The Profit Recap: Paddleboarding Is Not a Crime

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Marcus Lemonis. Photo: The Profit/CNBC
The Profit

The Profit

Windward Boardshop Season 4 Episode 13
Editor's Rating 3 stars

In 2010, longtime friends Chris, Tony, and Jess bought Windward Boardshop, a Chicago snowboard and skateboard store with a decades-long history and a solid reputation. They paid $200,000 for it, with money from the inheritance Chris received when his dad passed away. Business was going well, so they opened a massive new location in the suburb of Highland Park. Ever since, they’ve been bleeding money: Windward made $81,000 in 2015 but lost $250,000 in 2016.

Chris is responsible for accounting, buying, and overall business strategy. Tony handles inventory and marketing management, as well as IT. (Something tells me Tony also handles a lot of Solitaire and/or Minesweeper.) Jess manages the Highland Park location. Here’s how their equity is split: Chris has 56 percent, Tony has 34 percent, and Jess has 10 percent. Hmm.

But wait! Marcus says there’s a lot of money to be made in active sports (I prefer the inactive ones myself), and he appreciates the brand’s legacy.

Let’s run down the challenges facing Windward Boardshop.

1) Their inventory is a mess. The store had great success with Boosted electric skateboards a while back, but they’ve been out of stock for a year because they can no longer afford to buy them upfront. Chris estimates that not stocking Boosted skateboards has cost Windward $400,000 in revenue over the last 12 months. Then there are the paddleboards. Besides taking up a ton of space, paddleboards cost an intimidating $2,000, with a measly 30 percent margin — the overall store margin, per Marcus, should be at least 50 percent.

2) There’s a “flea market” vibe to the paltry women’s department, which only accounts for 10 percent of their sales. Matching tops and bottoms on the picked-over rack of bathing suits are few and far between. Maybe the issue here is that a dude is doing the buying?

3) Chris and Tony explain that they picked the Highland Park location because it’s an affluent area that’s close to the lake — that is, Paddleboard Country. But Marcus points out a key flaw in their logic: Demographically, it’s an older area. Not so much Paddleboard Country. The little-trafficked store’s monthly profit is $10,000, but their rent is a daunting $13,000.

4) Fun fact: Chris and Tony chose this location without consulting Jess, whom they now blame for its poor performance. Let’s talk about Jess: She started with a 20 percent ownership stake in the company. Then she got pregnant. She told her co-owners that once the baby came, she’d need three months of maternity leave and could no longer work six days a week. They responded by lowering her pay and cutting her equity. For this, they are unrepentant. “It felt like we financed your pregnancy with my money and our time,” Chris says. In general, it seems that Chris and Tony have a lot of critical conversations in the Chicago store that Jess isn’t privy to — for one thing, she had no idea how much money they were losing. Marcus calls this a “disjointed dynamic.” I call it “extremely rude.”

6) Windward’s offerings aren’t broad enough. Without losing their core customer base, Marcus says, they need to appeal to a broader segment of the population. In other words, they need to attract people who are interested in active sports more generally, and very possibly even people who would prefer not to pay black-market-organ prices for their equipment.

Marcus offers $500,000 for 50 percent of the company. Chris counters with $600,000 for 40 percent. They reach a compromise: Marcus will throw in an extra $100,000 for no additional equity if they can liquidate $200,000 worth of their off-season backlog and otherwise meh inventory in the next 30 days. Deal!

But not everyone is on, ahem, board. Cody, an employee who seems to spend a lot of time in the basement, is intensely loyal to the Windward brand and he doesn’t fully trust Marcus to steer it. “Are you just going to turn this into a glorified chain skateboard store in the malls?” How dare you? Marcus takes the dissent in stride, and the tentative peace of a fist bump is achieved.

With that détente achieved, Marcus gets dressed in all the gear he’d need to go snowboarding, from helmet to ski pants to board. The purpose of this exercise is theoretically to determine how expensive everything is (very expensive, by the way: $2,200!), but really it is an excuse to make Marcus wear an inherently hilarious outfit on camera.

Marcus joins Chris at a boat and RV show, where, for some reason, Windward has a booth. Marcus’s review? “This is the shittiest display I’ve ever seen.” They hardly have a display, with the notable exception of a large pool for (what else?) paddleboarding. After rent and staffing, the booth cost them a net $300.

