The Fitness Experience closes stores, reviews business plans

After hearing rumors fly for a few weeks about The Fitness Experience firing people, closing stores, not paying receivables, and even one that the owners had been laid off (no, really), SNEWS® went to the source to un-muddy the water about the Midwest-based specialty retailer.

“Basically, it’s right-sizing the company,” CEO Doug Pearson told SNEWS®. “It’s not about downsizing. You wake up and find out the numbers either work out or they don’t work.

“At the end of the day, if you use the million-dollar (per-store sales) benchmark, regardless of what the industry perceives this as, it’s not just about growing and opening stores, but also about knowing when to close stores,” Pearson said.

The Fitness Experience (www.fitnessexperience.com) has in the last month closed five “under-performing” stores that were either too close to each other, too close to Omni or Exercare stores The Fitness Experience (TFE) had bought in the last 18 months, or simply had lower sales ($400,000 to $600,000) than needed or expected.

Those stores include four in Ohio — Mentor, Westlake, Youngstown and the Columbus store on East Main Street — and one in Michigan — St. Clair Shores. The closures bring store numbers down to 49, if you don’t count a tiny warehouse store in Brook Park, Ohio.

“Yes, we’re cleaning it up,” Pearson said. But closures aren’t all that’s going on as TFE continues its growth and reorganization begun nearly two years ago. The company is this month reviewing its business plan through 2010, as well as doing store-by-store reviews, considering refinancing, and holding regional meetings to discuss the future. Pearson has also been on a road show to meet with suppliers about the retailer’s needs.

Some suppliers have told SNEWS® that TFE was delaying payment and that the company had told them in emails it hadn’t had a positive year ending Sept. 30. Pearson said the purchase of Exercare, which was announced in August 2002 but didn’t close until October 2002, put extra expenses and weight on the company’s financial year, which runs October to September.

He said that TFE has indeed been delaying some payments, but vendors that were working with it on margins and other benefits were getting paid per TFE’s norm of 10 days. Others, including smaller ones, were being delayed as much as 60 days.

“This week, next week, we’re meeting with our key suppliers to see where they fit in,” Pearson said, “so they can understand we can make this a win-win situation. A true partnership isn’t just about the manufacturer making money, but about everybody making money.”

One problem, Pearson readily admitted, was that the company set same-store sales goals that were overly aggressive. He said the company thought it could push 8 percent to 10 percent same-store growth last year, but it came down to maybe 1 percent to 2 percent each.

“When you set the numbers high, you can set yourself up,” he said. “But we’re excited about the progress we’re making.”

The closures drop TFE from the No. 1 position among specialty retailers based on store numbers to No. 2, now behind Fitness Holdings International (Busy Body, California). Busy Body with its latest acquisition of All About Fitness in Colorado has grown to 53 stores or more than double what it was last summer.

But, Pearson said, it’s not about being the biggest.

“We don’t care if we’re the biggest,” he said, “We want to be the best and get people trained so it doesn’t come down to price.”

SNEWS® View: Obviously we’d rather see a few closures here and there and a lot of belly-button pondering about the future than eyes-bigger-than-stomach syndrome that eventually causes the whole thing to implode. It’s only too bad that some suppliers are getting caught up in this since for those smaller folks who perhaps can’t do anything about margins, the receivables mean a lot to the bottom line. With fitness retail growth in the Midwest producing more “let’s make a deal” than elsewhere, we hope Pearson can be successful in his bid to train staff better and combat the low-price war. We also hope that TFE isn’t the loser in the long run.