How long can REI survive before they go bankrupt?

M Sprague wrote:

Yet you are happy to make use their site

The site they bought into and was created by our passion?

I buy from REI (just did, in fact) but I think them buying out this site is much more about our value to them than theirs to us. Their business is a convenience, not essential.

Also, I’m still waiting for my points here to roll into my dividend. Sad.

M Sprague wrote:

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

ADMIN for the win!

Spider Savage wrote: 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.  

Exactly which of their 120+ stores would you do this in?  And how many of the small manufacturers you refer to have the dozens (or maybe 100+) salespeople to populate these demo booths?  Your approach works for regional ice festivals, but little beyond that.

Zach Anatta wrote:

ADMIN for the win!

Pssst. I think he’s talking about you.

Probably. But I admire good technique when I see it. And when I see it, I salute it. Like the Red Baron.

At any rate, as someone said above, people are downplaying the extreme effects this sit-out is going to have on the recreational economy. There are probably some people in this forum who have seen their last climbing gym, for instance. And there are probably quite a few in the US who have climbed for the last time. Not that they'll die from the virus; they'll just be too poor to take part in the sport. I don't mean the hardcore dirtbags, but the majority of climbers (or boaters, or bike riders, or target shooters, or golfers...) are not hardcore - they're dabblers using their discretionary funds. And REI sales are probably more reliant on the dabbler than on the hardcore.

And of course, what affects REI is going to affect small-town outfitters as well. If small businesses do end up surviving this, they'll only do so by taking out emergency loans that they'll have to pay back over the next few years. Those payments will preclude investment, and lack of investment will mean the end of economic growth. This will not just be true in the recreational space, but everywhere.

Of course, I could be wrong. It would be incredible if they made some sort of grants available to small business owners instead of loans. But what I just laid out is still highly likely because I think at this point its looking like loans over grants for businesses. The question is to how great a degree this occurs and who survives it.

The good thing though, which I can see even on this forum, is that people are beginning to wake up to the economic effects of the COVID-19 response. Probably because more people are beginning to feel them. But the worst of it is to come.

https://www.cnn.com/2020/04/07/health/ihme-updated-covid19-model/index.html

For instance, if we follow the advice of the report above and stay in quarantine until August we'll save several thousand lives, but we'll utterly destroy our economy and our society.  Unfortunately we're going to have to make tradeoffs.

One good thing that may come out of all of this is student loan debt foregiveness.  If the economy gets as bad as I think it will this might be one of the last "break glass, pull lever" economic fixes they could do. Unleashing two generations of young people to buy houses and have families would be a massive boon for the economy, and could actually fuel growth. But this is mere speculation.

Zach Anatta wrote: Probably. But I admire good technique when I see it. And when I see it, I salute it. Like the Red Baron.

At any rate, as someone said above, people are downplaying the extreme effects this sit-out is going to have on the recreational economy. There are probably some people in this forum who have seen their last climbing gym, for instance. And there are probably quite a few in the US who have climbed for the last time. Not that they'll die from the virus; the businesses are going to disappear. I don't mean the hardcore, but the majority of climbers (or boaters, or bike riders, or target shooters, or golfers...) are not hardcore - they're dabblers using their discretionary funds. And REI sales are probably more reliant on the dabbler than on the hardcore.

And of course, what affects REI is going to affect small-town outfitters as well. If small businesses do end up surviving this, they'll only do so by taking out emergency loans that they'll have to pay back over the next few years. Those payments will preclude investment, and lack of investment will mean the end of economic growth. This will not just be true in the recreational space, but everywhere.

Of course, I could be wrong, but what I just laid out is highly likely. The question is to how great a degree this occurs and who survives it.

The good thing though, which I can see even on this forum, is that people are beginning to wake up to the economic effects of the COVID-19 response. Probably because more people are beginning to feel them. But the worst of it is to come.

https://www.cnn.com/2020/04/07/health/ihme-updated-covid19-model/index.html

For instance, if we follow the advice of the report above and stay in quarantine until August we'll save several thousand lives, but we'll utterly destroy our economy and our society.  Unfortunately we're going to have to make tradeoffs. 

Lol why don’t you try asking for the model and adjusting variables instead of modeling from the hip.

Tamiban Gueterstan wrote:

Cause they charge MSRP and aren't big enough to absorb a barely any questions asked return policy. Also, they employ maybe 10-20 people at around the same wage as REI with no opportunity for corporate advancement.

