Dick's Sporting Goods Fires In-Store Golf Pros

[subsonic]

Do you own a business or look at a P&L; on a regular basis? Payroll is always my biggest expense. Some of that is due to the government but bottom line it costs more to pay an American worker than it does to pay a similarly skilled worker in Mexico or China. That is why Nike makes shoes in Vietnam and not Portland Oregon. I see that you are located in CA and the soft costs such as insurance etc... are more expensive than most states. I live in a right to work state. Unions have not done much for the common worker in a long time.

[newtogolf]

Originally Posted by ay33660

Herein lies the rub.

Everyone wants the savings but don't think about the impact big box stores have on their local stores.

Local stores just cannot compete with the purchasing clout of big box stores.

Most people don't realize that distributors and manufactures can be hurt by big box stores.

A friend of mine owned a nice small (200 employees) manufacturing company. He was thrilled when Costco agreed to stock his product across North America. The first shipment was delivered on time and on price. A year later Costco wanted more. He leased more space, hired more employees and purchased more equipment. Then after 1.5 years Costco started to grind him on his price. Well now he was caught. His margins were squeezed and he was basically making no money on his Costco sales but had to commit to the volume because of his new overhead. This eventually sank his company.

Quote:

Originally Posted by Lihu

It's really sad to see this (and it is a common opinion), because it's not that the labor that is the most expensive part. It's the bureaucracy (i.e., too much overhead in management and labor unions).

The cost of labor is not the individual that makes between $10-$25 per hour, but the overhead that makes this cost $20 to $50 per hour. This is one reason why many small businesses were able to survive by building things in this country while larger corporations couldn't.

Some companies are moving things back into this country, because it makes sense to make smaller volume products here at only about 30% more cost than overseas. In some cases, it's even reversed.

As someone who built a business to just under 50 people I have to disagree with your some of your points.  Most small businesses don't have unions and have minimal overhead.  Our largest cost was payroll, followed by COGS (cost of goods sold),  employee benefits, employee expenses and taxes.

The example @ay33660 provided is a common point of failure of most businesses.  Our goal as business owners is to grow our business but sometimes in an attempt to grow too fast we make poor decisions.  Cash flow is key, small businesses that try to grow too fast make investments in their growth and that leaves them vulnerable to cash flow issues.  As revenue starts to peak or decline the bank accounts and credit lines start to shrink and the owner becomes forced to sell more or manage the business on the cost side of the P&L.;  Once you are forced to manage profits solely from the cost side you're entering a tailspin.

My guess is the guy that had a deal with Costco invested every dollar into meeting Costco's demands and never considered the impact the deal would have on his business if Costco tried to lower their per unit cost which is always a potential reality with these large distributors and retailers.  Once his deal was inked he should have looked into ways to optimize production and reduce his per unit costs, instead he likely  pocketed the profits to reward himself for cutting the deal and personally did well for a few years until Costco cut their price to a point where he could no longer make the profit on the deal he needed to cover his fixed costs nor could he take on new large deals because his production was close to maxed out.

As to the original topic, my understanding is the Pro's got fired because Dicks as a chain decided they weren't selling enough golf equipment overall.  The pro's at the Dick's I've visited were very limited in their knowledge and enthusiasm for the sport or customer service.  That said, I disagree with Dick's decision to solely blame the Pro's as I believe they have a huge corporate issue.  Most stores I visit seemed understaffed in specific departments, their staff were young and lacked basic customer service skills and seemed more interested in chatting amongst themselves about their binge drinking the night before than they did helping customers.   Individual stores need to ensure stores are properly staffed, their pro's don't leave their department, they are friendly and knowledgeable about the products they sell.

Dick's also owns Golf Galaxy which depending on your area most likely competes with Dicks for equipment sales.  If you have a choice of both why would anyone go to Dick's?

