Sports Authority is throwing in the towel, announcing it will be auctioning off assets and making the closure of all 463 of its remaining stores a near inevitability.
It has been a long, downward spiral for sports and clothing retailer Sports Authority, but it seems that it must finally admit defeat. As recounted in a recent article by Fortune, the company announced in March that it would be filing for Chapter 11 bankruptcy in federal court and shuttering roughly 140 stores. However, this week, the company acknowledged that its bankruptcy filing was not enough to save it from its financial woes and it would be liquidating remaining assets in a court-supervised auction.
While the company, according to Fortune, had hoped the bankruptcy filing and subsequent reorganization would be enough to pull it through its hardships, that never came to pass. As the retailer’s financial adviser, FTI Consulting Inc., told a bankruptcy court judge last week, existing takeover offers would not be enough to cover the $100 million in administrative and liquidation costs, let alone the $1.1 billion bill owed to creditors.
A lawyer for Sports Authority commented in a hearing last week that the company “will not be able to reorganize under a plan but will instead pursue a sale.” The company will participate in a court-supervised auction on May 16, wherein nearly all of its assets will be on the block. Contrary to many media reports this weekend, Sports Authority has not yet said whether it will shutter its entire fleet of stores. So far, no buyers have emerged with interest to continue to operate stores under the brand.
Sports Authority isn’t the only sports retail chain struggling. While just a decade ago Dick’s and Sports Authority were each ringing in $3 billion in annual sales, in the years since, there has been increasing pressure for primarily brick-and-mortar-based businesses to compete with online retailers like Amazon. This has resulted in lagging sales. Although Dick’s has outperformed Sports Authority for many years, it faltered this past holiday season (2015), posting a 2.5 percent loss for the quarter.
Fortune speculates that the downturn being experienced by sports retailers may, in fact, be a thinning of the herd, with the weakest being “killed off.” The outlet points out the long-shot scenario in which the chain is bought out and operated on a smaller scale, much like Radio Shack was several years ago. But for Sports Authority to do so might be akin to a miracle.