tv The Profit CNBC June 15, 2017 10:00pm-11:01pm EDT
[ sniffles ] lemonis: tonight on "the profit"... i've pretty much established that this whole thing sucks. at an iconic snowboard-and-skate shop in chicago... chris: in the summertime we do skateboards, stand-up paddleboards. lemonis: ...the owners are headed a nasty collision. this business looks like it's on life support. chris: i think things kind of fell apart pretty quickly up here. lemonis: their new location loses money hand over fist. there's nobody here. it's empty. their original location suffers from low margins and the wrong inventory. salena: it's about creating a reputation. lemonis: this business doesn't have a good reputation. did you know that? and now, their partnership is spinning out of control with two of the owners sidelining the third. chris: it felt like we financed your pregnancy with my money and our time.
lemonis: if i can't help them fix their process and their relationship... you guys picked this location. chris: yeah. lemonis: you guys did it. ...this board shop will have to board up its doors. my name is marcus lemonis, and i risk my own money to save struggling businesses. we're not gonna wake up every morning wondering if we have a job. we're gonna wake up every morning wondering how many jobs we have to do. it's not always pretty. everything's gonna change -- everything. but i do it to save jobs, and i do it to make money. this... let's go to work. ...is "the profit." ♪ tony: windward, chicago. this is tony. lemonis: in 2010, partners chris, tony, and jess bought windward sports, an iconic chicago retailer with a 30-year history and a reputation as the go-to store for skateboarders and snowboarders.
chris: do you want to print them a restock, jess? jess: yeah. totally. lemonis: longtime friends and avid snowboarders, the three partners introduced new brands, updated the store, and renamed it "windward boardshop." jess: there you go. have a good day. lemonis: they were off to a great start. after a few years, they decided to double down, taking on a lot of debt to open up a second store, this time in an affluent suburb of chicago. chris: we'll kill the helmet rack. lemonis: but instead of the new location boosting the overall business, it's actually bleeding it dry. chris: we still need to figure out a way to get more people in the store, shopping. tony: yeah. lemonis: profits have evaporated, and now they're struggling to keep both stores fully stocked. chris: still no boosted boards -- 'cause i know we got a lot of customers calling and on the wait list for that, so... it's just been [bleep] lemonis: active sports is one of the fastest-growing segments in the industry, and windward's longtime history
should give it a leg up against its competition. so i'm headed to the original location to check it out. jess: hey. how are you? lemonis: hey, hey. how are you? jess: excellent. [ chuckles ] come on in. chris: you must be marcus. lemonis: i am marcus. chris: i'm chris. lemonis: chris, how are you? chris: nice to meet you. lemonis: nice to meet you. this place is cool. chris: thank you. lemonis: you know, i've driven by here for years, 'cause i live in chicago. chris: yeah. lemonis: i think i've seen this place for, like, 20 years. chris: 1982 it opened. it's chicago's original board shop -- bought it about six years ago now. lemonis: okay. so, when i come in here, do i think about this as a snowboard shop? chris: in the wintertime, yes. in the summertime, we do skateboards, stand-up paddleboards. lemonis: that's a paddleboard? chris: yeah. lemonis: that's gigantic. chris: [ chuckling ] what? lemonis: like, okay. but how would i even get this there -- like, on my vw beetle? jess: we've definitely done it. chris: roof rack. this is jess. lemonis: how are you? jess: hi, marcus. lemonis: i'm marcus. jess: nice to meet you. lemonis: and you're jess? have you ever been on this thing? jess: oh, yeah. for sure. yeah. chris: we all go paddle. yeah. lemonis: what does something like this cost? chris: that's $2,000.
lemonis: and then, what does it cost you? chris: about a 30% margin on those. lemonis: that's it? chris: yeah? ♪ lemonis: paddleboards are gigantic, and they're taking up a ton of space, a ton of inventory dollars, but a 30% margin? the overall store margin should be at least 50%. how do you do? i'm marcus. tony: tony. lemonis: nice to meet you. tony: good to met you. me and chris actually grew up together. lemonis: what is your role on a daily basis? tony: it's inventory management and marketing management, i.t. jess: i manage the highland park location. lemonis: okay. chris: i do the accounting. i do the buying -- just the overall general strategy of the business. lemonis: what did you pay for the business? chris: about $200,000. lemonis: you put all the money up? chris: yeah. lemonis: and had you saved it? chris: i inherited a lot of it. lemonis: okay. and then, what's the equity spilt amongst the three of you? chris: so, i have 56%. lemonis: okay. tony: 34%. jess: i have 10%. lemonis: okay. take me through the rest of the store. the apparel's in the middle? chris: yep. glove wall here. snowboard wall. lemonis: men's over here. how many square feet is this?