[motsco]

many times I have been at dicks and the staff in the golf department never seemed interested in helping customers. the only reason I would got to dicks for any golf stuff would be for shoes, they have a hudge selection of golf shoes, and I'm sure you don't need a PGA pro to tell someone how the shoe goes on their foot. I goto GG in the winter to try clubs on their hitting monitor just so I can swing, sometimes I pay for the fitting just for more time on the monitor. People at GG have allways been nice and very helpfull. I even offer money to them for their time spent with me if I buy nothing. one thing that these big box company's are missing is point of sales. every time I have been in a hitting bay and say if I'm not hitting good they will try to give advise which is nice, but I think they should train the staff to try to sell lessons. only once has a GG employee ask me if I took leasons and when I responded yes I have a instructor that was it he didn't say anything else, my thinking a good salesperson would reply without prying something like "you know we have one of the finest pros at this store you should give him a try" even if I did not except I would have it in my mind to maybe try. I buy pretty much everything at my local range now! as for club prices there isn't a enough savings for me to drive a extra 10 miles, plus the guys at my local know what clubs I like. my instructor will walk by when I'm hitting and if he sees a problem in my swing he will stop and help without my asking. everybody at my local range is great. I believe that everybody is getting tiered of the big box economy, and people are starting to search for the mom and pop shops of the past.

[BuckeyeNut]

I don't think I've purchased a single golf club from Dicks.  I like to test clubs in front of a pro-style launch monitor, and Dicks never had one of these.  PLUS....their lefty club selection is weak.    I do buy clothes and golf shoes from Dicks.  You can add me to the others because I had no idea they employed golf pro's.  I guess because I avoid buying clubs from them, it only makes sense that I didn't know.  I also purchased my Bushnell laser from Dicks.

[jamo]

A friend of mine owned a nice small (200 employees) manufacturing company. He was thrilled when Costco agreed to stock his product across North America. The first shipment was delivered on time and on price. A year later Costco wanted more. He leased more space, hired more employees and purchased more equipment. Then after 1.5 years Costco started to grind him on his price. Well now he was caught. His margins were squeezed and he was basically making no money on his Costco sales but had to commit to the volume because of his new overhead. This eventually sank his company.

IIRC there's a book about this but Wal-Mart instead of Costco. The Wal-Mart Effect. I don't even remember if it was a good book or if any of its assertions have been refuted, but I do remember they was a story about Snapper lawnmowers. Anyway, I bought some golf gloves at Dick's a few days ago. TaylorMade stopped making the glove I use (Targa Tour), but Dick's had a few left so I cleaned them out. I also got a FootJob SciFlex. Nice enough grip. Expensive though.

[newtogolf]

IIRC there's a book about this but Wal-Mart instead of Costco. The Wal-Mart Effect.

I don't even remember if it was a good book or if any of its assertions have been refuted, but I do remember they was a story about Snapper lawnmowers.

Anyway, I bought some golf gloves at Dick's a few days ago. TaylorMade stopped making the glove I use (Targa Tour), but Dick's had a few left so I cleaned them out. I also got a FootJob SciFlex. Nice enough grip. Expensive though.

Didn't know Dicks specialized in fetishes, not surprised it was pricey

[jamo]

Didn't know Dicks specialized in fetishes, not surprised it was pricey :-$

Before I made that post I went to FootJoy.com to make sure I had the name write, and I misspelled it there too. Even posted on Twitter, "Just accidentally typed FootJoy.com as FootJob.com and I am NOT going to make that mistake again." Apparently I was wrong. :doh:

[Lihu]

As someone who built a business to just under 50 people I have to disagree with your some of your points.  Most small businesses don't have unions and have minimal overhead.  Our largest cost was payroll, followed by COGS (cost of goods sold),  employee benefits, employee expenses and taxes.

. . .

As to the original topic, my understanding is the Pro's got fired because Dicks as a chain decided they weren't selling enough golf equipment overall.  The pro's at the Dick's I've visited were very limited in their knowledge and enthusiasm for the sport or customer service.  That said, I disagree with Dick's decision to solely blame the Pro's as I believe they have a huge corporate issue.  Most stores I visit seemed understaffed in specific departments, their staff were young and lacked basic customer service skills and seemed more interested in chatting amongst themselves about their binge drinking the night before than they did helping customers.   Individual stores need to ensure stores are properly staffed, their pro's don't leave their department, they are friendly and knowledgeable about the products they sell.

So, I think there is hope for smaller businesses in this country to survive even building products in the United States. We can specialize in service and customization. It is always better to have a local shop/company where the owner has a direct stake in making the customers happy than to have a large corporation where most everyone in the company cares more about political pole position than pleasing any customer.

