WEBVTT - Modell's CEO Still Believes Shoppers Will Come to Stores

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<v Speaker 1>This is Bloomberg Business Week with Carol Messer and Jason

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<v Speaker 1>Kelly on Bloomberg Radio. Our next guest, death of Groove

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<v Speaker 1>into the sound of this, and for good reason, he

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<v Speaker 1>does love that commercial that is the Dulca tons of

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<v Speaker 1>Mitchell Model. He's chairman and chief executive officer of Model's

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<v Speaker 1>Sporting Goods. He is joining us in our Bloomberg Interactive

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<v Speaker 1>Broker Studio. Nice to have you here with Jason and myself.

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<v Speaker 1>I always love coming here. It's a great atmosphere. I

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<v Speaker 1>love the way you take care of the associates. It's fabulous. Well,

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<v Speaker 1>thank you. That's nice to hear. It is a pretty

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<v Speaker 1>cool place. Um. Talk to us about your place, because

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<v Speaker 1>you guys have been around. It's family owned a hundred

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<v Speaker 1>and thirty years. There is some great history in it

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<v Speaker 1>and for those of us, especially here on the East Coast,

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<v Speaker 1>this is where we go often for any kind of

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<v Speaker 1>supporting sporting goods, type of equipment and apparel. So, you guys, though,

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<v Speaker 1>like much of the retail environment, Mitchell are at a

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<v Speaker 1>tough point. Listen, retail is tough out there. I mean

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<v Speaker 1>you could see the apocalypse that's taking place, you know. Uh,

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<v Speaker 1>Pier one just closed four and fifty one stores. They

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<v Speaker 1>announced Macy's is closing stores over the next three years.

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<v Speaker 1>From what I hear, there's gonna be about five or

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<v Speaker 1>six more bankruptcies filing and the next two weeks. It

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<v Speaker 1>is tough out there, and you guys are closing stories.

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<v Speaker 1>So we decided on Thursday to close twenty four stores.

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<v Speaker 1>We were able to renegotiate UH landlords on some of

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<v Speaker 1>the rent structures, and so we just announced between Saturday

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<v Speaker 1>and yesterday we reopened five of those stores that would

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<v Speaker 1>do to close. So now we're only closing nineteen stores

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<v Speaker 1>and so and and give us the rational the cost structure,

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<v Speaker 1>the business just wasn't matching up. Mitchell. You know when

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<v Speaker 1>we look at we hired b R g R Company

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<v Speaker 1>who does restructuring. They've been running incredible models for us,

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<v Speaker 1>looking at our four wall structures to see what's taking place.

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<v Speaker 1>We've got to get rid of the stores that just

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<v Speaker 1>aren't making money, the bleeding cash from the company. And

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<v Speaker 1>so we were able to restructure some of the leases

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<v Speaker 1>where we bring down the occupacy course where now we

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<v Speaker 1>can make money on a going forward basis, so we're

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<v Speaker 1>able to save jobs. So Leader and miner. That is

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<v Speaker 1>a sustainable model for you guys going forward. Yes, you know,

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<v Speaker 1>it's like puning a tree, right, If you pun a tree,

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<v Speaker 1>the tree grows. If you don't, I gotta ask you that,

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<v Speaker 1>why don't you prune sooner? You know what? Sometimes it's

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<v Speaker 1>a great question. Sometimes, you know, you avoid making those

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<v Speaker 1>tough decisions, but when your backs against the wall, every

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<v Speaker 1>option is on the table. Now I'm looking to preserved jobs,

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<v Speaker 1>you know, so you look at the landscape in a

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<v Speaker 1>little different viewpoints. Talk to us about your customer and

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<v Speaker 1>how that customer has changed over the years. I mean

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<v Speaker 1>I was joking out here in Los Angeles to the

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<v Speaker 1>got to go to mos Uh. You know, I've taken

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<v Speaker 1>my sons there for years, whether it's or baseball or

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<v Speaker 1>lacrosse or football or my own you know, like running

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<v Speaker 1>shorts and things like that. And yet I know a

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<v Speaker 1>lot of people who you know, they're going to I'll

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<v Speaker 1>say the A word, they're ordering through Amazon, They're going

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<v Speaker 1>to a competitor. Uh, tell us how your customers have changed. So,

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<v Speaker 1>I mean you hit the nail on the head. I

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<v Speaker 1>mean it's so easy. I could even tell in my

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<v Speaker 1>own apartment building when you see FedEx packages coming on

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<v Speaker 1>Sunday at nights. I mean, it's an easy way for

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<v Speaker 1>people to shop, So huge initiative for us as a company.

