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As Sports Authority Liquidates, What’s Next For Its Stores?

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After a tumultuous few months that involved a Chapter 11 bankruptcy reorganization, preparations to close approximately 140 stores, then a push-back of the auction to May, Sports Authority has opted to liquidate all assets, according to a report from The Wall Street Journal.

Robert Klyman, an attorney representing Sports Authority, first informed a U.S. bankruptcy judge of the retailer’s decision at a court hearing.

Upon failing to reach an agreement with its creditors regarding $1.1 billion in debt, Sports Authority will not reorganize under Chapter 11 as an independent company. Instead, the company will be sold off in pieces.

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The question of the moment is: Who will be purchasing the residual assets of the former sporting goods leader? Competitors such as Dick’s Sporting Goods, Academy Sports + Goods and Modell’s already could be prime candidates to bid on the remaining holdings during the May 16 auction, with Dick’s CEO Ed Stack publicly acknowledging his company’s interest in the brand during a quarterly earnings call in March.

“We’re making the investments we feel necessary to capture a big part of that vacated market share with the Sports Authority closings,” Stack said during the call. “We want that business to come to us as opposed to somebody else, and we’re going to be very aggressive.”

Both Dick’s and Academy are presently in expansion mode. Dick’s has opened approximately 200 new locations within the past five years, while Academy Sports has added approximately 70 stores in the same time frame. Academy recently has entered Midwestern markets such as Kansas, Kentucky, Indiana and Missouri, perhaps indicating that the retailer would be welcome to acquiring Sports Authority locations presently based in this region.

Sports Authority will auction off almost all of its 464 stores with two different scenarios in mind: 1) the buyer of certain stores will keep them open and operating; and 2) certain stores will be sold after all the merchandise has been liquidated.

A Bloomberg report noted that Sports Authority’s financial standing is so poor that the company’s liquidation process will raise only enough cash to cover administrative costs of the bankruptcy (approximately $100 million of the $1.1 billion owed), making the option of a reorganization virtually impossible.

 

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