Bloomberg, 15-Feb-20
By Katherine Doherty
Mitchell Modell, chairman and chief executive officer of Modell’s Sporting Goods Inc., has a framed letter from his grandfather, Henry Modell, hanging on the wall of his New York City office. He said he likes to look it over, to remind him what’s at stake as he struggles to keep the 131-year-old family business afloat.
“Keep and cherish the good name of Modell as long as you live,” the letter reads.
Sports merchandisers have experienced the pain of the retail upheaval that’s led to a wave of bankruptcies and a record number of store closings. For Modell’s, America’s oldest family-owned sporting-goods retailer, trouble deepened last month after a disappointing holiday season pinched cash flow.
Modell, 65, blamed warm weather, which translated to fewer outerwear sales, poor showings by professional teams like the Jets and Giants, which crimped merchandise demand, as well as the old bugaboos -- competition from big-box stores like Walmart Inc. and online juggernaut Amazon.com Inc. Modell said he’s trying to avoid the fate of rivals such as Sports Authority Inc., which liquidated in 2016, but added that every option is on the table.
“I will leave no stone unturned,” he said in an interview Thursday.
Cortlandt Street
Great-grandfather Morris Modell opened the first store on Cortlandt Street in downtown Manhattan in 1889. Three subsequent generations of the family expanded the business into a chain of about 150 stores from Virginia to New Hampshire, according to its website. The current standard bearer said he feelsthe responsibility of family history every day.
Modell said he’s looking for an outside investor who can keep the doors open, and is so consumed by the search that he sleeps only two or three hours a night. He brought in help from investment bank RBC Capital Markets, advisory shop Berkeley Research Group and law firm Cole Schotz. Berkeley’s Bob Duffyis serving as the company’s chief restructuring officer.
To succeed, Modell said 90% of the closely held retailer’s vendors and landlords need to support a turnaround plan. In return, he promised them greater visibility into the company’s financial performance. Modell said investors are “waiting in the wings” to see what kind of support the retailer can garner.
This week, the company held a call with some of its 300 vendors, which include international brands like Nike, Under Armour, Adidas and Champion. Modell gave his mobile-phone number and email address to everyone.
‘Text Me’
“Call me or text me,” he said he told them. “If you don’t get a response that same day, try again.”
Modell’s occupies a unique place because “what they have going for them is the relationship with vendors,” said David Wander, a partner at Davidoff Hutcher & Citron LLP, who has represented vendors in retail bankruptcies such as Sears and Sports Authority. He’s not involved with Modell’s.
Vendors will want to keep the retailer out of bankruptcy, Wander said, because they need Modell’s. With Sports Authority gone, only Modell’s and Dick’s Sporting Goods Inc. remain for some of them, he said.
Next week the company will start reaching out to landlords in hopes of negotiating savings on rents, Modell said.
Because many Modell’s stores are so big, it’s difficult for landlords to find a replacement tenant, said Matthew Mason of consulting firm Conway MacKenzie.
“The willingness of landlords to restructure a lease is usually related to their faith in the company’s reconstructing,” Mason said. “If you’re just delaying the inevitable demise, there’s no benefit in reducing the rent now.”
Hard Times
Last year, a news report that Modell’s had hired restructuring advisers caused vendors, squeamish as retailers face hard times, to quit providing goods to the company.
Modell compared the vendors’ pullback to “not watering a tree.” During the eight-month period that inventory levels dropped, the retailer had trouble keeping customers from shopping elsewhere.
In May, Modell loaned the company $6.7 million of his own cash to help avoid a bankruptcy filing. JPMorgan Chase &
Co.and Wells Fargo & Co. have been the two largest bank lenders to Modell’s, he said.
“When the owner puts skin in the game, that’s the best signal to give to vendors,” Wander said.
“The name and the family go together,” he added. “No one can say, ‘Who is Mr. Sports Authority?’”
On the office wall near the letter from Modell’s grandfather is a mock front page of the New York Daily News. The headline reads, “Modell’s 100 years. Excellence: A Family Tradition.”
“When your last name is on the door, there’s a whole different set of values attached to it,” Modell said. “Either the vendors and landlords are going to help me and we hold hands together, or I move on to phase two of my life.
“I’m going all in.”
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