On the Money

Take a hike! REI's sales soar on boom in outdoor popularity

Spring fever

Whether it's hiking, biking or camping, an estimated 142 million Americans love the great outdoors. That statistic has helped propel outdoor retailer REI to new heights of success.

The recreational equipment chain's sales rose 10 percent to a record $2.2 billion last year, growing faster than the likes of Macy's, Target and Wal-Mart, thanks in large part to the growing popularity of outdoor sports. For water sports equipment sales alone, the U.S. market is nearly $19.4 billion, according to Statista.com.

"We're seeing what we would call our heritage categories: the camp, the hike trail, those things that we've been involved in for 75 years, are really strong right now," REI President and CEO Jerry Stritzke explained to CNBC's "On the Money" in an interview.

"There's a real movement towards fitness, and the idea of getting outside really has dovetailed to make these traditional outdoor activities compelling," said Stritzke, a veteran of retail powerhouses Victoria's Secret and Coach.

Small company, big numbers

Hermann Erber | Look-Foto | Getty Images

REI, which is not publicly traded, owns 140 stores in 33 states. It credits its success to a unique business model that has seen it surpass older, established companies like LL Bean in annual sales.

The company was established as a cooperative in 1938, which means the customers are also the stakeholders. By paying a one-time fee of $20, shoppers are guaranteed lifetime membership, an annual dividend of roughly 10 percent and exclusive member deals and discounts.

Membership now stands at 5.5 million people, with nearly a million signing up just in 2014. Currently, its members account for 88 percent of all sales; last year, the company returned 75 percent of the profits, or $168 million, back to its members as a dividend.

"As a cooperative, we're really owned by our members and as a members-owned operation, we kind of define success very differently. We take a long-term perspective," the CEO said. "We really run our business to meet our membership's objectives, and for us that's predominantly about delivering a compelling outdoor experience."

Creating such experiences is what prompted REI to partner with the National Park Service on its 100th anniversary. The retailer recently announced plans to invest in the infrastructure of America's national parks, and will launch 5 new outdoor education programs to attract members to these parks. The company has a total of 35 REI Adventure trips in national parks.

CORRECTION: This version corrects the number of outdoor education programs planned by REI to 5. The company said its earlier figure was incorrect.

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