TSA held an investor day on March 29 in the soon-to-be demolished .406 club at Fenway Park, with chairman and CEO Doug Morton starting the conference by telling investors that “We want the customer to come to TSA instead of WMT”.  He then proceeded to describe the successes of the merger between Gart and TSA, which included store remodels, the addition of Golf Day shops, and adding additional Footwear statement walls.  Other achievements included GM synergies, building private label to 11% of sales, and expense control.

As SEW reported in SEW_0511, TSA has identified five “Destination Categories”, comprised of Fitness, Winter Sports, Active Apparel, Golf, and Team Sports.  Footwear is also an important focus going forward.

Morton also reviewed some missteps they made with the merger of equals, including the loss of key personnel and poor ad execution, where ad in-stocks were as low as 80%. The much talked about expansion of winter products into the North East was described as “good, not great”. 
Weather was blamed for poor winter hardgoods performance.

Morton also noted there are still projects that need work, such as continuing supply chain initiatives, improving inventory turn, and re-branding all stores to The Sports Authority from their legacy nameplates. The company also intends to implement a customer loyalty program in 2006.  Store level improvements include improving store training, expansion of product specialists, and implementation of a payroll planning system. Finally, new president of merchandising David Campisi is completing what was termed a “final evaluation of talent”.

COO Tom Hendrickson said that “inventory per square foot will reduce by 10%, going from low $40’s to high $30’s.  Dick’s inventory per square foot is in the low $30’s.”  Hendrickson also stated, “We are never going to get to Dick’s number.”

TSA also revealed its marketing plans for 2005, which included an increase in print reach and frequency along with a consistent print format and an increased spend on radio and TV.

Campisi laid out his initiatives for the merchandising group which included “changing the culture from GM control to driving sales” and a “TSA First” mentality, which would involve more “newness” in stores, more exciting assortments, and making the stores more “shopable.”

Campisi also plans to implement a “FIFO Clearance cadence” (which will have serious margin impact in Q1) and to develop a “Good, Better, Best” assortment strategy.  He will seek SKU rationalization in all departments, for instance, reducing SKU count 17% in Team Sports, reducing Fitness SKUs by 42%, cutting winter apparel vendors by 50%, and reducing vendors by 10% in ski and snowboard. The intention is to move the assortments away for those at the mass merchants. Campisi also intends to improve flow of merchandise to stores by using more store pre-packs.

Hendrickson gave a little more color on Q1 guidance: EPS 25 cents to 27 cents, down from 35 cents last year, on the $50 million inventory reduction, comps of +1% to 2% (currently running on this trend) and inventory down 4% on per-square-foot basis.  Hendrickson cautioned investors, “Don’t look at turnover; look at inventory per square foot.” He also noted that TSA will be #2 in volume after 2006, after Dick’s projected expansion. Finally he said, “the key to achieving operating margins is positive comps.”

In terms of immediate store level plans, TSA will remodel 60 doors in 2005. The cost of remodels averages $285K. Morton noted that the lift from remodels has slowed from 7% to 5%, but reiterated that a 4% lift results in 30% ROI. TSA will be expanding footwear statement walls from 222 to 275 by the end of Q2 and will be expanding Golf Day shops to 131 from 66.  They achieve a comp lift of 20%+ with completion of the Golf Day shops.  They said Callaway will be in all doors by year-end. The goal is to be 100% in-stock on key items, which would be a 25% improvement from last year.

Morton expects to announce a new senior marketing position in the next two weeks. TSA will increase from 42 to 50 Sunday inserts in 2005 and expand the broadcast spending to $10 million from $1.5 million.  TSA has also begun a direct mail campaign focused on full price better footwear. Overall ad spending will not grow in 2005.

TSA held an investor day on March 29 in the soon-to-be demolished .406 club at Fenway Park, with chairman and CEO Doug Morton starting the conference by telling investors that “We want the customer to come to TSA instead of WMT”.  He then proceeded to describe the successes of the merger between Gart and TSA, which included store remodels, the addition of Golf Day shops, and adding additional Footwear statement walls.  Other achievements included GM synergies, building private label to 11% of sales, and expense control.

Morton also reviewed some missteps they made with the merger of equals, including the loss of key personnel and poor ad execution, where ad in-stocks were as low as 80%. The much talked about expansion of winter products into the North East was described as “good, not great”.  Weather was blamed for poor winter hardgoods performance.

Morton also noted there are still projects that need work, such as continuing supply chain initiatives, improving inventory turn, and re-branding all stores to The Sports Authority from their legacy nameplates. David Campisi, TSA’s new president of merchandising, is also completing what was termed a “final evaluation of talent”.

Campisi laid out his initiatives for the merchandising group which included “changing the culture from GM control to driving sales” and a “TSA First” mentality, which would involve more “newness” in stores, more exciting assortments, and making the stores more “shopable.”

Campisi also plans to implement a “FIFO Clearance cadence” (which will have serious margin impact in Q1) and to develop a “Good, Better, Best” assortment strategy.  He will seek SKU rationalization in all departments, for instance, reducing SKU count 17% in Team Sports, reducing Fitness SKUs by 42%, cutting winter apparel vendors by 50%, and reducing vendors by 10% in ski and snowboard. The intention is to move the assortments away from those at the mass merchants. Campisi also intends to improve flow of merchandise to stores by using more store pre-packs.

In terms of immediate store level plans, TSA will remodel 60 doors in 2005. The cost of remodels averages $285K. Morton noted that the lift from remodels has slowed from 7% to 5%, but reiterated that a 4% lift results in 30% ROI.

Morton expects to announce a new senior marketing position in the next two weeks. TSA will increase from 42 to 50 Sunday inserts in 2005 and expand the broadcast spending to $10 million from $1.5 million.  TSA has also begun a direct mail campaign focused on full price better footwear. Overall ad spending will not grow in 2005.

COO Tom Hendrickson said that “inventory per square foot will reduce by 10%, going from low $40’s to high $30’s.  Dick’s inventory per square foot is in the low $30’s.”  Hendrickson also stated, “We are never going to get to Dick’s number.” Hendrickson noted that TSA will be #2 in volume after 2006 after DKS projected expansion.