Fitness: Did you hear?…

>> The creator and founder of the PowerBar empire that is partly responsible for spawning the sports energy and sports food category has died of a heart attack. Brian Maxwell, 51, collapsed in a post office in Marin County just north of San Francisco near his home. Attempts to resuscitate him were unsuccessful. The Olympic marathon runner (he was once ranked No. 3 in the world) lived with his wife Jennifer and five children in Ross. The couple co-founded the popular energy bar company in 1986, when they began selling PowerBars out of their kitchen after Brian fell ill with stomach cramps during a marathon race and decided there had to be something athletes could eat during workouts. During the next decade, the Berkeley company grew to $150 million in sales and 300 employees. It was bought by Nestle SA in March 2000 for a reported $375 million when its revenues were said to be $30 million. A simple statement was posted on the PowerBar website: “PowerBar Inc. is deeply saddened by the sudden passing of its founder, Brian Maxwell…. Brian’s vision and personal insight into the nutritional needs of athletes helped to launch the energy bar category. Brian will be remembered as a dynamic innovator, whose passion was to help athletes perform at their best. Brian’s generosity and commitment to others was deeply felt by those around him. Since the purchase of PowerBar by Nestle S.A. in 2000, Brian had been actively involved with entrepreneurial ventures and served on various charitable, educational and arts boards. Our thoughts and prayers are with the Maxwell family.”

>> UNITED KINGDOM — Six million Britons are now members of public and private health clubs in the UK, but 2003 saw a significant slowdown as membership growth fell to just 4.5 percent — two thirds of the growth figures for 2002. The figures were released by the Fitness Industry Association (FIA) in its State of the Industry Report 2004 and compiled by The Leisure Database Company. The report also showed that only 88 new private health clubs opened last year, compared to 146 in 2002. This figure is the lowest since its peak in 1996. With the number of private club closures in 2003 higher than 2002, the net number of new clubs added to the UK total was just 13 last year. There are also just 69 clubs currently planned to open in 2004. The public sector is faring much better, however, with 2003 seeing 124 new publicly-owned sports centers opening, compared with 91 in 2002. Of UK sports centers, 64 percent offer fitness facilities while membership of public sector sites stands at 2.5 million people. The report says there are now 1,982 private health clubs (with over 500 members or part of a group) and 2,403 public fitness facilities now operating in the UK. Adding sports centers to the public fitness facilities total, the public sector offering in the UK is 3,738 sites. Despite the slowdown in membership growth, it is still growing, so the membership penetration rate — the percentage of the population who are members of a health club — has increased from 9.9 percent in 2002 to 10.3 percent in 2003, which is still slightly behind IHRSA’s calculated rate in the United States of 13.5 percent. More at www.fia.org.uk or www.theleisuredatabase.com.

>> GERMANY — Despite strong expansion plans of the Karstadt Sport fitness clubs in Germany, the company says it expects to eliminate 3,000 employees this year in the department store division. Details of the layoffs will be released by Easter. Meanwhile, Karstadt Sport said it plans to open up 25 Karstadt Fitness clubs over the next two years, after acquiring nine sites from 24 Hour Fitness last year. The nine acquired sites are located primarily in northern Germany and have been equipped with Precor cardiovascular equipment and Gym80 Sygnum. Two clubs operate on the site of the Karstadt Sport stores, and the company wants to open more clubs within Karstadt stores.

>> Lifetime Fitness Inc. announced March 19 that it has filed for a $200 million IPO with the Securities and Exchange Commission. The Eden Prairie, Minn.-based, chain of fitness centers said Credit Suisse First Boston and Merrill Lynch & Co. will act as joint book-running managers. As of March 15, the company operated 33 centers in eight states, including Minnesota. Lifetime Fitness noted in a statement announcing the IPO, that in addition to health clubs, it also has expanded into other health and wellness-related offerings, including a magazine, a line of nutritional products and athletic events. Prospectuses currently are not available. When available, interested persons may obtain copies of the preliminary prospectus from Credit Suisse First Boston LLC, Prospectus Department, 1 Madison Ave., New York, NY 10010-3629, or from Merrill Lynch & Co., 4 World Financial Center, New York, NY 10080.

