Sporting Goods Retail - Business Plan

1. SPORTING GOODS –
RETAIL BUSINESS PLAN
Philippe Burrelle
Justin Locke
Megan Kronberg
Srini Raghavan
Kevin Schumm

2. Opportunity
Idea • Big Box Sporting Goods Retailer
Stage • Seed Stage
• Brand Name Selection
Business • Large Format (40,000 square feet)
• Low Prices
Description • Store for the Everyman
2

3. Key Factors
Unit Type • Facility and Geographic Model
Critical • Brand Name Acquisition/Supplier Relationships
• Inventory Management
Economic • Marketing
Factors • Location
• Peak Cash (24 Months): $3.3M
Unit Model • Peak Cash (7 Years): $7.5M
• 10 Year IRR: 37.5%
Results • 10 Year Cash on Cash: 4.8X
3

4. S.U.C.C.E.S.S.
• $40 billion in sales for Sporting Goods
Size of segment per U.S. Census Bureau Annual
Retail Trade Survey
A Market • Highly Fragmented Market - average store
size of 5,000 to 10,000 square feet
• Ability to acquire brand name merchandise
• Ability to manage wide variety of inventory
C Uncertainty • Ability to find optimal rental properties
• Ability to bring customers into the store
• Recreational sporting goods customer looking
for a wide selection of well-known brand
A Customer name products at low prices
• Men and Women, 25-44 years old, $30-60K
• Specialty Sports Retailers
B Competition • Mom and Pop Sports Retailers
• General Merchandise Retailers
4

5. S.U.C.C.E.S.S.
• Limited entry barriers in this industry
Entry • Establishing relationships with
suppliers
B Barriers • Finding large facilities in key
locations
• Key Partner in Venture
• Large number of sporting good suppliers
B Suppliers • Co-op marketing/Market Dev Funds,
suppliers help retailers market their
products
• Mom and Pop Stores – Service,
Location
• General Merchandise Retailers – Low
C Substitutes Prices
• Specialty Sports Retailers – Service,
Some Brand Name Variety
5

6. M.M.M.M.
• Tampa Metro population 4 million
• Florida state population 20 million
A Market • $1,321 million Florida Sales for Sporting
Good Stores per U.S. Census Bureau
Annual Retail Trade Survey
• First Unit in Tampa, FL
A Model • Regional Roll Out within the state
• Waterfall Roll Out to neighboring states
• Unit Level Investment: $2.2M
B Money • Peak Cash Need (24 Months): $3.3M
• Peak Cash Need (7 Years): $7.5M
• Currently inadequate management team
C Management • Suggestions following page
6

7. Management
 Corporate Officers
Potential
 CEO - Steven G. Miller, CEO Big 5
Manageme
 CFO - Mike Newman, CFO Office Depot
nt
Personnel  COO - Mark Holifield, VP Supply Chain
Home Depot
 VP Marketing - Shawn Gensh, SVP
Marketing Gap
 VP Purchasing - Rebecca A. Jones, SVP
Merchandising Hibbett
 Board of Directors
 Rick McAllister, President & CEO Florida
Retail Federation
 Steve Knopik, CEO Bealls
7

8. Analogs
8

9. Quantitative Factors
Factor Why Important?
Sales/Square Feet Determine revenue based on store size
Same Store Insight into growth of a single store
Growth
COGS Understand margins
S&M Determine spend base
G&A Understand margins, normalized SG&A
A/R Turnover Determine A/R days
Days Payable Determine A/P days
Inventory Turnover Determine how fast inventory turns
Capex Insight into cash needed to maintain store
9

10. Quantitative Matrix
Factor Big Hibbe Golf Cabela Gande Kohl Targe Gap PetSma Staple Best
5 tt s r s t rt s Buy
Sales/Squar $21 $162 $234 $321 $168 $233 $295 $365 $214 $317 $805
e Feet 6
Same Store 8% 3.6% 0.3% 1.6% -5.6% 4.4% 2.1% 1.0% 4.8% -1.0% -1.8%
Growth
COGS % 67% 66% 66% 60% 75% 62% 69% 61% 66% 73% 75%
S&M % 5% 1% 3% 7% 1% 5% 2% 3% 1% 1% 2%
G&A % 22% 19% 28% 24% 23% 14% 14% 19% 21% 18% 17%
A/R 6 2 2 6 4 1 39 3 3 26 16
Turnover
Days 55 62 53 39 33 36 52 42 16 44 50
Payable
Inventory 2 2 3 3 2 4 6 6 6 7 7
Turnover
Capex 2% 2% 3% 3% 3.5% 5% 4% 3% 3% 2% 2%
10

11. Qualitative Factors
Factor Why Important?
Growth Stage Insight into growth and investments
Large Format Match store size factors
Sporting Goods Industry Similar cost and revenue models
Hard and Soft Sporting Same product mix and margins
Goods
Leasing Model Expenses, different initial investment
Low Price Same customer target, margins
Limited Service Focus Cost of labor
Large Selection Inventory management needs, costs
Brand Names Inventory management needs, costs
B2C Same economic model
Regional Growth Roll out model
Inventory Management Costs 11