chris: about 3,500. and there's a women's side over on the other side. do you want to... lemonis: yeah. ♪ what women's department? it looks like an anemic rack of bathing suits, and none of the bottoms or tops match. there was a lot of leftovers, like a flea market. who buys all this merchandise? jess: chris really heads up all the soft goods. lemonis: why such a little amount dedicated for the female? chris: it's only about 10% of our sales. lemonis: is it like a self-fulfilling prophecy? we know that females drive more than 50% of the transactions in the marketplace. well, the store should actually represent that portion of the market, and it doesn't. you want to know why? you have some guy buying product. chris: this is the skateboard section. lemonis: okay. chris: longboards, skateboards. lemonis: that is cool. kids love this, right? jess: oh, yeah. lemonis: there's this new phenomenon in electric skateboards. chris: yes. this is boosted. so, this is the biggest brand out there. lemonis: and do they sell?
chris: we -- our first year, did about $250,000. we've been out of these for almost a year now. we have to pre-pay and buy at least 10 to 15 of them at once. lemonis: yeah, but do you guys not have any working capital to buy inventory? chris: it's pretty minimal. lemonis: and so, in the last 12 months, how much revenue is actually missing from this not being here? chris: i'd say close to $400,000. lemonis: damn. chris: yeah. lemonis: that's a lot. it's a little odd to me that they have no working capital to buy boards, but when i look around this giant showroom, there is merchandise everywhere. so, did they buy the wrong stuff? i'm gonna walk around this store and kind of study it some more. jess: okay. cool. go for it. salena: salena. lemonis: salena. what do you guys do here? salena: i do everything from sales associate, retail -- this is my passion, so -- lemonis: it is? salena: yeah. ♪ lemonis: i'm marcus. cody: hey, marcus. how you doing, man? lemonis: nice to meet you. what is your name? cody: cody. lemonis: nice to meet you. you run this basement? cody: yeah. what i do is -- we do the shipping down here. lemonis: are these online shipping orders you're sending out? cody: yeah.
lemonis: how long have you worked here? cody: six going on seven? lemonis: do you love it? cody: i did. everybody has to do so much that there is no fun time. but i miss that part and the three p's, i guess -- the fun part. i've looked into your personal businesses and seen what you've done. and for everything i've researched about you... lemonis: yeah. cody: ...i don't know if you're about the businesses anymore. like, are you just gonna turn this into a glorified chain skateboard store in the malls and stuff? lemonis: are you concerned that, if someone like me, that some monster, got involved, that it would lose its authenticity? cody: you could just come in and say, "oh, we're just about the dollar now." lemonis: is that what you think about me? cody: i think you have a lot of money, and you're a powerful man, and that is not an easy thing to work with. lemonis: i think you're gonna be surprised. cody: really? lemonis: yeah. cody is fiercely loyal to the brand. when you're trying to change a business, that can be an impediment. but in most cases, it's a real asset to a company. it's like having brand ambassadors out in the marketplace. cody: all right, then, marcus. lemonis: all right. nice meeting you. cody: you too, boss. lemonis: but i wouldn't exactly call that
the warmest greeting i've ever received. okay, that guy was interesting. jess: cody? [ laughs ] lemonis: what i'd love to do is actually meet you guys at the other location. jess: yeah. chris: yeah, sounds good. lemonis: okay. great. chris: all right. ♪ lemonis: hey, chris, there's nobody here. it's empty. chris: yeah. lemonis: when did you open this store? chris: last year. lemonis: so walk me through the logic of how you picked highland park, how you picked this location. chris: demographic-wise, a more affluent customer -- the proximity to the lakefront with paddleboard sales made more sense for us to come north. lemonis: money and water don't equal opening up a windward location. highland park is a suburb of chicago that's got a slightly older demographic to it, and i haven't seen anybody ride down the street
on a skateboard before. this is cool. what size would i wear? chris: you would probably be a small. lemonis: really? have you seen the size of my ass? i'm gonna go try this thing on. chris: okay. lemonis: i wanted to understand how expensive snowboarding actually was. and one way to do that is to get dressed from head to toe in all the gear. jess: oh, definitely! yeah. lemonis: so, this is -- yeah. jess: all right. lemonis: how are these pants? jess: $250. lemonis: so, what's next after that? chris: jacket. jess: jacket. lemonis: all right. okay, how much is the jacket? jess: $500 for that guy. lemonis: ah. okay. how much for the helmet? jess: about 100 bucks. $220 here. lemonis: all right, now what? chris: $200 for snowboard boots. steady as she goes. lemonis: all right, what else do i need? chris: gloves. jess: 50 bucks. lemonis: okay. chris: this would be the board. $600 for the board, and then the binding's $250. tony: and then on a really cold day, you'll need a facemask. lemonis: so, i've just spend $2,200... chris: yes. lemonis: ...and i'm hot as hell. i did not expect it to cost over $2,000. like, that's a real investment,
