Close calls don’t count in sports retailing, and that helps explain why it will soon be lights out for the Sports Authority store in Cherry Hill.
The field is crowded – Dick’s Sporting Goods (the 800-pound gorilla because of its scale), Modell’s, REI, Cabella’s, and Bass Pro Shops are among the players vying for the sporting dollar.
There’s also Schuylkill Valley Sports, an employee-owned firm with 18 stores in the Philadelphia region, and City Sports, an East Coast chain that tanked and is being revived by two Wharton-trained brothers.
Add a deeply fragmented market ranging from marathoners to occasional campers and hikers to a growing number of active women, and no one has a headlock on the market.
The fierce competition forced Sports Authority Holdings Inc., the nation’s fourth-largest sporting goods chain, to file Chapter 11 reorganization on March 2.
The chain will close 140 stores. The Cherry Hill store is the only one in our region to close.
“Due to the changing retail environment, we have a long-term plan to streamline and strengthen our business so we can continue to make necessary investments in our operations,” said Michael Foss, SA’s chief executive officer, in a release on the day of the bankruptcy filing. “This was a tough decision to make, but we believe it was a necessary step.”
Those on the front lines know just how tough it is to sell sports T-shirts.
“The industry is in a state of upheaval,” said Brent Sonnek-Schmelz, who along with his brother, Blake, is reviving City Sports after the pair bought the brand’s intellectual-property rights in a bankruptcy auction in December for $400,000. Since the City Sports bankruptcy, sports retailers TSA and PacSun have filed for bankruptcy, and Eastern Mountain Sports and Sport Chalet are said to be close to filing.
“I see two things driving these bankruptcies,” he said. “First, retailers have a hard time managing large debt loads, which often occur with private equity ownership. With a large debt load, the margin for error and ability to invest in stores shrinks dramatically.
“Second, retail today requires intense community engagement,” Sonnek-Schmelz said. “You have to engage with your customers in a way that makes them want to buy from you.” He cited Dick’s and REI as doing this well.
“The knee-jerk reaction is to blame online and Amazon for a loss of business,” he said. “But online is not the enemy.”
It certainly hasn’t helped, either, said Greg Baldwin, vice president of merchandising for Schuylkill Valley Sports.
“The lines between wholesale and retail faded from black and white to gray to nonexistent,” he said. “I now compete with 90 percent of my suppliers via e-commerce, physical stores, or a combination of the two. The importance of the retailer as a pipeline to the consumer has been greatly diminished.
“The way it used to work was wholesalers/brands brought goods to market through retail distribution,” Baldwin said. “Wholesalers invested in R&D, product development, etc., while retailers invested in real estate, distribution infrastructure, and retail build-out.
“The Internet changed everything,” he said. “A large portion of sales starts with information-gathering online. In ever increasing percentages, those searches have turned into purchases. As more transactions take place digitally, either through brand DTC (direct to consumer) sales, or through third-party marketplaces, such as Amazon or eBay, it cuts the traffic at the store level, and ultimately, the sales.”
But retailers still have to pay rent, staff, and utilities, and buy inventory amid diminishing returns.
Ironically, Sports Authority is the product of a series of mergers: Gart Sports’ 1997 merger with Sportmart; the subsequent acquisition of Oshman’s Sporting Goods; Gart’s merger with Sports Authority; and Sports Authority’s purchase of bankrupt Copeland’s Sports stores.
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The chain was heavily leveraged when it went private in 2006, and now has about $1.1 billion in debt.
CEO Foss, who expects e-commerce sales to triple over the next five years, said Chapter 11 was a way to get the company’s debt down to a manageable level and have cash flow available to grow the business and e-commerce sales.
Some took advantage of the storewide closing-out sales in Cherry Hill a few days ago. Danny Aymes, 27, of West Deptford, bought a composite softball bat, originally $199.99, for $135.
Aymes said he also gets his sports gear from Modell’s and Dick’s, as well as online. “The prices are pretty even across the board,” he said. “I can also get good deals online.”
The Cherry Hill store’s closing is a disappointment for Aquera Brown, 25, of Camden, who has shopped at the store, in the Hillview Shopping Center, on Route 38 across from the Cherry Hill Mall, for five years. She works at the Target in the same center and often walks across the parking lot to it.
Brown is among a growing number of women who are buying sports apparel.
“This was just so convenient to come to,” Brown said as she left the store with Adidas workout pants marked 40 percent off Monday. “Now, I think I will have to drive to the one in Mount Laurel.”
When asked whether there was an official closing date, “We don’t know yet,” said a sales clerk. “We’re told maybe June, or sooner.”
215-854-4184@SuzParmley
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