12. Qualitative Matrix
Factor Big 5 Hibbe Golf Cabel Gande Kohl Target Gap PetSma Staple Bes
tt a r s rt s t
Buy
Mature x x x x x x x x x x x
Large Format x x x x x x x x
Sporting x x x x x
Hard/Soft Mix x x x x x x x
Leasing Model x x x x x x x x x
Low Price x x x x x x x x
Limited Service x x x x x x
Large Selection x x x x x x
Brand Names x x x x x x x x x
B2C x x x x x x x x x x x
Inventory Mgmt. x x x x x x x x x x x
12

13. Analog Selection Justification
Pros Cons Applies to…
Sports retail Smaller store format Leasehold, FFE,
Similar target market Preopening costs,
Regional footprint Inventory, COGS,
(NW/SW) SG&A, SSS growth
Leasing model
Sports retail Smaller store format Leasehold, FFE,
Similar target market Near national footprint COGS, SG&A, SSS
Leasing model growth
Sports retail Near national footprint COGS
Leasing model Specialized target Inventory Turnover
market Days Payable
Sports retail Superstore format COGS
Specialized target Revenue
market
US/Canada footprint
Corporate built and
owned 13

14. Analog Selection Justification
Pros Cons Applies to…
Sports retail Larger store format Preopening costs
Similar target market Inventory, COGS,
Regional footprint SG&A, SSS growth,
(MW/S) Leasing model Rollout
Similar target market Department store model Preopening Costs
Seasonal sales cycle Some corporate COGS
ownership SG&A
Larger store format SSS growth
Heavy soft goods/apparel
Similar target market General Merchandiser Revenue
Heavy urban presence Corporate built and owned SG&A
Effective marketing Larger store format SSS growth
Large inventory National footprint
Seasonal sales cycle Smaller store format Revenue
Strong apparel analog National footprint SG&A
Effective marketing SSS growth
14

15. Analog Selection Justification
Pros Cons Applies to…
Similar target market Specialty pet retailer Initial investment
Heavy urban presence Smaller stores Inventory, COGS,
Leasing model National footprint SG&A, SSS growth,
rollout
Similar target market Specialty business retailer Initial investment
Heavy urban presence Smaller stores COGS, SG&A
Leasing model International footprint
Heavy urban presence Electronics Merchandiser Inventory Turnover
Large Inventory International footprint Days Payable
Leasing Model
15

16. Analog Aggregation
Sports Specialty Electronics Department Home General Apparel Footwear Median
Income Statement
Sales Growth (CAGR) 2% 3% 4% 0.4% (1%) 3% 3% 5% 3%
% of Revenue
COGS 66% 72% 74% 62% 66% 65% 60% 56% 62%
Gross Profit 34% 28% 26% 38% 34% 35% 40% 44% 38%
G&A 22% 21% 17% 20% 19% 22% 23% 29% 22%
R&D 0% 0% 0% 0% 0% 0% 0% 0% 0%
Selling and Marketing 4% 2% 2% 5% 1% 1% 2% 11% 3%
EBITDA 8% 7% 11% 11% 14% 10% 13% 5% 10%
D&A 2% 3% 2% 4% 3% 2% 3% 2% 3%
EBIT 6% 4% 9% 8% 11% 8% 10% 2% 7%
Capex (3%) (2%) (2%) (4%) (3%) (3%) (4%) (3%) (3%)
Balance Sheet
Days Receivable 4 21 5 6 3 1 3 45 4
Inventory Turnover 3 5 6 4 4 5 5 3 4
Days Payable 53 34 50 39 44 36 34 42 39
 More than 55 analog companies 16

17. Analog Applied Rates
Metric Rate Sources
Sales/SF (mature) $233 Big 5, Hibbett, Cabela’s, Gander, Target, Kohl’s, Gap
Same Store 3% Big 5, Hibbett, Cabela’s, Gander, Target, Kohl’s, Gap,
Growth Primary
COGS 66.5% Big 5, Hibbett, Golfsmith, Primary
G&A 17% Big 5, Hibbett, Petsmart, Kohl’s, Primary
S&M 3% Big 5, Hibbett, Petsmart, Kohl’s, Primary
D&A 2.5% Big 5, Hibbett, Petsmart, Kohl’s, Gap
Capex .75% Big 5, Hibbett, Petsmart, Kohl’s, Gap, Primary
Days Receivable 3.6 Big 5, Hibbett, Petsmart, Kohl’s, Gap, Primary
Inventory 2.9 Big 5, Hibbett, Golfsmith, Best Buy, Gap
Turnover
Days Payable 55.2 Big 5, Hibbett, Golfsmith, Best Buy, Gap, Primary
17

18. Unit Model
18

19. Unit Model - Initial Investment
$1.2M • Leaseholds ($.8M) - Build out and improvements
• FFE ($.4M) - Furniture, fixtures, software and equipment
$1.6M • Inventory - 50,000 SKUs; $40/sq. ft. x 40,000;
split between hard goods/soft goods
55/45
($ .8M) • Accounts Payable - 50% of inventory; 45-60 days yr. 1
$ .2M • Marketing ($.15M) - Initial 2 month blanket area blitz
• Recruiting/Training ($.05M) - Initial payroll
$2.2M 19