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<v Speaker 1>You know, the online shopping experience, but brick and water

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<v Speaker 1>still is critically important for the kid that wants to

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<v Speaker 1>buy a baseball glove a little league. They want to

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<v Speaker 1>touch that clee. You want to see the smile on

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<v Speaker 1>the face first time they pot a literal league glove.

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<v Speaker 1>You know, you can't get that kind of emotion buying online.

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<v Speaker 1>So we're hoping that with those kind of experiences will

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<v Speaker 1>be able to continue and help me get me up

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<v Speaker 1>to speed. Um, in terms of an online presence, how

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<v Speaker 1>big it for you guys? Under develop It's still our

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<v Speaker 1>number one stories about five percent of our sales. Our

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<v Speaker 1>goal is to be over the next three years three

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<v Speaker 1>years though, but you don't have three years. And forgive

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<v Speaker 1>me because I think about I'm listening to you, I no, no, no, no, listen.

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<v Speaker 1>I mean, I love the Brandon I love these family

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<v Speaker 1>run businesses. Um, but I think about even a Target

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<v Speaker 1>who kind of missed Walmart right, it took them. They

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<v Speaker 1>played catch up big time. But you don't have three

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<v Speaker 1>years in an environment where things change so quickly and

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<v Speaker 1>consumers move on, they just do. So how do you,

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<v Speaker 1>I mean, could do you think first of all, that

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<v Speaker 1>online could be a really important part of your business.

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<v Speaker 1>It is an important part of our business and it

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<v Speaker 1>will continue, which is why for the first time in

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<v Speaker 1>our company's history, we're looking to get a minority selling,

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<v Speaker 1>a minority interest in our company. We've been privately held

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<v Speaker 1>for a hundred thirty years, always been passed down on

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<v Speaker 1>the torch. We'll never go public, will never sell equity.

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<v Speaker 1>Times have changed all options on the table. And you know,

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<v Speaker 1>hopefully we use this platform for people and say, you

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<v Speaker 1>know what, I like this guy who's thinking outside of

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<v Speaker 1>the box. Maybe we'll invest in him. And that's the

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<v Speaker 1>whole purpose of me doing all these kind of interviews

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<v Speaker 1>the lasts who's your ideal investor? Then, Mitchell, you know what,

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<v Speaker 1>it's probably the individual guy you know, looking at let's say,

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<v Speaker 1>at a billion it says, you know what, he wants

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<v Speaker 1>to sell a minority interest. Maybe I'll take a shot

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<v Speaker 1>with him. We have an iconic brand. It's not like

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<v Speaker 1>the brand is broken. The model is broken. And when

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<v Speaker 1>I say the model is broken, it's because our course structure,

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<v Speaker 1>and by again bringing in b RG to analyze our

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<v Speaker 1>course and to see how we want to move forward.

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<v Speaker 1>Getting rid of unprofitable stories is one way to put

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<v Speaker 1>the path on to success credited investors or anyone, anybody.

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<v Speaker 1>So we hired RBC, who was an investment banker. Because

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<v Speaker 1>of all the interviews we've done, we've sent a lot

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<v Speaker 1>of investors towards them. The flushing it at as we speak,

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<v Speaker 1>and hopefully in the next seventy hours, we'll see if

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<v Speaker 1>there's a possible life one out there. You are listening

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<v Speaker 1>to Bloomberg Business Week. Jason Kelly here in Los Angeles,

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<v Speaker 1>Carol Masster in New York City, and next to you

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<v Speaker 1>is Mitchell Model. Right. We are chairman CEO of Models

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<v Speaker 1>Sporting Goods, and we're talking about this. This is like

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<v Speaker 1>many retailers. They're struggling and trying to figure things out

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<v Speaker 1>for the future, and they're taking really their story and

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<v Speaker 1>their woes to outside investors. We're going to continue our

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<v Speaker 1>conversation when we come back, but I do want to

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<v Speaker 1>ask you because you and I were talking a little

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<v Speaker 1>bit about Bob Iger in the break, just got about

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<v Speaker 1>a minute and a half here, who's the CEO or

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<v Speaker 1>who's a company that you really look to that you say, Okay,

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<v Speaker 1>they figured out kind of this new world, especially when

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<v Speaker 1>it comes to the retail space or just generally overall.

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<v Speaker 1>I think Brian has done an incredible, incredible job at Target.

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<v Speaker 1>He has done an incredible job to see his back

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<v Speaker 1>against the wall when he came out with those major initiatives.

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<v Speaker 1>How he's investing big time Brian Crenell Brian Cornell Um,

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<v Speaker 1>And I know I've given you a hard time. Is

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<v Speaker 1>it is a different because I was saying your friend

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<v Speaker 1>and he's also a competitive But you know what, I

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<v Speaker 1>have so much respect for him for what he did.

