REI’s new CEO ready to sharpen its retail edge
Enthusiastic outdoorsman and former exec at luxury handbag-maker Coach says REI’s advantage is its “amazing authenticity.”
Seattle Times business reporter
REI, by the numbers
33: states where REI has stores
132: total stores
5.1 million: active members
1938: year REI was founded as a co-op
$1.93 billion: 2012 sales
$104.6 million: patronage refunds in 2012
Source: Seattle Times staff research
Title: CEO and president of REI
Hometown: Stillwater, Okla.
Personal: Lives on Mercer Island with his wife, Edith, and the youngest of three children, ages 23, 25 and 27
Education: Bachelor’s degree in agricultural economics from Oklahoma State University and law degree from the University of Oklahoma
Favorite outdoor pursuit: Climbs one of the 14,000-foot Collegiate Peaks in Colorado every summer
Mentor: Lew Frankfort, executive chairman and former CEO of Coach
Source: Seattle Times staff research
Three months after taking the helm at REI, Jerry Stritzke looks every bit the part of CEO at the Northwest’s popular outdoor-equipment retailer.
Stritzke, 53, walks the grounds of REI’s Kent headquarters sporting a three-day stubble and none of your typical CEO attire. Jeans, flannel shirt and Patagonia vest have replaced the suit and tie he wore as president and chief operating officer at posh New York-based handbag-maker Coach.
The Stillwater, Okla., native describes himself as an avid outdoorsman — a guy who spends his summer vacations fly-fishing and mountain-climbing, skis and snowboards in the winter and now bikes to work from his new home on Mercer Island.
While his appointment last fall to REI’s top post seemed something of a head-scratcher, Stritzke says the opportunity to combine his retail expertise with a passion for the outdoors “was really a dream come true.”
He gives off the impression that selling tents and bikes, not pricey purses, is what he was meant to do all along.
“We do a lot of different things for work,” he says of REI’s core customers. “But our love for the outdoors is a constant through our lives, and that’s been true for me.”
Stritzke is the seventh CEO in REI’s 75-year history, replacing Sally Jewell, who joined the Obama administration as Secretary of the Interior last spring.
Jewell, a former banker, led REI through the Great Recession as CEO for eight years, nearly doubling its annual sales from $1 billion in 2005 to $1.9 billion in 2012.
Stritzke, a lawyer by training, brings a different background to REI. He was the No. 2 executive of publicly traded Coach for more than five years. Before then, he held a number of top posts at Limited Brands in Columbus, Ohio, including a stint as COO of Victoria’s Secret.
REI, which was founded in 1938 as a member-owned co-op, has 132 stores in 33 states and more than 5 million active members.
Stritzke sees competition mounting from retailers as diverse as Amazon.com, Cabela’s and Nordstrom, and one of his responses is to mull more flagships like REI’s big downtown Seattle store.
REI Board Chairman John Hamlin said Stritzke was chosen for his long history in retail, strong leadership skills and “passion” for the outdoors.
Hamlin also rejected the notion that Stritzke is an odd cultural fit because he comes from fashion mainstay Coach.
“If you looked at Sally’s background, people would have said, ‘Wow, why did you get a banker to come in and run the co-op?’ The answer would have been, ‘We needed the financial stability,’ ” Hamlin said.
“We now strongly believe we need the retail expertise, and we’re seeing that value from him already,” Hamlin said.
Stritzke, he said, also is an authentic outdoors enthusiast: “He spends all his free time hiking and fly-fishing. He has every bit the same connection to the outdoors that our members do.”
A “logical choice”
Stritzke, who earned $4.4 million in his final year at Coach, probably took a pay cut to join REI.
He said his pay is similar to Jewell’s, which was worth $2.1 million in 2012, including incentives and deferred compensation. REI says it will disclose Stritzke’s pay in its annual financial report this spring.
His departure from Coach at the end of August was part of a broader management shake-up. Reed Krakoff stepped down as Coach’s longtime creative director last fall to focus on his own brand. And Stritzke’s mentor, Lew Frankfort, ceded the CEO post to chief commercial officer Victor Luis.
Stritzke reportedly was a contender to run Coach, as well as yoga-apparel retailer Lululemon, where he served on the board until joining REI.
Howard Gross, managing director of the retail and fashion practice at executive search firm Boyden in New York, said Stritzke’s move to Seattle was “a logical choice for both him and REI.”
“Being the CEO of a retail company is something he’s not been. It was the next step for him, and this provides it,” said Gross, who was not involved in the search. “He’s a very high-quality individual, with a very strong background. I would think REI did really well in getting him.”
Stritzke said he has been in listening mode since his Oct. 1 start date and will lay out his priorities over the next few months.