As swift and as sure as the angel of death, Marcus wastes little time in closing the Highland Park location. He directs the employees to pull everything that’s guaranteed to sell downtown. But what about the inconvenient matter of their lease? They’re locked in for five more years. Fortunately, Daddy Warbucks is here to save the day. Marcus negotiates with the landlord to buy the building, thereby freeing the good people of Windward from this obligation. (And hit Marcus Lemonis up if you want to buy property in Highland Park, I guess.)

But the original shop needs work, too. In the bowels of the Chicago store, the basement stockroom is a massive nightmarescape with merchandise littered everywhere. Marcus has decreed that the store needs a new name, so he brainstorms with the staff. Sales associate Salena, an employee who is seemingly permitted to leave the basement and roam freely among the daywalkers, argues they should stay away from “active” and “sports.” She explains, “When you skate or snowboard, you look at it as kind of like an art form in your lifestyle.” This is how I feel about crosswords. They settle on Windward 82, a nod to the year the store opened. After Cody complains about the word “Windward” itself, it gets abridged to W82, like WD-40’s cool older cousin.

When Marcus suggests expanding their offerings to servicing the likes of hiking and biking enthusiasts, or even snowboarders and skateboarders who are just starting out, Salena is scandalized. This is no big-box store. “That’s not how we approach our customer base,” she tells him. “You are coming off so self-righteous,” he responds, and he is not wrong.

Marcus enlists the Business Pals — who, praise the Business Gods, are finally communicating well — to look closely at their sales numbers, ranking the product categories from highest to lowest gross profit to figure out what they should cull to strive for an overall 50 percent margin. As it turns out, swim and women’s apparel have some of the strongest numbers. The paddleboards have trash numbers. The paddleboards must go, and good riddance. During the course of this episode, I have developed a deep and profound grudge against paddleboards.

The store closes for a full renovation. The upstairs will be rearranged into clear departments: swim, shoe, electronics (including those coveted electric skateboards, cameras, and, why not, drones). More exciting, they’re also converting a large chunk of the basement into 2,000 square feet of brand-new retail space. That’s where they’ll put the pure skate and pure snowboarding departments, for the “art form in your lifestyle” crowd.

Marcus takes Jess and Chris to Agenda, an apparel and footwear trade show in Vegas, where Jess demonstrates her knack for choosing new products and schmoozing with up-and-coming brands. Soon enough, Marcus unseats Chris as the company’s designated buyer so that Jess may ascend to her rightful throne. “I think if we have the right system in place, she can do this,” Chris says, which is not exactly a ringing endorsement, but I’ll take it. By the way, as for the liquidation effort, they’ve made half a million dollars in sales since they started this process — more than doubling their goal, all thanks to Jess’s leadership. Hashtag Team Jess.

Speaking of, Marcus calls a meeting with the three co-owners to talk about Jess’s equity. Now that Marcus has invested, she’s down to a measly 5 percent. This aggression will not stand. “The three of us are not going to have a baby, but we may have something else happen to us that require us to have to be gone for a little bit,” he chides the men. Marcus downgrades himself from 50 to 40 percent and upgrades the holdings of the other three: Chris from 28 to 30 percent, Tony from 17 to 20, and Jess from 5 back to 10. Marcus: 1, the patriarchy: 0.

After a final mad rush to get things just right — or at least move some of these damn boxes out of the middle of the store — W82’s grand opening appears to be a resounding success. Marcus calls this “the biggest transformation I have ever done to any business ever.” It cost him a not inconsiderable $400,000 to pull off. “Your dad would be very proud,” he tells Chris.

The updated W82 is now home to what may be the largest streetwear slash sneaker department in all of Chicago, with more than 300 different shoes available. That’s three centipedes’ worth of non-repetitive foot fashions. The snowboard room has a Park City vibe, complete with a chair lift. The new “skate cave” is decorated with graffiti — like, the kind of graffiti that someone might decide was a kicky design element in an urban Whole Foods — and boasts double the inventory. Marcus predicts that the new basement will yield another $700,000 of revenue without W82 paying any additional rent. For the record, Cody and Salena are okay with all of these developments, or at least, not so not-okay as to make a stink about it on national television.

Now if you’ll excuse me, I have a dumpster full of paddleboards to torch.

The Profit Recap: Paddleboarding Is Not a Crime