REI also charges MSRP. They don't really have a choice about it - prices are mostly set by manufacturers (not the retailer). Small independent retailers also have sales, rewards programs... and sometimes great return policies. Also, a "barely any questions asked return policy" is a terrible return policy. A great return process is figuring out exactly why something didn't work for you, and getting you the thing that fits your needs (involves questions). Better yet, get the right thing the first time by talking to an employee; get measured, get fit, talk about what you're going to do, and what you'll need. People buy things, use them, and return them not because that gear sucks, but because its not the right piece and they didn't know that ahead of time.
There is little room for "corporate advancement" at REI.  When I worked at REI, the majority of employees were scheduled less than 30hr/wk, and probably about 5-8 were working full-time. I would wager that the majority of the corporate employees at REI did not start as frontline or sales associate on the floor of an REI store.

From a perspective of working at REI and currently at a small independent shop, I definitely prefer the small shop. Pay and hours are better, and my co-workers actually know what they're talking about (which is cool). Lots of learning and room for growth, albeit not "corporate advancement".

It's okay, we have Amazon to fall back on.

Zach Anatta wrote: Probably. But I admire good technique when I see it. And when I see it, I salute it. Like the Red Baron.

At any rate, as someone said above, people are downplaying the extreme effects this sit-out is going to have on the recreational economy. There are probably some people in this forum who have seen their last climbing gym, for instance. And there are probably quite a few in the US who have climbed for the last time. Not that they'll die from the virus; they'll just be too poor to take part in the sport. I don't mean the hardcore dirtbags, but the majority of climbers (or boaters, or bike riders, or target shooters, or golfers...) are not hardcore - they're dabblers using their discretionary funds. And REI sales are probably more reliant on the dabbler than on the hardcore.

And of course, what affects REI is going to affect small-town outfitters as well. If small businesses do end up surviving this, they'll only do so by taking out emergency loans that they'll have to pay back over the next few years. Those payments will preclude investment, and lack of investment will mean the end of economic growth. This will not just be true in the recreational space, but everywhere.

Of course, I could be wrong. It would be incredible if they made some sort of grants available to small business owners instead of loans. But what I just laid out is still highly likely because I think at this point its looking like loans over grants for businesses. The question is to how great a degree this occurs and who survives it.

The good thing though, which I can see even on this forum, is that people are beginning to wake up to the economic effects of the COVID-19 response. Probably because more people are beginning to feel them. But the worst of it is to come.

https://www.cnn.com/2020/04/07/health/ihme-updated-covid19-model/index.html

For instance, if we follow the advice of the report above and stay in quarantine until August we'll save several thousand lives, but we'll utterly destroy our economy and our society.  Unfortunately we're going to have to make tradeoffs.

One good thing that may come out of all of this is student loan debt foregiveness.  If the economy gets as bad as I think it will this might be one of the last "break glass, pull lever" economic fixes they could do. Unleashing two generations of young people to buy houses and have families would be a massive boon for the economy, and could actually fuel growth. But this is mere speculation.

There actually are relief funds specifically for business owners and small business owners. Not sure what all of them are but I specifically know of a $10,000 stimulus check business owners can get to use towards expenses, to my understanding it is similar to the $1,200 stimulus checks individuals will get biggest difference is that the business needs to request it and meet criteria of having been a business since February to avoid people from filing for an LLC and pocketing the check. Nearly no questions asked, I believe they do have to pay it back but it may just be taken out of 2020 taxes not too sure as I’m not a business owner so haven’t looked too much into it. 

My understanding is if used for payroll, with the stipulation that you keep them on for a certain amount of time (I think it is 4 months), the business doesn't have to pay the loan back (might have to eventually pay taxes on it as a gain though)

Matthew Bertolatus wrote:

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

Matt.  Granted.  However, in my opinion, "back of the envelope" means roughly 10 seconds of thought.  My question to you is: What is the correct reading of the financial statements?  Can you put a more accurate timeline of how long REI could hold out under current economic conditions?  (Assuming no government bail outs, or new substantial credit-lines, or external investment.  Just on their own current resources, without closing any stores permanently.)   

anyone hating on REI just makes me laugh. read what the ceo posted. they are doing more for their employees than most companies do.

big ups. there is a reason they keep expanding. they offer more, provide better service, and treat their staff properly.

people talk a big game about local climbing shops. here is the reality, most of them suck. there are less than handful that i have ever been to where the staff was knowledgeable and paid me the time of day.

john

Mike Lane wrote: 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.

Yes.  It is rather amusing that Zach's first concern is whether or not REI will survive.  Perhaps he's worried that if REI goes bankrupt then MP won't survive either.  Then he won't have the free entertainment & forums the MP is providing him.  Personally, I am more worried about how most Americans are going to survive.  In other countries, their governments are paying people's wages, so they can keep their jobs.  Here in the GREAT US EMPIRE, THE NATION OF CORPORATE GREED AND WORLD DOMINATION, 10 million people have lost their jobs.  That means that many people have also lost their employer based healthcare, too.  No time like now to see how Medicare For All would be of great benefit to the majority of Americans. Trump is an idiot, but Obama was nothing more than the black mascot of Wall Street. Biden can hardly complete a sentence.  The DNC looks like morons for rigging the primary for this walking corpse.  The revolution won't be televised!