>> After two years with the company and more than 15 years in the industry, Chris McGill has been appointed vice president of sales, U.S. and Canada, for FreeMotion Fitness.In June 2003, McGill was promoted from territory manager to northeast regional manager where he oversaw six representatives. Since then, with his leadership, the northeast region has reached all time sales records. McGill spent time as the fitness director and general manager for a Bally Total Fitness facility. He also spent two separate stints with Star Trac and more than five years with Cybex.

>> Wal-Mart Stores Inc. (NYSE:WMT) announced it has been named the top corporation for multicultural business opportunities in 2004 having earned first place on the DiversityBusiness.com “Div50” list. The list is produced annually by DiversityBusiness.com, the nation’s leading multicultural B2B online portal that links large organizational buyers to women and minority-owned product and service suppliers. The 200,000 voting business owners based their decisions on such factors as volume, consistency and quality of business opportunities granted to diversity business owners.

>> Looking to compete with the likes of Wal-Mart, Sears will open the doors on April 3 on its pilot concept called Sears Grand in Gurnee, Ill., where shoppers will find everything from milk to refrigerators. Chicago’s largest hometown retailer, Sears, Roebuck and Co. (NYSE: S) said the store is 201,000 square feet and is at 6136 W. Grand Ave. at Gurnee Mills. It has the same products Sears is known for — from appliances to fitness equipment but adds other home shopping needs such as garden supplies, books and groceries. Sears Grand will carry its familiar brands including Lands’ End, Craftsman, Kenmore, Cuisinart, Nike, Whirlpool and NordicTrack.

>> For those of you who received our latest publication, FitBiz (by GearTrends®), we of course knew we’d have a brain lag in juggling names of retailers nationwide and leave out a couple of super ones on our list that ranked retailers by total numbers in three categories: specialty fitness, sporting goods and mass. Well, shucks, we did. FitCorp USA (dba Busy Body and Fitness in Motion) in Texas has 17 stores and should have been seventh on our list of 25. Guess it’s a matter of not seeing the forest through the trees. Fitness Systems (Tennessee) has eight stores and should have been 16th on our list. Precision Fitness (Florida) also has eight stores in the continental United States and should also been about 17th. And, to be totally explicit, we should have split up Fitness Gallery into two entities: Fitness Gallery Inc. of Arizona (three stores under Donnie Salum), which would have dropped it off the list since we stopped at five, and Billie Salum’s Fitness Gallery (legal name: Fitness Equipment of Colorado Inc.) with five stores in Kansas and Colorado, which would have just eked into the bottom of our list along with Fitness Expo in Louisiana with its five doors. In addition, Dunham’s Sports should have been on our SG list in about fourth place since most of its 120 stores have at least 2,500 square feet of fitness retail. We greatly appreciate the calls and additions! OK, alert readers, who else did we leave off? Email therese@snewsnet.com with any others with five or more storefronts or those who will have five or more by the end of this year. And if you didn’t receive the publication, the entire business journal FitBiz pub will be downloadable in PDF by the end of this month at www.geartrends.com (click on the magazine icon at upper right). Or, if you’re at the IHRSA show this week, track us down and demand your very own copy.

>> UNITED KINGDOM — Nigel Armstrong has been promoted to operations director at Bannatyne Fitness in order to aid the company’s rapid expansion program. Armstrong has been with the company since its inception in 1996 and has worked across the full spectrum of the business including finance, commercial and operations functions.