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<v Speaker 1>I mean, he stepped out of the box. He said,

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<v Speaker 1>I'm investing in my stories, investing in technology, investing in

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<v Speaker 1>me in the Internet, and everyone thought he was crazy.

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<v Speaker 1>And now three years later, I mean, his stock is

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<v Speaker 1>through the roof and he's the Darling and Wall Street

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<v Speaker 1>And we're continuing our conversation with Mitchell Model. He's the

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<v Speaker 1>chairman and CEO of Model's Sporting Goods, a multi generational

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<v Speaker 1>business familiar to many of the US who live in

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<v Speaker 1>the New York City area. And Mitchell, I want to

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<v Speaker 1>talk more about your potential deal. But I have sort

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<v Speaker 1>of a parent slash dad question for you, which is,

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<v Speaker 1>tell me what you're seeing in terms of youth sports

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<v Speaker 1>and in terms of sports in general, what's rising in popularity,

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<v Speaker 1>what is waning in popularity? You have one of the

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<v Speaker 1>best windows into this that I can think of. So

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<v Speaker 1>baseball and soccer are definitely on the uptick. Football, the

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<v Speaker 1>course of all the um problems with you know, the

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<v Speaker 1>brain and the tackling and injuries, injuries has has really

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<v Speaker 1>slowed down. We can't even see in our team week

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<v Speaker 1>sign ups that you know a lot of the teams

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<v Speaker 1>that used to be set up three years ago, like

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<v Speaker 1>half of them are gone already. The switching to other sports,

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<v Speaker 1>even lacrosse is an issue with some of safety issues.

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<v Speaker 1>So parents are more concerned about safety today than ever before.

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<v Speaker 1>And I do wonder about, like, how do you track

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<v Speaker 1>in terms of the changing customer base your demographics that

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<v Speaker 1>are coming in has as much changed over the last

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<v Speaker 1>couple of years. Oh, absolutely, absolutely So. One of the

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<v Speaker 1>things we subscribe to is mp D, so there is

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<v Speaker 1>search firm that gets a lot of data from all

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<v Speaker 1>our competitors, so we could see are we bucking the trend?

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<v Speaker 1>Are we following the trend? And you know, you our

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<v Speaker 1>intel from the store level is pretty strong. Every week

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<v Speaker 1>we gotta roll up a feedback from our stores to

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<v Speaker 1>the different managers, gets fed to the merchants. So we

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<v Speaker 1>get we're pretty on top of like what's happening trends?

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<v Speaker 1>Why is it up? Why is it down? But but

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<v Speaker 1>you know, because we go back and forth about a

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<v Speaker 1>younger generation. I mean there's still the majority of shopping

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<v Speaker 1>is on is in brick and mortar. It's just the

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<v Speaker 1>growth is online. And I do wonder do you still

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<v Speaker 1>see a younger generation? I mean, I guess it is

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<v Speaker 1>right because they know that's where they go or for

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<v Speaker 1>you know, various equipment and so on. You know, it's

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<v Speaker 1>it's listen. I can even tell by my own kids, right,

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<v Speaker 1>my two boys seventeen and eighteen. You know, they buy

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<v Speaker 1>a lot online where we don't grow up like that,

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<v Speaker 1>you know when that tech grows like they are. And

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<v Speaker 1>so it's again it's part of the world that's changing.

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<v Speaker 1>You know, technology is playing a huge part on the

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<v Speaker 1>buying habits of the consumer. And so what do your

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<v Speaker 1>stores look like going forward? Then, Mitchell, is it a

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<v Speaker 1>smaller footprint. Is it a different sort of interactivity? Do

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<v Speaker 1>you staff them differently? How do you create the sort

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<v Speaker 1>of sports apparel sports retailer of the future. So a

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<v Speaker 1>hundred percent will be smaller footprints. You know when we

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<v Speaker 1>opened up stores and we went larger and bigger. Today

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<v Speaker 1>with the Internet, we call it the endless aisle. So

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<v Speaker 1>you can have the base of core assortment in a

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<v Speaker 1>store and if someone wants to go online, they'll see

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<v Speaker 1>hundreds of baseball bats, hundreds of ball class You can't

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<v Speaker 1>stop that in a in a retail environment today, A

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<v Speaker 1>it's very coarse intensive and B you have a space problem.