and to pick snowboarding or skateboarding as almost 90% of the product really limits the number of people that'll walk through the door. what about all the other things that people do outside? how much revenue does this store do a year? chris: $350,000. lemonis: and the margins are... chris: it's a 35% margin. lemonis: so the gross profit would be about $100,000. chris: yes. lemonis: you divide that by 12. that's basically a little over $10,000, and your rent alone is... chris: $13,000. lemonis: so, you're losing money before you pay for anything. chris: yes. lemonis: where did the money come from to open this store? chris: we have an sba loan we took out. lemonis: how much is that? chris: $390,000. lemonis: just for this location? chris: yes. jess: i regret not knowing more about it beforehand. i agreed to open a second location when the idea was brought to me, but what i didn't know is that the location had already been chosen. lemonis: so, you did it on your own? chris: tony was involved with some of it, as well. jess: mm-hmm. lemonis: okay. and so why didn't you have a say in it? jess: i don't really know. lemonis: the fact that they didn't include jess --
it's just disrespectful. let me spend a minute with jess, just so i can understand this store a little better, okay? jess: yeah. mm-hmm. lemonis: what's going on here? jess: i found out when we were signing paperwork, and this guy says "i love the location," and i just looked at them, and i said, "we have a location?" said it was kind of in place, and i was just either gonna be on board or not on board -- these are my business partners. lemonis: you're on the team. jess: let's do it. i'm on the team, so that's fine. let's do it. lemonis: how much equity did you say you had in the business? jess: i have 10%. i started with 20%. when i told them that we were gonna have a baby -- we were all working six days a week, and i told them that, once the baby came, i was wanting to go down to five days a week to have more of, like, a normal schedule. lemonis: did you lower your wage, as well? jess: mm-hmm. lemonis: so you lowered your wage because you're working less -- that i get. jess: correct. yep. lemonis: i don't understand why your equity would go down. jess: i agreed to it because i really didn't feel that there, you know, was another option. again, like -- lemonis: in or out? jess: yeah. yeah. and i had a newborn at home, so what am i gonna do? lemonis: i don't know what choice jess really had.
chris and tony leveraged the situation to get the result that they needed. it really makes me question their ability to be in a partnership with anybody. i'd like to go over the financials. how are you feeling? chris: tired. lemonis: yeah? chris: yeah. lemonis: been a long couple years? chris: long six years, yeah. it's been challenging from the start. lemonis: what did you do before this? chris: i started out working with my dad originally. we were brokers, and then my father passed away. this opportunity kind of came up. and so, i inherited that money. lemonis: how did he pass away? chris: he took his own life. lemonis: holy [bleep] man. i can't even begin to think about what that would feel like... chris: yeah. lemonis: ...so first of all, i'm sorry that it happened. did you do this business with the inheritance? that was the seed money? chris: yeah. in a weird way, it's kind of like this is part of him still. lemonis: and that's probably what weighs on you, because you probably think to yourself, "this can't fail." chris: yeah. it would feel like another loss, a big loss.
lemonis: 100% of the money that opened up this business came from his father. this idea of the business failing creates this illusion for chris that, if the business fails, he's lost his connection with his father. chris: this is through 2016. lemonis: okay. so, in 2010, it did $325,000 in revenue. 2016 -- $2,714,000 so far in revenue -- so impressive growth. you made $81,000 in '15 and '16. chris: we'll probably lose $250,000, about. lemonis: so you went from making $81,000... chris: yes. lemonis: ...in '15 to losing $250,000 almost entirely from this location. so the company's sitting with $600,000 of payables, $200,000 that are past due, and the debt -- $250,000 owed to two banks and an sba loan of $390,000. so you got no excess working capital and a location that is sucking the life out of the business.
chris: yeah. lemonis: all right, i want to take this back and study it. chris: yeah. lemonis: it was honestly a real pleasure to meet you. thank you so much. chris: very nice to meet you. lemonis: nice meeting you, as well. chris: thanks for coming in. lemonis: absolutely. ♪ the original store was a decent first effort. but they took that success, and they tried to parlay it in a different market without a lot of research and thought. that type of naivety can put you out of business. tony and jess, have you guys seen the financial statements? jess: it has been a little while. lemonis: so, it looks like you guys are gonna lose about a quarter of a million dollars for the year. did you know that? tony: i was aware of it. lemonis: did you know the number? jess: no. lemonis: shocked? jess: you know, i think there's a lot of conversation in the office at the chicago store where they are always at, and i'm just kind of worrying about the day-to-day of this place. lemonis: that was a nice way of you saying, "i'm not there, and they talk about things, and i'm not included."
