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The rise and fall of Sportsman's Warehouse

Stuart Utgaard was busy cleaning out his office overlooking the Apple River in Star Prairie last week.

Utgaard said he will soon lose the impressive commercial building, built in 1993, due to personal bankruptcy and a mortgage foreclosure.

Unless a miracle occurs, Utgaard also expects that the nearby Utgaard Hatchery property that has been in his family since 1901 will be taken away.

Not only that, it will be a challenge for Utgaard to keep his family's home, he admitted. His family no longer can afford the monthly payments because they have no income.

"I got myself into this," he said. "It shouldn't have ended this way, but it did."

When it's all said and done, Utgaard estimated, he'll have about $2,000 to his name.

"It's been brutal, but hopefully soon we'll be at the bottom," he joked. "Then we can start digging ourselves out."

Utgaard's current status is quite a departure from the position he was in just a few years ago. He estimates that his personal financial loss will total about $10 million.

Sweet success

No one could have guessed that Utgaard and his wife, Kim, would find themselves in such a mess.

Utgaard had done well in the family's hatchery business, and eventually transitioned into a consulting job helping companies grow through acquisitions and start-ups.

Eventually a new business opportunity dropped into his lap, and Utgaard took action. He purchased one sporting goods store and a wholesale company in Utah in 1996.

I started with practically no money, Utgaard recalled. He gathered a group of investors and borrowed the money he needed to get started with his retail venture.

The 1963 graduate of New Richmond High School used his previous experience to develop a plan for creating a new giant in the sporting and recreational goods industry called Sportsman's Warehouse.

Over 13 years, Utgaard led the company to more than $700 million in annual sales and 72 stores. His success made other major players in the industry, like Gander Mountain and Cabelas, nervous.

"We were on track to reach $1 billion in sales by 2010," Utgaard said. "It was an unbridled success."

The growth rate of Sportsman's Warehouse amazed the experts. In an industry that was seeing minimal overall growth, Utgaard's company was seeing significant improvement in sales and increasingly higher profits.

The ride to the top didn't go unnoticed. In 2004, Utgaard was named Entrepreneur of the Year by the accounting firm of Ernst & Young. The state of Utah recognized his company for its incredible revenue growth.

"When things are going good," Utgaard commented, "you don't think anything can go wrong."

But by 2006, the success story started to show some signs of stress.

"We got along great for 10 years," Utgaard shrugged.

Big isn't better

Sportsman's Warehouse invested heavily in a new inventory replenishment system that was supposed to ensure the growing company could meet the merchandise demands of their customers.

When the system was implemented, Utgaard recalled, it didn't work. The company suffered financially as inventories skyrocketed and distribution lagged. The system ended up costing the company $40 million to $50 million, compared to the $6 million Sportsman's officials expected to spend.

By 2007, with more Sportsman's Warehouse stores opening across the nation, the nation's economy began to turn sour and credit was tightening.

Utgaard began to study options for keeping his business moving forward.

He was able to negotiate a higher line of credit with a financial institution to keep the Sportsman's Warehouse inventory at acceptable levels. He also secured a new investor, Siedler Equity Partners, which pumped $50 million into the company.

As Sportsman's Warehouse continued to struggle with inventory issues, Utgaard said he was forced to take out a bridge loan to get over the financial hump.

But things continued to spiral downward. By September of 2008, when the nation's economy went in the tank, Sportsman's Warehouse was sucked down too.

The company's $50 million investor decided to redeem its stock, even though Sportsman's Warehouse had no way to pay them back. Utgaard's banking partners tightened the screws further, and suppliers stopped shipping products to stores because they were worried they wouldn't get paid.

"Within a period of three weeks, we lost $110 million in liquidity," he said. "The way the banks took money away from us was incredible. It all happened so fast."

With lower inventories, and lagging retail sales figures, Sportsman's Warehouse was clearly on the rocks.