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<v Speaker 1>But by order, by offering the core assortment and offering online,

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<v Speaker 1>you could cover both both consumers. So so let's go

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<v Speaker 1>back to you know, you really are, like I said,

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<v Speaker 1>you know, pitching out to the public to help you,

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<v Speaker 1>uh in terms of keeping the company going, Like what

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<v Speaker 1>are the kind of funds that you're looking for and

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<v Speaker 1>what kind of response have you gotten so far? You

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<v Speaker 1>did say you're working with a firm, right, we're not

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<v Speaker 1>allowed I was told legally we can tell like what

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<v Speaker 1>percent we're looking for and what kind of uh A

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<v Speaker 1>dollar amount? All I could say is if you're interested,

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<v Speaker 1>go to Mitchell dot Model's Mitchell dot model at models

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<v Speaker 1>dot com, send me an email. I'll pass it onto

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<v Speaker 1>our investment banker and they'll take over from there and

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<v Speaker 1>they'll ultimately decide in terms of figure out which investors. Well, okay,

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<v Speaker 1>they'll flush it out. I talk to them every single day.

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<v Speaker 1>What's happening? Who do you have? Let me hear? And

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<v Speaker 1>it's that kind of dialogue again and only started up

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<v Speaker 1>in the last five days. And so, Mitchell, have you

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<v Speaker 1>thought I dare say about selling the whole thing at

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<v Speaker 1>this stage? I would say everything is on the table.

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<v Speaker 1>That's not our first preference. Our first preference is selling

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<v Speaker 1>in a minority interest. But if someone came and offered

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<v Speaker 1>us a deal, I'd have to look at everything. I

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<v Speaker 1>owe it to our associates, I owe it to our family.

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<v Speaker 1>Is there ultimately too, maybe just going forward and online

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<v Speaker 1>route for you guys, rather than a brick and water.

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<v Speaker 1>Now brock and brick and water, that's a heritage, it's

0:11:57.160 --> 0:12:00.600
<v Speaker 1>our roots still a very important part. But there's still

0:12:00.720 --> 0:12:03.920
<v Speaker 1>the great opportunity to build your online presence better than

0:12:03.960 --> 0:12:06.080
<v Speaker 1>it is today. I have to ask you because Jason.

0:12:06.120 --> 0:12:09.720
<v Speaker 1>I have a lot of um conversations with executives and

0:12:10.080 --> 0:12:13.280
<v Speaker 1>sometimes we ask about, you know, people they admire or

0:12:13.320 --> 0:12:15.040
<v Speaker 1>you know, if there's one thing that they you know,

0:12:15.080 --> 0:12:17.160
<v Speaker 1>a mistake that they learned from. Is there anything that

0:12:17.200 --> 0:12:19.320
<v Speaker 1>you would have done differently in terms of the business.

0:12:20.280 --> 0:12:23.920
<v Speaker 1>I just got about probably looking where we expanded. We

0:12:24.000 --> 0:12:28.920
<v Speaker 1>expanded in the northeast to like Massachusetts, Connecticut, New Hampshire,

0:12:29.240 --> 0:12:32.800
<v Speaker 1>Rhode Island. We thought that would be a bridge from

0:12:32.800 --> 0:12:36.280
<v Speaker 1>New York and uh, the bridge didn't work. You know.

0:12:36.480 --> 0:12:38.280
<v Speaker 1>It took a lot of money, a lot of time,

0:12:38.360 --> 0:12:41.200
<v Speaker 1>effort and energy to build our brand and then we

0:12:41.240 --> 0:12:46.440
<v Speaker 1>were just out competed by exporting its and bobs. All right, well,

0:12:46.480 --> 0:12:49.040
<v Speaker 1>we wish you well and um, hopefully you'll come back

0:12:49.040 --> 0:12:51.200
<v Speaker 1>and tell us how things go. Absolutely, thank you so

0:12:51.280 --> 0:12:53.200
<v Speaker 1>much for having me. Yeah, you bet, Mittell Modell. He's

0:12:53.240 --> 0:12:56.800
<v Speaker 1>chairman and chief executive officer of Model's Sporting Goods. Jason.

0:12:56.840 --> 0:12:59.520
<v Speaker 1>Of course, in our Bloomberg Interactive Broker's studio here in

0:12:59.520 --> 0:13:01.800
<v Speaker 1>New York, and as you've said, I've shopped at them.

0:13:01.880 --> 0:13:04.000
<v Speaker 1>My family has over the years that I know you

0:13:04.160 --> 0:13:08.440
<v Speaker 1>are with your son, so it's certainly something. If you

0:13:08.440 --> 0:13:10.440
<v Speaker 1>looked at my credit card statements, you'd see a lot

0:13:10.559 --> 0:13:13.319
<v Speaker 1>of model's lines all in there. Uh. There's one of

0:13:13.400 --> 0:13:17.000
<v Speaker 1>White Plaines Road Terrytown Road, uh, right between our house

0:13:17.400 --> 0:13:20.920
<v Speaker 1>and White Plane so uh. And a frequent customer in

0:13:21.040 --> 0:13:22.240
<v Speaker 1>New York City as well