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Forzani Group accounts for about 16 per cent of the Canadian sporting goods market.
Forzani Group accounts for about 16 per cent of the Canadian sporting goods market.

How a need for football cleats led to a sporting goods empire Add to ...

It started 37 years ago with a pair of football cleats made of kangaroo leather.

John Forzani, then a left guard with the Calgary Stampeders football club, couldn't find his favourite brand of cleats - a soft but durable Riddell product - in Canada. Frustrated, he and three other Stamps scrounged up $9,000 to start their own shoe store for at serious athletes. On Aug. 5, 1974, Forzani's Locker Room opened in Calgary, a growing venture that consumed so much time that Mr. Forzani would eventually choose retailing over football.

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Now, after a colourful few decades that saw a massive expansion, multiple acquisitions, culture clashes, flirtations with bankruptcy, and a public fight with a hostile shareholder, the Forzani Group Ltd.'s run is about to end with a $770-million takeover by Canadian Tire Corp. Mr. Forzani, the company's founder and chairman, said the friendly deal was driven, in part, by a struggle shared by all retailers: implementing the technology necessary to manage inventory, and therefore get the best prices.

Indeed, technology woes are just as much a part of Forzani's history as kangaroo-leather shoes. Within five years of its founding, Forzani's Locker Room had 23 locations in Alberta and Saskatchewan. And in 1991, the company picked off the floundering Sport Chek International Ltd., with plans to liquidate its inventory. But instead, Forzani's turned the company around, raised $70-million in a 1993 initial public offering, and then went after the larger Sports Experts chain in Quebec.

That's when things got messy. The three banners each had their own computer system, there were two different buying offices, and a corporate culture inherited from Sport Experts that did not fit with Forzani's entrepreneurial attitude.

"It almost cost us the company," Mr. Forzani, who won a Grey Cup with the Stamps in 1971, said in an interview Monday. "The key factor is that we didn't have the proper technology to support a business of this size, and yet we tried to manage it as one."

The enlarged company ended up with tens of millions of dollars in excess inventory and had to slash prices. It was time for a change - sharper management was needed. "Lots of times as an entrepreneur, it is ready, fire, aim later," said Mr. Forzani, now 64 and a part owner of the Calgary Stampeders. "More professional managers aim a little more before they fire."

Facing bankruptcy protection in 1997, Forzani's brought on professional executives - Bill Gregson as president and chief operating officer and Bob Sartor as chief financial officer.

The company skirted bankruptcy protection by asking Forzani's vendors to cut the company some slack on payments, negotiating with landlords, and by building a relationship with GE Capital, which gave the Calgary-based retailer a revolving line of credit. This came as two American retailers, Hibbett Sports and Sport Mart USA (unrelated to the Sport Mart banner under Forzani's control) were making their way into Canada.

With experts at the helm, Forzani's shaky operations settled around 1999. Mr. Sartor later took over as chief executive around 2002, putting further power in the hands of outsiders, rather than concentrating it among founders and original executives.

Many entrepreneurs miss this critical turning point, according to Mehdi Mourali, an assistant professor of marketing at the University of Calgary's Haskayne School of Business. "Sometimes [they]don't see it - they are excited about the growth."

Forzani's continued to make acquisitions, and the original Forzani brand was phased out about six or seven years ago, as the company focused on larger, anchor stores under brands like Sport Chek.

But despite this turnaround and growth, a hedge fund known for its aggressive shakeup skills, Crescendo Partners LP, wanted two seats on Forzani's board in 2009, arguing the company was a slow-moving retailer. Crescendo's activism often leads to company sales, but Forzani became the first outfit to ever ward off an attack from the New York-based fund.

The Forzani Group Ltd., now with 12 banners and control over about 16 per cent of the Canadian sporting goods market, technology is once again a factor. "The single biggest reason I'm in favour personally of this deal [with Canadian Tire]is because technology is where it is. You have to have a lot of critical mass to be able to support stores in today's environment.

"With the Internet, the marketplace is the world. You've got to have the right price [and selection]for the world ... and the only way you can do that is to have big, big mass," Mr. Forzani said.

Follow on Twitter: @CarrieTait

 

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