Eastern Mountain Sports Closing Stores As Vestis Retail Group Files Bankruptcy
Eastern Mountain Sports owner Vestis Retail Group filed for bankruptcy protection on Monday. Citing changes in the way consumers shop, a downward slide in sales and continued pressure from competitors, the company filed a chapter 11 petition listing $500 million in debt and $50,000 in assets.
“The continuing shift in consumer behavior away from traditional brick-and-mortar retailers and toward online-only stores, together with increased competition from big-box and specialty sporting goods retailers, have contributed to an industrywide weakness,” Mark Walsh, chief executive officer of Vestis, said in a court filing.
On Saturday, the company unexpectedly announced the closure of all Sport Chalet stores. While signs and banners were posted at retail locations kicking off liquidation sales, the company halted all online sales and shut down its retail website.
Many regular customers received a short, vague email from the sporting goods store about the closures.
“We’re closing. Thank you for 57 great years,” wrote Sport Chalet. “We hope to see you at our store closing sales.”
Per a report from Bloomberg, all three chains combined generate roughly $660 million in revenue and employ nearly 4,000 workers. With locations scattered throughout the northeastern U.S., Eastern Mountain Sports mainly sells camping, hiking, and skiing gear, while Bob’s stocks mostly footwear and clothing. General sporting goods retailer Sport Chalet locations are found in the western U.S., primarily in California.
Vestis, owned by private equity firm Versa Capital Management, has asked Wells Fargo Capital Finance for a $125 million debtor-in-possession loan to help fund operations while the company reorganizes. Additionally, Versa has offered to buy Eastern Mountain Sports and Bob’s Stores from Vestis, but will need approval by the bankruptcy court first.
According to court documents, Versa would pay $1.5 million in cash to acquire the two brands. The equity firm is also willing to forgive $35 million in outstanding loans, as well as cover several other debts.
Vestis has been thrust into a unique market environment due to recent bankruptcy petitions filed by competing retailers. Pacific Sunwear of California sought chapter 11 protection earlier this month, while retail sporting goods chain Sports Authority filed for bankruptcy in March.
“Ongoing store-closing sales at certain Sports Authority locations have created unusual competition,” said Walsh.
Consumers are also spending less at the mall in general. According to the National Retail Federation, U.S. retail sales are expected to increase by only 3.1 percent in 2016 as consumers shift their spending toward travel and restaurants.
The focus of Vestis Retail Group has been to buy struggling companies and turn them around. In recent years, Vestis has acquired mostly athletic goods-type retailers that were on the brink of closing.
With 35 locations, Bob’s Stores was bought by Vestis in 2008 and Eastern Mountain, operating 69 stores in 12 states, was purchased in 2012. The retail group took over failing retailer Sport Chalet in 2014. Since the acquisitions, Vestis has been able to improve the performance of all three brands, but still faces significant challenges to make them profitable.
“As a result, EMS and Bob’s are now delivering solid performance but have been burdened by limited financial flexibility due, in part, to the unique competitive pressures facing Sport Chalet,” Vestis Chief Executive Mark Walsh said in a statement. “After reviewing a variety of strategic alternatives, we determined that the best path forward is to separate the businesses and confront the challenges that have been hindering our overall progress.”
Vestis Retail Group LLC filed for chapter 11 bankruptcy protection with the U.S. Bankruptcy Court in Wilmington, Delaware. Pending court approval, the group hopes to complete the sale of Eastern Mountain Sports and Bob’s Stores by midsummer.
[Photo by AP Photo/Reed Saxon]
