By Thomas J. Ryan
While Dick’s Sporting Goods stepped up at the last moment to keep a number of Golfsmith stores in operation, liquidators appear set to inflict more damage in the bankruptcy case of the country’s largest golf retailer.
As reported first by Reuters, Dick’s partnered with Hilco Global and Tiger Capital Group on the winning $70 million bid. Dick’s plans to keep about 30 Golfsmith stores open while the remaining 59 will face liquidation. The winning bid still has to earn bankruptcy court approval.
Golfsmith filed for bankruptcy protection on September 14 with 109 stores and last week received court approval to close 20 of those locations. In all, about 72 percent of its stores will liquidate in bankruptcy proceedings under the proposal, measuring 1.84 million square feet of selling space.
The closures mark another blow to net square footage in the sporting goods channel following the liquidation of Sports Authority this summer, as well as Sport Chalet earlier in the year and City Sports last December.
The size of the bid is also a shortfall for creditors. The bankruptcy filing listed $195 million in secured debt and $38 million in unsecured trade debt that included about $6 million in rent due to the landlords. At the time of its bankruptcy, Golfsmith employed about 2,300 workers.
Dick’s also won Golfsmith’s intellectual property and inventory, although the new owner will likely convert the stores to its sister chain, Golf Galaxy, and retire the Golfsmith nameplate. As of July 30, 2016, Dick’s operated 72 Golf Galaxy stores in 29 states with approximately 1.3 million square feet, and with the Golfsmith addition would easily become the nation’s new leading retailer in the space.
Golfsmith’s stores currently range in size from 8,000 to 60,000 square feet, with an average size of 23,250 square feet. That fits closely with Golf Galaxy’s average size of 18,000 square feet, although some of Golf Galaxy’s newer stores are closer to 40,000. Flagship Dick’s Sporting Goods locations tend to be much larger, with an average size of 53,000 square feet, but could see some Golfsmith conversions.
Dick’s bid with Hilco Global and Tiger Capital reportedly beat out one Worldwide Golf Shops was preparing with liquidators from Great American Group.
Worldwide Golf Shops was similarly looking to continue to operate about 30 Golfsmith stores and close the rest, although they would have been more likely to keep the Golfsmith name in operation. Worldwide Golf Shops’ portfolio, which would now stand as the second largest, ranges from Roger Dunn Golf Shops in California and Hawaii, The Golf Mart in California, Vans Golf Shops in Arizona, Golfers’ Warehouse in New England, Uinta Golf Shops in Utah and Edwin Watts Golf Shops in the Southeast.
Dick’s bid came despite its recent efforts to reduce space allocated to the golf category in its own flagship stores while slowing expansion at Golf Galaxy amid weakness in recent years in the golf category.
The National Golf Foundation reported that the total number of people who played at least one round of the sport was approximately 24 million in 2016, down from 25.7 million in 2011 and 30 million in 2005. The golf slowdown is also being marked by Adidas’ ongoing efforts to sell TaylorMade and Nike’s move to exit its golf equipment business.
Forewarning Golfsmith’s exit, Ed Stack, Dick’s Sporting Goods’ chairman and CEO, said on the company’s second-quarter conference call August 16 he felt “there will be some consolidation on the retail side of the business” in golf. But he also indicated that the category had stabilized for the retailer so far this year while reasserting that the company’s focus in the category would remain on profitability rather than growth.
“I think we are very well positioned and our golf business, we remain committed to our golf business,” said Stack at the time. “And understand, our golf business is profitable. It’s not a drag on earnings. Our golf business is profitable.”
The sport is expected to gain a boost as more boomers reach retirement while the arrival of younger players such as Rory McIlroy, Jordan Spieth and Jason Day, along with some technological enhancements, should attract more millennials and junior golfers to the sport.
Photo courtesy Golfsmith
