Watson’s CEO Erik Mueller has expansion on his mind.
Last year the company gutted, and completely renovated an existing retail space off of Interstate 50 in O’Fallon, Illinois to open its newest store— which serves a portion of the market the company wasn’t in before. Just this week, Watson’s announced the acquisition of Detroit retailer Allstate Home Leisure, and it’s not stopping there.
Casual News Now caught up with Mueller on his drive back from visiting the Allstate team in Detroit to learn more about the acquisition, why Watson’s has been eyeing The Motor City, and how acquisitions might affect the casual industry in the coming years.
While Mueller says the company looked at several acquisitions over the last couple of years, Detroit’s been attractive because the company already has a presence in the state of Michigan with a store in Grand Rapids.
“Detroit’s three and a half hours north of Cincinnati, and strategically and geographically it made a lot of sense,” Mueller says of acquiring Allstate’s Detroit stores. “And we just felt like that Detroit market was a bit underserved, generally speaking in the categories we were in.”
Mueller also says Watson’s looked at other retailers to acquire previously in different areas of the country, but Detroit just happened to be an open region they’ve had their eyes on.
“When I was made aware of the opportunity with Allstate, we started talking to them on and off for about a year, and we were able to finally put a deal together at the beginning of this year,” Mueller explains. “The Allstate culture and business model ended up being the right fit and aligned with our long-term growth strategy.”
Through the acquisition, Watson’s will add five greater Detroit retail locations in Ann Arbor, Novi, Livonia, Rochester, and Sterling Heights and 1 distribution center to the company’s current corporate and franchise footprint of 25 full-line and accessory locations.
Allstate will operate as a wholly-owned subsidiary of Watson’s, initially integrated as Allstate Home Leisure by Watson’s, with a full transition to complete Watson’s branding over the next 18-24 months.
In terms of expanding organically vs. acquiring, Mueller says the retailer doesn’t look at one strategy harder than the other.
“I would’nt say one is more important or less important than the other to us,” he says. “We’re out looking for companies in any region of the country that make sense for us.”
However, he does say that with a shrinking number of casual specialty retailers and many next-generation owners selling the business rather than continuing on, acquisitions present a major opportunity in the casual industry.
“Acquisitions create an opportunity for the right retailers to exit their businesses if they’re at that time in their life,” Mueller explains. And with the right partner, it can be a win-win for both companies. I think it’s really an individual company opportunity, whether it makes sense for them to be acquired or to take a different route. But it depends on the strength of the team that’s behind them and the management team that they’re leaving behind.
“Acquiring a company where the owners leave and there’s nothing left, besides an owner or two that are doing everything and running the company day-to-day, I don’t know that acquisition in that situation makes all the sense in the world. But if there’s a nice management team behind them and they have a nice healthy business with some good infrastructure and some good processes, then potentially the acquisition makes sense. I do believe that there will be more opportunities in our industry for this type of transaction. We’re certainly going to continue to be out there and pursue them and look for similar opportunities in other areas.”