But he already has made some changes. One of his first moves as CEO was to launch a national search for a chief marketing officer, a new position. REI announced last week the new CMO will replace senior marketing vice president Angela Owen, who is leaving the company.
Stritzke said he’s also asked his leadership team to consider new store concepts and a separate strategy for more flagships. He praised REI’s largest stores in Seattle and Denver and another flagship in Manhattan’s SoHo district.
“They do an amazing job of telling the REI story,” he said in a recent interview at REI headquarters. “They’re incredibly successful, and I actually believe there’s an opportunity for us to do more of that.”
Stritzke takes over REI at a time of fierce competition from the likes of Amazon, Cabela’s and Dick’s Sporting Goods. Even Seattle-based Nordstrom sells North Face apparel, Stritzke said.
“Increasingly, we’re seeing a number of retailers try to take a piece of that outdoor experience and integrate it into their stores,” he said. “What makes REI unique is it’s at the core of what we do. That puts us in a position of amazing authenticity, and we’re able to tell that story in a very different way.”
REI’s annual profit declined 4 percent in 2012 amid tepid sales growth. Last year’s results won’t be announced for a couple more months.
A focal point over the past few years has been new technologies, including mobile checkout devices and a combined inventory system that merges online and in-store sales.
With a large cash pile and no debt, REI is poised to make more technology upgrades, open additional stores and perhaps expand its distribution network beyond a pair of warehouses in Sumner, Pierce County, and Bedford, Pa.
“I’m impressed that as I show up, online represents about 20 percent of our sales volume,” Stritzke said. “I’m thrilled with that 20 percent figure.”
Stritzke counts among his key accomplishments at Coach helping to expand the company’s business in China after it was bought back from a distributor in 2008.
“A lot of that was telling a brand story, building a flagship, creating a presence and really engaging a customer base,” he said.
Hamlin said Stritzke can use his brand-building experience to make REI better known outside of its long-established markets on the West Coast.
More than a third of its stores are in California, Oregon and Washington. REI plans to open at least seven new stores in 2014, up from five last year. Its newest markets include Jacksonville, Fla., Kansas City and Columbus, Ohio.
“We’ve done a pretty good job on both coasts and a reasonably good job in Texas and a couple of other states,” Hamlin said. “But we still have a large opportunity to raise awareness of our brand and add stores.”
While REI has a “towering presence” locally, it’s not exactly a household name everywhere, said Sandeep Krishnamurthy, dean of the University of Washington-Bothell School of Business.
“They have to figure out if they want to be a national player or a niche regional player,” he said. “Right now, they’re very much a West Coast retailer.”
Stritzke said it’s too soon for him to say how big he thinks REI should get. During his job interviews with the REI board, he asked how the co-op defines success, and the question remains up for discussion.
“What we agreed to do is really dig in on that” over the next six months, he said. “Success isn’t just a function of growth, and it’s not just a function of bottom-line contribution. We can also look at the relationship with our employees and the value proposition we provide to members.”
Because REI is a consumer co-op, rather than a publicly traded company, it can pursue nonfinancial goals, such as protecting the environment and increasing access to outdoor recreation.
To join the co-op, members pay a one-time fee of $20 and receive a portion of REI’s annual profits based on a percentage of their eligible purchases.
Former CEO Dennis Madsen, who led REI from 2000 to 2005, said the co-op model enables Stritzke to be patient and get to know the company before making major changes.
“They’re not a retailer trying to post ever-bigger numbers for Wall Street. A successful year for REI is a dividend for members and good-quality product on the shelves,” Madsen said. “Hopefully, he doesn’t have some grand plan that has REI overreaching.”
Under Jewell, REI consistently made it onto Fortune Magazine’s list of the 100 Best Companies to Work For and deployed more renewable energy at its stores. Jewell also was outspoken about the need to broaden REI’s popularity beyond its core baby-boomer base.
Stritzke said he’ll follow in her footsteps, noting that REI’s culture is a big reason he pursued the CEO post.
“The work-life balance, passion around the outdoors, commitment to stewardship, the concern about our environment — those things were very attractive to me. And certainly, I want to honor and advance those great values,” he said.
As a child, Stritzke raised Angus cattle, hauled hay and mended fences on family-owned land in northern Oklahoma. His dad was an agronomy professor at Oklahoma State University.
“Growing up in a rural agricultural environment, I actually had a lot of exposure to co-ops,” Stritzke said. “I do see it as a positive, because it’s not just about the bottom line. Being part of an organization that is more than bottom-line-oriented is inspiring.”
Amy Martinez: 206-464-2923 or firstname.lastname@example.org. On Twitter: @amyemartinez