Mitchell Modell has been entrusted with his great-grandfather's retail business, and things aren't any easier in the 21st century than in the 19th.
Modell's Sporting Goods has long been a fixture in the Northeast, expanding under Mitchell Modell's leadership in the past couple of decades beyond New York and New Jersey to Pennsylvania, Connecticut, Massachusetts, New Hampshire, Delaware, Maryland, Virginia and Washington, D.C. Even while e-commerce challenged the retailer, which leans on its physical stores to foster the customer interaction it depends on, its operations have been unwieldy at times. For example, its Philadelphia stores delivered a boon last year when the Eagles made it to the Super Bowl. Modell gambled, bought more than 300,000 units of licensed merchandise, and cleaned up when the team won their first ever big game. Had they lost to the favored Patriots, there would have been a lot of midnight-green jerseys at prices even lower than the discounts Modell's is known for.
That surge in sales led to a recoil of sorts this year, however, as the Eagles failed to advance and fans held on to the merch they already owned. Warm winter weather, meanwhile, left cold-weather gear on the racks. The company has also experienced some turmoil in its upper ranks. Although Modell is famous for his hands-on leadership — infamous, even, in light of stunts like the espionage he allegedly conducted on rival Dick's — the retailer had until recent days been working with consulting firm Berkeley Research Group for the last couple of years. The firm was hired to help streamline operations, Modell told Retail Dive in an interview.
But when the Wall Street Journal in March reported the hire of the "restructuring advisor," implying a possible bankruptcy, several vendors got spooked and refused to give the company the credit lines and advances any retailer depends on. Modell has spent the last month or so wooing them back. Then the company's longtime chief financial officer, Eric Spiel, also left in March after 10 years on the job.
"For 35 straight days — the difference is I know every vendor personally — they said, 'We've heard this song before.' I said, 'You know me personally,'" Modell said, adding that, in light of the bankruptcies of sporting goods banners Sports Authority, Bob's, Eastern Mountain Sports and others, he understood their sensitivity. He blames the press for sounding the alarm, and whoever leaked to the press.
"I don't know who it is," he said. "I don't know if it's an ex-wife or who. Things are back to normal, stabilized. We no longer have BRG. Our new CFO started Monday, David Stern. Formerly with Pep Boys and A.C. Moore, a real seasoned veteran."
As a privately owned company, Modell's isn't required to back up its CEO's assertions with publicly available financial details. He laughed at a recent Debtwire report that the company is looking to trim its annual rental payment outlook from $66,978 in 2019 to $61,219 in 2020 and then to $52,817 in 2021. "It's more like $90 million," Modell told Retail Dive of his yearly rent bill. "I don't know where they're getting these numbers."
He said the company is looking to ease that. The retailer operates more than 150 stores, an expansion that may have taxed the business. Modell's is working with another outside firm, real estate adviser A&G Realty Partners, for a lease-renegotiation effort that Modell says is par for the course in retail.
"The landlords are all rooting for us. They know at the first of the month they're going to get paid," he said.
Josh Augenbaum, president of Augenbaum Realty Corp., is one of them. "All the landlords have been made whole. Not one of them is owed money," he told Retail Dive in an interview. "You know what I mean, when Payless went bankrupt they already were a few months behind in rent and whatnot. Unfortunately, one paragraph in an article can put somebody in retail, with the situation these days, into dire straits. He was available, he was accessible."
Not all are on board. There are indications of ongoing wariness among some property owners. "I am hearing from retail industry executives throughout the Northeast that Modell's is experiencing a cash crunch and has been seeking at least short term rent relief from owners," Nick Egelanian, president of SiteWorks, told Retail Dive in an email. "While some owners indicate that they are cooperating with Modell's, others are reportedly taking a wait and see approach. Most sophisticated landlords today will not entertain requests for rent relief unless the need is well-demonstrated, the causes are considered correctable and the tenant is considered likely to be able to sustain operations for a sustained period."
Modell admits as much. "Are there one-offs? Yes. Is it 100%? No, if I said that I'd be lying to you," he said. "I'd say I'm close to 95%, though. There might be a couple, and we understand why. One is because they have us on a long term lease and they don't want to do anything — another is in a good place so they're saying take it or leave it. But for the most part they've been really really cooperative, and that's been consistent."
After 130 years, the retailer is also looking for a new lease on life. Modell would rather talk about more constructive changes now that his turbulent month is over and he has a new CFO at his side. "We're going very heavily into private label to give us differentiated merchandise," he said. "We have a really unique culture and we work really hard at that. We have local school colors in our stores. A lot of our managers live close to our customers and they know that for 130 years we've given them phenomenal value."
