Big-box chain Sports Authority lost its bid to remain in the retail game without a dramatic restructuring as the company filed for Chapter 11 bankruptcy protection Tuesday and announced the closure of 140 stories, including four in Oregon.
The retailer — owned by Los Angeles-based private equity firm Leonard Green & Partners — said it would seek to sell or close about 140 stores, or nearly one-third of its locations. The company admitted that it had lost market share to online retailers, became swamped with $1.1 billion in debt and failed to keep up with consumer trends, such as golf's decline in popularity.
The chain has five stories in the Portland area and three in Eugene and Southern Oregon. It is closing the Roseburg, Salem, Hillsboro and Klamath Falls stores as early as Friday.
Although bankruptcy protection often offers companies a second chance at life, Englewood, Colo.-based Sports Authority's survival is not guaranteed. The company said it would pursue either a comprehensive debt restructuring plan or a sale of all or some of its assets.
“We are taking this action so that we can continue to adapt our business to meet the changing dynamics in the retail industry,” Sports Authority CEO Michael E. Foss said in a statement. “We intend to use the Chapter 11 process to streamline and strengthen our business both operationally and financially so that we have the financial flexibility to continue to make necessary investments in our operations.”
The company, which filed for bankruptcy protection in a federal court in Delaware, currently operates 463 stores with about 13,000 employees in 40 states and Puerto Rico. Its top 10 unsecured creditors include Nike, which is owed $47.9 million, and Under Armour, which is owed $23.2 million.
Sports Authority's private equity owner took the retailer private after acquiring it for $1.3 billion in 2006. In the 1990s, the company was held by Kmart before being spun off.
The retailer said it posted a net loss of $156.6 million with total revenue of $2.6 billion in the fiscal year ended Jan. 30.
A spokesman declined to make Foss available for comment.
In retail bankruptcy reorganizations, a sale could come to competitors or investors who plan to keep the company afloat in some capacity or to a liquidator that plans to sell the remaining assets to the highest bidder.
Foss said in a statement that the company has received "strong interest from third parties interested in buying some or all" of the company.
In addition to the 140 stores it plans to offload, the company also plans to close distribution centers in Chicago and Denver.
Ken Rosen, a Lowenstein Sandler attorney who has represented bankrupt retailers but is not involved in the case, said Sports Authority would likely liquidate a portion of its inventory and sell its most valuable leases to competitors such as Dick's Sporting Goods or to other retailers.
"The value of their locations will depend on their proximity to other retailers," Rosen said.
Liquidation sales at up to 140 stores will begin Friday if the company wins approval for its motion from a bankruptcy judge, chief financial officer Jeremy Aguilar said in a court filing. Store managers and sales people at the affected stores could get bonuses for staying with the company through completion, a routine measure in retail liquidations.
Rosen noted that liquidators often haul in additional inventory to sell during going-out-of-business sales, meaning that early deals may not be as lucrative as later discounts.
The company, legally incorporated as TSA Stores Inc., said it had secured access to up to $595 million in bankruptcy financing that will help it keep its doors open for now. The financing is contingent upon approval for the liquidation sales.
Sports Authority said customers would still be able to use gift cards. But bankruptcy experts often advise customers to spend store gift cards quickly when a retailer files for bankruptcy because those gift cards can be rendered effectively worthless if the restructuring converts to an all-out liquidation.
One of the company's biggest assets may be its brand name, which could be sold off to a competitor or an online retailer, Rosen said.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
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