The operator of Sport Chalet and two other struggling sports chains filed for bankruptcy protection on Monday, citing consumers’ shift to online shopping and competition from big-box retailers.
Vestis Retail Group has already begun shuttering its 47 Sport Chalet stores and, through the Chapter 11 process, is proposing to sell the Eastern Mountain Sports and Bob’s Stores chains to affiliates of private-equity backer Versa Capital Management. The Sport Chalet stores have been holding liquidation sales since Saturday.
Vestis CEO Mark Walsh said the company had been improving performance at all its brands but EMS and Bob’s “have been burdened by limited financial flexibility due, in part, to the unique competitive pressures facing Sport Chalet. After reviewing a variety of strategic alternatives, we determined that the best path forward is to separate the businesses and confront the challenges that have been hindering our overall progress.”
Sport Chalet has struggled financially for years, last reporting an annual profit in 2007. It had more than $52 million in debt when Vestis bought it for $17 million in 2014.
“The chain has faced growing competition from online retailers, discounters and the likes of Target Corp., whose stores carry the kind of workout merchandise and sports equipment that might interest the casual enthusiast,” The Los Angeles Times said.
The tough market conditions have hit other sports retailers, with Sports Authority filing Chapter 11 last month. Vestis’ stores have “faced increased competition in the marketplace resulting from the liquidation sales of many Sports Authority stores, which are direct competitors,” Walsh said in a court document.
Vestis plans to sell the EMS and Bob’s chains through a court-supervised auction process. Versa, the stalking horse bidder, has offered to pay $1.5 million for the stores that will stay open and forgive $35 million in debt and other liabilities.
“The Bob’s Stores and EMS brands enjoy competitive market positions,” Walsh said. “The debtors are confident that this restructuring effort will allow these core brands to emerge as part of a stable and strong enterprise.”