Question for those who own Running Stores, what is the profit %?

I'm curious as well.

I looked into this a few years ago. I can't provide the numbers you want, but I ran into another unforeseen problem that you are overlooking. It stopped us from pursuing the venture.

The major shoe companies would not do business with us because they felt the market was sufficiently covered in our metro area. From their perspective, why open a 4th specialty running store when the three existing stores plus a half dozen box stores already existed? From their perspective, the market was saturated.

Specifically, we could not get an account with NB, Asics, Nike, and I think Brooks and Saucony. This was a major handicap to a start up venture so we decided not to pursue it.

Since then, FOUR new running specialty stores have opened in our area. One is small and doing business only with the remaining shoe brands. One has failed and closed. The other two are too new to see if they will be successful... however they are new locations of an existing store, so they have an advantage of being able to carry all brands.

some numbers below. probably don't need 6.5m gross to take away 160k. and ive heard widely varying quotes on margins on goods. 44 on 100 is pretty good. food, bev, other retail wouldn't come close (and you'd hope to make up in volume).

http://www.washingtonpost.com/wp-dyn/content/article/2010/01/24/AR2010012402468.html

But they have built Potomac River Running into a seven-store chain that earns about $500,000 profit on revenue of $6.5 million. That's after the Pugsleys and Shapiros take out $80,000 per household to pay themselves.

The cost of goods sold -- running shoes, clothes and accessories -- was $3.5 million to $3.6 million last year. Nearly 70 percent of revenue is in athletic shoe sales; 20 percent is in clothing; and the rest is in accessories. (A running shoe that sells for $100 typically costs Potomac Running about $56.)

Labor is about $1 million a year, and rent for all seven stores comes to $705,000. Credit card fees, health-care insurance and utilities eat up most of the rest.

The debt on the company is $650,000, split between a home equity line of credit (4 percent interest rate) and a business line of credit (4.5 percent). The company has 60 employees, 15 of whom are full time and receive health care. The owners are starting a 401(k) plan for employees this year.

Online sales are killing the running speciality stores. A lot of vacant buildings in strip malls where running stores once stood proud. What happened here? We'll, some of these online deals for shoes are unbelievable...the stores can't compete with that.

Thanks for sharing your story Fisky.

My question for you is did you work in the run specialty industry when you were making plans to open your own store? Did you have a relationship with the reps? I'm currently the buyer and have a good relationship with the reps in this area. The potential area that I'm looking at is about an hour away and is undeserved with only one running store and given the population I believe 2-3 could survive. So in no way would I be competing with my current employer.

When I first started about 10 years ago one of our managers made the same jump and opened his store in a neighboring state. He experienced the same difficulty you had with Nike but was able to get all other accounts to open with him even as an independently owned store. Nike at the time wanted a $250k initial buy in which basically meant he would have to be a nike outlet store and carry hardly anything else so he opted out. Still to this day he doesn't have Nike but he does have all the other major brands.

Also, going through this process did you hire a consulting company to help you find a space based on the demographics or did you do all of your own homework before finding out that accounts wouldn't open you?

Excellent insight one model!

Our store that I currently work for is about 70% footwear, 20% accessories and 10% apparel so basically just flipped from what Potamac does. That's also probably because we don't have 4 true seasons the way the mid atlantic does which hurts our winter apparel sales.

So based on $6.5M in sales, they COULD pay themselves the $80k each + the $500k in end of the year profits. Counting salaries, that would mean approximately $650k in potential income or approximately 10% profitability on $6.5M in annual sales. Do those figures look correct to you? About ~10% of store sales equals the amount they can pay themselves if they did not reinvest into the business, hypothetically?

Thanks again.

Bump