After nearly two years operating under a new owner, Northern Lights Trading Co. in Bozeman, Mont., was days away from being liquidated this July, until former owner Mike Garcia stepped in and bought the business on July 15.
Garcia founded Northern Lights (www.northernlightstrading.com) in 1979, and sold the store to Jay Allen, a former financial analyst for a medical products manufacturer, in 2008. (Click here to read the Feb. 4, 2009, SNEWS® story, “Northern Lights enjoys smooth change in leadership.”)
Following the sale in 2008, Garcia assisted in the management transition for three months, and then left to launch Rivers, Lakes and Oceans, an import paddlesports business in Chile and Costa Rica. Over the past two years, Garcia had little if any contact with the new Northern Lights owner, until Allen called him June 22, 2010, requesting a meeting.
“I was thinking they must be talking about when I’m going to put that fresh coat of paint on the west side of the building,” said Garcia, who retained ownership of the building following the sale. “I came in, and they said that things were terrible, and they were losing their shirt, and they had no choice but to liquidate and leave. I basically got six days notice they were going to liquidate and leave town.”
Garcia said he told Allen that wasn’t a good idea. “This thing was spinning out of control, and they were making rash decisions. They were going to slam the door, and 30 people were going to be out of jobs,” Garcia told SNEWS.
“I told them, ‘You give me a number you think you’ll get from your liquidation, and I think I can find you a buyer.’ I got a number that wasn’t realistic, and worked backwards from that,” Garcia said.
He established a new company, Alpine Visions LLC, with two other partners, brothers who are also friends of Garcia, and purchased all three Northern Lights Trading Co. locations in Bozeman free and clear, with no liens -- Garcia owns 50 percent of the new company and the brothers each own 25 percent. In the deal, he acquired the store’s inventory and fixtures at what Garcia said was “obviously a distressed price,” and also took back rights to use the Northern Lights Trading Co. name.
Garcia also purchased the e-commerce site NorthernLightsTrading.com, plus the Barrel Mountaineering store in Bozeman (www.barrelmountaineering.com), which Allen had bought in September 2009. Pipestone Mountaineering in Missoula, Mont., a business that Allen purchased in May 2009, was not part of the acquisition by Garcia and was liquidated by Allen in June 2010.
Garcia said he would keep Barrel Mountaineering running through next year to assess its financial status and future.
SNEWS contacted Allen who told us he had no comment when we asked him how and why the business went downhill so quickly following the acquisition. When we asked him again if he wished to provide any comment on the sale to Garcia or the financial challenges that led to the sale, he said, “I have no comment…what’s there to say?”
On July 16, Northern Lights, a long-time Grassroots Outdoor Alliance member, had its membership terminated, following notification by Allen that he was selling the business.
Roanne Miller, president of Grassroots Outdoor Alliance, told SNEWS that Allen notified the organization of his intent to withdraw membership because he was selling the company. The sudden notification caught GOA by surprise, and it quickly issued a letter terminating membership for cause because, as Miller stated, Allen had sold the assets to the company, was behind on payments to vendors, and was trying to negotiate repayment on his own terms to vendors, which all violate the terms of membership.
Garcia said it pains him knowing vendors are not happy with the company he founded. By far the most difficult part of the repurchase so far has been the struggle to repair damaged relationships with vendors, he told us.
He said that Allen hired Retail Sales Consultants, a company in Norfolk, Va., so that Allen’s company, Crestline Holdings, could settle debts with vendors. “They’re offering to settle for 15 cents on the dollar, which is ludicrous,” said Garcia.
The lowball payment rate has caused friction with Northern Lights’ vendors, we were told, and Garcia and his staff members are working hard to prevent any bridges from being burned.
“It’s such a heartfelt industry that people try to find ways to take care of each other,” said Garcia, explaining that his primary concern is that manufacturers are treated fairly.
“My employees feel awful because they’ve had these fantastic relationships with people they have been buying from all these years, and now they’re stuck behind this 8-ball,” Garcia said. “It’s very emotionally draining. I just have to rely on my long history in the industry, and my own business sense.”
Reasons for failure
Garcia said he is still trying to sort out how Allen got into such financial trouble, but he said he suspects that it was due to overspending, as well as a lack of understanding of the local market and the outdoor industry.
He noted that when he sold the store, and through the 2008 Christmas season, Northern Lights was in good shape. But, he added, the Barrel Mountaineering and Pipestone purchases caused financial strain. “They were spending rather freely,” Garcia said.
He added that the previous owners also did not understand the customer base in Bozeman. “I warned them, ‘You’re not buying an outdoor shop in just any old town in the United States; you’re buying a shop in Bozeman, Mont., one of the outdoor Meccas, and the people in this town are extremely passionate about this stuff, and you need to understand what you have here and embrace it.’ But, they didn’t know how to engage the people.”
To make matters worse, he said the previous owners did a poor job of managing the staff. “They never got control of their staff, and stripped the staff of their legitimacy in so many ways. They were left in the dark,” Garcia said.
Greg Caracciolo, general manager of Northern Lights, told SNEWS that the previous owners often second-guessed buying decisions and did not trust the staff to purchase products based on their many years of experience and knowledge of trends.
“Instead of letting things flow, and learning how and why we did things that had made us reasonably successful over the years, they wanted to put their stamp on things maybe too quickly,” Caracciolo said, adding that he was often cut out of the decision-making process. He said the owners basically put up a barrier between themselves and the employees.
That’s a very different scenario than Caracciolo faced when Garcia was running the shop. “I had always had an open-door policy,” Garcia said. “Sure, I’m the owner, but also kind of an owner-operator, and my door is always open. If there’s a problem under this roof, it’s my problem. Bring it to me. And (the former owners) didn’t do that.”
Caracciolo said the owners also pitted employees against each other. “I was the general manager when they bought it, so one of my personal looks on the whole thing was to stick up for my employees,” he said. “I did that to the best of my ability without getting too in their face, and they didn’t like that very much. Employees were very uncomfortable many times.”
Back at the helm
Now that Garcia is back in control, the store is getting back to its old self. “We have plenty of customers coming in, and things are going pretty well,” he said.
Nevertheless, Garcia certainly didn’t envision that, at this point in his life, he would be running Northern Lights again. In 2008, he sold the store so that he could spend more time with his wife and sons, and they planned to spend three months of each year in Chile.
Garcia will now be traveling back and forth between Montana and Central and South America to keep tabs on the growing Rivers, Lakes and Oceans company, which is being run by one of Garcia’s sons.
Not that Garcia is sad to be spending lots of time in Montana. “You could lock me up here forever and I’d be happy,” he said. And he thinks he’ll devote at least the next three to five years righting the Northern Lights ship.
“We’re going to sail this thing hard and do as much business with the vendors as we can,” he said, emphasizing that he wants to focus on helping out the manufacturers who have been such good partners over the years. “I really want to help them out a bit,” he said. “Those might sound like empty words, but they’re not empty emotions.”
--Marcus Woolf with Michael Hodgson