The past few years have been brutal for traditional sporting-goods retailers.
Dick's Sporting Goods (DKS) -) has been a market leader, carving out a niche in a very crowded space. But a number of lesser rivals have fallen. Modell's and Olympia Sports — two once-popular regional chains — moved quickly from Chapter 11 bankruptcy to Chapter 7 liquidation.
They followed the collapse of Sports Authority, which both went out of business in 2016.
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You can blame Amazon, but the overall sporting goods industry has suffered. That may be because people can buy replacement items like golf balls and tennis balls without visiting a store, dragging overall sales down.
Dick's has fought this by turning its big-box stores into destinations by leaning on experiences. Maybe customers can hit a golf ball or take batting practice — it's an evolving thing — but there's a reason to visit the store.
Now, another sporting-goods company that owns multiple brands in the space has run out of money and has begun the process of liquidating.
Image source: TheStreet/ Out&Back
Signa Sports United begins liquidation
You may not know the parent's name, but Signa Sports United has a large profile doing business under a number of names.
"We own businesses and brands in bike, tennis and outdoor. SSU has 80 online sites and partners with 500 shops in serving over 6.7 million customers worldwide," the company says on its website. "The SSU group includes Tennis-Point, Tennis Pro, Tennis Express, WiggleCRC, Fahrrad.de, Bikester, Probikeshop, Campz and Addnature."
SSU began to fall apart in mid-October when it saw its funding partner, Signa Holdings, terminate a €150 million ($162.8 million) binding equity letter. The company had drawn only €7 million of that credit line.
"After many years of mutually trusted collaboration and reliable financing between the company and Signa Holding, SSU has relied on the binding and unconditional nature of the Equity Commitment Letter to continue to draw funds to meet its near-term obligations and for its going concern assessment of the company and its subsidiaries," SSU said in a news release.
"The company considers the termination of the Equity Commitment Letter by Signa Holding unjustified,"
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Signa Sports delisted in October
SSU had clearly seen some writing on the wall as it started the process delisting its stock from the New York Stock Exchange a few weeks before.
On Oct. 2 the board concluded that "the benefits associated with being listed on the New York Stock Exchange do not justify the costs and demands of management’s time necessary to meet the company’s U.S. regulatory commitments," the company said. The board then decided to begin the delisting process, it said.
SSU ostensibly wanted to get out from under the expense of meeting NYSE listing requirements. After its credit was pulled, however, the company began closing and liquidating its various brands.
Jacob Dudek, a vice president at SSU who was the company's second employee, wrote an insider's account of the bankruptcy process on LinkedIn.
I lost my job on Friday, October 20th. It wasn’t like a “you’ve performed poorly, you are fired” kind of a thing. It was more like a “this $3.2B entity is going into insolvency and liquidation and here is a few days’ notice of termination” kind of a thing. It’s unclear if this violates the U.S. WARN Act (see 20 CFR Part 639 if you really want to dive in). I’m sure there are highly complex legal implications here as people in various countries try to unwind a multinational conglomerate that went from employees assuming the thing was a going concern to waiting in the unemployment line in basically a 48-hour period.
That's a shockingly quick turn, but Dudek said he ignored some clear warning signs.
"In retrospect, there were some red flags with the weather and conditions leading up to the event. I think the issue at hand here is not the classic 'it was impossible to see the warning signs' argument. I think the issue (at least for me) is that I wanted to achieve a goal and in doing so, I ignored updating my ‘mental probability model’ for the likelihood of bad things happening," he wrote.
The company's liquidation process has begun, but it's complicated by the legal structure of the various brands.
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