A liquidity crisis has the CEO of Modell’s Sporting Goods thinking outside the box in an attempt to attract investors who can sustain his family’s 131-year-old retail business and save at least 3,300 jobs.
CEO Mitchell Modell is hoping to keep the fourth-generation family operation alive for the generation to come.
Playing into the retailer’s famous tagline “Gotta Go to Mo’s,” Modell is hoping vendors, landlords and customers will help him save the New York City-based chain, which sells athletic apparel, footwear and equipment in more than 150 stores across the Northeast. To reach that goal, and ignite interest on the investment front, Modell and his family for the first time are turning to crowdfunding platforms in hopes of selling a portion of the business to new investors.
“We are selling a minority interest,” Modell told SJ in a telephone call. When asked if the company has determined a percentage for the minority stake, or if it was looking for one big investor or willing to sell smaller stakes to multiple investors, Modell said, “We’re not allowed to say publicly.”
Modell first disclosed the company’s intent to use a crowdfunding platform on Friday when he appeared on the Fox Business show, “Mornings with Maria.”
The company last week also said it would execute 24 store closings, or more than 15 percent of its total fleet. This past weekend saw one bit of good news.
“On Saturday, Mr. Modell and one of his landlords negotiated a deal to reverse the closure of four stores that were announced last week. As a result of their agreement, 64 union jobs were saved,” Modell’s said in a statement.
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Just how bad is Modell’s financial picture?
The company suffered a liquidity crisis in January following “$38 million less in receipts [and] dropped $50 million in sales, on top of a warm winter, on top of no snow, lousy [sports] teams,” Modell said in a video clip explaining the company’s financial predicament to its suppliers, landlords, customers and potential investors.
“This is now ‘my back’s to the wall, and I gotta figure out what I’m going to do,'” Modell said.
But Modell also believes his fight is doable: “If I get 90 percent cooperation, then we could show a path to success.”
As for what has brought about these turbulent waters, Modell acknowledged the shift in consumer shopping behavior.
“Ten years ago, all the power was in the retailer’s hands. That paradigm totally shifted,” Modell said. “The consumer controls all the power because of technology, because of the access of information that they have.” Today’s retailers must provide an experience and serve customers “like you’ve never served them before,” he added, pointing out that the nameplate still has a reason to exist.
“We know who we are and we know who we’re not. We cater to the masses, to the blue-collar worker who can’t afford to spend $150 on a bag,” Modell said. “People love our brand–it’s not a tarnished brand. The model is broken, and that’s why we’re changing it…. It’s my responsibility to make sure that people are still able to go to Mo’s.”
The clip ends with the CEO’s email address—mitchellbrucemodell@modells.com—for anyone interested in making an investment.
“We will do whatever it takes to save these stores and protect the communities that we have served and loved for generations,” Modell said in a company statement issued Monday. “This is not a business, and these are more than associates. Much more. This is a real family, and with a little help, we hope to serve your children, just as we served you, for generations to come.”
Modell’s was founded by Morris Modell in 1889 when he opened a store on lower Manhattan’s Cortlandt Street. It currently operates over 150 stores across the tri-state area, as well as in Pennsylvania, Rhode Island, Massachusetts, New Hampshire, Delaware, Maryland, Virginia and Washington, D.C., in addition to modells.com.