Why Sports Authority Is Likely to Close All 463 Stores
It’s almost certainly the end of The Sports Authority’s road. In March, the debt-laden retailer filed for Chapter 11 protection in federal bankruptcy court in Delaware, saying that it would close about 140 of its 463 stores. But last week, The Sports Authority gave up hope it could re-organize under bankruptcy protection, opting instead to auction itself off for whatever it can get.
The company “will not be able to reorganize under a plan, but will instead pursue a sale,” a lawyer for Sports Authority said at a hearing last week. So the company is offering up almost all of its assets at a court supervised auction on May 16. Contrary to many media reports this weekend, The Sports Authority has not yet said whether it will shutter its entire fleet of stores.
The erosion of Sports Authority has been so deep that its financial adviser, FTI Consulting Inc., told a bankruptcy court judge last week that existing takeover offers were barely enough to cover its $100 million in administrative and liquidation costs, according to Bloomberg News. That’s a far cry from the $1.1 billion Sports Authority owes creditors.
A number of parties, including rival Dick’s Sporting Goods have expressed interested in buying some stores, but no one has stepped up yet to buy the retailer in its entirety while maintaining the brand.
At best, it looks as though some Sports Authority locations could live on but under a different banner. (Switching from a Chapter 11 re-organization to a liquidation is usually the kiss of death in retail: the Borders bookstore chain tried to reorganize but ultimately put itself up for sale and found buyers, including Barnes & Noble, for pieces of its chain.)
Hard as it is to believe, a decade ago Dick’s and Sports Authority were about even in size, each with annual sales of about $3 billion. But in the years since, Dick’s has pulled way ahead, thanks to better in-store presentation and tech in stores.
Adding to the pressure, sporting goods retailers in general are having a lot more trouble competing with the Amazon’s of the world, meaning consolidation and an overall reduction of stores is in the offing. Two weeks ago, Vestis Retail Group, the operator of the Eastern Mountain Sports, said it would wind down its Sport Chalet retail chain as part of a Chapter 11 bankruptcy protection filing, the better to focus on saving Eastern Mountain. (Vestis also had said that Sports Authority’s closing out sales were hurting its business.)
Even Dick’s Sporting Goods, the best in class, has hit a rough patch: comparable sales at its namesake chain fell 2.5% during the holiday quarter. And Cabela’s is up for the sale. So the disappearance of Sports Authority is probably just the unwinding of over-expansion over the last ten years, with the weakest being killed off.
Some Sports Authority aficionados might hope that company ends up like Radio Shack, which went bankrupt last year but lives on as a much smaller chain of 1,700 stores, the struggles and overabundance of sporting goods stores means it will be hard for Sports Authority to live on as a physical retailer.
But Sports Authority fans might find solace in this: some retailers, namely Sharper Image and Linens N Things, have come back from the dead as online-only brands. Better than nothing.
This article originally appeared on Fortune.com
Have your own perspective on business or politics? Click here to find out!