Sports Authority announced nearly 140 stores will close this year. Early Wednesday, the company filed for Chapter 11 bankruptcy protection.
As previously reported by the Inquisitr, Sports Authority isn’t the only retailer who has fallen on hard times. Kohl’s is closing stores due to poor performance sometime before June.
In a statement yesterday, the sporting goods retailer said nearly one-third of retail locations will be closed before the summer. The complete list of Sports Authority store closings is available in the company’s bankruptcy documents.
CEO Michael Foss said in a statement that the decision was not easy, but it was an essential step to make Sports Authority a considerably better company for customers, employees, and vendors.
For now, the majority of Sports Authority locations will operate as normal, and customers should not notice a difference in service. Additionally, the company’s website will continue to function and be available for purchases.
The retailer and its creditors are considering two possible options to get the company back on its feet and competitive again. The first option is to eliminate a substantial portion of the company’s debt and cut costs. The second choice is to sell all or part of the business.
The bankruptcy process and restructuring are expected to be completed before May. The Chapter 11 petition will allow Sports Authority to default on the leases of the stores that will close.
CNN Money reported that industry analysts have predicted the bankruptcy filing since January after the athletic apparel retailer revealed it was delinquent on a $20 million debt payment and entered negotiations with several lenders.
According to the filed documents, Sports Authority has 450 stores and 14,500 employees, most of which are part-time. The company has over $1 billion in debt and assets valued between $500,000 and $1 billion.
“In terms of their long-term viability, I think they need to do more than just close stores,” said Andrew Bove, a credit analyst with Standard & Poors. “There’s other issues. They’re not doing enough to get consumers in the door to spend money.”
While Sports Authority is in bankruptcy, it will use $595 million in additional borrowed funds to maintain operations. However, unless a buyer comes forward to purchase the remaining stores, the loan may never get paid back.
While Bove believes the company has brand recognition and is a leader in the sporting goods retail industry, a buyer willing to take on the risk will be quite a challenge. He says Sports Authority still has value, so the challenge may not be an impossible one.
Nearly 10 years ago, Sports Authority was the largest retailer in the sports apparel and equipment category. Since then, however, the company has struggled with a massive debt load. Dick’s Sporting Goods, a major competitor, has taken the top spot in recent years.
“Someone who wants to shop in a brick-and-mortar store and try on the baseball glove, or get the feel of a golf club, wants a better shopping experience,” said Larry Perkins of SierraConstellation Partners, an expert in business reorganizations. “That’s not Sports Authority any more.”
Like other large retailers, Sports Authority has been losing the game against online retailers like Amazon and Fanatics. Also, online retail sites operated by the NFL and NBA have lured customers away from the company’s stores.
“You used to go to Sports Authority or some other store to buy your fan gear. Now it’s much easier to find online,” said Perkins.
Sports Authority owns the naming rights to the stadium where the Denver Broncos play. The 25-year contract costs the company $6 million per year, and it is unclear how the bankruptcy will affect the deal.
In addition to the 140 stores that will close in 2016, Sports Authority will also shutter two distribution centers in Denver and Chicago. The sporting goods retailer is owned by private equity firm Leonard Green & Partners LP, who bought it for $1.3 billion in 2006.
[Photo by Tim Boyle/Getty Images]