do you guys think it's weird that you have such a disjointed dynamic between the three of you? tony: it boils down to better communication, i think. lemonis: better communication? jess: we need any communication. lemonis: why'd you cut her equity? chris: 'cause we're putting in more time and effort into the business. it's barely getting by. i've put in my life savings on it. it's hard for someone to come to me and go, "i need time off," and work less. lemonis: i understand that. do you guys have families? chris: no. jess: we never talked about what happens when we have babies. it wasn't said. it wasn't asked. chris: it was written in there -- the 5-year commitment... jess: yeah. chris: ...for the first five years. jess: and if one of us walks away -- lemonis: so, just so you know, you shouldn't have had a baby in the first five years. jess: in the first five years. lemonis: what are you essentially telling her? "don't get married. don't have kids. put your life on hold. and at the end of the five years... we'll let you know"? there's no question that you guys have put your heart and soul into this. i think that's a great sign of business character. you don't always find that, so i compliment you
on the fact that you care about what you do. so, i want to make an offer, because i need the business needs to solve its past-due payables and needs to get current inventory in, and it needs to be a store that can speak to more people and more families. so, my offer is $500,000 for 50%. chris: if i had to pick a number, it'd be, probably, more to $600,000... for 40%. lemonis: so, this is your display? chris: this is our booth. lemonis: this is the [bleep] display that i've ever seen.
chris: if i had to pick a number, it'd be, probably, ♪ to err is human. to anticipate is lexus. experience the lexus rx with advanced safety standard. experience amazing. will you be ready when the moment turns romantic? cialis for daily use treats ed and the urinary symptoms of bph. tell your doctor about your medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, or adempas® for pulmonary hypertension, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have a sudden decrease or loss of hearing or vision, or an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis.
more to $600,000... for 40%. lemonis: um, i'm not willing to budge from my 50%. i can't philosophically do it, 'cause it's risky. so here's what i'm willing to do. there's $750,000 worth of inventory in the system. chris: yeah, yeah. lemonis: how much of the $750,000 is inventory you would never buy again? chris: probably at least $100,000 or $200,000 of inventory to get rid of... lemonis: great. chris: ...that's off-season. lemonis: so, i'll throw in an extra $100,000 for no additional equity if you can liquidate the $200,000 of inventory that you believe shouldn't be here in the next 30 days. and it is pass-fail. chris: yeah, i think that -- i think we could.
lemonis: i'm going to write two checks. one's for $500,000. one is for $100,000. if you liquidate the $200,000 of problem inventory in 30 days, you'll get this check and i'll ask for no more equity. chris: yeah. lemonis: if you don't, this is the check. chris: i want to communicate well and ask if you guys are on board. jess: i'm in. tony: if you feel confident in it, then i will. lemonis: so, do we have a deal? chris: yeah. jess: let's do it. lemonis: here you go. okay? jess: got it. ♪ lemonis: you know what i'd like to do, jess? jess: yeah? lemonis: i'd like to get everybody together and have a discussion. chris: yeah. lemonis: so, yesterday, tony, chris, and jess, and i made a deal for me to invest $500,000 in the business. the $500,000 can actually become $600,000. if you could figure out how to liquidate
$200,000 worth of dead inventory in the next 30 days, i hand you another $100,000. the money's gonna pay the past-due payables, buy new inventory, and we're going to pretty significantly change the look of the store. when i think about windward's customer base, i think about it like you're standing outside of a door. the product offering is so narrow and the price points are so high, that very few customers could actually fit through that door. now, the shop has a long-standing history, and we don't want to lose those core customers. but we also want to widen the door and find new customers who are interested in active sports in general, whether they're looking for sneakers or swimwear or anything else they would use in their lifestyle. that's the key to growing this business. also, the name of the store is changing. salena: okay. man: are there options? lemonis: there are options. regardless of what it's called, we're not gonna be making these big decisions without having some sort of discussion
about what it is that we're doing. all right? let's go to work. thanks, guys. salena: thanks. ♪ hey ♪ ♪ hey lemonis: chris asked to meet me at the mccormick convention center where the chicago boat, rv & strictly sail show is. but i'm not exactly sure why a board shop would have a trade-show booth at a boat and rv show. chris: welcome to the boat show. lemonis: how you doing, buddy? chris: well. how are you? lemonis: good. so, this is your display? chris: this is our booth. we have our flyers over there. we have a little video to try to entice people. lemonis: you brought nothing else but the paddleboards? chris: no. lemonis: nobody's in uniform. there's no other signage. there's no other products. this is the [bleep] display that i've ever seen. i was not only annoyed, but i was embarrassed. "free delivery and free paddle and up to 15% off." chris: yes. lemonis: so, when we talked about the overall paddleboard margins... chris: yes. lemonis: ...we already knew they were low at 30%. chris: yes.