20. Unit Model - Revenue
Assumptions
Revenue Per Sq Ft
Revenue Per Store ($ in millions)
$310
$290 $279 $12.00 $11.49
$10.82
$270 $262 $287 $11.00 $10.19
$247 $11.15
$250 $233 $270 $10.00 $9.31 $9.60 $10.50
$222 $255
$230 $9.00 $9.89
$240
$210 Revenue Per Sq Ft $8.87 Revenue Per Store
$8.00
$190
$170 $7.00
$164 $6.57
$150 $6.00
Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Total Revenue $6.57 $8.87 $9.31 $9.60 $9.89 $10.19 $10.50 $10.82 $11.15 $11.49
Revenue
Growth 35.0% 5.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Revenue Assumptions
Store Size (sf)
Average Sales/sf (at maturity)
40,000 Case assumptions; Primary Roy Cohen SVP GMM Sports Authority
233 Median Big 5, Cabela's, Gander, Hibbett, Target, Kohls, Gap
Key Unit Revenue Growth Drivers
Average Sales/sf (initial) 164 Worked back from Mature Same Store Sales/sf
• Change in mix of Hard Lines and Soft
Sales Growth Rate
Year 2
Primary Roy Cohen SVP GMM Sports Authority, Troy Mundahl
35.0% Erik's, Christopher Perrigo Target
Lines
Year 3
Primary Roy Cohen SVP GMM Sports Authority, Troy Mundahl
5.0% Erik's, Christopher Perrigo Target
• Adding new categories
Average Big 5, Cabela's, Gander, Hibbett, Target, Kohls, Gap;
• Increased Sales per Sq ft
Mature Same Store 3.0%
Primary Roy Cohen SVP GMM Sports Authority
20

21. Unit Model - Expenses
Admin Expenses: 10%
Inventory Shrinkage: 5% Normalized
Store Occupancy Cost: 5% SG&A: 21%
Freight: 7%
Store Operating Cost: 3%
Distribution: Distribution Expenses: 3%
Percent of COGS
15%
Percent of SG&A
Marketing and
Advertising:
34%
Cost of
Merchandise:
58%
Payroll
Expenses:
39%
21

22. Unit Model - COGS
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Direct expense
assumptions
COGS as % of revenue % of Rev 66.5% 66.5% 66.5% 66.5% 66.5% 66.5% 66.5% 66.5% 66.5% 66.5%
Cost of merchandise 38.6% $2.53 $3.42 $3.59 $3.70 $3.81 $3.93 $4.05 $4.17 $4.30 $4.43
Distribution 10.0% 0.66 0.88 0.93 0.96 0.99 1.02 1.05 1.08 1.11 1.15
Freight 4.7% 0.31 0.41 0.43 0.45 0.46 0.47 0.49 0.50 0.52 0.53
Store occupancy cost 3.3% 0.22 0.29 0.31 0.32 0.33 0.34 0.35 0.36 0.37 0.38
Inventory shrinkage 3.3% 0.22 0.29 0.31 0.32 0.33 0.34 0.35 0.36 0.37 0.38
Other expenses 6.6% 0.44 0.59 0.62 0.64 0.66 0.68 0.70 0.72 0.74 0.76
Total COGS $4.4 $5.9 $6.2 $6.4 $6.6 $6.8 $7.0 $7.2 $7.4 $7.6
Source – Primary research with Roy Cohen, SVP & General Merchandise Manager at The Sports Authority
(1980s), Big Five Sporting S-1, and primary research with Troy Mundahl, Manager at Erik’s Bike Shop.
22

23. Unit Model - SG&A
Initial
(Dollars) Assumption Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating expense assumptions
% of revenue
In store manager
Wage 50,000 50,461 51,479 52,509 53,559 54,630 55,723 56,837 57,974 59,134 60,316
Percent annual raise 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
FTEs 2.0 2.0 2.0 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5
Wage for managers 100,922 102,959 131,272 133,898 136,576 139,307 142,094 144,935 147,834 150,791
Sales Associates
Wage 18,000 18,141 18,502 18,872 19,249 19,634 20,027 20,427 20,836 21,253 21,678
Percent annual raise 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
FTEs 16.0 17.2 19.5 20.5 20.8 21.1 21.4 21.6 21.8 21.9 22.1
Wage for salespeople 311,497 360,830 386,400 400,124 414,336 429,053 440,963 453,204 465,784 478,714
Total Payroll Expenses (Managers +
Salespeople) 412,419 463,789 517,672 534,022 550,912 568,360 583,056 598,139 613,618 629,505
Marketing and advertising 2.0% 588,606 441,455 463,528 477,632 492,166 507,142 522,573 538,474 554,859 571,743
Distribution expenses 1% 32,853 44,342 46,559 47,976 49,436 50,940 52,490 54,087 55,733 57,429
Store operating expense (CAM, utilities,
tax) 0.5% 32,853 44,342 46,559 47,976 49,436 50,940 52,490 54,087 55,733 57,429
Normalized SG&A 3.0% 197,118 266,052 279,354 287,855 296,614 305,639 314,939 324,522 334,397 344,572
Total SG&A 1,263,850 1,259,979 1,353,672 1,395,460 1,438,562 1,483,020 1,525,549 1,569,310 1,614,341 1,660,678
19% 14% 15% 15% 15% 15% 15% 15% 14% 14%
Source – Primary research with Roy Cohen, SVP & General Merchandise Manager at The Sports Authority
(1980s), Big Five Sporting S-1, and primary research with Troy Mundahl, Manager at Erik’s Bike Shop. 23

