Sports Authority files for bankruptcy

Mar 02, 2016, 12:33 PM EST
Source: swong95765/flickr
Source: swong95765/flickr

Sports Authority, with $1.1 billion in debt, filed for bankruptcy protection on Wednesday.

Reuters reports:

Sports Authority Inc said it filed for Chapter 11 protection on Wednesday, becoming the latest U.S. retailer to file for bankruptcy to slim down its business as more shoppers spend their money online. The sporting goods retailer has hired liquidators to begin store closing sales at up to 200 of its 463 locations, according to court documents. Sports Authority asked the U.S. Bankruptcy Court in Wilmington, Delaware, to allow it to begin closing the underperforming stores immediately to help shore up its finances. The Englewood, Colorado-based company also said it planned to close or sell two of its five distribution centers, in Denver and Chicago. "This decision follows a comprehensive review of the Sports Authority store portfolio in light of the increasing amount of shopping that is occurring online," the company said in a statement. In the past year, many teen retailers, including Wet Seal Inc, and electronics chain RadioShack Corp have used bankruptcy to close weaker stores.

The Wall Street Journal notes:

Sports Authority has “accumulated substantial losses” as sales shifted from traditional brick-and-mortar retailers to online resellers, Chief Financial Officer Jeremy Aguilar said in a court filing. In fiscal year 2015, which ended Jan. 30, 2016, Sports Authority posted before-tax losses of about $156 million on sales of $2.6 billion. The retailer’s bankruptcy puts the jobs of 5,400 full-time employees and 9,100 part-time employees at risk, according to court papers. Sports Authority said it has identified about 140 stores and two distribution centers, in Denver and Chicago, that it intends to close or sell in the coming months. The company said it expects most stores to continue in operation throughout the chapter 11 process. Sports Authority has agreed to take up to $595 million in bankruptcy financing from senior lenders including Bank of America Corp., Wells Fargo & Co., J.P. Morgan Chase & Co. and TPG, the people said. As a condition of the loan, Sports Authority would close and clear out dozens of stores after filing for chapter 11, some of the people said. The company would need to close the rest of its store base by the end of April if it can’t find a buyer that would put more money into the business, they added.

CNN Money writes:

Sports Authority is just the latest retail giant to fall on hard times as more and more shopping moves online. Circuit City went bankrupt in 2008, followed by Borders in 2011. Both eventually closed. RadioShack went bankrupt a year ago, and American Apparel (APPCQ) filed in October, although both companies remain in business with fewer stores. Store closings are a growing trend among troubled retailers not in bankruptcy, such as Sears (SHLD). Even successful retailers such as Walmart (WMT) are closing stores. For Sports Authority, the online competition has come from online retailers such as Amazon (AMZN,Tech30) and Fanatics, and also retail sites run by sports leagues such as the NFL and NBA. "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 spends $6 million a year to have its name on the stadium that is home to the Denver Broncos, which just won the Super Bowl. Whether that 25-year naming rights deal will continue under the bankruptcy is unclear. "This was a tough decision to make, but we believe it was a necessary step in our plan to make Sports Authority an even better partner for our customers," said CEO Michael Foss.