Locally based athletic apparel giant Finish Line Inc. is laying plans for an aggressive expansion of Man Alive, the local hip-hop clothing chain it bought in a surprise move six months ago.
Man Alive is expected to balloon from 38 stores to 78 by the end of next year. Eventually, Finish Line CEO Alan Cohen said, Man Alive could grow to 400 stores nationwide, providing Finish Line with an avenue for growth as its own rapid expansion begins to play out.
Finish Line, which topped $1 billion in annual sales for the first time for the fiscal year ended in January, expects to level out at 800 to 1,000 stores nationwide. The company now has 631, with another 70 expected to open by the end of the year.
Analysts initially viewed the pairing as an odd match. Finish Line caters to a mainstream clientele with shoes from the biggest names in retailing-Nike, Reebok, New Balance. Man Alive’s market is young, urban consumers who want clothes from labels started by hip-hop stars like Nelly and Russell Simmons.
But like every good odd couple, Finish Line and Man Alive have more in common than might meet the eye, company executives maintain. They share customers, a few brands and a similar entrepreneurial history. The Bublick family, which founded Man Alive in 1969, continues to run the company under the new ownership.
Finish Line CEO Alan Cohen has said he expects Man Alive’s sales, which were $30 million in 2004, to someday reach $500 million. Finish Line executives said Man Alive is profitable, but they wouldn’t disclose how much the chain contributed to Finish Line’s $12.7 million first-quarter profit.
Based on sales per square foot of retail space, a common measure in the industry, Man Alive could eventually outperform Finish Line stores, said Finish Line Chief Operating Officer Steven J. Schneider. Finish Line stores post sales of $351 per square foot, while Man Alive stores post a little more than $300 in sales per square foot.
While executives aim to double the store count for Man Alive by adding 40 stores in the next year and a half, Man Alive’s total retail square footage under roof will increase about 125 percent, Schneider said.
In May, Man Alive opened a prototype store in the Richmond, Va., suburb of Colonial Heights that’s more than 25 percent bigger than the typical Man Alive. The 3,600-square-foot store has softer interior finishes and is designed to appeal to women, a growing segment of both Man Alive and Finish Line’s customer base. Women now represent 45 percent of Man Alive’s business, said company President Jeff Bublick.
The store was planned before the acquisition, but was built with input from Finish Line. Like Man Alive’s stores going forward, the Virginia store has a much larger selection of footwear than previous stores, which carry a few brands in a small display. Eventually, up to 10 percent of Man Alive’s merchandise will be shoes, but it won’t look like a Finish Line kiosk inside a Man Alive store, Bublick promised.
“We’re working very hard to avoid that,” Bublick said. “There will be some [shoes] carried at Man Alive that may not be carried at Finish Line.”
Indeed, some analysts think shoes will be key to Man Alive’s success.
“The ultimate success of the Man Alive concept rests in Finish Line’s ability to get meaningful allocation of Nike’s urban footwear product,” wrote New Yorkbased Morgan Stanley analysts Joseph Yurman and Corey Benjamin in a June 21 report initiating coverage of Finish Line’s stock with an “underweight” rating.
The investment community overall, which seemed to mutter a collective, “Huh?” when Finish Line announced it was getting into the urban apparel market, is slowly warming up to the idea.
“We will have a much better feel for how things are progressing after we get through the next couple of quarters and see how the company may be able to market to the urban demographic and realize synergies from the acquisition,” said James O. Lykins, an analyst with Louisville-based Hilliard Lyons Inc. who covers Finish Line and does not own the company’s stock. Hilliard Lyons rates Finish Line stock as an attractive longterm buy.
Lykins admitted he knows of no other retailers like Man Alive, but said he’s encouraged that the stores will begin carrying more footwear, leveraging Finish Line’s expertise.
Man Alive also will offer insights into the needs of the urban customer, the Morgan Stanley report noted.
Analysts haven’t been the only ones on a learning curve following the acquisition. Executives of both stores expect to learn more in the coming year about how Man Alive will look in the future and how it will fit into Finish Line.
“[The Bublick family] created the concept,” Cohen said. “The upper management of Finish Line is going to learn it.”
That’s one reason execs aren’t offering a timetable for the 400 stores Cohen said he believes Man Alive can achieve.
Executives of both companies are in the process of integrating Man Alive’s systems and corporate functions into Finish Line’s. Given Man Alive’s expansion plans, executives don’t expect any of its 34 corporate employees to lose their jobs in the transition. By the beginning of the year, the chain’s corporate and distribution employees are expected to move from headquarters on the northwest side of Indianapolis to Finish Line’s recently expanded HQ and distribution center near 30th Street and Mitthoefer Road.