Cold weather warms hearts inside Sunny's

THE BALTIMORE SUN

This winter has had more than its share of cold, miserable, snowy days.

Just the kind of weather to bring a smile to John Sullivan.

Sullivan took over nearly a year ago as president and chief executive officer of Sunny's Great Outdoors Inc., which had run into some rough weather itself.

The Elkridge-based camping and outdoor store was drowning in debt and hadn't made a profit in seven years. The future looked dire for the regional chain, which began 56 years ago as an outlet for surplus military gear.

But aided by the cold this winter and last, which moved people to buy new weather gear, Sullivan has helped reverse the slide at Sunny's.

Sullivan, who was brought in from sportswear manufacturer Fila Inc., anticipates a 10 percent increase in sales at comparable stores for the fiscal year that ends in July. He also expects a profit of $627,000, up from a loss of $389,644 in the last fiscal year.

The past seven years have been tumultuous for the company, a widely recognized retail name in the region. An overly ambitious expansion plan developed in 1997 that aimed to double the company instead landed it in bankruptcy. Sunny's emerged from Chapter 11 protection within 13 months and is now looking to post its first annual profit.

Formerly named Sunny's Surplus, the chain store got its start selling military peacoats and Army fatigues left over from World War II.

Founder Morris Weinman named the company after the nickname of its first manager and opened the first store downtown at Baltimore and Eutaw streets. The store expanded to camping equipment in 1974 as military surplus became less popular - ironically, in part, because the end of the Vietnam War eroded sales to anti-war demonstrators who favored surplus Army jackets and the like.

The chain grew steadily through the 1980s and 1990s. In 1997, John D. Reir, who had run Family Dollar Stores, bought a 15 percent stake in Sunny's and took over as chief executive officer. He had grand plans to expand to 60 stores from 26 and introduced a prototype "big box" concept.

With the initial public offering market minting instant millionaires in the technology sector, he planned to take the chain public within five years and to change the store's name to "Sunny's, the Affordable Outdoor Store." Sunny's also expanded into sporting goods.

But the chain opened more stores than it could handle and lost its distinctiveness.

"They weren't focused on their core business," said Susan Anderson, vice president at H&R; Retail, a commercial real estate brokerage in Baltimore. "They tried to grow too big too fast. They thought they were going to be supersized when everyone thought bigger was better. But bigger wasn't for everybody."

After Reir left in 1999, Stephen A. Blake, who had run Sunny's in the early 1990s, was brought back to rescue the operation. Under Blake, Sunny's filed for Chapter 11 bankruptcy protection to reorganize.

He closed eight stores and refocused on military surplus, camping gear and work clothes. Blake also brokered an agreement with creditors to emerge from bankruptcy, but was unable to make the chain profitable.

When Sullivan arrived last March, he noticed several problems. The company was paying thousands of dollars for an expensive colorful circular that didn't have a wide audience. Merchandise was placed on sale even when it sold well at regular prices. Sunny's warehouse and many stores were too large for a company of its size, he found.

Sullivan began leasing out 4,000 square feet of the company's 38,000-square-foot warehouse in Elkridge and is working to renegotiate leases at super- sized stores. He improved the inventory process to better determine what sells well. He hired a publicist to better market the company, and stepped up advertising in daily newspapers and on radio.

"He's given the company a shot in the arm and helped reinvigorate it," said Mark Millman, president of Owings Mills-based Millman Search Group, an executive search firm that helped find Sullivan.

He also strengthened key areas. The Boy Scouts of America, for example, have long had a contract with Sunny's for uniforms, badges and other equipment, but customers complained that Sunny's didn't keep up its stock. Sullivan dipped into the company's line of credit to beef up the inventory and sales have risen as a result.

"It's a great partnership," said Red Blom, camp director for the Baltimore Area Council of the Boy Scouts of America on Wyman Park Drive in North Baltimore. "When you don't have to drive all the way to the city to our headquarters when you can go right to the mall, that makes volunteers happy."

Work clothes were also traditionally a top seller at Sunny's, but it wasn't aggressively targeting that customer either. Sullivan hired a business-to-business sales manager, Dan Meisner, to identify companies that could buy uniforms in bulk.

One day, for instance, Meisner noticed William Esner shopping at a Sunny's in Timonium while wearing a construction uniform. After a brief conversation, Meisner discovered that Esner owns B.E.E.C.O. Inc., a construction company in northern Baltimore County, and typically bought his uniforms from Pennsylvania. Today, Esner's company orders them from Sunny's.

Like many small to midsize stores, Sunny's has faced greater competition in recent years from chains such as Sports Authority Inc. and Dick's Sporting Goods, and discounters such as Wal-Mart Stores Inc. and Target Corp. But experts believe there's still room for stores such as Sunny's.

Their merchandise is usually less expensive than that in the larger outdoors stores, and they offer greater expertise than the general discounters. Meanwhile, sales of camping equipment have risen to $1.5 billion in 2003 from $1.2 billion in 1998, according to the National Sporting Goods Association in Illinois.

"The reality of the marketplace now is that as these larger chains come in, the regional stores have to find a niche so that they're able to function well," said Thomas B. Doyle, vice president of information for the National Sporting Goods Association.

Adele Kroart of Monkton was in the Timonium Sunny's one recent Tuesday buying her teen-age daughter clothes for a snowboarding trip. She walked around as a sales associate explained which socks keep feet the warmest and which boots are better for snow.

Kayaks hung from the ceiling and work jeans lay folded on shelves along the wall at the store, located in an old strip mall. A rack of army dress pants and old military hats sat in the middle of the store.

Kroart said she comes to Sunny's because its salespeople are knowledgeable and she lives nearby.

"They definitely know what they're talking about here," she said.

Sullivan plans for growth, but this time more slowly and strategically. The company will open two new stores this year, in White Marsh and in the Washington area.

He'd also like to spruce up the look of several of the stores - about half of them in strip centers and the other half free-standing - but said he'll focus on the financial bearings of the company first.

The history of Sunny's

1948: Weinman family opens first Sunny's Surplus store in downtown Baltimore, targeting blue-collar customers with military surplus from World War II.

1970s: Company adds affordable camping equipment and "irregular" apparel to its mix.

1990: In its first of two name changes, the chain becomes "Sunny's, The Affordable Outdoor Store."

1998: Announces plans to double to more than 50 stores from 26 based on a new prototype twice the size of a typical Sunny's with a nature-oriented look.

2000: Blaming a mild winter and overzealous expansion plan, Sunny's files for Chapter 11 bankruptcy protection.

2001: Sunny's emerges from Chapter 11, and continues struggling to make a profit.

2003: John Sullivan, a former Fila Inc. executive, becomes president and chief executive officer. Company turns its first quarterly profit in six years.

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