The long-speculated bankruptcy of Sports Authority is official.
In a statement posted to its website Wednesday, CEO Michael Foss said that the company decided to file for Chapter 11 bankruptcy as a way to implement a financial and operational restructuring that it sees as necessary to better appeal to customers.
Foss said the sporting goods retailer has identified 140 stores to close or sell in the coming months. “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,” he wrote.
Speculation of the filing heated up when Sports Authority missed a $20 million interest payment in January. That prompted a 30-day grace period during which it could compromise with creditors. That window ended February 14.
The 140 stores on chopping block are a sizable chunk of the 463 it operates overall.
The retailer filed for Chapter 11 protection in federal bankruptcy court in Delaware in a move aimed at helping it shed much of its debt and clean up its balance sheet. A successful revamp would let Sports Authority improve its brick-and-mortar, perhaps with in-store boutiques similar to the Under Armour and Nike shops that have been so fruitful for rival Dick’s Sporting Goods.
(FreeBham Editor’s note: According to the details of the bankruptcy filing, the company has less than $1 billion in assets and between $1 billion and $10 billion in liabilities. The 140 planned store closures represent 30% of Sport’s Authority’s current store base. Given the amount of liabilities, the significantly reduced store count and the difficulties presented by DIP financing in securing merchandise to operate stores, it is likely that Sports Authority will close even more stores as time progresses.)
Sports Authority, whose name adorns the stadium of the Denver Broncos, has been saddled with boatloads of debt ever since a $1.3 billion leveraged buyout a decade ago. At the time, the Colorado-based retailer and Dick’s DKS 0.19% were similar in size with annual sales of $3 billion. But since then, Dick’s has invested in its in-store experience and in-store tech, which have helped propel the retailer’s sales past Sports Authority’s. Analysts are forecasting total 2015 sales of $7.3 billion for the Pennsylvania-based company, compared to almost $3 billion at Sports Authority.