24. Unit Model - Advertising
Sample Market Spend
Medium Spot Type Optimum Mix Spend ($)
Local Newspaper Half Page 18% $ 105,949
Local TV Spot 30 Sec 17% $ 100,063
Cable TV 30 Sec 15% $ 88,291
Local Magazine 1 Page 10% $ 58,861
Web based advertising Banner Ads 10% $ 58,861
Billboards Bulletin 10% $ 58,861
Local Radio Spot Spot Type 9% $ 52,975
Industry and special interest publications 1 Page 3% $ 17,658
Local Yellow Pages (online+print) 1/2 page 3% $ 17,658
Grand opening Expenses Onsite & Event 3% $ 17,658
Information seminars Local Clubs/Events 1% $ 5,886
Mail-in Information Direct Mail 1% $ 5,886
Total 100% $ 588,606
24

25. Unit Model – Cash Flow
(Dollars)
Initial
Cash flow assumptions Assumption Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Total Revenue 6,570,613 8,868,387 9,311,806 9,595,151 9,887,118 10,187,968 10,497,974 10,817,412 11,146,570 11,485,745
Accounts receivable 63,957 86,324 90,640 93,398 96,240 99,168 102,186 105,295 108,499 111,801
Collection days 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6
% of revenue 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
Unit COGS 4,368,025 5,895,543 6,190,320 6,378,682 6,572,777 6,772,777 6,978,863 7,191,220 7,410,038 7,635,515
Inventory 1,506,215 2,032,946 2,134,593 2,199,546 2,266,475 2,335,440 2,406,504 2,479,731 2,555,186 2,632,936
Inventory turnover 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9
% of revenue 22.9% 22.9% 22.9% 22.9% 22.9% 22.9% 22.9% 22.9% 22.9% 22.9%
Accounts payable 661,170 892,384 937,003 965,515 994,894 1,025,167 1,056,362 1,088,505 1,121,627 1,155,756
Days payable 55.2 55.2 55.2 55.2 55.2 55.2 55.2 55.2 55.2 55.2 55.2
% of revenue
Net working capital 800,140 909,003 1,226,885 1,288,230 1,327,429 1,367,820 1,409,441 1,452,329 1,496,521 1,542,058 1,588,980
change in NWC (108,863) (317,882) (61,344) (39,199) (40,392) (41,621) (42,887) (44,192) (45,537) (46,923)
Fixed assets
Beginning balance 1,196,764 1,196,764 859,073 688,362 517,078 350,652 189,233 32,973 (117,971) (263,438) (403,260)
Additions: Maintenance cap ex -0.8% (49,280) (66,513) (69,839) (71,964) (74,153) (76,410) (78,735) (81,131) (83,599) (86,143)
Subtractions: Depreciation 0 117,700 104,198 101,446 94,462 87,266 79,850 72,209 64,336 56,223 47,863
Ending balance 1,196,764 1,029,785 688,362 517,078 350,652 189,233 32,973 (117,971) (263,438) (403,260) (537,266)
Depreciation life 10
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Unit cash flow
Net income 533,675 1,045,633 1,083,139 1,122,255 1,162,533 1,204,009 1,248,880 1,295,155 1,342,880 1,392,098
Depreciation 117,700 104,198 101,446 94,462 87,266 79,850 72,209 64,336 56,223 47,863
Capital expenditures (49,280) (66,513) (69,839) (71,964) (74,153) (76,410) (78,735) (81,131) (83,599) (86,143)
Change in Working capital (108,863) (317,882) (61,344) (39,199) (40,392) (41,621) (42,887) (44,192) (45,537) (46,923)
Unit cash flow 493,233 765,436 1,053,402 1,105,554 1,135,254 1,165,828 1,199,467 1,234,168 1,269,966 1,306,895
5-year 10-year
IRR 25.3% 37.5% 25
Cash-on-cash 2.0x 4.8x

26. Unit Model - Performance
Revenue $6,570,613 $8,868,387 $9,311,806 $9,684,278 $10,071,649 $10,474,515 $10,893,496 $11,329,236 $11,782,405 $12,253,701
COGS 66.5% 66.5% 66.5% 66.5% 66.5% 66.5% 66.5% 66.5% 66.5% 66.5%
SG&A 19.2% 14.2% 14.5% 14.5% 14.5% 14.5% 14.4% 14.3% 14.3% 14.2%
EBITDA 14.3% 19.3% 19.0% 19.0% 19.0% 19.1% 19.1% 19.2% 19.3% 19.3%
Unit Cash Flow 7.5% 8.6% 11.3% 11.4% 11.4% 11.4% 11.4% 11.4% 11.4% 11.4%
26

