A new forecast from Forrester Research credits greater online spending by Canadians, lower shipping costs and more selection for the spending increase.
While FogDog.com was one of the first online sporting goods retailers, it’s getting out while the getting is good. In late October, Global Sports Inc., the leading sporting goods web site developer and operator, announced it will acquire all FogDog’s outstanding stock. The transaction was valued at $38.9 million based on the closing price of Global Sports’ stock the day before the announcement.
Global Sport’s CEO and Founder Michael Rubin says Global Sports is interested in buying the online sports store for its technology and its balance sheet. At the end of September, FogDog reported net worth of $45.4 million and cash and marketable securities of $42.5 million. Rubin says the deal enhances Global Sports’ already strong balance sheet. It makes the site Global Sports’ 14th sporting goods web site. Global Sports will integrate FogDog into its operating systems but will keep a small technical staff in FogDog’s headquarters in Redwood City, Calif.
FogDog brings its highly recognized brand, 300,000 customers, 600,000 email addresses, 48,000 affiliate marketing programs, and performance-based online marketing deals, while Global Sports has the infrastructure to make the web business profitable. The acquisition clearly follows Rubin’s theory that pure plays in the sporting goods sector will not make profits. Richard Zimmerman, vice president of equity research for specialty retail at Philadelphia-based Janney Montgomery Scott, says that while FogDog was doing well, it had spent a lot of capital building its brand name. “With stock of less than $1, they could only stay in business for so long,” he says.
FogDog CEO Timothy Harrington concurs, saying that while the company was doing well, b2c is a tough online endeavor. “Other companies have gone bankrupt and then looked for deals. We did not have enough cash to get profitable but our balance sheet is good-we were in the best possible negotiating position,” he says. “The deal with GlobalSports is a great marriage to leverage core competencies: We have the technology and the design skills and they have the back end infrastructure.”