Despite Dick's Sporting Goods moving heavily into the Southern California market with its acquisition of Chick's, Sport Chalet's CEO Craig Levra doesn't seem too concerned. Prompted by a question at the Wedbush Morgan investor conference held last week, Levra said he has long maintained that the California market “is the most competitive market in the country and way more competitive than the east coast.”
He mentioned a litany of competitors besides Chick's in the market, including Tilly's, Active, Val Surf and Zumiez targeting youth as well as Adventure 16 and REI in the outdoor space. Cabela's and Bass Pro also compete with Sport Chalet in some markets. Levra also noted that Southern California has a host of independents “doing a great job.”
“It's a more complex, diverse and competitive set here,” said Levra. “So we look at [Dick's arrival] as one more player. Certainly they're a very, very strong one and they do a multitude of things very, very well. They make more money than anyone in the industry. They're giant. So they'll add a different set to the competitive landscape. No doubt about it.”
Asked to assess the merger, Levra said Chick's is particularly strong in fashion/lifestyle product on both the apparel and footwear side. “They're really one of the strongest operators out there,” said Levra. “If you walk into their stores, they tell unbelievable stories, whether it's Quicksilver, Roxy, Volcom, Hurley or Billabong.” Three other areas where Chick's excels, according to Levra, are baseball, snowsports and licensed product.
By comparison, Levra believes Dick's Sporting Goods offers more focus on the core athletic side such as baseball, footwear and soccer; is “dominating in golf;” and has a “great” fitness department.
“So there's certainly some similarities in the two companies but also a lot of differences,” said Levra.
Levra said Sports Chalet is already competing against two DKS stores in two former Galyan's locations in Henderson, NV, and Salt Lake City, UT, and both continue to do well. In his presentation, Levra also spelled out what makes Sport Chalet stand out from many of its competitors, including its commitment to being first to market with performance, technical and lifestyle merchandise. Other noted differentials are its extensive repair, tune-up and training services; expertise in activities such as scuba diving, snowboarding and cycling; and its unique rental services.
Another example of what makes Sports Chalet unique is its Action Pass loyalty program, which had previously been in test mode, but rolled out to all stores four weeks ago. Instead of small discounts, the program provides special perks. For instance, its top basketball consumers get a chance to meet Phil Jackson and Kobe Bryant along with frontcourt tickets to a Lakers game. The program is also providing the retailer with valuable insight into customer behavior.
Levra nonetheless admitted in the Q&A session that he isn't a fan of the ongoing consolidation in sporting goods, especially on the vendor side.
“I'm not so sure you can say that in every case that efficiency got better and I could tell you that in many cases the product hasnt improved that dramatically,” said Levra. More critically, consolidation often removes the personalities behind the brand. “When you take people who are passionate about an individual sport or activity and it's their company, they control it, they run it, they create new product, and their ability to succeed or fail [is] based on their or their team's efforts; I think you get a higher degree of product innovation and development than you do when you're part of a giant and you're trying to hit a financial number at the end of the year,” said Levra. “It may be a personal prejudice that I hold and many of our team holds.”
