Big 5’s 2-year Stock Price
Big 5 shares are now trading at all-time historic low prices and the company recently warned that it will suffer losses through the holiday-season. The Concerned Shareholders of Big 5 Group (the “CSB5 Group”) believes these are desperate times for Big 5!
The CSB5 Group is trying to save Big 5. It has repeatedly reached out to the Board of Directors.
SOME OF THE SUGGESTIONS THE CSB5 GROUP PRESENTED TO THE BOARD
Overhaul Big 5’s marketing strategy
First, Big 5 describes itself as a “leading sporting goods retailer.” This description is a mistake. In consumers’ reality, Big 5’s identity is quite different as evidenced by its merchandise quality. A more accurate description is that Big 5 has historically been an “off-price retailer.” Second, Big 5’s marketing has not kept up with the times. Despite drastically sinking newspaper circulation, Big 5’s management has continued the same marketing approach that was formulated when first going into business. What worked in 1955, does not necessarily work today.
Eliminate or reduce the dividend and
reinvest in the Company
Although the dividend was recently reduced, management continues to borrow money to pay the dividend. Management’s decision to borrow money and pay out Big 5’s profits rather than seek out ways to grow the company’s revenue is further evidence of Big 5 not keeping up with the times. The CSB5 Group offered to meet with the Board to discuss how reinvesting some of Big 5’s earnings would add value to the company and Big 5’s shareholders.
Eliminate carry over inventory
When the CSB5 Group began its analysis of Big 5’s business, inventory turn was of great concern. Big 5’s CEO recently stated on a conference call “we’ve been through difficult winters before and we know how to efficiently transition the products to the next season and buy around it as appropriate. Fortunately, the product that we will carry over is not fashion and should play well next year.” Based upon the CSB5 Group’s decades of experience in retail, there was one thing they stated collectively as though it is a well-known fact: carry over inventory is a “retail sin.”
Get Fresh Retail Experience in
Management and on the Board
The Board needs to bring in new Board members or management personnel who have off-price retail experience (outside of Big 5) to rebrand Big 5 as the place to shop for extreme value athletic footwear and sporting goods. Unlike most publicly traded companies, Big 5 has been managed by a father and then his son since the 1950’s. A new and improved merchandising strategy should be clear, congruent, and compelling to the customers. With the CSB5 Group’s experience in off-price retail, they are confident they could add tremendous value to Big 5.
These are desperate times for Big 5
There are two vacant Board seats which should be filled by professionals with retail experience, Mel Redman and Jeff Moore, to take advantage of significant opportunities to increase shareholder value.
Mel Redman has nearly 50 years of experience in the off-price retail industry and would be an extraordinary addition to the Board. He had a distinguished career with Wal-Mart Stores, Inc. Starting in 1976, he served in a variety of management positions. Specifically, he served as Senior Vice President, Store Planning and Operations Systems – responsible for 4 Regional Vice Presidents, 57 District Managers, 427 Store Managers, and 180,000 Associates who generated $20 billion (U.S.) in annual sales. From 1990 to 1994, as Senior Vice President U.S. Store Planning and Operations Systems, Mr. Redman was responsible for all phases of the store development process including new stores, relocations, expansions, and remodeling including merchandise, fixtures, planning, budgeting, recruiting, and training associates with 2,000 Wal-Mart, Supercenter, and Sam’s Wholesale Club initiatives.
In 1994, Mr. Redman spearheaded Wal-Mart’s successful entry into Canada as Senior Vice President and Leader of the U.S. “Transition Team” of 28 Senior Managers and Officers following the company’s purchase of 122 Woolco Stores. Throughout 1994-95, he was responsible for the complete corporate re-structure and re-engineering of the acquired organization and its establishment as an independent and self-sufficient international subsidiary. While in Canada, the company created a new, national distribution system; doubled product selection from 35,000 to 70,000 SKU’s; and established an effective Canadian P.O.S. and Home Office Merchandising Support System to meet company’s superior performance expectations.
Wal-Mart Canada has grown from 7% of the general merchandise market share at the time of purchase to 45% at the end of 1996 with exceptional profitability. During the Canada transformation assignment, Mr. Redman also directed Wal-Mart Canada’s $200 million (U.S.) renovation cost of the 122 former Woolco Stores. While all stores remained open for business, he completed the renovation which was acknowledged to be the most comprehensive program of its kind in Canadian retail history.
Mr. Redman has also served on the Board of Directors of Modell’s Sporting Goods, MSC Industrial Supply, Knoodle Kidoodle Toys, Little Giant Ladder Co., and Win-Holt Mfg.
Jeff Moore also has extensive retail experience, particularly in the shoe industry. His experience and insight into the retail shoe industry would be an ideal addition to the Board. From July 2005 through August 2010, Mr. Moore was the Executive Vice President and a Director for Vans, the leading American manufacturer of skateboarding shoes and related apparel. While at Vans, he expanded their segmentation strategy, converted both Canada and Mexico into direct business models, and created an in-store strategy that both helped elevate brand story telling and higher conversion in both retail as well as wholesale partners. Vans grew over 200% during Mr. Moore’s time as an Executive Vice President.
From August 2010 through February 2018, Mr. Moore was the Global President for REEF, one of the world’s leading active sandal manufacturers. At REEF, Mr Moore set a clear 5-year global growth strategy which yielded top line as well as bottom profit results. With his focus on building a strong executive team, reshaping both Europe & APAC business models, spending time in Asia with key factories and collaborating closely with other key leaders in VF Corporation, REEF began to have a sustainable global business. Mr. Moore also was a part of VF Corporation’s acquisition team within the Action Sports space.