>> According to a story in the March 19 edition of the Pittsburgh Business Times, Tom Lapcevic, the founder of Robinson, Penn.-based, ClubCom, is preparing to sell the rest of the company after Amer Group (Precor parent) purchased the technology side two months ago for $22 million. The journal said he’s building what’s left — an ad component known as Active Media — for eventual sale, while he remains president of ClubCom, as well as Active Media. Moreover, the new company has an exclusive 99-year contract for the media ad rights over the ClubCom network, making the sales a lesson, as the article put it, in dual exit strategies. The Washington County native began designing exercise equipment with his father at age 13, continuing throughout his days at Washington & Jefferson College and at law school at the University of Pennsylvania. During his third year at Penn in 1989, he founded Strive, an exercise equipment maker. He returned to Pittsburgh upon graduation to practice law, but left in 1994 to become president of Strive. He sold the majority of his interest in Strive and launched ClubCom in 1999. He told the journal that talks began with Amer last year, but the discussions took “many twists and turns.” Lapcevic told the paper that finally, they agreed that Amer would purchase all of ClubCom but with the advertising rights being spun-off to a new company called Active Media.

>> Galyan’s Sports & Outdoor (NASDAQ: GLYN), a 44-store chain in 20 states, reported during a morning conference call on March 18 that the company’s profits plunged 40 percent in the fourth quarter. Net income was $9.99 million in Q4 of 2002, compared to $16.7 million in Q4 of 2003. Net sales for the year rose 15.6 percent to $690.7 million, from $597.7 million, while same store sales dropped 5.8 percent, but the company’s gross margin slid from 30.4 percent in 2002 to 27.6 percent in 2003. Galyan’s has managed to garner a per customer sales number of only $59.48 for the year, which won’t cover many treadmills or other fitness accessories.

>> An editorial on March 22 in the Washington Post newspaper called “Missing the Fat Target” read in part: “The House of Representatives had a novel response to news that obesity was catching up with tobacco as the nation’s leading cause of preventable deaths: It voted to immunize the fast-food industry against lawsuits by those who gain weight as a result of overeating. The idea of suing over fat is admittedly ridiculous. Whatever the solution to the country’s obesity problem may be, it isn’t lawsuits…. The urgent problem is the public health consequences of epidemic obesity. What Congress or the administration should be doing about obesity is not an easy question. Addressing it effectively would require real changes in American culture, from getting people to eat better to persuading them to watch less television — or at least watch it from a stationary bicycle.” To read the whole column, click here.

>> SGMA is seeking companies interested in sponsoring one or more events at its lobbying days in Washington, D.C., called National PE Day on May 4-5. Various levels of sponsorship are available. For more information, contact SGMA at 816-472-7345. After a kick-off event the evening of May 4, participants will learn how to lobby and then participate in sessions with their representatives to voice support for various PE and fitness measures.

>> Former Fitness Gallery Manager Jerry Irion is now working in All About Fitness’ Tempe, Ariz., store doing retail sales and may work with the company as it seeks to expand further into the Arizona market.

>> AUSTRIA — Austrian entrepreneur, Alois Fauster, who operates six health clubs across Austria, has been reunited with a club he established four years ago. City Fitness was launched in October 2000 by Fauster and a partner in St. Poelten, about 31 miles west of Vienna. The partnership was dissolved in 2001 and Fauster’s former business partner continued to manage the club with other investors until the business went bankrupt in November 2003 and it closed. Fauster acquired the site, installed new equipment and is now concentrating on growing the business again. Re-branded as Lifeline, Fauster is running the club with two new business partners. The facility has been equipped with Precor and attracted 300 members within the first four weeks of opening. This January also saw the launch of Fauster’s first low-cost fitness concept. Located in Graz, Austria, Fit-Inn offers both cardiovascular and resistance training. The site offers no fitness classes or wellness facilities and showers and instructor training costs extra. The site is equipped with Precor, Life Fitness and Gym 80 and attracted 1,000 members within the first six weeks of opening. Fauster has plans for another Fit-Inn in Vienna.