Agreed, that the failure at Dick's is purely due to corporate issues.

[RFKFREAK]

...where most everyone in the company cares more about political pole position than pleasing any customer.

What do you mean by this?

[newtogolf]

So, I think there is hope for smaller businesses in this country to survive even building products in the United States. We can specialize in service and customization. It is always better to have a local shop/company where the owner has a direct stake in making the customers happy than to have a large corporation where most everyone in the company cares more about political pole position than pleasing any customer.

Agreed, that the failure at Dick's is purely due to corporate issues.

Yes, small businesses are the heart of local economies.  For example, on Long Island, employers of less than 50 people form 96% of all firms here.  The downside is over 95% of new businesses fail in their first three years which means there's substantial risk to starting a business.

Dick's like many large retailers are being mismanaged because the focus is on what their shareholders want, not their customers.  Eventually the customers find alternative places to spend their money and the businesses fail.  Who would have thought Kodak would ever file Chapter 11, Hostess would fail and Quiznos, JCPenney and Red Lobster would be on life support.

[Lihu]

What do you mean by this?

Just that many people in a large corporation care more about their careers than what they are actually supposed to be doing. In many cases, people manipulate the system in order propel their personal gain rather than being good at what they do. The only issue is some of the more skillful and harder working individuals get sidelined by people who are better at playing politics.

Yes, small businesses are the heart of local economies.  For example, on Long Island, employers of less than 50 people form 96% of all firms here.  The downside is over 95% of new businesses fail in their first three years which means there's substantial risk to starting a business.

Dick's like many large retailers are being mismanaged because the focus is on what their shareholders want, not their customers.  Eventually the customers find alternative places to spend their money and the businesses fail.  Who would have thought Kodak would ever file Chapter 11, Hostess would fail and Quiznos, JCPenney and Red Lobster would be on life support.

Small businesses are the heart of America, the focus should be on helping to make more of them prosper.

[DwightC]

Sheesh!  This is getting all political.  Or something.  There's nothing wrong with hating (or loving) big box stores or chain stores.  Doesn't make you a leftie or a conservative.  And I'm not sure what kind of chops you get from being a small businessman or knowing somebody who didn't get the risks associated with becoming a captive supplier.  Even as  I type this, the Moscow Open is finishing up (well, given the time difference, it's pr'ly over).  Not sure Mother Russia is fertile soil for the auld game--though from what I hear the Chinese are deep into the love/hate relationship with golf that we're all familiar with.

I don't think Dick's problems are completely corporate or internal.  I think golf is a cyclical business and the game itself ebbs and flows in popularity.  We're currently still working off the excesses of the last boom, though we're getting towards the end of the process.  We'll know that's over when a couple of management teams at the equipment manufacturers take a long walk off a short plank and go splash in the shark tank.  Hasn't happened yet.  Dick's is run by a bunch of C-List guys, and they made a dumb bet, doubled down, blew the execution, etc. etc.  I tried this out on my wife and a friend of hers at a dinner party over the weekend--telling them Dick's is clearing the space for, get this, yoga gear (which I read somewhere)--and they both (both being yoga practitioners) announced they would never buy yoga togs at a sporting goods store like Dick's.

Dick's has got a problem.  I hope some of those 560 pros have new jobs by now.

[newtogolf]

Sheesh!  This is getting all political.  Or something.  There's nothing wrong with hating (or loving) big box stores or chain stores.  Doesn't make you a leftie or a conservative.  And I'm not sure what kind of chops you get from being a small businessman or knowing somebody who didn't get the risks associated with becoming a captive supplier.  Even as  I type this, the Moscow Open is finishing up (well, given the time difference, it's pr'ly over).  Not sure Mother Russia is fertile soil for the auld game--though from what I hear the Chinese are deep into the love/hate relationship with golf that we're all familiar with.