lemonis: then you gave 15% off, then you gave a free paddle, then you gave free delivery. what's left? chris: 10%. lemonis: okay. what does it cost you to rent the booth, come down here, staff it? chris: $2,800. lemonis: so, last year, you did how much? chris: about $25,000. lemonis: how much gross would there be? chris: $2,500. lemonis: "windward boardshop -- where we love to lose money." it seems to me that chris makes a lot of decisions without doing much research -- the product that he buys, the low margins that he has, the new stores that he opens, and now this. woman: scoot your feet a little further apart. perfect. lemonis: chris, we're good. i got on. i don't like the margins. so i've pretty much established that this whole thing sucks. it makes no sense to be here -- none. no more of these shows this way. stop wasting money and making quick decisions. you got to think through them. ♪
hey, chris, i thought if we could just get everybody together -- just chat as a group. jess: yeah. it's clear to me that you guys were doing perfectly fine a year and a half ago. had you not opened up this location, i doubt that you would have called me. chris: we bit off more than we can chew, and we thought we could do it. lemonis: well, don't say "we." you. there are not enough paddleboarders and snowboarders and skateboarders in this part of chicago to give you the revenue. so, first order of business -- this store is officially closed. so, we have work to do here tonight. pull everything off the floor that you know will sell downtown without a question. while we're closing the store, the company still has an obligation to five more years at $13,000 a month. so what i've decided to do is to negotiate with the landlord to buy the building. i now own an asset, and i've solved a very big problem for windward. chris: yeah, jess just being up here
without us to make sure things are getting done properly -- i think things kind of fell apart pretty quickly. tony: yeah, it's just the consistency is not there with her. the inventory got a little out of whack here -- there with her. lemonis: you guys -- you know, i've heard you guys say that you don't think that jess was really a great manager her. chris: i think she was overwhelmed with the level of responsibilities she had. lemonis: you guys picked this location. tony: yeah. lemonis: you guys did it. we should make sure that we carry products that are for novices. salena: that's not how we approach our customer base at all. lemonis: you are coming off so self-righteous. ♪
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it can be sculpted, in beautiful detail. or painted in luxurious strokes. ♪ and in rare cases...both. you don't think that jess was really a great manager here. chris: i think she was overwhelmed. lemonis: you guys picked this location. tony: yeah. lemonis: you guys did it. what upsets me more than anything else is chris and tony standing here talking about the fact that it's jess' fault. like, at some point, you guys need to take responsibility for your screw-up. ♪ jess: [ sniffles ] lemonis: while everybody's packing up boxes, i'm noticing that jess is really upset. jess: i just feel like i failed everybody. cody: nobody can tell you you didn't try your best. lemonis: jess. jess: [ sniffles ] lemonis: you all right? what's wrong? jess: yeah -- no. i'm -- i don't know how i feel right now, but i want to do what is best for the company,
but, like, what about our staff? like, what am i telling my highland park staff tomorrow? lemonis: jobs available for them in the city, no problem. jess: yeah. okay. lemonis: but i think, more importantly, the way i'd like you to think about it is, "let's fix this," as an owner... jess: yeah. lemonis: "let's fix the city. let's get that thing cranking, pumping out cash." the fact that jess is upset actually is a confirmation for me of her passion. right now she's worried about what's gonna happen with her staff, and she's doing all that in spite of what's happened with chris and tony. i'm gonna give this to you. go put them up in the front door. chris: all right. jess: [ chuckles ] ♪ lemonis: here you go, brother. man: yep. lemonis: as part of closing down the highland park store, i'm having all of the inventory packed up and moved downtown to the chicago store so we can consolidate it and liquidate the bad stuff all in one location. ♪
i never expected their stock room to look like the amazon fulfillment warehouse, but i also didn't expect it to look like a garage sale. it's thousands of square feet. get it organized and then make use with the rest of the place. cody. well, so, i figured since your inventory's upside down, i would hang upside down, too. chris: i knew there was gonna be a good joke here. lemonis: it doesn't look good. chris: yeah. lemonis: we need to totally remodel this basement. so, here's the challenge you have -- you have to liquidate $200,000 in 30 days, you have to organize this warehouse and the store up top. chris: it's a -- it's a constant game of keeping up right now, and that would -- lemonis: did you say "keeping upright"? chris: [ chuckling ] trying -- trying to keep upright -- jess: [ laughs ] chris: there it is. ♪ lemonis: eventually, we're gonna need to close down the whole store in order to remodel it, but for now, we'll start with the basement. there's at least 3,000 square feet down here.
i want to use a portion of it to properly organize the inventory. but the balance of it -- i want to turn it into a whole retail environment. jess: $13.78, and with the discount... lemonis: meanwhile, the team has been busy liquidating the inventory in an attempt to hit their $200,000 goal i gave them. jess: on sale. [ scanner beeps ] salena: it's, like, the sweetest deal ever. man: yeah, it is. lemonis: hey, bud. jess: both thumbs is the easiest way. man #2: this way? jess: there. yep. lemonis: i've been most impressed by jess, because she single-handedly led this liquidation. these are the mfis that tony brought. lemonis: she kept the team motivated and focused. jess: layers are definitely going. streetwear has been moving. lemonis: now that we've been making progress on the inventory and the remodeling, it's time to really rethink how the customer's gonna see this store and what it's gonna be called. a boardshop? that just doesn't do it anymore. the name of the store is changing. let's get some names moving. man: yeah, yeah, yeah. lemonis: windward active sports.
