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Grow Biz International cashes in on used goods

September 30, 1997

GOLDEN VALLEY, Minn. (AP) _ As kids around the country returned to school this fall, their parents cringed at the mountain of the usual back-to-school expenses: clothing, musical instruments, sports gear, maybe even a computer.

But instead of heading to the department stores, many bought, or traded, for new and used merchandise at stores under the umbrella of Grow Biz International, a fast-growing company that is cashing in on people’s fondness for recycling _ and for saving a buck.

``If you’ve got kids, I think you can’t beat it,″ said David Young, who was trying on golf shoes recently at a Play It Again Sports store near his home in Minneapolis.

He’s bought and sold skates and other things there for himself and for his son and daughter, who are now ages 17 and 15.

``They grow so fast,″ he said with the voice of experience. ``You’re always returning something that they’ve outgrown and can’t use any more.″

Grow Biz was founded in 1990 by a pair of franchising experts, Ronald G. Olson, who is now president and chief executive, and K. Jeffrey Dahlberg, the chairman.

``We realized then that there really was a need out there for this kind of retailing, where you blended new and used product,″ Olson said, adding the attraction would be that used items would cost about half of the retail price.

The recipe worked. Grow Biz ballooned from an initial 18 Play It Again Sports stores to nearly 1,200 stores that market various merchandise under six different names. Olson and Dahlberg hope to continue expanding to 3,000 franchised or company-owned stores within five years.

Grow Biz expended quickly. After looking at the success of Play It Again Sports stores, it bought out Once Upon a Child in late 1992, and began trading in used and new children’s clothing, toys and furniture. In 1993, it moved into computers and computer equipment with Computer Renaissance and musical instruments and accessories with Music Go Round. A year later, the company expanded into CDs with Disc Go Round. This summer, it purchased Video Game Exchange, renamed the stores It’s About Games, and now includes video, computer and other games.

The Play It Again Sports stores continue to be the centerpiece of the chain, with nearly 700 stores in the United States and Canada, as well as Australia and Germany.

Overall, the company had $415 million in sales in 1996, up from $238 million in 1994. Net income rose 30 percent to $2.6 million.

Tom Emmel, a research analyst at John G. Kinnard & Co. in Minneapolis, says Grow Biz can expect to spend the next decade riding the wave of baby boomers’ children who need to buy things for their children.

``As those children grow up, that plays into all of the Grow Biz themes,″ Kinnard said. ``The other thing is, personal income growth is still being kept fairly tight, so the family budget is getting more and more stretched.″

Along with that, Olson said, the stigma of buying used merchandise has gone by the wayside as consumers are encouraged to reuse and recycle.

But Grow Biz is not without its growing pains. In 1994, it was rated the fastest growing public company by Inc. and Fortune magazines and became a hot stock on Wall Street. But it fell from favor when it missed some earnings targets.

Olson said the company expects revenue to stay flat this year because it scaled back its internal buying after many franchise owners said they preferred buying directly from manufacturers. Although the change meant lower revenue, it resulted in higher net income and earnings per share, the company said.

And Emmel, the analyst, thinks there’s still growth potential for Grow Biz.

``What really appealed to me about Play It Again Sports is it makes so much more intuitive sense,″ he said. ``When you have a child going into golf, hockey, expensive sports, and they are outgrowing their equipment every year, why would you want to purchase more expensive (gear)?,″ he asked.

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