>> Shares of Kmart Holding (NasdaqNM: KMRT) rose 7 percent to $37.06 on March 18 after it reported its first positive quarterly earnings since emerging from bankruptcy nine months ago, although same-store sales continued to fall. The stock climbed as much as 13 percent intraday, and is up 147 percent since it exited Chapter 11 in early May 2003. For its fourth quarter ended Jan. 28, 2004, Kmart posted net income of $276 million, or $2.78 a share, much better than the loss of $1.1 billion, or $2.13 a share, recorded a year earlier. Income before interest expense, reorganization items, income taxes and discontinued operations was $503 million, including an $86 million gain on real-estate transactions. Fourth-quarter revenue tumbled 26 percent year-over-year to $6.32 billion. Same-store sales and total sales for the period fell 13.5 percent and 25.8 percent, respectively. Kmart said the decline in same-store sales was due to promotions held the previous year and a reduction in advertising in fiscal 2003. The decrease in total sales was compounded by the closure of 316 stores during the first quarter of 2003, it said. For more information about this company or its financial reports, as well as to view stock prices updated every 15 minutes, visit the SNEWS® Stock Market Updates. Click on: www.outsidebusinessjournal.com/cgi-bin/snews/stock_report.html.

>> The Sports Club Company Inc. (AMEX: SCY) has announced the completion of a $6.5 million private placement of a newly created class of preferred stock. The entire offering was purchased by Rex A. Licklider, affiliates of Kayne Anderson Capital Advisors, and affiliates of Millennium Entertainment Partners, three of the company’s major stockholders. The club’s chairman and founder, Michael Talla, also announced that he will be stepping down as the company’s co-CEO. The company will now be lead by Licklider as CEO, assisted by Phil Swain as president and COO.

>> Nike has announced the Nike 26.2, a marathon and half marathon for women to be run in San Francisco on Oct. 24. The event will benefit The Leukemia & Lymphoma Society. Participants can train for the marathon through the Society’s Team In Training program. This race is planned to be an annual event. Running legend Joan Benoit Samuelson and CSI Miami actress Emily Procter will serve as ambassadors for the Nike 26.2 Marathon. The Nike 26.2 marathon is inspired by the 20th anniversary of Joan Benoit Samuelson’s historic win in 1984 in Los Angeles. Joan is currently training for the women’s marathon trials on April 3 and hopes to qualify for the summer marathon in Athens. The event will also include a weekend of activities with speakers and classes. More at www.nikemarathon.com.

>> In other Nike news: On March 18, Nike Inc. (NYSE: NKE) reported third quarter (ended Feb. 29, 2004) revenues increased 21 percent to $2.9 billion vs. $2.4 billion for the same period last year. Third quarter net income totaled $200.3 million, or $0.74 per diluted share, compared to $124.7 million, or $0.47 per diluted share, in the prior year. During the third quarter, U.S. revenues increased 4 percent to $1.17 billion vs. $1.13 billion for the third quarter of 2003. U.S. athletic footwear revenues increased 1 percent to $772.8 million. Apparel revenues increased 7 percent to $329.3 million. Equipment revenues increased 13 percent to $67.4 million. Revenues for the European region (which includes the Middle East and Africa) grew 36 percent to $880.0 million, up from $645.8 million for the same period last year. Twenty-one points of this growth were the result of changes in currency exchange rates. Footwear revenues increased 48 percent to $537.7 million, apparel revenues increased 19 percent to $284.1 million and equipment revenues increased 34 percent to $58.2 million. Revenues in the Asia Pacific region grew 21 percent to $402.4 million compared to $331.6 million a year ago. Revenues in the Americas region increased 26 percent to $135.0 million, an improvement from $107.4 million in the third quarter of 2003. Nike reported worldwide futures orders for athletic footwear and apparel scheduled for delivery from March 2004 through July 2004, of $4.7 billion, 9.9 percent higher than such orders reported for the same period last year. Approximately four points of this growth were due to changes in currency exchange rates. For more information about this company or its financial reports, as well as to view stock prices updated every 15 minutes, visit the SNEWS® Stock Market Updates. Click on: www.outsidebusinessjournal.com/cgi-bin/snews/stock_report.html.

