How long can REI survive before they go bankrupt?

Fat Dad wrote:

And we all know what happened to Croesus...

Nobody reads Herodotus anymore. 

Brandon Mollett wrote:

Nobody reads Herodotus anymore. 

Did he close up shop and go back to mail order?

Brandon Mollett wrote:

Nobody reads Herodotus anymore. 

"Fat Dad wrote:And we all know what happened to Croesus..."

Did he close up shoppe and go back to being strictly mail order again? 

Here's an email letter from REI:
To our Co-op Community:

Three weeks ago, in the face of the growing outbreak of COVID-19, I shared our decision to temporarily close our 162 retail locations and continue paying all of our retail employees and maintaining their benefits through April 14. As that date approaches, I want to share what we’re doing next.

Our hope is to begin a gradual reopening of our stores in the coming months. We plan to begin with curbside pickup hopefully in the next 45 days. And we look forward to welcoming you all back into our stores when it’s safe to do so. As we did with our decision to temporarily close our stores, we’re going to prioritize the safety of our employees and customers and closely track federal and local guidance.

While we cannot predict the future, we must make informed assumptions and plan accordingly to control what we can. We’re particularly focused on the next few months because we don’t know exactly when we’ll be able to reopen our stores. We believe this will be the most challenging period for our business, and we have to make some immediate decisions that impact REI employees.

Those decisions begin with me and with my senior leadership team. I am forfeiting 100% of my base salary for the next six months, as well as forfeiting all of my incentive eligibility for 2020. Our board of directors is forfeiting their fees for the next six months as well. My entire senior leadership team will be taking a 20% pay reduction for the next six months and will also forfeit all of their incentive eligibility for 2020.

We have also made the decision to begin an unpaid 90-day furlough of the majority of our retail and field employees, beginning on April 15. During this period, all health and welfare benefits will continue as normal for all eligible furloughed employees. In addition, REI will also pay the employee portion of benefit premiums, which means we’ll be covering 100% of eligible employee health and welfare premium costs for all furloughed employees for all 90 days for those employees. All furloughed employees will be eligible to apply for government-funded unemployment pay.

Our limited operations mean we are also making overall reductions of our headquarters workforce. All impacted full-time employees will receive severance along with outplacement services and support.

As the co-op’s CEO, my job is to serve our employees and you, our members. This current crisis is testing us all, but we have worked to make sure our decisions and actions are consistent with the co-op’s mission and values.

To everyone who has reached out with suggestions about ways to help the co-op and our people during this period, I thank you. We have considered every option, and I’m confident the actions we’re taking are the most beneficial for affected employees. The best thing you can do to continue to support the co-op is to continue supporting the co-op—both our business and our community of non-profit partners across the country. In the coming days, we’ll be sharing more about how to directly support that nonprofit network.

And even with our stores closed, we’re working hard to continue serving your needs. Most orders through REI.com are being shipped for free. Customers who have questions about gear and local outdoor activities can get answers through our digital community, REI Conversations, and Co-op Journal will feature articles that help people find ways to safely get outside during these challenging times.

I am determined and committed to seeing the co-op through this. I am optimistic we will come out of this crisis as strong a community and business as we were coming into it. And I will continue to fight to ensure the co-op will be here for another 82 years to connect our members to a life well lived outdoors.

My best,

Eric Artz
President & CEO, REI Co-op

It's already too late for me to worry about my local shops, they've all been run out of business. That local shops are closing should be enough evidence that REI isn't in dire straits financially.

Landlords will definitely not want to lose REI as a tenant. Any retail is hit hard with the shutdown but REI has a strong online presence and they have very large stores that take time to fill a lease. In the time it will take for this to pass over the landlord wouldn’t be able to fill the lease with any tenant let alone a strong one. In addition any new tenant would have to renovate the space which would take more time. Not like REI can’t cover several months of rent either, this will definitely hurt them but they can afford it. Evicting would not be beneficial for a commercial landlord especially at this time. Specialized sporting and outdoors gear is one of the few things I prefer to buy in person more so skiing and bike gear than climbing. Retail will definitely change after this is over but I don’t see REI changing much.
I am interested to see how consumer preferences in general will be affected after this.

REI could save the entire outdoor industry but they need to do this:

Chop up the store into 10x10 booths.  Rent booths to small high quality manufactures where you can go in and see and touch their stuff.  No inventory.  If you like it you buy it on line and have it shipped to you direct or pick up at the store.  

REI is up against the Internet. Stocking inventory is crazy expensive.  Turning into a live 365 (or much less) Outdoor Retailer show is the future.

Outdoor Gear manufacturers have a huge problem: No one can see or touch their stuff in person.  Their only chance is to actually show it to real customers.

