin in 1946. The brothers then incorporated the company as Gart Bros. Sporting Goods Co. in 1946.

“Sniagrab” Debuted in 1954

Meanwhile, during the Great Depression, skiing was slowly turning into a commercial recreational activity in Colorado. The first truly commercial ski resort in Colorado was in place at Winter Park by the late 1930s. Aspen, Breckenridge, and a host of other resorts soon followed. The state’s burgeoning ski industry—which really took off in the 1960s—created a huge demand for equipment and apparel, which Gart Bros, quickly stepped in to meet.

In 1954 Gart Bros, held its first annual “Sniagrab” Ski Sale (“Sniagrab” is “bargains” spelled backwards), a preseason sale of ski equipment which became an annual Gart—and Denver—tradition and by the mid-1990s was being touted as the “world’s largest ski sale.” Company lore has it that the sales event originated during a marketing meeting when Nathan’s son Jerry Gart, who had only joined the firm earlier in the year, wrote “bargains” on a paper napkin and, upon turning the napkin over, saw marketing potential in the word “sniagrab.” This event eventually became Denver’s largest annual sales event. Over the years, Gart also began to offer ski equipment rentals.

Sports Castle Opened in 1971

Under Nathan Cart’s continued leadership, Gart Bros, expanded the original store several times over the years so that the initial 12-foot frontage was 100 feet by 1971. By that time, the company had opened four other Gart outlets in the Denver area, including suburban locations in Aurora and Englewood. In 1971, however, the Larimer store was replaced by what became known as the Gart Bros. Sports Castle, a pioneering superstore located at 1000 Broadway in downtown Denver. Built in 1925 by Walter Chrysler for an auto dealership, the building was modeled on a French castle, complete with stone, parapets, and a turret. Gart purchased the building and turned it into a seven-floor, 100,000-square-foot sporting goods superstore featuring a wide range of brand-name merchandise; until the late 1980s, this was the largest sporting goods retail store in the world. The headquarters of Gart Bros, was also set up in this building. The Sports Castle would eventually include an indoor ski ramp and basketball and tennis courts on its roof.

In 1976 the company formed a new division, Gart Bros. Sports Country Stores, for expansion outside of the Denver area. The first non-Denver store was soon open in Fort Collins, a city in Colorado north of Denver. In 1981 Nathan Gart died, leaving a company that had grown to 12 stores. By that time, Jerry Gart was largely running the business, having assumed the presidency some years prior.

Purchased by Thrifty Corp. in 1986

In December 1986 Thrifty Corp.—a Los Angeles-based retailer and a subsidiary of California utility company Pacific Lighting Corp. (soon to be known as Pacific Enterprises Inc.)—bought Gart Bros, for approximately $20 million, with the Gart family slated to continue to run the company. By this time, Gart was a 16-store chain with annual sales estimated at between $25 and $30 million. Jerry Gart needed a cash infusion in order to pursue an aggressive expansion strategy, including taking the company outside its home state for the first time. He did just that the following year, with a 65,000-square-foot “sports castle” superstore opening in Salt Lake City; five other smaller Gart stores opened in Utah as well, all in 1987.

Utah, however, was just the beginning of a Gart spending spree. In mid-1987 the company bought three Hagan Sports stores in Denver. In early 1988 Gart bought Dave Cook Sporting Goods Co. for about $20 million. Dave Cook was a longtime rival to Gart and the number two sporting goods retailer in Denver at the time of its purchase by Gart. While the first Dave Cook store had opened in 1932, there were 21 by 1988, all located in Colorado, except for a single store in Casper, Wyoming. Gart and Cook had been bitter competitors for 60 years, frequently engaging in price wars, but were now joined together in a 48-store regional sporting goods empire. Herb Cook, son of founder Dave Cook, initially joined Gart Bros, following the sale, but resigned—along with other Cook family members—in early 1989. Although at first Gart continued to use the Hagan and Dave Cook names on its acquired stores, by the early 1990s a gradual conversion had resulted in all the stores bearing the Gart name.

In 1988 Gart also bought Casey’s Sports Stores, a 49-year-old, 12-store chain based in St. Louis. Following the purchase, six more Casey’s were soon opened in Kansas City. By the recessionary early 1990s, however, Gart executives had decided to return to the company’s Rocky Mountain base. In June 1991, therefore, they sold their St. Louis and Kansas City stores to MC Sports of Grand Rapids, Michigan. By 1991 Gart had 13 stores in Utah and had entered Idaho for the first time with a store in Boise. Annual sales of Gart Bros, for 1990 were estimated at more than $140 million.

New Owner, Resignation of Garts in 1992

In February 1992 Pacific Enterprises put up for sale Thrifty Corp., including its Gart Bros, subsidiary as well as two other sporting goods chains and three drugstore chains. In September Leonard Green & Partners LP, a Los Angeles-based investor group experienced in the retail sector, paid $275 million for Thrifty. The following month the Gart family attempted to repurchase Gart Bros, through a management buyout but were unable to reach an agreement with Leonard Green. In November six members of the Gart family who held senior management positions at the company resigned, ending 64 years of Gart family management. The Garts subsequently entered the real estate business, building and selling condominiums, before returning to the sporting goods business in January 1994 when they began purchasing smaller specialty sporting goods retailers, including Grand West Outfitters, Colorado Ski & Golf, and Boulder Ski Deals. Jerry Gart died on October 12, 1996, following a series of strokes.

