Sports Authority Inc. on Wednesday filed for chapter 11 bankruptcy protection and said it would close 140 stores, as the big-box chain struggles with a shift to online shopping.
The retailer, which has about 450 stores, could shut down in the coming weeks unless it finds a buyer for the rest of its business, according to people familiar with the matter.
Sports Authority became one of the largest sporting-good retailers following a merger in 2003, but it has been weighed down with debt from a leveraged buyout a decade ago.
It joins a growing list of superstore operators, including Circuit City Stores and Borders Group, that have filed for bankruptcy. Other chains, such as Macy’s Inc. and Wal-Mart Stores Inc., are adjusting to fewer shopper visits and competition from Amazon.com Inc. by closing dozens of stores this year.
The company has $1.1 billion in financial debt, including more than $717 million in bank loans, and about $211 million in trade debt, or debt owed to suppliers, court papers say.
Sports Authority has “accumulated substantial losses” as sales shifted from traditional brick-and-mortar retailers to online resellers, Chief Financial Officer Jeremy Aguilar said in a court filing. In fiscal year 2015, which ended Jan. 30, 2016, Sports Authority posted before-tax losses of about $156 million on sales of $2.6 billion.
The retailer’s bankruptcy puts the jobs of 5,400 full-time employees and 9,100 part-time employees at risk, according to court papers.
Sports Authority said it has identified about 140 stores and two distribution centers, in Denver and Chicago, that it intends to close or sell in the coming months. The company said it expects most stores to continue in operation throughout the chapter 11 process.
Sports Authority has agreed to take up to $595 million in bankruptcy financing from senior lenders including Bank of America Corp., Wells Fargo & Co., J.P. Morgan Chase & Co. and TPG, the people said.
As a condition of the loan, Sports Authority would close and clear out dozens of stores after filing for chapter 11, some of the people said. The company would need to close the rest of its store base by the end of April if it can’t find a buyer that would put more money into the business, they added.
Sports Authority has been struggling to compete in a crowded sector that includes big-box retailers like Wal-Mart Stores Inc. and Target Corp. Moody’s Investors Service has said bad weather, weak execution, poor margins and high shipping costs have also eaten into Sports Authority’s sales.
Papers filed in the U.S. Bankruptcy Court in Wilmington, Del., show Sports Authority’s big trade creditors include Nike Inc., which is owed $48 million, and Under Armour Inc., owed $23 million. Unsecured mezzanine debt topping $300 million is also reflected in bankruptcy court papers.
Leonard Green & Partners L.P. bought Sports Authority in a $1.3 billion leveraged buyout in 2006. At the time of the buyout, Sports Authority had a larger store footprint than rival Dick’s Sporting Goods Inc. Now Dick’s operates about twice as many stores and has more than double the sales.
Leonard Green is a big investor in the retail sector and also owns stakes in J. Crew Group Inc., David’s Bridal Inc. and BJ’s Wholesale Club Inc.