Sportman’s Guide Makes Its First Acquisition

The Sportsman’s Guide president/CEO Greg Binkley said in early 2003 that the company would be hunting for acquisitions. A year later, the South St. Paul, MN-based cataloger of outdoor gear has captured its first prize. On June 29 the company bought The Golf Warehouse (TGW), a Wichita, KS-based cataloger of golf equipment closeouts, from New York-based private equity fund Falconhead. The all-cash transaction was valued at about $30 million.

The acquisition gives Sportsman’s Guide, which does the lion’s share of its business during the third and fourth quarters, a significant second-quarter business while further fueling its holiday business.

Both catalogers have enjoyed steady growth in recent years. Sportsman’s Guide’s revenue has grown from $168.8 million in 2001 to $194.7 million last year. The company’s gross profit figures have also held steady — from $33.0 million in ’01 to $32.9 million last year.

TGW launched in 1998 as an online-only marketer; it began mailing catalogs in November 2002. The $40 million company has had a five-year compounded growth rate of more than 60%, and this past year had operating income of $1.7 million.

TGW was Falconhead’s only catalog. Falconhead chairman/CEO David Moross says that he’s happy with TGW’s return on investment. “We got a very good price for the company. A lot of people have been trying to buy it for the past 18 months. So it was the right thing to do at the right time. We built up TGW, and now we move on.”

Immediate cost savings

Sportsman’s Guide’s Binkley says that the acquisition “meets all the objectives we established for ourselves when we set up our business to grow through acquisition. We’ll achieve immediate cost savings in printing, paper, and postage through comailing catalogs, outgoing bulk shipping rates, and various operational efficiencies.”

Sportsman’s Guide will retain TGW’s Wichita headquarters and fulfillment center, as well as all of TGW’s staff of 120, including CEO Mark Marney.

Patrick Donohue, CFA, senior analyst for Minneapolis-based investment brokerage firm Northland Securities, points out that selling golf clubs and equipment is “a whole different ballgame” from selling outdoor gear. “And that’s why I asked [Binkley] if contracts were in place with TGW’s senior management — and they are. I don’t think it would be Greg’s and [executive vice president/chief financial officer] Chuck’s [Lingen] forte to figure out contracts with the kinds of golf companies TGW deals with.”

What Sportsman’s Guide’s management does bring to the table is far broader experience in catalog marketing. Although the print catalog already represents nearly a quarter of TGW’s sales, it will prosper from Sportsman’s Guide’s experience, Binkley says.

But there are no plans yet for sharing mailing lists between the two catalogs. “We may test that,” Binkley says, “but we’re pretty conservative on our mailing plans.” Sportsman’s Guide will discontinue a spin-off PGA Tour catalog that TGW launched last year, although Binkley won’t divulge why the book is being dropped.

As to how TGW will take on such golf industry leaders as Golfsmith and Edwin Watts, Binkley notes that “TGW differs from other golf retailers in that its formula revolves around closeouts.” What’s more, “TGW is more active online than Golfsmith and Edwin Watts, both of which appear to be emphasizing stores more.”

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