Sportsman’s Warehouse gets big investorThe credit crunch has forced a local businessman to make a difficult decision.
By: Jeff Holmquist, Woodbury Bulletin
The credit crunch has forced a local businessman to make a difficult decision.
Stu Utgaard, chairman and chief executive officer of Sportsman’s Warehouse, has signed a deal with a Canadian firm, United Farmers of Alberta, to help bring extra cash to the outdoor retailer.
“It’s bittersweet news. We’d like to have stayed a privately held company forever,” Utgaard said in a phone interview Nov. 26. “But as a business, you have to be able to pay your bills.”
Utgaard, who has an office in Star Prairie, Wis. and lives in rural Polk County, has owned and guided the company since 1996, when he purchased a single store in Utah.
Today, Sportsman’s Warehouse touts 73 stores nationwide; however, six have been closed over the past year due to lagging sales. The closest store in this area is in Woodbury, Minn.
While Utgaard said business remains brisk in the Sportsman’s Warehouse stores, tightening credit terms with vendors made it difficult to stock the shelves.
“The economy has turned out to be less of a challenge than the credit market,” he explained. “The tightened credit has caused inventories to drop.”
The credit crunch resulted in Sportsman’s Warehouse losing access to $45 million in cash over the past couple months, Utgaard said. The company received a “significant amount of cash” from UFA last week, Utgaard said, ending the immediate concern.
With the infusion of new cash, Utgaard said, the Sportsman’s Warehouse stores can pay cash rather than rely on credit sources.
The stores will thus be able to meet customer needs and grow their market share in the outdoors-related industry, Utgaard said.
“Now we don’t have a cash problem. We’re in great shape,” Utgaard said. “Not everybody else is.”
In fact, competitors like Gander Mountain are facing tough times ahead, according to industry analysts.
Sportsman’s Warehouse is now positioned well, thanks to the partnership with UFA, Utgaard said.
“We continue to increase sales and our earnings are up significantly,” he said.
As for Utgaard’s future with Sportsman’s Warehouse, he said the next couple months will determine how things play out.
If UFA invests all of the committed cash into the retailer, Utgaard said the Canadian cooperative will take over a controlling interest in Sportsman’s Warehouse.
If that happens, Utgaard would likely no longer be chairman of the board and will likely be hired on as a consultant.
If the stock is equally split between the Utgaards and UFA, or if the Utgaards remain as the majority stock holder, Sportsman’s Warehouse operations will continue to be handled as they have been.
However Sportsman’s Warehouse moves forward, Utgaard said the company is made stronger by UFA’s involvement. He said they have an “excellent management team” that will help the outdoor retailer grow and weather any economic challenges.
UFA is an agricultural supply cooperative headquartered in Calgary, Alberta, Canada. The co-op has been diversifying its operations in recent months, including its recent purchase of Canadian outfitter Wholesale Sports. Since 1909, the cooperative has grown into a multi-billion organization with 110,000 members.
Utgaard said he finds it ironic that an ag-related cooperative has partnered with Sportsman’s Warehouse. Utgaard got his start in business operating the Utgaard Hatchery in Star Prairie after buying the operation from his father. The hatchery grew from 150,000 chicks hatched annually to about 2.2 million chicks at its peak.
Utgaard, a 1963 graduate of New Richmond High School, has been competing with other outdoor mega-stores like Cabela’s and Gander Mountain and faring well for more than a decade.
In an interview with the New Richmond News in 2005, Utgaard said he’d always wanted to own and operate a national chain. When he was younger, however, he thought the eventual business would be a grocery store chain.
Sportsman’s Warehouse had just 40 stores by the end of 2005, but has added many more since then.