City Sports Inc. is moving to liquidate all 26 of its stores after failing to find a buyer in bankruptcy proceedings.
The Boston-based chain filed for Chapter 11 bankruptcy in October with plans to close eight of its locations and seek a buyer for the remaining 18. The company needed to secure a buyer by Oct. 30 in order to maximize liquidation sales during the holiday selling period, according to court documents.
A combined bid from Hilco Global and Gordon Brothers Retail Partners won an auction last week and going-out-of-business sales at the remaining stores began Friday.
City Sports also sold its intellectual property, including the City Sports name, for $400,000 to Soccer Post, the soccer retailer with stores in 16 states. According to the Wall Street Journal, Blake Sonnek-Schmelz, owner of Soccer Post, plans to launch a retail operation under the City Sports name next year.
City Sports was founded by high school friends Mike Kennedy and Eric Martin in 1983 with a location on Massachusetts Avenue. Finding city dwellers had to head out of town to purchase sporting goods, the two positioned City Sports to fill a void in the market in delivering premium sporting brands and a premium service to urban athletes, particularly fans of running, training, tennis, swimming and cycling. Yoga and triathlon was added to the mix over the last two decades. The stores became particularly known for their signature T-shirts.
In 2008, the company, with 14 stores at the time, was acquired by the Highland Consumer Fund in 2008 and ambitious growth plans were announced. The late Thomas Stemberg, who founded Staples and was a managing general partner at Highland, said at the time that he thought City Sports could eventually grow to include 300 locations.
The recession slowed growth plans and the company also struggled opening stores in suburban locations. The urban-focused chain was also impacted by heightened competition from niche specialists like Lululemon and REI in its markets as well as Marathon Sports, which has become the dominant running store in Boston.
In an affidavit filed in Delaware’s bankruptcy court, Andrew Almquist, senior vice president and CFO at City Sports, said that starting in August 2014, the company’s revenue and profitability declined due to several factors, including “the extremely competitive market for athletic apparel (especially from Nike, Asics and Under Armour), still struggling national economy and record setting weather in the Northeast impacting the sale of various types of athletic apparel.” The region was hit by severe snowstorms last year.
In response, numerous initiatives were undertaken to improve its performance, including engaging financial advisors, FTI Consulting, Inc., to identify opportunities to reduce costs. A failure to renegotiate leases led to the decision to file for bankruptcy.
The bankruptcy petition listed assets of $38.6 million and $39.6 million in liabilities. Top unsecured trade creditors included Nike, owed $1.27 million Under Armour, $1.04 million; Asics, $1.03 million; Patagonia, $1 million; The North Face, $968,301; Brooks Sports, $605,095; Adidas America, $482,791; New Balance, $482,791; and Saucony, $252,350.
–Tom Ryan