Upon the resignations of the Gart family members, John Chase was named president and CEO of Gart Bros. Chase was a 27-year retailing veteran, with stints as president of Home Base, Fotomat Corporation, and Child World/Children’s Palace. With the departure of the Garts, the company’s new owners felt that a name change was appropriate. A new holding company called Gart Sports Company was created, with Gart Bros. Sporting Goods Co. becoming its operating subsidiary.

Company Perspectives

While continuing profitable growth, Gart Sports is committed to being the industry leader in its markets, by serving the sports consumer with quality service and broad assortments of brand name products at competitive prices.

Superstore and Geographic Expansion in the Mid-1990s

By the beginning of 1993 the number of units in the Gart Sports chain still stood at 48 as the company had concentrated on assimilating its late 1980s acquisitions. In mid-1993, however, growth was back on the front burner, evidenced by the purchase of 10 stores from the bankrupt Herman’s World of Sporting Goods chain. Five of the stores were in Utah, bringing the total there to 17, while the other five joined two existing stores in Idaho. Gart Sports had clearly become the top sporting goods retailer in the Rocky Mountain region. In 1994 the company expanded into Montana and the following year into New Mexico, while the states of Washington and Nevada became Gart territory in 1997.

At the same time that it was expanding geographically, Gart Sports joined the trend toward larger stores. Although the company had been a pioneer in large-format stores with its Sports Castle, many of the stores in its chain were either shopping mall locations averaging 11,500 square feet or freestanding/strip center stores—typically located in smaller markets—averaging 15,000 square feet. In the mid-1990s, Gart Sports opened several “superstores” ranging from 45,000 to 60,000 square feet and intended to be “category killers.” The move was in part a defensive one, as the company was facing increasing pressure from such large-format chains as JumboSports and REI. In 1993 Gart opened its first suburban superstore in Aurora, Colorado, while three more superstores debuted the following year, including one in Billings, Montana. In 1996 four superstores opened for business, two in Salt Lake City, one in Colorado Springs, and one in Missoula, Montana.

Meanwhile, in September 1993 Gart announced plans to sell 15 percent of the company to the public. Less than two months later, however, Leonard Green called off the IPO because of complications resulting from Green’s purchase of Pay Less Drug , Stores Northwest Inc. In May 1995 Chase resigned as head of Gart Sports. Doug Morton was named the new president, CEO, and chairman. Morton had joined the company in 1986 as manager of the Utah division, eventually rising to the position of executive vice-president of operations and advertising in 1995.

1998 Acquisition of Sportmart

By the middle of 1997, Gart Sports had 61 stores in seven states. Seeking to fund further expansion, company officials once again began to plan an initial public offering. But an opportunity to expand rapidly through a huge acquisition presented itself in the form of Sportmart, Inc. [for Sportmart’s history, see IDCH 15], scuttling this IPO as well. Ironically, the first Sportmart had opened in 1971, the year the Gart Sports Castle debuted. Sport-mart, based in Wheeling, Illinois, was the first category killer to enter the sporting goods market. By 1997 it had 59 stores in seven states—Illinois, Minnesota, Iowa, Ohio, California, Oregon, and Washington—and posted sales of $514.6 million but a loss of $27.1 million for fiscal 1997. Sportmarts—averaging 40,000 square feet apiece—were larger on average than Gart stores and they were concentrated more heavily in large metropolitan areas than Cart’s more scattered stores.

In a deal completed in January 1998, Sportmart agreed to merge into Gart Sports’ Gart Bros, subsidiary, with Gart Sports Company emerging through a stock split as a public company on the NASDAQ exchange. Adding Gart’s approximate revenue of $202 million to the $514.6 million pushed the new Gart Sports into the number two position in sporting goods in the United States, behind The Sports Authority and its approximate revenues of $1.7 billion. Gart Sports now had 120 stores in 16 states, compared to Sports Authority’s 174. Leonard Green & Partners controlled about 60 percent of the company’s stock following the acquisition. Morton was named chairman, CEO, and president of Gart Sports, while Andrew Hochberg, who had headed up Sportmart, served as a consultant.

The merger seemed to be a good marriage between two chains that overlapped very little geographically—with the exception of Washington state. In part for this reason, no immediate plans were announced to change store names, so the company operated both Gart Sports and Sportmart units. The match also seemed promising because Gart stores were largely located in the mountain states, while Sportmart’s category killers had landed mainly in large metropolitan areas. This mixture held hope for countering some of the cyclically of sporting goods sales, as the Gart units generated almost a quarter of their revenue from winter sports, while Sportmarts generated a large proportion of their sales from athletic shoes and apparel—20 percent from Nike-brand products alone (only eight percent of Gart sales were for Nike wear). Although issues of integration were likely to predominate for a few years following the merger, another opportunity presented therein was that of further growth through purchases of smaller chains struggling in the highly competitive sporting goods market or through moving into any number of additional markets not yet served by either Gart or Sportmart.

Principal Subsidiaries

Gart Bros. Sporting Goods Company; Colorado Wholesale Sporting Goods Company; Sportmart, Inc.; Sportdepot Stores Inc.; Thaxton Corporation.

Gart Sports Company

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Gart Sports Company

1000 Broadway
Denver, Colorado 80122
U.S.A.
(303) 861-1122
Fax: (303) 829-1511
Web site:http://www.gartsports.com

Public Company
Incorporated: 1946 as Gart Bros. Sporting Goods Co.
Employees: 2,391
Sales: $717 million (1997 est.)
Stock Exchanges: NASDAQ
Ticker Symbol: GRTS

SICs: 5941 Sporting Goods & Bicycle Shops