Mountain Equipment Co-op, Canada’s largest outdoor gear retailer,\u00a0is losing money, says its new CEO\u00a0Philippe Arrata \u2014 a lot of it.<\/p>\n
The outdoor recreation gear and clothing\u00a0retailer\u00a0lost $11.487 million last year on earnings of\u00a0$462 million,\u00a0according to financial statements audited by KPMG\u00a0and posted on MEC’s website.<\/p>\n Arrata,\u00a0the former CFO of Best Buy, says the co-op is at a turning point, facing slow sales, inventory backups, supply chain problems and ever-increasing online competition.<\/p>\n He issued a statement Tuesday about the recreation equipment\u00a0giant’s financial challenges.<\/p>\n “The sales growth hasn’t materialized, as we’ve seen increased competition by traditional big box players and emerging e-commerce players,” Arrata said in the statement.<\/p>\n But some longtime MEC members say the 22-store co-op has lost money by spending too much on stores in Toronto and Vancouver and racking up more debt while inventory piled up and sales slowed because of stiff competition from online retailers like Amazon.com.<\/p>\n Since its founding in Vancouver in 1971, Mountain Equipment Co-op has expanded to 20 cities across Canada with 2,700 employees and today bills itself as Canada’s largest supplier of outdoor clothing and recreation gear with a reputation for a commitment to environmental protection.<\/p>\n Steve Jones said he is\u00a0glad to see MEC’s leader acknowledging the seriousness of the situation.<\/p>\n In 2018, the software engineer ran unsuccessfully for MEC’s board. He’s long been critical of “aggressive expansion” and is calling for transparency around financial details such as the CEO’s salary.<\/p>\n Jones said some members think MEC has strayed in recent years from its founding retail goals, which focused on selling gear for outdoor pursuits such as climbing, cross country skiing, canoeing and kayaking.<\/p>\n “I don’t think that the membership ever really formally gave the board or the leadership the mandate to pursue that type of growth,” said Jones.<\/p>\n “When you think about backcountry tents or snowshoes, we are in a very strong position. I worry that [we are] trying to compete in other categories such as jean jackets and running shoes,” he said.<\/p>\n Jones and other longtime MEC members questioned the\u00a0co-op removing\u00a0the word “co-op” from the chain’s logo in 2013\u00a0and then, this spring, replacing\u00a0the\u00a01% for the Planet program\u00a0\u2014 which donated to environmental causes\u00a0\u2014 with an internal program called\u00a0MEC\u00a0All Out.<\/p>\n Meanwhile,\u00a0the co-op’s\u00a0balance sheets show\u00a0no cash assets\u00a0or any dividends paid to members last year.<\/p>\n Arrata\u00a0said\u00a0sales grew 1.7 per cent \u2014 but costs grew faster \u2014 up 4.4 per cent.<\/p>\n “Every day and every waking moment I’m thinking about how can we improve, actually even during sleeping moments,” said Arrata in an interview Tuesday.<\/p>\n Arrata took over in July and launched an internal rallying cry warning of the financial crunch. He.says his new team will turn around an\u00a0“unsustainable trajectory.”<\/p>\n Compounding his challenge is the unionization this year of two MEC outlets in B.C., creating the potential for higher labour costs.<\/p>\n University of British Columbia accounting professor Kin Lo,\u00a0who studied MEC’s financials, confirmed the co-op’s finances do show strain. But he sees Arrata’s experience as a past Best Buy exec as a plus.<\/p>\n “I think Arrata has a good shot,” said Lo, who also believes MEC’s physical stores \u2014 where buyers can touch and try products \u2014 are a key asset.<\/p>\n With Amazon, you have to go by what is shown on screen and just roll the dice sometimes,” he said.<\/p>\n Arrata acknowledged the financial headwinds in staff memos over the past few months.\u00a0He says he also sought advice from another co-op that faced similar struggles in the past.<\/p>\n Recreational equipment retailer REI Co-op turned around its troubles and in 2018 listed $570 million in cash assets and $129 million in member dividends.<\/p>\n Arrata said MEC will offer up its price matching, product guarantees and passionate staff to cement its bond as “part of Canadian DNA.”<\/p>\n The Montreal-born retailer recalled how his own Egyptian immigrant father loved to take the family on outdoor adventures.<\/p>\n He said he recently noticed a Syrian mother talking to staff in the MEC in Kitchener, Ont. She had bought a tent and told them about her family’s first backyard tenting experience\u00a0in the rain.<\/p>\n It struck Arrata how MEC makes emotional connections with people who come to buy gear in the stores. That is something online retailers can’t do and says he hopes experiences like this will help MEC weather this financial storm.<\/p>\n “Retail is always tough. Ten years ago there were different retailers that kept us up at night and 10\u00a0years later there are a different set of retailers that keep us up at night because the sands always shift in retail.”<\/p>\n The retail co-op is governed by a board of directors that is elected by members. Membership in MEC is $5.<\/p>\n The nominations for the next election are\u00a0coming up in January.<\/p>\n CBC<\/p>\nCosts grew at 4 times the rate of sales<\/h2>\n
‘Retail is always tough’<\/h2>\n