CEO Interview: Sport Supply Group, Inc. - Adam Blumenfeld

• On 5:54 pm EDT, Tuesday October 20, 2009

67 WALL STREET, New York - October 20, 2009 - The Wall Street Transcript has just published its Online And Direct To Consumer Retailing Report offering a timely review of the sector to serious investors and industry executives. This 38-page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Online Retailer Profit Margins Vs. Bricks-And-Mortar Retailers - Uptick In Internet Commerce - Secular Shift In Market Share To Internet Retailers - Post-Crunch Consumer Confidence - Growing Market Share For Online Travel Agents - Possible Consolidation Of HSN, Inc. - Amazon As The "Wal-Mart Of The Internet" - Online Marketing Vs. In-Store Marketing - Maximized Markdowns - Online Traffic Conversion Rates - Social Networking To Drive Brand Awareness - Online Sales Holiday Outlook - E-Commerce As A Path To International Expansion

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In the following brief excerpt from the 38-page report, Adam Blumenfeld, CEO of Sport Supply Group, Inc., discusses the outlook for the sector and for investors.

TWST: Please begin with a brief overview or summary of your business.

Mr. Blumenfeld: Sport Supply Group (RBI) is the largest direct marketer and distributor of sporting goods equipment to institutional clients in the United States. We sell to over 100,000 clients in virtually every ZIP code in the United States, and we sell a packaged offering of equipment and uniforms. So the company acts more or less as a one-stop shop for the industry. Its intent as a company is to act as a portal or a gateway to institutional clients, which are schools, parks, YMCAs, boys clubs, churches, anybody that buys sporting goods in bulk and also to the online community - partners like walmart.com, samsclub.com, GSI Commerce and those kinds of people.

TWST: You've grown through a series of acquisitions and strategic partnerships. At this point, what types of alliances make sense for you to continue growing?

Mr. Blumenfeld: As you mentioned, we have done some recent transactions, and we can touch on them, but future growth can take on any number of components. We think the business is a solid and stable top-line grower organically, and we think we'll demonstrate that here in fiscal 2010, which just started for us June 30. Beyond that, acquisitions can take on the form of branded equipment companies, but they can also take on the form of distributors, regional or national, that are in a similar space. And there is a full pipeline that exists in both of those categories that we are taking a look at.

TWST: Many of your end-market customers, like schools and sports clubs, are really being impacted by budget restraints because of the economy. How has that impacted your business?

Mr. Blumenfeld: Two answers for that. The first answer is that, sure, budgets are depressed. In some parts of the country, they are down as much as 20% to 30%. You must remember, Sport Supply Group is a factory-direct supplier. One-third of what we sell is under private label brands like MacGregor or Voit that we control for these institutional markets. So when budgets get tighter, we don't really mind that because you stop going down the street to buy from your local supplier and you start looking for the best value. Our core offering to this customer base is that we can provide product at a 10% to 30% better price than a local competitor can. So a tightened budget isn't necessarily a bad thing for Sport Supply. I think when you look at the fiscal 2009 year that just ended, and you look at net income up 22%, and we have flat sales and growing EPS and growing EBITDA, it kind of speaks to that. Beyond that, there is a misunderstanding of sorts when it comes to the sporting goods market versus the institutional market in general. If I were selling textbooks into the school markets, I would have a problem on my hands because that is truly state- and city-funded. When I sell sporting goods into schools, a great deal of the funding that comes from that comes from booster clubs, gate receipts, popcorn money, fundraisers and pay-to-play programs that have become really attractive in the last 18 months, where there will be literally a student activity fee applied to the kid that plays in the sport. So schools have all sorts of ways and reasons to fund their sporting goods programs versus other parts of their school. And there is a reason for it, which is that the sports division, the football, basketball, baseball programs, they actually produce revenue for the schools. They have gate receipts, they have participants that come in and watch. So they use these gate receipts to subsidize other portions of the school that they want to keep running. So there is an economic as well as an emotional incentive for these schools to keep these programs running.

TWST: In which of your customer markets do you see the greatest opportunity for growth right now?

Mr. Blumenfeld: I think lacrosse offers kind of an untapped opportunity for us, so we are looking at some opportunities there. Bringing uniforms as a category on to the catalog platform that's normally resided on the road platform but kind of dragging it over to the catalog platform we think is opening up a big opportunity, because we're turning uniforms on to 90,000 customers that normally thought of us as an equipment provider. So it's reinforcing that concept of us as a one-stop shop. So I think that that's a compelling added line to our customer base. The market remains highly fragmented and we're continuing to participate in a large way in aggregation with salesmen and territory there. Fundraising is a component that we've been in and out of, but we're back into it via our online solution called My Team Shop, which gives schools the chance to provide their players with the customized uniforms that they need for the brother and the sister, and the mom and dad at the game, while at the same time raising money for the school. That's been a very popular tool in the last two years. So those are some of the areas that have been interesting for us.

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