Yet new stores were still being opened, because plans for the outlets had been underway for many months. When the stores opened up, Utgaard said, they were usually poorly stocked and started losing money right away.

A solution turns sour

Utgaard found a retail partner, Canadian cooperative United Farmers of Alberta, that was willing to rescue Sportsman's Warehouse. The deal was for $90 million and an 80 percent interest in the company.

With the money, Utgaard expected to pay off his bank obligations and vendor bills.

But UFAs investment stopped at $30 million, Utgaard claimed, and eventually the cooperative ended the arrangement and took control of 15 Sportsman's Warehouse stores.

With bank financing frozen, no investor in sight and mounting losses, Utgaard had to bite the bullet and close 23 remaining stores. Money from the liquidation was used to pay off some loans.

It still wasn't nearly enough money. Sportsman's Warehouse filed for bankruptcy on March 21, 2009.

"It was like a drowning man grasping at straws," he said." You get stuck in the vortex and you get sucked down."

Utgaard said he feels bad for the many small vendors who lost big money due to the company's failure. For many, it amounted to an entire year's profit lost.

Utgaard said he also feels sorry for the 2,300 Sportsman's Warehouse employees who lost their jobs due to the financial disaster. The company's employees had all become family, he noted, and he felt bad that so many had lost their livelihood.

With 29 Sportsman's Warehouse stores still operating, Utgaard remained optimistic that the company would survive and eventually thrive again.

As the company worked its way through bankruptcy, Siedler took control of the retail operation.

While Utgaard remained a senior executive for the retailer for a while, he was eventually given the boot.

Utgaard said the company removed all the pictures of the Sportsman's Warehouse founder from the walls of the stores.

"Still, I wouldn't trade my Sportsman's Warehouse experiences for anything," he said. "It was a lot of fun."


"A perfect storm of circumstances helped to derail a company that had defied the odds for years," Utgaard said.

"People want to blame me. Was I part of the problem? Yes. Was I the only problem? I don't think so."

To tell his side of the story, Utgaard has written a new book, "The Sportsman's Warehouse Story."

The book tells of Utgaard's journey from the peak of financial success to the eventual financial free fall. He said the book is good reading for entrepreneurs, business owners and business students.

He hopes the book helps others from making the same mistakes he made like installing unproven inventory systems, growing too fast and raising capital through outside investors.

"I think a lot of people can learn from my experiences," he said.

The books can be purchased for $29 by sending a check to Enterprise Investments, PO Box 10, Star Prairie WI 54026.

What's ahead?

Utgaard said he also goofed up by not protecting his personal wealth from the declining business. Personal guarantees and maxed-out credit cards spelled eventual ruin for his family.

"I feel sorry for my kids," he admitted. "They had a huge inheritance coming. Now there's nothing. I'll have to do something else to build up some sort of inheritance for them."

That won't be easy, Utgaard admits, as he's reached retirement age.

"I should be retired right now, but I'm not," he said. "Instead, I'm at square one."

He said he doubts that he can start a new business on his own, due to a lack of funding, but he is looking at several job possibilities around the country.

"I'm excited to find the next deal," he said. "I don't know what it's going to be, but I'm chomping at the bit to do something."

Ideally, Utgaard said, he'd like another shot at being the chief executive office of a retail or manufacturing company.

"I'll make somebody a great chief executive," he said, "after everything I've been through. I've learned a lot."

Jeff Holmquist
Jeff Holmquist has been managing editor of the New Richmond News since 2004. He holds a bachelor's degree in journalism and business administration from the University of Wisconsin-River Falls. He has previously worked as editor in Wadena, Minn.; Detroit Lakes, Minn.; Hutchinson, Minn.; and Bloomington, Minn. He also was previously owner of the Osceola Sun, Stillwater Courier and Scandia Messenger along with his wife. Together they previously founded and published The Old Times newspaper for antiques and collectibles collectors; and Up!, a Christian magazine of hope and encouragement.
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