Sports Authority Bankruptcy Impact Stagnates in Retail Industry

Sports Authority Bankruptcy EffectRetailers far and wide have filed Chapter 11 bankruptcy over the past few years due to a loss of market share to e-commerce giants like Amazon and Alibaba, as well as a failure to reposition their interests after the 2008 recession.

Some of these companies, however, have more of an impact on their industry than others.

Tumble from stardom

In March, 2016, the inevitable hit the airwaves—Sports Authority, a long-time stalwart of the sporting goods retail industry, had filed Chapter 11 bankruptcy. There were numerous factors that went into the decision, including $1.1 billion in debt and continual turnover in executive leadership positions, according to The Denver Post.

The company quickly laid out plans to secure debtor-in-possession financing during its looming reorganization, the initial court filings explained. The massive upheaval in operations would result in it closing 140 out of its 464 stores and laying off 3,400 out of 15,000 employees, but the plans never blossomed.

“We’re charging down both paths,” Sports Authority CEO Michael Foss told the The Denver Post. “We don’t know which path we’ll end up going down, but we want to make sure we’ve looked at everything broadly and determined what’s best for all four constituencies.” Foss was referring to the company’s stakeholders, workers, consumers and strategic partners.

The second path Foss spoke about was to sell the company, which it decided to do in May after just a few months into its restructuring plan, Footwear News reported. Dick’s Sporting Goods ended up purchasing 31 stores, as well as the failing business’ entire inventory of intellectual property.

Market still reeling

Sports Authority’s bankruptcy and liquidation served as a stark reminder to the big box store industry that the good times are far away. Experts around the industry likened the mark left upon shopping centers across the nation as similar to Circuit City and Blockbuster, whose often large stores sat vacant for years. The Denver Post reported the average size of a Sports Authority store was between 8,000 and 80,000 square feet.

While it was initially expected that other companies like Dick’s and Modell’s would pick up the $2.6 billion in annual sales left up for grabs, Footwear News reported the opposite has occurred. Consumers once loyal to Sports Authority have failed to return to the market, leading to a Chapter 11 filing for Vestis Retail Group LLC just last year and an 8 percent decline in running shoe sales.

Although it’s unknown exactly how many customers transitioned to online purchasing, one thing is clear—the days of big box retail are coming to an end. Excessive overhead in an industry with tight margins and an increasingly competitive landscape simply won’t allow for enough growth to stay relevant.

Sports Authority’s days were numbered long before it filed for Chapter 11, but other retailers are using the legal prowess of their attorneys to stay relevant in light of bankruptcy. Having an ace cast of lawyers at your side will help plan the next best move to get out of financial ruins and back into the promised land.

Are you a creditor in a bankruptcy?  Have you been sued by a bankrupt?  If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.

Joel Glucksman is an experienced civil and bankruptcy litigator specializing in the representation of secured lenders and other creditors in complex suits and bankruptcies. His court appearances take him throughout the State and Federal courts in the metropolitan area, focusing in particular on the Bankruptcy Courts for the District of New Jersey and the Southern and Eastern Districts of New York. For more information, please visit Joel Glucksman's full biography at Scarinci Hollenbeck

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