Sports Authority files Chapter 11; store closings loom
The Sports Authority on Wednesday filed for Chapter 11 bankruptcy protection and said it plans to close or sell as many as 140 of its 463 stores nationwide. The beleaguered company has struggled in recent years under increased competition not only from online players, but also from the likes of Dick’s Sporting Goods and specialty retailers such as Lululemon that have capitalized on the “athleisure” boom in fitness apparel.
The filing was not a surprise. Sports Authority was expected to file Chapter 11 after it missed a $20 million coupon payment on Jan. 15, 2016, which triggered a 30-day grace period to work out a compromise with creditors, Reuters had reported.
The former big-box powerhouse said it would pursue either a comprehensive debt restructuring plan or a sale of all or some of its assets. The Wall Street Journal quoted anonymous sources as saying the retailer could shut down in the coming weeks unless it finds a buyer for its business. And Bloomberg reported that the retailer has been in the "early stages" of talks with Dick's Sporting Goods about selling stores and intellectual property, with the transaction one of several options being considered.
“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, CEO of Sports Authority, which was acquired by Leonard Green & Partners in 2006 for $1.3 billion. “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.”
In addition to the 140 stores it is looking to offload, retailer said it has identified two distribution centers, in Denver and Chicago, for closure in the coming months. With court approval, the majority of those stores could begin closing sales as early as Friday.
Sports Authority said it expects to have access to up to $595 million in debtor-in-possession (DIP) financing. Subject to court approval, the DIP financing, combined with the company’s cash from operations, is expected to provide sufficient liquidity during the Chapter 11 process, the company said.
Although the list of the stores affected was not immediately available, the company plans to exit markets such as Texas, Virginia Beach, Puerto Rico, Kansas City and Omaha, Nebraska, the Denver Post Business reported.
Sports Authority stores nationwide remain open and continue to operate on normal schedules, the company said. Customers also may continue to shop online. The majority of Sports Authority stores are expected to continue to operate without change or interruption during the entire Chapter 11 process, the company said.
The company’s customer loyalty program is expected to continue without any changes, and the company intends to honor warranties on goods purchased at one of its stores or through its e-commerce site. Customers also should be able to make returns and exchanges in accordance with Sports Authority’s return policy and use any Sports Authority gift card with an available balance to purchase merchandise in stores or online.