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 Sports Authority studying Chapter 11
Retail | 11.02.2016

U.S. retailer in financial trouble

Sports Authority studying Chapter 11

Sports Authority studying Chapter 11. Quick fix wanted: The Sports Authority urgently needs fresh money. If not, the shutters may close at many of the U.S. chain’s outlets. (Quelle: BrokenSphere)
Quick fix wanted: The Sports Authority urgently needs fresh money. If not, the shutters may close at many of the U.S. chain’s outlets.
Bild: BrokenSphere
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One of the United States’ largest sporting goods retailers is facing severe financial difficulties. According to Bloomberg, The Sports Authority (TSA) badly needs to satisfy short-term financial claims which are due in the next few days. Should the efforts fail, the chain may seek protection in the courts under the insolvency procedures outlined in Chapter 11 of the U.S. bankruptcy code. This move would help buy time to restore the financial balance.

The immediate cause of the troubles is apparently TSA’s inability to pay 20 million U.S. dollars in interest on a loan which was already due in January. It was said that negotiations with the lenders were ongoing, but that time is running out. One solution might lead to the creditors accepting a loss, but only in return for new warranties to keep the loans working.

If negotiations fail, there will be few options left, apart from filing for bankruptcy. The retailer’s total debts are estimated to be as high as 643 million dollars. The underlying cause of TSA’s difficulties are its lacking response to online retailers and traditional competitors such as Dick’s Sporting Goods.

Exit Strategy: Shutting down outlets?

One exit strategy would be to shut down a substantial number of stores. Sources close to the TSA management hinted to Bloomberg that 200 of more than 450 outlets might have to go. The U.S. newsletter Sporting Goods Intelligence suggests that the chain should have regional strategies. For example, in the Southeast, where TSA is facing an uphill fight against the competition.

A long-lasting rumor has it that mega retailer Décathlon might be interested in acquiring the Authority. The United States is by far the most important market where the French chain is not operational. It should be mentioned, however, that Décathlon tried previously, over a decade ago, to move into the U.S. by taking over an ailing chain – and failed. This was maybe partly due to Décathlon’s philosophy of relying mainly on exclusive brands, an approach which does not necessarily meet fertile ground in the States.

The Sports Authority is not the only large U.S. retailer which seems to be in trouble. As reported, also Cabela’s, the large specialty hunting and outdoor chain, is weighing various options which might lead the way out of current underperformance.

Markus Huber (Quelle: ISPO)
Article by Markus Huber, editor
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