27. Unit Model - Performance
(Dollars)
Projected
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue $6,570,613 $8,868,387 $9,311,806 $9,595,151 $9,887,118 $10,187,968 $10,497,974 $10,817,412 $11,146,570 $11,485,745
COGS 4,368,025 5,895,543 6,190,320 6,378,682 6,572,777 6,772,777 6,978,863 7,191,220 7,410,038 7,635,515
Gross profit 2,202,589 2,972,844 3,121,486 3,216,468 3,314,341 3,415,192 3,519,111 3,626,192 3,736,532 3,850,230
Normalized SG&A 3.0% 197,118 266,052 279,354 287,855 296,614 305,639 314,939 324,522 334,397 344,572
Operating Expenses 1,066,732 993,928 1,074,318 1,107,606 1,141,949 1,177,381 1,210,609 1,244,788 1,279,943 1,316,105
Total SG&A 19% 1,263,850 1,259,979 1,353,672 1,395,460 1,438,562 1,483,020 1,525,549 1,569,310 1,614,341 1,660,678
EBITDA 938,738 1,712,864 1,767,814 1,821,008 1,875,779 1,932,171 1,993,562 2,056,883 2,122,192 2,189,552
% margin 14.3% 19.3% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.1%
Depreciation & Amortization 117,700 104,198 101,446 94,462 87,266 79,850 72,209 64,336 56,223 47,863
EBIT 821,039 1,608,666 1,666,368 1,726,546 1,788,513 1,852,321 1,921,353 1,992,547 2,065,969 2,141,689
% margin 12.5% 18.1% 17.9% 18.0% 18.1% 18.2% 18.3% 18.4% 18.5% 18.6%
Taxes 35.0% 287,364 563,033 583,229 604,291 625,980 648,312 672,474 697,391 723,089 749,591
Net income 533,675 1,045,633 1,083,139 1,122,255 1,162,533 1,204,009 1,248,880 1,295,155 1,342,880 1,392,098
Memo:
Unit profit contribution 2,005,470 2,706,792 2,842,132 2,928,614 3,017,727 3,109,552 3,204,172 3,301,670 3,402,135 3,505,657
% margin 30.5% 30.5% 30.5% 30.5% 30.5% 30.5% 30.5% 30.5% 30.5% 30.5%
27

28. Unit Model – 1st Year
Month 0 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Selling Sq Footage 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000
Average Sales Per Square Foot $110 $118 $126 $135 $144 $164 $187 $194 $196 $197 $199 $201
Total Revenue $366,667 $392,333 $419,797 $449,182 $480,625 $547,913 $624,621 $646,482 $652,139 $657,845 $663,601 $669,408
Cost of merchandise $141,377 $151,273 $161,862 $173,193 $185,316 $211,261 $240,837 $249,266 $251,447 $253,648 $255,867 $258,106
Distribution $36,563 $39,122 $41,861 $44,791 $47,927 $54,636 $62,285 $64,465 $65,030 $65,599 $66,173 $66,752
Freight $17,063 $18,257 $19,535 $20,903 $22,366 $25,497 $29,067 $30,084 $30,347 $30,613 $30,881 $31,151
Store occupancy cost $12,188 $13,041 $13,954 $14,930 $15,976 $18,212 $20,762 $21,488 $21,677 $21,866 $22,058 $22,251
Inventory shrinkage $12,188 $13,041 $13,954 $14,930 $15,976 $18,212 $20,762 $21,488 $21,677 $21,866 $22,058 $22,251
Other expenses $24,375 $26,082 $27,907 $29,861 $31,951 $36,424 $41,524 $42,977 $43,353 $43,732 $44,115 $44,501
Total COGS $243,753 $260,816 $279,073 $298,608 $319,511 $364,242 $415,236 $429,770 $433,530 $437,324 $441,150 $445,010
In store manager
Wage $4,167 $4,174 $4,181 $4,188 $4,195 $4,202 $4,209 $4,216 $4,223 $4,230 $4,237 $4,244
Percent annual raise 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2%
FTEs 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0
Wage for managers 8,333 8,347 8,361 8,375 8,389 8,403 8,417 8,431 8,445 8,459 8,473 8,487
Sales Associates
Wage 1500 1503 1503 1505 1508 1510 1513 1515 1518 1520 1523 1525
Percent annual raise 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
FTEs 16 16 16 16 16 18 18 18 18 18 18 18
Wage for salespeople 24,000 24,040 24,040 24,080 24,120 27,180 27,226 27,271 27,317 27,362 27,408 27,453
Total Payroll Expenses (Managers +
Salespeople) 32,333 32,387 32,401 32,455 32,509 35,583 35,643 35,702 35,762 35,821 35,881 35,941
Marketing and advertising $ 196,202 49,051 49,051 49,051 49,051 49,051 24,525 24,525 24,525 24,525 24,525 24,525
Distribution expenses 2,738 2,738 2,738 2,738 2,738 2,738 2,738 2,738 2,738 2,738 2,738 2,738
Store operating expense (CAM, utilities,
tax) 5,476 5,476 5,476 5,476 5,476 5,476 5,476 5,476 5,476 5,476 5,476 5,476
Corporate Executive Salaries 109,375 109,375 109,375 109,375 109,375 109,375 109,375 109,375 109,375 109,375 109,375 109,375
Corporate Selling and Marketing 8,213 8,213 8,213 8,213 8,213 8,213 8,213 8,213 8,213 8,213 8,213 8,213
National Headquarters rent and other 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333
Total SG&A 362,670 215,573 215,587 215,641 215,695 218,769 194,303 194,362 194,422 194,481 194,541 194,601
Operating Profit (239,757) (84,055) (74,863) (65,066) (54,580) (35,099) 15,081 22,350 24,187 26,040 27,910 29,797
Cash Taxes 0 0 0 0 0 0 5,278 7,823 8,465 9,114 9,769 10,429
Net Income (239,757) (84,055) (74,863) (65,066) (54,580) (35,099) 9,803 14,528 15,722 16,926 18,142 19,368
+ Depreciation 9,973 9,950 9,926 9,899 9,871 9,841 9,807 9,768 9,728 9,687 9,646 9,604
-Capital Expenditure (2,933) (3,139) (3,358) (3,593) (3,845) (4,383) (4,997) (5,172) (5,217) (5,263) (5,309) (5,355)
Change in Net Working Capital (3,551) (3,799) (4,065) (4,350) (9,309) (10,612) (3,024) (783) (789) (796) (803)
Initial Investment (2,231,841) 0 0 0 0 0 0 0 0 0 0 0 0
Free Cash Flow (472,474) (164,850) (146,958) (127,892) (107,484) (74,048) 24,360 46,272 52,102 55,715 59,361 63,039
Cumulative Free Cash Flow (2,704,316) (2,869,166) (3,016,124) (3,144,016) (3,251,501) (3,325,549) (3,301,188) (3,254,916) (3,202,814) (3,147,099) (3,087,738) (3,024,699)
28