[ laughter ] chris: the "active" part i think will turn off a lot of people. you feel like you're going to a running store. salena: "active" suggests more of a sport. when you skate or snowboard, you look at it as kind of like an art form in your lifestyle. chris: and that's why i'm saying "windward" or "windward outdoor." lemonis: "outdoor" feels like a hiking-camping store to me. salena: yeah. lemonis: any numbers that matter? jess: '82 was the year that it opened, yeah. lemonis: so that's kind of cool. chris: "windward '82." chris: i don't think it would turn anyone off... jess: "windward '82" could be really good. chris: ...the skate kid or the active person. salena: i really like that. chris: i like that one the best. jess: i feel good about it. chris: yeah. lemonis: hey, cody! cody: we talking about names? lemonis: i think we already landed on a name. cody: oh, we did? jess and chris: windward '82. cody: see, but i think that impromptu-ness is part of the problem. it doesn't allow for proper communication. "windward" is an awkward word to say, it's an awkward word to spell, and it's an awkward work to talk to people about. lemonis: it's an awkward word that's existed for 30 years that people know, and i want to celebrate the fact that we've been here since 1982. jess: what about just "w82?" cody: yeah. lemonis: that's awesome, right? cody: that can definitely work. lemonis: don't worry about it.
chris: i think a hug is in order! i think a hug is in order! lemonis: w82 -- it's short, it's simple, and it's awesome for e-commerce. the less somebody has to type in, the better. and even cody likes it. do you see how we can work it out? cody: no, we are gonna work quite well together. ♪ lemonis: one of the things that i want to do today is analyze this downtown store, and then we're gonna start looking at the different categories and ranking them from highest to lowest gross profit. chris: yeah, you want me to start putting together those -- lemonis: yeah, if you could pull them, that'd be great. chris: i'll get the numbers going. lemonis: in order for windward to move their business forward, they have to solve two problems -- gross margin and the inventory mix. so what i wanted the team to do is actually pull sales data. i want to find out what sold, what has margin, what's gonna stay, and what's gonna go, but have them come up with the conclusion. what is the minimum margin that a product should have
for it to make the cut? chris: i would say 40% would be the minimum. lemonis: that would be the minimum? chris: yeah. lemonis: okay. so let's talk about this product. jess: bindings. lemonis: okay. how much revenue did we do? jess: $17,166 -- margin's 29%. lemonis: why are the margins so bad on this? tony: likely the sale price -- when we have overstock, at the end of the season, we have to discount it to -- lemonis: so this is a buying mistake. what would the margins be if you didn't have the buying problem? jess: 40%. lemonis: this product is staying in the stores, but we have a buying problem. snowboard boots. jess: $25,000 -- again, coming in with a 31% margin that's got to be sale. lemonis: so, you didn't make your cut as well. what's the problem here, tony? jess: sale. tony: same problem. jess: definitely for overbuying. lemonis: who bought all these? i'm sorry. i didn't see your hand high enough. chris either bought too much or bought the wrong stuff, and in order to sell it, they had to discount it. when your product offering is as narrow as windward's is, the pool of people that actually want to buy it is too small.
so the more you discount doesn't make the audience bigger. it just makes the profit smaller. to think you're gonna sell skateboards, paddleboards, and snowboards only is a giant mistake. ultimately, we want to service everybody, whether it's hiking or biking or anything else. salena: but we're not a department store, either. i don't want to see this turn into dick's sporting goods. lemonis: we're not talking about having basketball and football. salena: right, but this industry is about creating something that's unique. you're not gonna find this in your typical big-box stores. lemonis: but we should make sure that we carry products that are for novices if -- salena: but we're not gonna carry, like, plastic boards or a [bleep] quality product. lemonis: but who says we are? where are you getting that from? salena: i mean, that's not how we approach our customer base. lemonis: you are coming off so self-righteous. you made the decision to change the equity structure. chris: at the time, it felt like we financed your pregnancy
a used car, that it almost makes me feel like i'm not included here, that i shouldn't shop here. what you're telling me is that you guys are trying to create this "cool" vibe that has a certain look. salena: it's more about -- about creating a reputation. lemonis: this business doesn't have a good reputation. did you know that?
salena: that's interesting. lemonis: the vendors don't like you, 'cause you don't pay your bills. woman: yeah. lemonis: and when you don't pay your bills, they don't ship you merchandise, and if you don't have merchandise, the customer comes in, and they have a different perception of what the place is versus what it used to be. there used to be a wider selection. there were things in stock. i want to have cool vendors, too. maybe we're partnering with some up-and-coming companies that would never get a shot to get into a big-box store. we're that company that gives the little guy a chance. salena: and that's what i want to see. i'm very protective of... jess: but just know -- lemonis: and i'm very protective of my money, and you're very protective of the brand, so it's gonna be a great marriage. salena: okay. [ laughter ] lemonis: i'd like to break you guys up into twos. and why don't you take categories and say what categories you would get rid of and what categories you would keep? cody: all right, where we going? salena: we're gonna have to start with the products that we make the least margin on. lemonis: in order for this business to really be profitable, they have to get to a 50% margin. the only way to do that is to eliminate the low-margin things and find things that are greater than 50% that are gonna allow us to land at the end of the year at 50%.
