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Sports Authority to File For Bankruptcy Protection

Will Close One-Third of Its Stores Anyway Under Bankruptcy Plan
Sports Authority
Sports Authority has stores in Piscataway, East Brunswick, and Iselin, N.J., plus in other Garden State towns. Wikipedia

EAST BRUNSWICK, NJ–Beleaguered Sports Authority Inc. (SA) will file for bankruptcy protection immediately or could find itself out of business completely in coming weeks if it fails to find a buyer for its business, according to reports.

But the company plans to close about 150 of the 450 stores it operates nationwide anyway, as part of a bankruptcy plan, reports Bloomberg, citing sources with knowledge of the matter.

Dicks Sporting Goods Inc. and Modell’s Sporting Goods could also purchase the company.

SA has agreed to borrow $595 million in bankruptcy financing from Bank of America Corp., Wells Fargo & Co., and J.P. Morgan Chase & Co. according to a Wall Street Journal report, which cites sources familiar with the matter.

Some of the sources told the Journal that SA would be required to shutter and clear out dozens of its stores after filing for chapter 11 protection, and then close all its remaining stores, by the end of next month, unless it was then able to find a buyer to invest in the business.

But SA may be bluffing the bankruptcy: “To be sure, companies and their creditors often use the threat of bankruptcy to cut last-minute deals,” reads the Journal report.

The Journal notes that if a buyer wants a “package of Sports Authority’s best stores,” a portion of the business would continue running, adding that bankruptcy is very challenging for retailers.

“Under pressure from creditors, vendors, landlords and other stakeholders, money-losing store chains often go out of business while trying to reorganize in bankruptcy,” according to the journal which cites data from consultancy AlixPartners LLP, that just over half of retail bankruptcies since 2005 have ended up in liquidation.

Substantial debt, cut throat competition in the retail environment, and a consumer shift toward more spending on experiences and services, rather than trips to malls continues to challenge traditional retail, as more people begin shopping online.

To that end, many retailers are investing heavily in technology to improve the in-store shopping experience for consumers.

Progressive retailers are also educating their workforce to engage with customers more effectively, use devices to stay abreast of inventory levels, and track items in stores and distribution centers so as not to stock-out of items and loose sales.

Other supply chain challenges are also being solved through technology such as Radio-frequency identification (RFID) chips, which use radio waves to read information stored on price tags and packages, and also help give consumer information on TV screens in some stores.

“We recognize consumers are doing things differently than they have in the past,” said National Retail Federation President and Chief Executive Officer, Matthew Shay recently, after the trade group announced growth of only 3.1% for this year.

But the federation says online sales will grow as much as 9% this year.

Chains such as Macy’s Inc., Wal-Mart Inc., and Sears Holdings Corporation have begun closing dozens of stores this year and will shutter many more.

In the past decade Dicks, which operates 600 trade-mark name stores, has become larger than SA.

SA’s e-commerce business, which SA does not operate on its own, but has given that task to eBay, GSI Commerce, now called eBay Enterprise, has reportedly not gone well in terms of SA ability to build vendor relationships.