29. Unit Model – 2nd Year
Month 13 Month 14 Month 15 Month 16 Month 17 Month 18 Month 19 Month 20 Month 21 Month 22 Month 23 Month 24
Selling Sq Footage 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000
Average Sales Per Square Foot $208 $211 $215 $219 $221 $223 $225 $226 $227 $228 $229 $230
Total Revenue $692,837 $704,962 $717,299 $729,851 $736,238 $742,680 $749,178 $752,456 $755,748 $759,054 $762,375 $765,710
Cost of merchandise $267,140 $271,815 $276,571 $281,411 $283,874 $286,358 $288,863 $290,127 $291,396 $292,671 $293,952 $295,238
Distribution $69,088 $70,297 $71,527 $72,779 $73,416 $74,058 $74,706 $75,033 $75,361 $75,691 $76,022 $76,355
Freight $32,241 $32,805 $33,379 $33,963 $34,261 $34,560 $34,863 $35,015 $35,169 $35,322 $35,477 $35,632
Store occupancy cost $23,029 $23,432 $23,842 $24,260 $24,472 $24,686 $24,902 $25,011 $25,120 $25,230 $25,341 $25,452
Inventory shrinkage $23,029 $23,432 $23,842 $24,260 $24,472 $24,686 $24,902 $25,011 $25,120 $25,230 $25,341 $25,452
Other expenses $46,059 $46,865 $47,685 $48,519 $48,944 $49,372 $49,804 $50,022 $50,241 $50,461 $50,681 $50,903
Total COGS $460,586 $468,646 $476,847 $485,192 $489,437 $493,720 $498,040 $500,219 $502,407 $504,605 $506,813 $509,030
In store manager
Wage $4,251 $4,258 $4,265 $4,272 $4,279 $4,286 $4,293 $4,301 $4,308 $4,315 $4,322 $4,329
Percent annual raise 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2%
FTEs 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0
Wage for managers 8,502 8,516 8,530 8,544 8,558 8,573 8,587 8,601 8,616 8,630 8,644 8,659
Sales Associates
Wage 1528 1530 1533 1535 1538 1541 1543 1546 1548 1551 1553 1556
Percent annual raise 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
FTEs 19 19 19 19 19 19 20 20 20 20 20 20
Wage for salespeople 29,027 29,075 29,124 29,172 29,221 29,270 30,861 30,913 30,964 31,016 31,068 31,119
Total Payroll Expenses (Managers +
Salespeople) 37,528 37,591 37,654 37,716 37,779 37,842 39,448 39,514 39,580 39,646 39,712 39,778
Marketing and advertising 147,152 36,788 36,788 36,788 36,788 36,788 18,394 18,394 18,394 18,394 18,394 18,394
Distribution expenses 3,695 3,695 3,695 3,695 3,695 3,695 3,695 3,695 3,695 3,695 3,695 3,695
Store operating expense (CAM, utilities, tax) 7,390 7,390 7,390 7,390 7,390 7,390 7,390 7,390 7,390 7,390 7,390 7,390
Corporate Executive Salaries 112,656 112,656 112,656 112,656 112,656 112,656 112,656 112,656 112,656 112,656 112,656 112,656
Corporate Selling and Marketing 19,299 19,299 19,299 19,299 19,299 19,299 19,299 19,299 19,299 19,299 19,299 19,299
National Headquarters rent and other 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333
Total SG&A 336,054 225,753 225,815 225,878 225,941 226,004 209,216 209,282 209,348 209,414 209,480 209,546
Operating Profit (103,802) 10,563 14,636 18,781 20,859 22,956 41,922 42,955 43,993 45,035 46,082 47,134
Cash Taxes 0 3,697 5,123 6,573 7,301 8,035 14,673 15,034 15,397 15,762 16,129 16,497
Net Income (103,802) 6,866 9,513 12,208 13,558 14,921 27,249 27,921 28,595 29,273 29,953 30,637
+ Depreciation 9,519 9,064 8,976 8,887 8,796 8,704 8,611 8,517 8,423 8,329 8,234 8,139
-Capital Expenditure (5,543) (5,640) (5,738) (5,839) (5,890) (5,941) (5,993) (6,020) (6,046) (6,072) (6,099) (6,126)
Change in Net Working Capital (3,241) (1,677) (1,707) (1,737) (883) (891) (899) (453) (455) (457) (459) (461)
Initial Investment 0 0 0 0 0 0 0 0 0 0 0 0
Free Cash Flow (206,869) 22,874 30,803 38,874 43,741 47,782 85,562 87,954 89,907 91,869 93,840 95,820
Cumulative Free Cash Flow (3,231,569) 22,874 (3,200,765) 61,748 (3,157,025) 109,530 (3,071,462) 197,484 (2,981,555) 289,353 (2,887,716) 385,173
29