cody: paddleboards produced $38,000. margin was 26% on these. so...not making the cut. lemonis: so paddleboards should go. salena: wet suits... billy: you got -- i mean, that's -- those, actually, are pretty popular. salena: casual boots are actually doing pretty good. jess: so... chris: you want to come back, and we'll work through some of this? lemonis: you guys learning anything? jess: yeah. chris: we learned a lot. jess: definitely. chris: yeah. jess: women's swim bottoms, bikini bottoms, were 50%. billy: men's, actually -- the work shorts was 47.39%. lemonis: so better than our company average. jess: and women's tops -- 50.82%. lemonis: so swim is up 48%, plus. chris: it's a good margin category. jess: right. yeah. man: and a good volume. lemonis: i think the best part of this is that you guys are working together. chris: communicating. lemonis: communicating together, making decisions together. ♪ i've closed the store for a total remodel. the upstairs is going to be transformed,
creating new and clear departments, like a swim department, a shoe department, an electronics department with electric skateboards, cameras, and drones. work continues in the basement reallocating space, having a segmented stock room that's organized and clean. with the additional 2,000 square feet, we're building a pure skate department and a pure snowboarding department. the new spaces are built to speak to that enthusiast. ♪ i've taken jess and chris to agenda, one of the largest apparel and footwear trade shows in the country, and it really is a great opportunity to not only find new products, but to expand on the ones we already have. there's literally almost 1,000 different brands represented here. ♪ what do you think of these kind of glasses? chris: it's edgier than we do right now. jess: i love these.
lemonis: this stuff is really nice. jess: so, we're gonna do the crew pocket for guys, crew pocket for girls, and then a couple of the women's tanks. okay. lemonis: as i watch jess, i'm noticing some of the great characteristics that i see in my other buyers -- asking the right questions, getting the right product at the right price. man: $59 retail. lemonis: she has a familiarity and a comfort in doing this. right now, i need to make a switch on who the buyer is. jess, i feel like you are a better buyer than chris. chris: part of my concerns with you buying... jess: yeah. chris: ...tracking the numbers. jess: i know that i can do it. chris: buying's a full-time role. jess: taking that off your plate and putting it on to mine opens you up for bigger-picture things that you need to be worrying about. chris: yeah. jess: and i think, also, i want to bring the staff in so that it's not necessarily me on my own. i can do this. i can -- i can do this. chris: and i believe she can. i think if we have the right system in place, she can do this. i always felt like i kind of had to lead everything,
but i think you've stepped up to lead, and we sold a lot of stuff up there over the past week and a half. lemonis: how much have you guys sold since we started this process? chris: total? over, probably, $500,000. lemonis: and what was the goal? chris and jess: $200,000. chris: yeah, we... once she led the team, we did it. lemonis: and i appreciate you recognizing that. chris: yeah. lemonis: so, this is very different than how you were when i first met you. chris: yeah, i can see that. ♪ lemonis: so, i thought it would be good for the four of us to get together and just talk about jess' equity. when jess first started, she had 20%, and then chris and tony cut her to 10%, and then, when i invested, her equity dropped to 5%. based on her contribution, it's time for me to do something about it. you made the decision to change the equity structure. chris: for me, when it happened, i put my life savings into this business.
i'm not getting a paycheck. you said, "i need three months off. i need to get paid for three months," so we can't afford to hire anyone to replace you. tony: it's tough on us. it makes it feel like you're not giving enough. chris: at the time, it felt like we financed your pregnancy with my money and our time. ♪
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and get medical help right away. with my money and our time. lemonis: things in life happen. the three of us are not gonna have a baby, but we may have something else happen to us that requires us to have to be gone for a little bit. it's clear to me now that everybody's contributing. with you guys having more skin in the game, the odds of my investment succeeding are better. so, what i'd like to do is lower myself from 50% to 40%.
you were at 28%. i'd like to take you to 30%. you were at 17%. i'd like to take you to 20%. and you were at 5%, and i'd like to take you to 10%. tony: well, i appreciate your fairness in this. yeah. it's a side that you don't see too often in business. lemonis: you earned it, though. do you agree? jess: i was gonna give you a hug. [ laughs ] lemonis: okay. chris: cool. good to see you. lemonis: all right, guys, thank you. and what happened to my hug? jess: i am gonna take a hug. lemonis: there you go. ♪ [ machinery whirring ] ♪ we have one week left before the grand opening of the new w82. the contractors are busy putting in the final touches. ♪ also, i brought in several artists to create a unique look to the store.