Fat Dad wrote:

And we all know what happened to Croesus...

I like the cheese kind...

https://www.thespruceeats.com/cheese-croissants-recipe-1374833

Oh.  Wait.

john chan wrote: anyone hating on REI just makes me laugh. read what the ceo posted. they are doing more for their employees than most companies do.

big ups. there is a reason they keep expanding. they offer more, provide better service, and treat their staff properly.

people talk a big game about local climbing shops. here is the reality, most of them suck. there are less than handful that i have ever been to where the staff was knowledgeable and paid me the time of day.

john

Interesting. Thats what I’d say about REI.

john chan wrote: anyone hating on REI just makes me laugh. read what the ceo posted. they are doing more for their employees than most companies do.

big ups. there is a reason they keep expanding. they offer more, provide better service, and treat their staff properly.

people talk a big game about local climbing shops. here is the reality, most of them suck. there are less than handful that i have ever been to where the staff was knowledgeable and paid me the time of day.

john

It's not about hating on REI, but what you're saying is that it's far more important for the outdoor retail giant to survive than small climbing shops.  I strongly disagree. First, REI will survive & has the resources to do so.  Small climbing shops like Neptune Mountaineering & Rock And Resole in Boulder, Colorado offer a much larger selection of shoes, ropes, gear & guidebooks than does REI.  Their owners & staff are made up of the real experts in rock climbing like Dan Hare, Colby Rickards, Shelly Dunbar, Malcolm Daly & others.  Secondly, small businesses will have a much harder time surviving this pandemic, where 47 million people may lose their jobs & forgivable loans from the SBA will be slow & cumbersome to receive.  As a nation what we got from Trump & congress in the $4.5 trillion stimulus bill is what Niomi Klein wrote about in "The Shock Doctrine":  How the ruling capitalist class exploits a disaster to become richer.  The upside is maybe Americans might actually wake up & realize we need real change. That change will only come when we demand, not from fraudulent elections on electronic voting machines.  It will soon be time for a national strike.

I've had 60+ years of good shopping  at  REI starting before the California stores but I sure miss Marmot Mountain Works in Berkeley .

Zach Anatta wrote
https://www.cnn.com/2020/04/07/health/ihme-updated-covid19-model/index.html

For instance, if we follow the advice of the report above and stay in quarantine until August we'll save several thousand lives, but we'll utterly destroy our economy and our society.  Unfortunately we're going to have to make tradeoffs.

It's not a report, it's a model. It provides a prediction, not recommendations. Could you point out to me where the authors recommend continuing quarantine through August? I know of no rational person or institution that is recommending that, it's a total red herring.

J-- Kaiser wrote:

Matt.  Granted.  However, in my opinion, "back of the envelope" means roughly 10 seconds of thought.  My question to you is: What is the correct reading of the financial statements?  Can you put a more accurate timeline of how long REI could hold out under current economic conditions?  (Assuming no government bail outs, or new substantial credit-lines, or external investment.  Just on their own current resources, without closing any stores permanently.)   

It's impossible to say.  A few things to consider:

1. They still have online sales, which have probably gone up as they've closed all the stores.  So some money is coming in the door.  
2. They've got $270M in cash (noting again this is all 16 months old) but also $292M in short term investments - these are things that can be turned into cash pretty quickly.  
3. They've got $530M in inventory.  They may have some ability to return some of this to manufacturers (which would reduce payables) and they may be able to get some amount of financing against this inventory if things got really bleak.
4. Their largest single liability is accounts payable.  The manufactures are likely willing to negotiate on payment terms here, just as landlords will be, because what else are they going to do?
5. The second largest liability is "customer related obligations".  This is an odd entry, but the notes indicate it's potential sales returns and unredeemed gift cards.  Basically, retailers can't record a sale as final until the return period has expired.  People are going to have a tough time returning stuff with the stores closed, so a big chunk of this goes away just with the passage of time. 6. Finally we've got patronage dividends payable.  That's obviously your dividend.  When you redeem that though, you're redeeming in for inventory, not cash, and not at a 1-1 rate  (ie they'll buy a shirt wholesale from Patagonia for $30 and put it on the rack for $75).  So there's very little cash cost involved in paying down that liability.  

 

never understood climbers not liking REI at all    Their shops are beautiful and they often have the essentials you need. I sincerely hope they come out of it ok! The SOHO store in NYC is dope!