Sports Authority files bankruptcy after missing fitness boom
SPORTS Authority Inc. filed for bankruptcy last Wednesday after failing to exploit the fitness boom that’s been a rare bright spot in retail.
The company, whose name adorns the stadium that’s home to the Super Bowl champion Denver Broncos, has fallen far since a US$ 1.3 billion buyout in 2006 piled it with debt. The company said in a statement following the bankruptcy filing in Delaware that it will close as many as 140 of its 463 locations.
In 2006, the chain was even with Dick’s Sporting Goods in sales. Today, Dick’s has hundreds more locations and takes in almost twice as much per store, making it the US leader in selling athletic gear, while Englewood, Coloradobased Sports Authority’s debt load has hampered its ability to expand or innovate.
“We are taking this action so that we can continue to adapt our business to meet the changing dynamics in the retail industry,” said Michael E. Foss, chief executive officer of Sports Authority. “We intend to use the Chapter 11 process to streamline and strengthen our business both operationally and financially so that we have the financial flexibility to continue to make necessary investments in our operations.”
The company listed liabilities of as much as US$ 10 billion ( RM42 billion) in the bankruptcy filing in Wilmington, Delaware. The company said it has access to as much as US$ 595 million in debtor in possession financing.
In 2015, sales at US retailers were the weakest since 2009, according to the US Commerce Department. But as big-box giants and online merchants encroached on clothing stores and consumer electronics chains, sports were one of the few healthy areas.
So, while companies including Target and Gap shored up sales by expanding their fitness offerings, American Apparel and Quiksilver last year all sought creditor protection.
Sports Authority has about 200 fewer stores than Dick’s. The company said that in addition to the retail store closures, distribution centres in Denver and Chicago will be shut down or sold.
With so much debt to manage after the buyout, Sports Authority hasn’t been able to make the kind of improvements seen at its larger rival.
One area where it’s lagged is presentation, according to Joe Feldman, an analyst at Telsey Advisory Group. Dick’s excels in layouts and displays and has partnered with manufacturers including Nike Inc. and Under Armour Inc., which operate instore shops.
Those improvements have helped Dick’s pull in about US$ 10 million a year in sales from the average store, while Sports Authority collects about US$ 5.75 million, according to Steven Ruggiero, a credit analyst at RW Pressprich & Co. — WPBloomberg