and jess is really hustling to get new merchandise onto the shelves. ♪ [ thumps ] today's the grand opening of the new and improved w82. ♪ as i look around, there is stuff everywhere. what time is it supposed to open? chris: 4:00. lemonis: and what time is it now? chris: noon. lemonis: okay. chris: i've got four hours to get this wrapped up. lemonis: there's not even racking here. this doesn't look done, either. chris: no, no, no. jess: we're gonna get it done. ♪ lemonis: if your business is in trouble and you need my helpg on .
it can be sculpted, in beautiful detail. chris: four hours to get this wrapped up. or painted in luxurious strokes. ♪ and in rare cases...both. yet up 90% fall short in getting key nutrients from food alone. let's do more. add one a day men's complete with key nutrients we may need. plus heart-health support with b vitamins. one a day men's in gummies and tablets. it's just a burst pipe, i co(laugh) it. no. with claim rateguard your rates won't go up just because of a claim. i totally could've - no! switching to allstate is worth it.
you won't see th lemonis: there's not even racking here. this doesn't look done, either. chris: no, no, no. jess: we're gonna get it done. lemonis: all right. we'll get there. jess: we're gonna get there. lemonis: we'll figure it out. jess: we're gonna get it done. ♪ [ machinery whirring ] we have a lot of really colorful, nice spring bags from burton right now, so that would at least be eye-catching. chris: cool. jess: cool. lemonis: that looks good. jess: let's go ahead and hang this workout apparel. woman: yeah. jess: i want it to live here. ♪ lemonis: want to take a little quick tour before we open the door? it looks like a totally different business. chris: yeah, it is. lemonis: this is the biggest transformation that i have ever done to any business ever, and i spent about $400,000. i wanted to create the largest streetwear sneaker department
in all of chicago. there are over 300 different types of shoes. i brought in an electronics department -- drones and gopros and cameras and the new electric skateboard display. we now have a real swim and a real ladies' department. jess did an amazing job buying bathing suits, women's apparel, streetwear, hoodies, shorts, tanks, t-shirts, in a wide selection. chris: you want to see the basement here? lemonis: this looks cool. chris: it looks [bleep] awesome. lemonis: this looks really cool. chris: sorry. ♪ lemonis: [ chuckling ] so, this room looks awesome. i wanted to create a snowboard room that felt like you were in park city, so i brought in special wood -- i brought in a chair lift. i don't even like snowboarding, but i'm ready to go. chris: skate room. lemonis: this is the coolest space. the new skate cave has double the amount of inventory and a full display of all the accessories. this store is essentially double the size
of what it used to be. chris: yeah. lemonis: we now have about 9,000 square feet. the additional floor space will generate at least $700,000 of revenue without more rent, without more headaches. i have a quick question for you. does it feel like a mall store to you? cody: no. it feels good. lemonis: are you happy with it? salena: i am happy with it, yes. lemonis: okay. should we get the store open? ♪ your dad would be very proud right now. you did a really good job. chris: well, now we enjoy it. lemonis: go say "hi" to everybody. how are you, sir? man: hey, man. chris: thank you, everyone, for coming out to the grand re-opening of w82. [ cheers and applause ] excited to have you guys in here. jess: this -- just by ourselves. chris: we didn't build it all. this was a huge team effort, and we're excited to have it open so you guys can come enjoy it now. so, thank you, everyone, for coming out. jess: thank you so much, you guys. chris: and thank you to marcus for believing in us. jess: thank you, marcus! lemonis: my vision going forward for w82 is for it to become an iconic retailer in chicago.
if it's as successful as i expect it to be, it could be coming to a city near you. chris: mom, this is marcus. lemonis: how are you? nice to meet you. woman: nice to meet you, marcus. lemonis: what did you think when you came in here? woman: i was shocked. everything is awesome. lemonis: you know, when i first met him, he wasn't the greatest communicator i ever met, but he's become a really great leader. chris seems more comfortable, like he has a new outlook on things. you should be very proud of him. woman: i'm very -- you have no idea how proud i am. lemonis: he's communicating great with jess. more importantly, i feel like he trusted the process. you guys happy with the way things turned out? tony: yeah. i am surprised. i was -- i was hesitant. chris: it's a good balance of him going, "i don't think we can do it," and me going, "just shut up. we got to do it." jess: i'm so pleased that we could do this. chris: yeah. lemonis: okay. thank you. jess: thank you, marcus. ♪ ♪
"... mary ellen: that's pretty. i like that. lemonis: ...a family has sunk their life savings into their swimwear company... i leave here inspired by your story. ...only to find themselves out to sea. i mean, you guys are, essentially, out of business right now. that's a lot of pressure on you. there's no clear leader... charlie: i've kind of run the show. -mary lou: no. -mary ellen: [ scoffs ] lemonis: ...no design process in place... charlie: i just don't have the time. chuck: no, you did. you did. you absolutely did. lemonis: ...and now, there's no money left either. mary ellen: they have put their finances into running this company. i don't want to see you guys lose everything. mary lou: i don't want you to worry about me. lemonis: if i can't help them swim with style, it won't be long before they go under. -mary lou: i'm afraid. -lemonis: listen, listen.