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Factory Fitness, the chain founded in 1998 that not only quickly climbed to a top-25 position among specialty retailers but also gained industry respect, will shut its doors for good by the end of April.
Planning for the demise happened nearly immediately after Kris Reibel, the founder and former president and CEO of the Indianapolis, Ind.-based, specialty retailer, left his own company in January 2004. That’s when he accepted the position of director of fitness products for burgeoning equipment manufacturer Bladez Corp. (See SNEWSÂ® story, Feb. 20, 2004.)
At that time, remaining owners initiated plans to sell off equipment and shut down the seven stores in the chain, which is partly owned by Life Fitness. Five stores are already shuttered, with one in Indianapolis and one in Louisville, Ky., still open but running liquidation sales.
“I’m very surprised by this,” Reibel told SNEWS, saying that he only recently had been made aware of the closings. “It is extremely disappointing because we had multiple players who wanted to buy some or all of the stores, and the owners made that impossible.”
Life Fitness purchased 49 percent of Factory Fitness in 2000. The remaining 51 percent is owned by the company Factory Holdings Inc. That company includes the Derrickson family, a local venture investment group, which has 50 percent of the remaining 51 percent; Reibel, who still had 20-percent ownership of the remaining portion; and two other partners with smaller portions.
Over the years, Reibel said that his role had been diluted to the point where Life Fitness and the Derrickson family essentially completely controlled Factory Fitness. He told SNEWS in February that role is what had partly motivated him to leave the chain since he felt “locked in a go-nowhere managerial position and the company seemed stuck in limbo.” He said at that time he became frustrated with head-butting on strategic business decisions that left him feeling “like a ball in a pinball machine.”
In late 2003, SNEWSÂ® was told as a part of research for a report on leading retailers for its FitBiz business publication (March 2004, go to www.geartrends.com) that Factory Fitness generated $6 million in revenue in 2003. That was up 10 percent over 2002, we were told, and all stores were making money.
When contacted by SNEWS, Life Fitness only confirmed that it was closing the Factory Fitness stores and expected the shut-down to be completed soon. The company declined further comment about the reason for the shut-down, about any financial losses expected from the closure, how it would fill in its retail gap in the Indianapolis area, or any other matters.
“Life Fitness is in the process of sorting out details and is not in a position to discuss the matter,” a company spokeswoman said in a company statement.
Word on the street is that Reibel had functioned somewhat as a buffer between the other owners, who apparently butted heads due to differing interests, and that his departure left the two at odds and in a position where each had the power to veto the other’s decision.
“It’s really too bad,” said Reibel. “I would have preferred that the owners finish what we had started and allow the business to continue.”
When Reibel left, Factory Fitness owners hired Michigan-based liquidation consultant Theodore Mullett to manage the closings. Mullett told SNEWS that to date only fitness products — not fixtures and office equipment — are being sold via liquidations promoted through local newspaper advertising, signs, balloons at the storefront and word of mouth. Discounts vary by product and condition, Mullett said, but boxed materials are going with low discounts and floor model discounts range from 15 percent to 50 percent off list prices.
As of April 7, the Factory Fitness website (www.factoryfitness.com) gave the impression that it was business-as-usual, complete with a motivational Flash intro that concluded with, “Strong words from a strong company.” The site still had a listing of all store locations and a misleading splash of various brands such as SportsArt, Landice, StairMaster and Trimline. Upon closer inspection of the detailed product pages, however, only Life Fitness and its own ParaBody and Hammer Strength brands were showcased across every cardiovascular and strength commercial and home equipment category. In fact, SportsArt said that it hasn’t worked with Factory Fitness in about a year and a half.
By April 9, however, the website was mostly dismantled and displayed only one landing page with basic contact information and no longer offered access to any additional company or product pages, or any explanation about the lack of information or about the chain’s closure.
Without Factory Fitness, the Indianapolis market is still served by the one-store 12,000-square-foot Bob Block’s Fitness Equipment store, whose owner Chris Lutz said that last year was its best ever after 28 years in the business. Lutz also added that his company currently is planning to expand within the Indianapolis area, but that this would have proceeded regardless of Factory Fitness’ fate. At the same time, Galyan’s and Dick’s Sporting Goods continue to aggressively move into this market.
SNEWSÂ® View: With Life Fitness silent, one can only speculate about why it chose to shutter Factory Fitness, particularly if other local stores or other specialty retailers indeed were interested in purchasing the company, and if another local store was doing boom business despite bust economy. We can speculate a bit: From 1999 to 2000, Life Fitness took ownership positions in several specialty fitness retailers, including Omni Fitness (which it eventually bought entirely but last year sold off all but the Eastern storefronts). Life Fitness’ stated intention at that time was to help retailers grow and, in turn, sell more Life Fitness products. SNEWS has heard from several sources that the company may not have allocated sufficient resources to these ventures, and some industry insiders have speculated that the manufacturer doesn’t appear totally committed to them. Perhaps this liquidation was a quick and relatively easy way out while Life Fitness is challenged to meet increasingly rigorous financial goals set out by parent company Brunswick (NYSE: BC). On the other hand, others in the industry have criticized Factory Fitness for making the age-old mistake of expanding too quickly — particularly in a limited market where stores can cannibalize themselves. We’ve see Arizona-based Fitness Gallery shrink to a mere memory of its former self in the last few months and that’s only the most recent example. The industry painfully remembers the bankrupt demise of the old Busy Body a few years ago, which left millions of dollars in unpaid debts. In this case — as in all such cases — we’ve seen a lot of finger-pointing and heard a lot of talk about who’s at fault and what went wrong. Bottom line is, it’s disappointing to see what was once a strong and respected retail chain flatten faster than a stability ball that got stuck with a skewer while someone was sitting on it.