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For sports retailers, clock has run out

Just one major chain, Dick’s is flourishing as others fall victim to online competition


Sporting goods stores are down for the count.

The scourge of insolvency is sweeping through the sector as online sellers gain the upper hand over yet another corner of retail just recently dominated by big-box chains, specialty stores and mom-and-pop shops.

Yet another general sporting goods retailer, MC Sports, filed for bankruptcy in February with plans to liquidate its 68 stores, as the fallout accelerates. The demise of MC Sports, based in Grand Rapids, Mich., will eliminate 1,300 jobs in seven Midwestern states. It was at least the 10th bankruptcy of a sports retailer with more than $10 million in liabilities in the last 18 months, according to bankruptcy research source Reorg First Day.

Others have included:

  • Sports Authority. The nation’s second largest sports retail chain liquidated in 2016, closing more than 400 locations.
  • Golfsmith. The golf equipment chain filed for bankruptcy protection in September, closing two-thirds of its stores and selling the remaining ones.
  • Sport Chalet. The 47-store chain based in southern California shut down last year after 57 years.
  • Eastern Outfitters. The company that owns discount chain Bob’s Stores and outdoor retailer Eastern Mountain Sports filed for bankruptcy protection in February.
  • Total Hockey. The specialty retailer sought bankruptcy protection in July and sold itself to TSG Enterprises, whose brands include Pure Hockey.

Some of the biggest losers have been sporting good chains that offer broad assortments — from canoes to croquet sets. Online sellers are undercutting store-based retailers on price and options and some specialty retailers are luring customers away with upscale items.

“The marketplace for broad-spectrum sporting goods is very, very limited now,” said Larry Perkins, CEO of interim management firm SierraConstellation Partners, whose clients include struggling retailers. “Sporting goods retailers are really in the center of bull’s-eye.”

Amid the ruin, some see opportunity. Dick’s Sporting Goods, the dominant remaining chain, is capitalizing on the fallout. It acquired dozens of stores from its bankrupt competitors, including converting 22 Sports Authority locations into its own stores. Dick’s also purchased Sports Authority’s intellectual property, including its website, which now redirects to Dick’s.

The strategy of expanding as others contract looks like it might work. While Dick’s reported a fiscal fourth-quarter decline in profit Tuesday, $90.2 million compared to $129 million for the same quarter last year, it said the reduction was based on special items. Most encouraging was that sales at stores open at least a year — a key industry measure — rose 5% and that Dick’s plans to open 43 new stores this year.

Another sporting goods retail chain files for bankruptcy
It has been operating 676 Dick’s stores in 47 states, 74 Golf Galaxy stores in 29 states and 27 Field & Stream stores in 13 states.

“In 2016, we capitalized on opportunities in the marketplace, and further solidified our leadership position by enhancing the shopping experience in our stores,” said CEO Ed Stack in a statement.

After the demise of Sports Authority left Dick’s as the only national big-box retail sports chain, several analysts drew comparisons to Best Buy’s emergence as the last remaining major national electronics retailer following the 2009 liquidation of Circuit City. Not counting chains focus on outdoor wilderness sports like hunting and fishing, the second largest general chain is now Modell’s Sporting Goods, which has some 150 stores in the Northeast.

But all of the remaining players, including Dick’s, face challenges. For example, the emergence of specialty retailers selling “athleisure” wear, such as Lululemon, present a threat to the bottom line. Meanwhile, contraction in the popularity of golf has undermined sporting goods chains that once relied on a steady clip of sales of golf balls, shoes and clubs.

To some extent, the sector’s problems mirror the broader retail industry’s troubles. About 14% of retailers tracked by Moody’s Investors Service qualified as “distressed” in February, reaching the highest point since the Great Recession.

Physical store sales for companies in the sporting goods, hobby store, book and music sector tumbled 6.9% during the 2016 holiday shopping season, while online sales jumped 19%, according to research first First Data. Unlike online sellers, stores have to pay for often costly leases, which hampers their ability to keep prices low.

“What we found is just that the customer will come back when you offer the right discounts,” said Michael McGrail, chief operating officer of Tiger Capital Group, which is jointly handling the MC Sports liquidation sales along with Great American Group. “I think their day-in, day-out shopping habits have changed and they don’t come into the stores as often.”