A U.S. bankruptcy court Thursday blessed plans outlined by Golfsmith International Holdings Inc. to begin closing poorly performing U.S. stores, the golf retailer said in a press release. A Canadian court has moved similarly to approve the sale of its Canadian chain, Golf Town, to two Toronto-based creditors, Fairfax Financial Holdings Ltd. and CI Investments Inc.
Golfsmith will be able to access up to $135 million in debtor-in-possession financing, which will be used to continue its operations as it restructures its debt and operations. The retailer is expected to close 20 stores, the Wall Street Journal reports.
With more than 164 retail stores between its Golfsmith and Golf Town units, the company owes between $100 million and $500 million. Creditors include Nike, Under Armour and Callaway, among other brands.
Golfsmith’s bankruptcy process officially began Wednesday, when the court approved Chapter 11 protection from its creditors as the sports retailer moves to restructure. The drastic stumble by the world’s largest golf retailer signals more trouble in sporting goods retail, though so far things are going much smoother for Golfsmith than they were for Sports Authority.
Sports Authority's bankruptcy process this summer was marked by conflicts, including lawsuits with creditors and, ultimately, the liquidation of all stores under the Sports Authority name. Dick’s Sporting Goods ultimately won the rights to the Sports Authority brand, as well as leases to several stores, but is unlikely to run them under that name.
While Golfsmith seems to be moving through its proceedings in an orderly fashion, with plans to spin off its Canadian unit already underway, the athletic brands selling through the retailer are feeling the pinch of that process, adding to the woes brought on by Sports Authority’s collapse.
Under Armour, Nike and other brands are not only dealing with the difficulty of collecting what they’re owed from Golfsmith, but they’re also losing sales due to stores closing. Under Armour is Golfsmith's biggest apparel supplier, while Nike is a top supplier of footwear and Callaway supplies much of the retailer's golf equipment, according to Bloomberg.
Golfsmith owes its 30 largest creditors a total of $29.9 million. Creditors include Callaway Golf Co. (owed $5.5 million), Adidas’ Taylormade Golf Co. ($5.1 million), Nike USA ($3.5 million), PING Inc. ($2.3 million), Titleist/Acushnet Co. ($2.1 million) and Puma-owned Cobra Puma Golf Inc. ($1.8 million).