Sports Authority has officially filed for Chapter 11 bankruptcy, with CEO Michael Foss making the move public via a personal message to consumers on the company’s web site. As part of the retailer’s restructuring plan, the retailer will close or sell approximately 140 stores and lay off 3,400 employees.
With the future of Sports Authority hanging in the balance ever since initial reports in February of the retailer’s bankruptcy filing, the question now becomes: What will happen to all those stores?
Although the closings are set to occur over the next three months, the retailer has been in discussions with rival sporting goods retailers Dick’s and Modell’s about potentially selling stores and intellectual property. At this point, details are minimal regarding the discussions, and it is unknown how many stores Sports Authority will consider selling.
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The potential sale represents a major shift in the sporting goods industry over the past decade that has changed the fortunes for both Sports Authority and Dick’s. A year prior to taking the company private, Sports Authority reeled in $2.5 billion in revenue in 2005, a shade under the $2.6 billion total Dick’s gathered. Since then, Dick’s has far and away taken the lead in the sporting goods industry, with annual sales last year reaching $6.8 billion, outpacing Sports Authority’s $2.7 billion.
Dick’s competitive success could be attributed, at least in part, to the ability to adapt to the modern retail environment by focusing on omnichannel strategies. Particularly when it came to selling online in markets with brick-and-mortar stores present — Sports Authority didn’t execute its transition as smoothly, with its physical stores paying the ultimate price.
Only 23% of Dick’s stores are located near a Sports Authority location presently, according to a note from Sam Poser, an analyst at investment bank Sterne Agee CRT. Therefore Dick’s could have a relatively easy entry point into these locations. If that becomes the case, Dick’s will likely remain the king of the sporting goods industry for the foreseeable future as long as it continues to prioritize its omnichannel offerings.