30. Roll Out – 10 Year Footprint
30

31. Roll Out – By Store
Year 1 2 3 4 Year 4 5 6 7 8 9 10
Florida - Southern/Central Georgia 3 4
TampaCentral 1 South Carolina 2 3
TampaLakeland 1 Alabama 2 3
TampaSarasota 1 North Carolina 2 3
MiamiCape Coral 1 Tennessee 1 3
MiamiCentral 1 Total 3 4 2 5 5 4 3
MiamiFort Lauderdale 1
Fort Myers 1
Gainesville 1 Total Stores Added:
Ocala 1 Years 1 to 5 26
OrlandoNorth Central 1 Years 6 to 10 19
OrlandoTitusville 1 Cumulative Stores by Yr 10 45
OrlandoDaytona Beach 1
OrlandoSouth 1
West Palm Beach 1
Florida - Northern
Jacksonville 1
Tallahassee 1
Panama City 1
Mobile-Pensacola 1
Mobile-Fort Walton 1
Total 1 3 10 5 31

32. Roll Up
(Dollars)
Projected
Operational Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Total revenue 6,570,613 28,580,226 101,623,096 178,779,338 242,161,399 296,358,660 349,760,093
Unit profit contribution 2,005,470 8,723,203 31,017,210 54,566,692 73,912,045 90,454,031 106,753,116
% margin
Corporate Expenses
CEO/President 450,000 463,500 477,405 491,727 506,479 521,673 537,324
CFO 262,500 270,375 278,486 286,841 295,446 304,309 313,439
VPs 300,000 309,000 318,270 327,818 337,653 347,782 358,216
VPs 300,000 309,000 318,270 300,000 309,000 318,270 327,818
Pre-opening Expenses 234,937 704,811 2,349,369 1,879,495 1,409,621 1,174,685 1,174,685
Corporate Selling and Marketing 98,559 428,703 1,524,346 2,681,690 3,632,421 4,445,380 5,246,401
National Headquarters rent and other 100,000 100,000 300,000 300,000 500,000 500,000 500,000
Total Corporate Expenses 1,745,996 2,585,389 5,566,147 6,267,571 6,990,620 7,612,099 8,457,882
EBITDA 259,474 6,137,813 25,451,063 48,299,121 66,921,425 82,841,932 98,295,234
% margin
Depreciation 117,700 457,298 1,591,040 2,382,383 2,924,898 3,311,525 3,658,280
EBIT 141,774 5,680,515 23,860,023 45,916,737 63,996,528 79,530,407 94,636,954
Taxes 35.0% 49,621 1,988,180 8,351,008 16,070,858 22,398,785 27,835,642 33,122,934
Net income 92,153 3,692,335 15,509,015 29,845,879 41,597,743 51,694,764 61,514,020
Free cash flow
Net income 92,153 3,692,335 15,509,015 29,845,879 41,597,743 51,694,764 61,514,020
Depreciation 117,700 457,298 1,591,040 2,382,383 2,924,898 3,311,525 3,658,280
Capital expenditures (1,147,485) (3,375,941) (11,205,468) (8,233,268) (5,364,374) (3,761,131) (3,360,620)
Working capital (108,863) (3,044,891) (10,105,021) (10,674,080) (8,768,509) (7,497,850) (7,387,752)
Free cash flow (1,046,494) (2,271,199) (4,210,434) 13,320,915 30,389,757 43,747,309 54,423,928
Cumulative cash flow (1,046,494) (3,317,693) (7,528,128) 5,792,787 36,182,544 79,929,853 134,353,781
Peak Cash Need (2 Years) 3,317,693 32
Peak Cash Need (7 Years) 7,528,128

