Who Stands To Benefit From The Sports Authority Bankruptcy?

Sports Authority
Sports Authority.
Rex Shutterstock.

The Sports Authority is the latest casualty in the mid-tier retail market.

After falling behind on carrying key product and updating physical stores, the athletic retailer fell prey to much-larger competitor Dick’s Sporting Goods and online, cost-conscious retailers such as Amazon.com.

The company announced on Tuesday it was filing for Chapter 11 bankruptcy and closing at least 140 of its locations. Sports Authority management said it was using the bankruptcy to reorganize itself, as well as seek out a buyer. Whether anyone in the private equity field will take up the ailing brand is certainly up for debate.

Analysts seem bearish on a sale. “Sports Authority has generally been plagued by poor real estate, old stores with little investment and poor IT systems,” wrote Cannacord Genuity analyst Camillo Lyon in a note this week. “All of which made it more difficult to compete with Dick’s, Academy and Amazon.”

While the closure seemed a long time coming since rumors started flying about a filing at the end of 2015, there are a few brands that stand to benefit from the Colorado-based retailer’s troubles.

Not surprisingly, analysts say Dick’s Sporting Goods, which shares a ZIP code with several of the closing Sports Authority stores, will certainly experience a boost.

Sam Poser of Sterne Agee said he expects Dick’s to capture about $135 million in annual revenue from the closing stores.

While there was some chatter that the liquidation and store closures could impact Dick’s revenue negatively, market watchers don’t view it too much as a negative and don’t expect it to impede traffic. Additionally, analysts don’t seem to think Dick’s will take over any of the closing Sports Authority stores because those locations are so close to their own.

“We do not believe a liquidation event will be disruptive to Dick’s Sporting Goods. We also believe that TSA is in the process of transferring current go forward inventory from the stores that are slated to close to the more productive stores that will remain open,” wrote Poser in a note.

Brands also stand to gain from the reorganization. It was reported earlier this week that Sports Authority owes millions of dollars to Nike, Asics, Under Amour and other big-name brands. The chatter about the outstanding debt has been enough to cause Under Armour, which has an unsecured claim of $23.2 million with Sports Authority, to reassert its own fiscal guidance for the coming year.

Under Armour as a company released the following statement on the bankruptcy: “The Sports Authority is a longstanding customer of the Company, and the Company intends to support them as they proceed through their restructuring. The Company plans to offset the impact of the bankruptcy on the Company’s full year 2016 results through continued sales to The Sports Authority and sales through other channels and customers.”