REI reports lower profit as online competition heats up
The Kent-based outdoor-gear retailer said its sales rose 7 percent last year to $1.9 billion, its smallest percentage gain since the recession.
Seattle Times business reporter
Has outdoor-gear retailer REI hit a bump in the road? Kent-based REI recently reported a 4 percent decline in its annual profit amid tepid sales growth.
REI blamed the profit drop on erratic ski weather and economic uncertainty.
Chief Executive Officer Sally Jewell, in an online message to customers, said a total of $104 million will be returned to 5.1 million active members, representing, as usual, 10 percent of their eligible purchases.
REI’s sales rose 7 percent last year to $1.9 billion, while its profit dropped 4 percent to $29 million. Sales growth was down from 8 percent the year before and 14 percent in 2010.
Spokeswoman Libby Catalinich said mild November weather delayed the start of ski season for the second year in a row, hurting holiday sales. Widespread uncertainty surrounding federal tax and spending policies also dampened consumer sentiment, she said.
Jewell, who’s awaiting Senate confirmation to lead the U.S. Department of Interior, said REI redoubled its efforts to sell compelling new products, including an array of items developed in-house. The 129-store chain opened a handful of new locations nationwide and equipped its salespeople with mobile checkout devices to cut down on long lines, Jewell said.
“Through new stores, new technology and continuous improvement in execution, our team is working hard to deliver the right product in the right place at the right time to support your outdoor adventures,” she wrote.
Like most store chains, REI is having to step up its efforts to keep pace with Internet rivals. Overall, outdoor product sales rose 5 percent to $11.4 billion during the fiscal year ended January, according to the Outdoor Industry Association. But sales growth via the Internet hit 26 percent for mass merchants with large e-commerce operations, as well as online-only players like Amazon.com.
Avery Stonich, a spokeswoman for the Boulder, Colo.-based trade group, said increased pressure to be price competitive without compromising customer service is squeezing profit margins.
“Consumers often visit brick-and-mortar stores to check out product, then make their purchases online. In addition, they often expect free shipping,” Stonich said. “All of these factors have the potential to eat into retailers’ bottom lines.”
REI last month confirmed reports of layoffs at its headquarters and various stores, saying a “limited number” of employees were let go in response to changing business needs. It did not disclose the number of layoffs.
The company also said it planned to hire more employees in the coming months, promising a “net increase” in headquarters jobs by year’s end. REI currently has about 1,100 headquarters employees.
Catalinich said in terms of sales, 2013 is off to a better start than 2012.
“January was a very strong month for us,” she said. “Sales are going well.”
Meanwhile, President Obama has nominated Jewell to become the Interior Department’s next secretary.
REI Board Chairman John Hamlin said a national search for her replacement won’t begin until she is confirmed, possibly later this month.
“The board is enthusiastic and supportive of her confirmation, as we know she would bring great leadership, a balanced approach to complex issues and her lifelong passion for the outdoors to Washington, D.C.,” Hamlin wrote in a message to REI customers online.
Amy Martinez: 206-464-2923 or firstname.lastname@example.org. On Twitter: @amyemartinez