REI would still sell some popular stuff, mostly clothes.  Clothes are where the profit is. (I have heard.)

If REI does not do this, someone else will.

Brassmonkey wrote:

Nope. 

I was so confused when I made back up to North Conway last year and EMS was in some new smaller shop. Turned out that there lease ran up and rei swooped in and took it! (According to the guy I asked at least)

They recently opened in Burlington too, unfortunately. 

Yuri Rodea wrote: Waiting for the liquidation sale to use my dividend. 

Re: dividends. 

Now, don’t take this as legal advice, but.....I’m pretty sure that if REI declares bankruptcy your dividend will be classified as unsecured debt and either be discharged before the asset sale, or else be reduced to a payment worth pennies (or fractions thereof) to the dollar. The money from the asset sale will go to paying off secured creditors first, then to unsecured creditors.  Unsecured creditors split whatever is left equally amongst themselves. It's always pennies on the dollar, if it's anything.
And, if the name "dividend" was some reflection of ownership, then you'd be paid off after the unsecured creditors are- which means you'd be assed-out.

Not trolling, serious, for reals.  
But it depends if it’s a Chapter 7 or 11 bankruptcy.

Zach Anatta wrote: I think we can all agree that we want REI to do well.

Yeah cause I enjoy watching local gear shops all over the country closing their doors a few years after the REI comes to town.

Troll in the Dungeon ! wrote:

Yeah cause I enjoy watching local shops all over the country closing their doors.

  If only young people at little risk of harm from COVID-19 were allowed to travel and keep the (re: their) economy alive... huh.

BUT THEN AGAIN....

When we're living in caves this time next year because unemployment is at 30% we'll have a lot of access to good rock...  

Zach Anatta wrote: If something happened to REI we would lose this charmant forum.

I'm more concerned about the loss of the money they give annually to LCO's and the Access Fund.
I can't speak for other LCO's, but I can safely say that a significant portion of the BCC's money comes from REI.

J-- Kaiser wrote: Back of the envelope estimate is 4 months.  Given they have $270M cash on hand with annual liabilities roughly equivalent to $789M in 2018, assuming similar proportional numbers for 2019.

No, that's not a correct reading of the financial statements.  

Those decisions begin with me and with my senior leadership team. I am forfeiting 100% of my base salary for the next six months, as well as forfeiting all of my incentive eligibility for 2020. Our board of directors is forfeiting their fees for the next six months as well. My entire senior leadership team will be taking a 20% pay reduction for the next six months and will also forfeit all of their incentive eligibility for 2020.

Good move by the CEO.

We have also made the decision to begin an unpaid 90-day furlough of the majority of our retail and field employees, beginning on April 15. During this period, all health and welfare benefits will continue as normal for all eligible furloughed employees. In addition, REI will also pay the employee portion of benefit premiums, which means we’ll be covering 100% of eligible employee health and welfare premium costs for all furloughed employees for all 90 days for those employees. All furloughed employees will be eligible to apply for government-funded unemployment pay.

This seems better than most retail reduction-in-force moves reported recently. Big Retail has essentially laid off all store staff with pittance of severance and nothing but self-funded COBRA to last through two months.

Our limited operations mean we are also making overall reductions of our headquarters workforce. All impacted full-time employees will receive severance along with outplacement services and support.

There are some inevitable guiding principles: 

1. Conserve cash on hand
2. Slash expenses till cash-in exceeds cash-out (to conserve cash on hand)
3. When the lights go back on, prioritize the re-deployment of those employees most directly related to bringing more cash back into the business (sales, distribution and production).
4. Continue to insure cash-in exceeds cash-out.

I know someone at Apple retail; furloughed with full pay through the end of April, as of now. Apples has a lot of cash on hand; a lot. Most companies could not afford to do this.

I find the lack of situational awareness on display here amusing.
We don't know what retail is going look like a year from now. Tens of millions of jobs have evaporated. The domino effect that will be tens of millions more as the supply chain disruptions radiate through the economy.  Demand will plummet when a large segment of the population finds themselves in desperate poverty for the first time in their lives.
Go out and find the interactive gif graphing unemployment and you might get a sense of how bad an impact our fragile consumption economy took.
2008 was a warm up compared to this, and the experts all agreed we were a hair away from financial oblivion then. 

You’re quite the beacon of hope first thing in the morning

Dylan Pike wrote: REI can kick rocks for all I care.

Yet you are happy to make use their site

People seem to forget that for decades, really for over a half century REI was the local gear shop in many places. Yeah they have gotten bigger but they have also done a lot to support the outdoor communities.

Dylan Pike wrote:

That might make the world a better place.

Don''t confuse the shithole forum (made that way by some of you) with the route database. The database was always meant to be the main aspect of the site (it's pretty good) and the forum secondary