AUSTIN, Texas (BRAIN) — This time last year, Hill Abell was contemplating some big changes at his five Austin stores.
"Things were to the point that we felt like we needed to close a couple of location and have a pretty drastic cut to our headcount," he told BRAIN on Friday, the day after announcing that he and his wife, Laura Agnew, were selling the business to Trek Bicycle.
"It was going to be very painful," Abell recalled. He said the stores were not growing in sales, and the high costs of doing business in Austin were squeezing the bottom line. "Property taxes, rent increases, and the high cost of living here, which makes it difficult to pay a living wage. This is one expensive place to live," he said.
Abell managed to hold off making any drastic changes for a few more months.
"In early March when the pandemic struck we were questioning whether we were going to be in business at the end of the year. We just didn't know how we were going to operate. A month later, we couldn't keep up. We couldn't build bikes fast enough," he said.
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He said sales stayed strong through the summer and into the fall; November — prime riding season in Austin — was the business's most profitable month ever.
"We had no supply issues all year," he said. "We were super fortunate that the partners we have were able to keep inventory. Now, that hit a wall in December. We are finally having problems getting inventory and that's going to hamper December revenues."
In September, Abell was willing to talk to Trek about a possible sale.
"Paul Moran (Trek's North America sales manager) calls me every six months and says, 'how can I get you to do more business with Trek.' ... So we had that call in early September, and then he said, 'I know you aren't old, but you're not young, either. What's your plan?' So we started that conversation."
Abell said Trek has been trying to get Bicycle Sport Shop, which sells Specialized, Trek, Santa Cruz, and Yeti, to make a bigger commitment to Trek. Abell said Trek, which he had been selling since 1988, made up 38% of his stores' sales.
"Trek felt like they were woefully under-represented in this market. They have us and Mellow Johnny's, but they felt they were getting only 30-to-40% of the sales here that they should have. They felt like there was a lot of positive upside for the brand here in Austin."
Trek sent a team of its "retail transition specialists" to Austin to tour the stores and talk to Abell. Soon they had a deal, and the stores will be renamed Trek of Austin in late January.
Abell said Trek has committed to offering jobs to every employee in the stores. "The only people who won't continue are the senior leadership team of six people, and a handful of workers in the warehouse. We are going to have about a 98% (employee) absorption rate."
Trek has a minimum wage of $15 per hour for any employee; Abell said almost all BSS employees were already making more than that. The company also offers health care, a 401k program, and two weeks of vacation to all employees.
Abell said Trek's plan for the stores makes sense to him. He said Trek will eliminate a layer of management as it does at all its stores; store managers will be the highest-paid employees. It will not have a local warehouse and will carry less inventory, with a curated selection of Trek bikes on the floor.
"There's a lot to be said for that," Abell said. "People don't need to see four brands, or heaven forbid seven brands. Some bike people say they want to see that selection, but Trek is not looking for bike people necessarily. The direction they are taking the retail model makes a lot of sense."
In a 2013 BRAIN article on retailer succession plans, Abell said he had recently launched an employee stock ownership plan (ESOP), a plan for employees to buy ownership of the business over time. But Abell said on Friday that the plan was abandoned after about two years.
"We just haven’t been profitable enough. The only way to do it would have been to loan money to the employees in order for them to buy us out, which doesn’t make any sense ... so, yes, we put the ESOP in place around 2012, and two years later we just hit a wall of poor profitability; it's been a struggle ever since."
Until this year. For the same 2013 BRAIN article, Abell said he planned to retire around 2024, when he turns 65. So what inspired him to make the move a couple of years early?
"It was just the right opportunity. We have had such an incredibly lucrative year and we’ve been able to eliminate all of our debt and get on a firm financial footing," he said.
He also said he's not retiring yet.
"I don't use the R-word. We'll be taking a year off. We're going to sit back and soak it in for a year."
Then what? Will he re-enter the bike business? "Noooooo. Very slim chance of that. It's been great, but I'm done with the bike business, there's no need to re-create that experience, there are too many other interesting areas of life to pursue."
BRAIN reached out to Trek Bicycle on Thursday and Friday to see if the company wanted to comment on the sale. We haven't heard back yet.