33. F.A.C.E.S.
A Focus • Targeted market and focus
N/A Ash • Lack of adequate information
• Specialty superstore concept has been
B Capability proven in other industries
• Strategic mergers – Gander, Hibbett
B Exit • IPO – Staples, Home Depot, PetSmart
• Sponsor purchase
• Highly scalable
A Scalability • Regional/National model
33

34. Discussion
34

35. Appendix
35

36. Primary Contacts
• Former SVP and General Merchandise Manager,
Roy Cohen The Sports Authority
• Former VP, Target Global Operations and Delivery
Christopher Perrigo Services
• Manager, Erik’s Bike and Board Shop
Troy Mundahl Minnetonka, MN Location
Ken LeSesne • Director of Sales, WJXX/WTLV Jacksonville, FL
• Global Finance Manager, P&G Beauty and
Mike Hewett Grooming
36

37. Primary Research (interviews):
1 Roy Cohen
SVP and General Merchandise Manager at The Sports Authority at start-up in 1980s.
Transcript available upon request
2 Christopher Perrigo
Senior Executive Advisor at Booz & Co, formerly VP and Chairman at Target (India), VP Global Operations and Delivery services at Target.
Transcript available upon request
3 Troy Mundahl
Store Manager at Erik's Bike Shop ($25M, 18 store, Minneapolis-based bike shop)
Transcript available upon request
4 Ken LeSesne
Direct of Sales at WJXX (ABC, Jacksonville)
Transcript available upon request
5 Mike Hewett
Global Finance Manager, P&G
Transcript available upon request
Capital IQ - Company Overview Reports: Mintel Co - Consumer Research Reports:
BestBuyCoIncNYSEBBY_PublicCompany Action & Extreme Sports - Mar-11
Big5SportingGoodsCorpNasdaqGSBGFV_PublicCompany Athletic Shoes - Jun-08
CabelasIncNYSECAB_PublicCompany Baby Boomers - US - Dec-11
CitySportsInc_CIQReportLandscape Clothing & Footwear - Trends Developments & Prospects
FootLockerIncNYSEFL_PublicCompany Department Store Retailing - Aug-10
GolfsmithInternationalHoldingsIncNasdaqGMGOLF_PublicCompany Fitness Clothing - Sep-11
HenryModellCompanyInc_CIQReportLandscape Footwear US - Nov-10
HibbettSportsIncNasdaqGSHIBB_PublicCompany Marketing to Sports Enthusiasts - Jun-11
HRBlockIncNYSEHRB_PublicCompany Marketing_to_Sports_Enthusiasts__Infographic_Overview
MichiganSportingGoodsDistributorsInc_CIQReportLandscape Sporting Goods - Team Sports - Aug-08
ScheelsAllSportsInc_CIQReportLandscape
SportChaletIncNasdaqGMSPCHB_PublicCompany Industry Reports:
WinmarkCorpNasdaqGMWINA_PublicCompany S&P - Apparel & Footwear - Retailers and Brands - Sep-11
ZumiezIncNasdaqGSZUMZ_PublicCompany S&P - Retailing General - Nov-11
S&P - Retailing Specialty - Nov-11
ESSN Big Box Report
10Ks: S1s: Retail Brand - State of the Industry - 2011
Best Buy 2009, 2010 Cabela's 2004
Big Five Sporting Goods 2009, 2010 Finish Line 1996 Other Publications:
Big Lots 2011 Gander Mountain004
2 Sporting Goods - Intel - 2005
Cabela's 2009, 2010 Gart Sport 1996 Sportswear as Cheap Chic
Finish Line 2009, 2010 Hibbett Sports 1996 US Consumer in 2020
Gander Mountain 2007, 2008, 2009 Big Five 2001 The Future of Mall Stores
Gart Sport 2003 Clear Channel Outdoor Rates
Hibbett Sports 2008, 2009, 2010 Goldman Sachs Global Retail Conference Powerpoint - 2011
Home Depot 2010 Chain Store Age for Retail Executives - Magazine
Lululemon 2011 2004, 2005, 2006, 2008, 2009, 2010, 2011
Office Depot 2009 Big Builders Survey - 2010
Office Max 2010 Big Five, Big Lots - DataMonitor
Petsmart 2008, 2009, 2010 Big Box Retailer Properties - Pitfalls of Valuation
The Sports Authority 2006 Buyers Guide - POS systems
Sports Chalet 2011 Chain Store Age - Cost is Still Key - 2007
Staples 2010 Chainlinks Real Estate Advisors - 2012
Target 2009 Annual Store Construction and Survey - 2012
Walmart 2010 Big Box International - 2011 - Colliers International
Tenant Improvement Issues in Retail Real Estate - International Council of Real Estate Centers
37