Outdoor retailer Recreational Equipment, Inc. (REI), the nation’s largest consumer cooperative, today announced 2008 sales of $1.4 billion, an increase of 6.9 percent from the previous year. Reflecting the challenging economic environment, the co-op’s operating income for 2008 decreased to $73.6 million, down 31 percent from $106.5 million in the prior year. Net income of $14.5 million was down 65 percent from $41.4 million in 2007. The company’s direct sales channel, which includes online and catalog sales, grew by 14.2 percent while comp store sales increased by 0.3 percent in 2008.
Based on a significant business slowdown in the final months of 2008 and continued projected weakness in 2009, the company announced the elimination of 61 full-time jobs, which represents less than 2 percent of its full-time workforce. The positions are primarily located in its Kent-based headquarters, and the Sumner, Wash. distribution center. In addition, a number of part-time, hourly positions were eliminated on a store-by-store basis in about half of the company’s 105 retail stores and in the Sumner, Wash. distribution center. The job eliminations were part of a companywide effort to scale to 2009’s difficult business climate.
“REI posted positive results for the year because of strong performance prior to the fourth quarter,” said Sally Jewell, REI’s president and CEO. “November and December were very challenging months and our business plan for 2009 is generally flat to last year. While we are financially strong and free of the debt that has challenged so many businesses, we must plan accordingly to this drop in customer demand. This unfortunately means that we must reduce expenses and staffing to align with projected lower sales and workload demands.”
Jewell noted the expense management plans include deferring raises for headquarters and management staff, hiring only critical staff positions, and the delay or elimination of some projects and programs.
Full-time employees departing from REI will be given transition support – including severance pay, outplacement assistance, and access for two years to REI’s Employee Assistance Program.
As a co-op, REI shares it profits with its members in proportion to their eligible purchases with the goal of returning 10 percent through an annual patronage refund. Based on the co-op’s 2008 sales, $72.7 million in patronage refunds will be distributed to 3.7 million active co-op members. While anyone may shop at REI, only members share in the co-op’s profits.
“I’m pleased that despite our reduced net income, REI’s 2008 performance allows us to pay our members a 10 percent patronage refund,” Jewell said. “The co-op is committed to operating carefully and for the long-term so that we can continue to meet our members’ expectations, support their interest in enjoying nature and the outdoors, and grow the next generation of outdoor participants.”
For 2009 REI is planning to make key strategic investments to position the company for success when the economy recovers. These investments include plans to open five new retail stores this year and an upgrade to the company’s key merchandising systems.
REI is a national outdoor retail co-op dedicated to inspiring, educating and outfitting its members and the community for a lifetime of outdoor adventure and stewardship. Founded in 1938 by a group of Pacific Northwest mountaineers seeking quality outdoor equipment, REI is committed to promoting environmental stewardship and increasing access to outdoor recreation through volunteerism, gear donations and financial contributions.
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EDITOR’S NOTE: REI’s condensed consolidated balance sheets and statements of income for 2007 and 2008 can be viewed here.