I don't think Dick's problems are completely corporate or internal.  I think golf is a cyclical business and the game itself ebbs and flows in popularity.  We're currently still working off the excesses of the last boom, though we're getting towards the end of the process.  We'll know that's over when a couple of management teams at the equipment manufacturers take a long walk off a short plank and go splash in the shark tank.  Hasn't happened yet.  Dick's is run by a bunch of C-List guys, and they made a dumb bet, doubled down, blew the execution, etc. etc.  I tried this out on my wife and a friend of hers at a dinner party over the weekend--telling them Dick's is clearing the space for, get this, yoga gear (which I read somewhere)--and they both (both being yoga practitioners) announced they would never buy yoga togs at a sporting goods store like Dick's.

Dick's has got a problem.  I hope some of those 560 pros have new jobs by now.

The problem is Dicks golf revenue came from selling drivers.  The predominant products they sold were TaylorMade and Callaway which both have very short product life cycles and sell at significant discounts after release.  As the article states, they were getting stuck with a lot of inventory that they had to sell at a discount, that isn't a problem just associated with their store pro's, but also their corporate buyers.   Why were they getting stuck with inventory?  Were the pro's not doing their jobs or were people overall buying less drivers.  Whatever the case, the results were 500+ people lost their jobs in a declining industry.

The article also states that Dicks is TM's largest buyer so the decision to fire al the pro's could also indicate a change in focus and have a short term and long term impact on TaylorMade as well.

[Lihu]

Sheesh!  This is getting all political.  Or something.  There's nothing wrong with hating (or loving) big box stores or chain stores.  Doesn't make you a leftie or a conservative.  And I'm not sure what kind of chops you get from being a small businessman or knowing somebody who didn't get the risks associated with becoming a captive supplier.  Even as  I type this, the Moscow Open is finishing up (well, given the time difference, it's pr'ly over).  Not sure Mother Russia is fertile soil for the auld game--though from what I hear the Chinese are deep into the love/hate relationship with golf that we're all familiar with.

I don't think Dick's problems are completely corporate or internal.  I think golf is a cyclical business and the game itself ebbs and flows in popularity.  We're currently still working off the excesses of the last boom, though we're getting towards the end of the process.  We'll know that's over when a couple of management teams at the equipment manufacturers take a long walk off a short plank and go splash in the shark tank.  Hasn't happened yet.  Dick's is run by a bunch of C-List guys, and they made a dumb bet, doubled down, blew the execution, etc. etc.  I tried this out on my wife and a friend of hers at a dinner party over the weekend--telling them Dick's is clearing the space for, get this, yoga gear (which I read somewhere)--and they both (both being yoga practitioners) announced they would never buy yoga togs at a sporting goods store like Dick's.

Dick's has got a problem.  I hope some of those 560 pros have new jobs by now.

Right, we got a bit off topic. Thanks for reeling us back in.

The question is not whether the golfing business is down enough to justify eradicating these positions. Their decision was purely to reduce the cost of selling goods even if it is not beneficial to their customers. If you don't believe me, just wait until you try to ask questions regarding the equipment from someone making barely above minimum wage and probably doesn't know a lot about golf and possibly never played it.

Let's just say that the average position being eliminated makes $18 to $20 per hour, the job is now being done by someone making $9 per hour. The amount of savings is about $5600 per hour or about 11.65M per year.

The top executives made 9M, 3M, 4M, 4M, 5M per year in 2013 (rounded up). The senior executives made 25M in only their salaries last year. They make far more in options and other perks, and remember that the people who work for them make a commensurate salary. The net income of the second and lower tier management? Possibly in the 50M range.

http://insiders.morningstar.com/trading/executive-compensation.action?t=DKS

Edward Stack took home 142M in stock options making him number 6 of all CEOs in 2012.

http://www.bizjournals.com/pittsburgh/news/2013/10/23/stock-options-boost-dicks-ceo-to-top.html

So, they think that Golf is not going to do well?

Golf and Hunting are a substantial part of their business, because the stock dropped 15%. Investors were concerned that the reason for this was a reduction in the Golfing business.

http://www.forbes.com/sites/samanthasharf/2014/05/20/dicks-sporting-goods-bogey-shares-slide-on-golf-hunting-weakness/

Well, just wait until their "Golf Technicians" scare off the remaining customers.

The way I look at it is they took out the engine that powers their golfing sales, and replaced it with a squirrel cage hoping to keep their existing sales.

