Tuesday, May 24, 2016

All 463 Sports Authority Stores to Shut

Sports Authority is going down, as all the dinosaurs will.  The writer makes the nonsense assertion that the internet did the company in.  Nonsense.  REI continues to do well in this economy, but then REI is a co-op, not a capitalists' scam.

The Sports Authority closings come on the heels of another athletic goods retailer,Sport Chalet, taking similar action. The chain stopped online transactions and began closing sales at its nearly 50 stores in April.
Sports Authority, which was owned by the Los Angeles-based private equity firm Leonard Green & Partners, has said that it was hampered by $1.1 billion in debt, and was late in picking up on shifting consumer trends.

Well, who cares if the debt is 1.1 billion if interest rates are zero, in effect, that debt costs you nothing?  The reason is that there is no way they can buy anything upon which they can make a profit and work their way out.  They played the game of borrow-the-most mal-credit and steamroll over anyone who did not borrow enough.  The online micro-component of sales of sporting goods has nothing to do with it.

Sports Authority was $35 a share in 2002, hundreds of millions in mal-tallies.  its ownership resided in pensions, investors, etc.  Now it is all gone.  This is one way to balance the books.  A billion in losses on the liability side, nothing gone on the asset side, for the hegemon.  At teh same time, for about 75 years REI (Recreational Equipment, Inc) has had a "stock price" of about 5 cents a share, as a co-op.  It continues to be rock solid.

Who is going to fire up a production line to serve Sports Authority when it is clear that it cannot pay for what they buy. No one.

For the small entrepreneur, there are two vacuums hear, the customers this big business will no longer serve, plus the widening excess product capacity of manufacturers.

Step in with your own sporting goods, and sell to stores like REI, or open a retail store and sell new and used products side by side.

Feel free to forward this by email to three of your friends.


Anonymous said...

What about the effects of changing consumer habits on the sporting goods business? My theory: Older aging Americans become less physically active, and most Americans are couch potatoes anyway and the younger generations prefer video games and the internet. I remember reading recently that even golf is having a downturn - and golf can barely be considered a sport (requiring minimal physical exertion and skill).

John Wiley Spiers said...

Interesting observation.... seems reasonable.... and REI, which serves a rather hard-core segment of the population, would not be impacted by these demographics... and how many people who consumed sporting goods before and are now going longer between getting new...?


Mike said...

Interesting note on consumer aversion to exertion.

I stopped going to Sports Authority when they stopped selling fishing paraphernalia. Same thing for Kmart. I speculate that both companies ceased to sell fishing lines because they were deemed less attractive from a revenue per square foot basis (or some other corporate type metric)

But fishing stuff was what brought me in the door. And in passing thru I would often pick up other things in clothing, household and kitchen.

No longer.