>> Most key measures of profitability slipped for full-line sporting goods stores and specialty sport shops, according to data in the newly released NSGA Cost of Doing Business Survey. (See SNEWS story from March 1 that focuses only on fitness specialty’s Cost of Doing Business results as well as additional explanation.) The report, published every two years by the National Sporting Goods Association, found that net operating profit as well as return on net worth fell for full-line retailers while return on total assets rose. Specialty sports shops slipped on all three key measurements. For full-line sporting goods stores, Net Operating Profit fell to 1.2 percent compared to 2.4 percent in the 2001 survey; Return on Net Worth, 6.2 percent versus 7.3 percent; Return on Total Assets rose to 3.4 percent versus 1.4 percent in the 2001 survey. For specialty sports shops, Net Operating Profit fell to 2.8 percent versus 4.1 percent compared to the 2001 survey; Return on Net Worth, 11.9 percent versus 19.9 percent; Return on Total Assets, 4.4 percent versus 9.5 percent. In spite of the drop in gross margins, full-line retailers improved four other measures of productivity (sales per selling square foot, sales per employee, total operating expenses and inventory turnover), while specialty sports shops improved only gross margins from levels in the previous study. Sales per selling square foot edged up slightly for full-line sporting good stores ($260 in 2003 compared to $254 in 2001), but fell sharply in specialty sport shops ($215 in 2003 compared to $278 in 2001). For full-line stores, gross margin fell to 34.7 percent from 38.0 percent two years ago in the last survey. Full-line store inventory turnover rate rose to 2.6 times versus 2.0 times in 2001 and on a level with the 1999 and 1997 surveys. Specialty sport shops, with an inventory turn of 2.5 times, was on a par with the three previous surveys. A record number of 314 companies participated in the 2003 study versus 295 in 2001. More information is available at www.nsga.org or by emailing bwebb@nsga.org.

>> With the completed merger of The Sports Authority (NYSE: TSA) and Gart Sports Co. in August 2003, fourth quarter results for TSA more than doubled, representing the performance of the new consolidated company. Total sales for the 13 weeks ended Jan. 31, 2004, increased 125 percent to $712.0 million compared with $316.8 million in the prior year’s fourth quarter as reported by the former Gart Sports on a stand-alone basis. Fourth quarter comparable store sales for the combined company increased 0.2 percent from last year’s combined company results. Fourth quarter net income of $14.6 million, or $0.55 per diluted share, includes the effect of after-tax, merger integration costs of $13.7 million, or $0.52 per diluted share. Excluding merger integration costs, fourth quarter net income was $28.3 million, or $1.08 per diluted share, compared with $1.03 per diluted share in the prior year’s quarter, as reported by the former Gart Sports on a stand-alone basis, and pro-forma combined net income for the prior year’s quarter of $0.77 per diluted share. “We are pleased with our fourth quarter results given the on-going efforts to integrate the two companies,” said Doug Morton, vice chairman and CEO of TSA. Total sales for the 52 weeks ended Jan. 31, 2004, increased 67 percent to $1,760.4 million compared with $1,051.2 million in the prior year’s 52 weeks as reported by the former Gart Sports on a stand-alone basis. Year-to-date comparable store sales decreased 0.7 percent, which represents a year-over-year comparison of the combined company results for the third and fourth quarters and the former Gart Sports on a stand-alone basis for the first six months. TSA opened six stores during the fourth quarter, for a total of 14 new stores in 2003. It also closed five former Sports Authority and two former Gart Sports stores during the quarter for a total number of stores in operation as of Jan. 31, 2004, of 384 stores. The company estimates FY2004 sales of $2.6 billion. For more information about this company or its financial reports, as well as to view stock prices updated every 15 minutes, visit the SNEWS® Stock Market Updates. Click on: www.outsidebusinessjournal.com/cgi-bin/snews/stock_report.html.