[newtogolf]

Right, we got a bit off topic. Thanks for reeling us back in.

The question is not whether the golfing business is down enough to justify eradicating these positions. Their decision was purely to reduce the cost of selling goods even if it is not beneficial to their customers. If you don't believe me, just wait until you try to ask questions regarding the equipment from someone making barely above minimum wage and probably doesn't know a lot about golf and possibly never played it.

Let's just say that the average position being eliminated makes $18 to $20 per hour, the job is now being done by someone making $9 per hour. The amount of savings is about $5600 per hour or about 11.65M per year.

The top executives made 9M, 3M, 4M, 4M, 5M per year in 2013 (rounded up). The senior executives made 25M in only their salaries last year. They make far more in options and other perks, and remember that the people who work for them make a commensurate salary. The net income of the second and lower tier management? Possibly in the 50M range.

http://insiders.morningstar.com/trading/executive-compensation.action?t=DKS

Edward Stack took home 142M in stock options making him number 6 of all CEOs in 2012.

http://www.bizjournals.com/pittsburgh/news/2013/10/23/stock-options-boost-dicks-ceo-to-top.html

So, they think that Golf is not going to do well?

Golf and Hunting are a substantial part of their business, because the stock dropped 15%. Investors were concerned that the reason for this was a reduction in the Golfing business.

http://www.forbes.com/sites/samanthasharf/2014/05/20/dicks-sporting-goods-bogey-shares-slide-on-golf-hunting-weakness/

Well, just wait until their "Golf Technicians" scare off the remaining customers.

The way I look at it is they took out the engine that powers their golfing sales, and replaced it with a squirrel cage hoping to keep their existing sales.

Golf accounts for 15% of their revenue, significant but depending on costs possibly not very profitable.  I'd guess that at some point we will see the a huge reduction or elimination of golf equipment in some Dicks stores or closing of some Golf Galaxy's.

BTW - Stock options are not cash, they represent the opportunity of the option holder to purchase stock (usually at a preferred price) within a specified period usually in order to make sure they have sufficient skin in the game.   Stack made the money he did in 2013 because he exercised $3.7M worth of options he earned from previous years that were well below the price of the stock when he exercised them.

[MS256]

Golf accounts for 15% of their revenue, significant but depending on costs possibly not very profitable.  I'd guess that at some point we will see the a huge reduction or elimination of golf equipment in some Dicks stores or closing of some Golf Galaxy's.

BTW - Stock options are not cash, they represent the opportunity of the option holder to purchase stock (usually at a preferred price) within a specified period usually in order to make sure they have sufficient skin in the game.   Stack made the money he did in 2013 because he exercised $3.7M worth of options he earned from previous years that were well below the price of the stock when he exercised them.

There could be benefit beyond the obvious 15% if it attracts one or more members of a family out shopping. I know anytime our family ever went shopping when we got to the store we all went our separate ways to the departments we were interested in. I might or might not buy an item or two but could pretty much bet the rest of the family was going to have a shopping cart full when we met back up at the cash register.

Take away one of those departments and maybe the family chooses another store to shop.

[tye203]

I went to dicks yesterday to demo a nike hybrid 4. They were very friendly but a new hybrid was $229. My wife got my nike vrs x iron set for $250. I am interested in their fitting services but not until next year. As far as the economic of golf there are three core issues. Affordability ; clubs and green fees are expensive along with shoes. Unless you are diligent and buy used stuff you could easily spend $1,000 just to start. Most 18-30 don't have that kind of money because of student loans or not having a job at all. Diversity; most 18-30 want diversity in culture and color in the activities that they do. Golf just isn't it for diversity at this point in color and class. See affordability Time; let's be honest we enjoy golf but it is time consuming. A career person would have to give up a Saturday or Sunday to play a round of golf. I have 2 kids and I get out twice a month but it's because I teach and have summers free and half days during the year. At some point golf will have to innovate or they will continue to decline. A young charismatic golfer needs to bring excitement to the game or it won't be appealing to young people.

[David in FL]

At some point golf will have to innovate or they will continue to decline. A young charismatic golfer needs to bring excitement to the game or it won't be appealing to young people.

It's a shame there aren't any of those out there these days...... :-\