Who's Going to Acquire the Sports Authority Building Leases?
In March, after months of media speculation, Sports Authority declared Chapter 11 bankruptcy. It was set to reorganize after retail rival Modell’s expressed interest in acquiring the brand. However, plans fell through after both parties failed to agree on a purchase price. With no other companies lining up to buy the company, Sports Authority will file bankruptcy, liquidate assets and abandon store leases. With this in mind, who, if anyone, is going to buy the troubled sports retailer’s leases?
According to a Bloomberg article published earlier this month, an auction is set for May 16 for about 140 store leases, representing about 30% of its 463 locations. This was planned back in March, when the company said it would restructure. Now that plans have changed, it is unknown whether more or all of the stores will close. This means more leases could be sold at auction. Competitors that have showed interest in bidding include Dick’s Sporting Goods and Academy Sports + Outdoors, a chain with 208 stores mainly concentrated in the Midwest and the South.
In Los Angeles County, there are 12 Sports Authority stores. Five locations in LA County will be included in Monday’s 143 store auction. Perhaps competitors such as Big 5, Dick’s and REI will expand in areas where none of their stores currently exist. However, due to Sports Authority's preference for large format stores, with virtually all locations exceeding 40,000 square feet, the list of sports retailers potentially occupying Sports Authority stores will be short. Rivals with comparable space requirements include REI, Dick’s and Academy. They have 5, 7 and 0 stores, respectively, in LA County, so it would be a great opportunity for any or all of the companies to expand operations here if that is their goal. Since Big 5 buildings tend to be on the smaller side – around 10,000 sq. ft. – it does not appear that they will be bidding on any of the leases.
In conclusion, it will be interesting to see what happens at the auction on Monday and which retailers end up acquiring the troubled company’s leases. Only 143 stores will be auctioned off this round, although many more opportunities to take over additional leases may be offered in the future. There will also be numerous winners at the auction, since any one company will not take over all of the leases due to location preferences, existing stores, etc. Close attention will also be paid to the asset auction, which is to be held on the same day as the lease auction. Will the Sports Authority brand remain, whether via online and/or retail stores? Or, like La Cañada Flintridge based Sport Chalet, will it become a thing of the past?
Image: Creative Commons License - (C) torbakhopper