- Dick's Sporting Goods looking at taking over store leases
- Performance Sports plummets after cutting its 2016 outlook
Sports Authority Inc.’s bankruptcy rippled through the sporting-goods industry on Tuesday, with companies saying it was creating both hardships and opportunities.
Dick’s Sporting Goods Inc. said it would try to pick up market share ceded by its longtime rival, which is closing stores as it makes its way through bankruptcy court. Performance Sports Group Ltd., meanwhile, was dealt a blow by the Chapter 11 filing. The maker of baseball bats and hockey gear wrote down anticipated sales that it would have gotten from Sports Authority. Performance slashed its outlook, sending its stock down 66 percent on Tuesday.
Sports Authority was once the largest sporting-goods retailer in the U.S., and its decline has broad repercussions. In addition to going after the chain’s customers, Dick’s may scoop up real estate vacated by the bankrupt business. Dick’s Chief Executive Officer Edward Stack said on a conference call that his company would be looking at Sports Authority leases to see which ones would make sense.
“We’re going to be very aggressive to go after that displaced market share,” he said.
Suppliers like Performance are in a weaker position. Though Sports Authority plans to re-emerge from bankruptcy, there will be a smaller fleet of stores to sell to. The Chapter 11 filing has contributed to sluggish demand for baseball and softball products, Performance CEO Kevin Davis said in a statement on Tuesday.
The company cut its annual earnings forecast to 12 cents to 14 cents a share, excluding some items. That was down from as much as 69 cents. The writedown of the receivable balance and anticipated loss of sales from Sports Authority accounted for 9 cents of the reduction.
Performance fell $5.75 to $2.91, marking its biggest single-day plunge since the shares began trading in 2011. The stock was down 10 percent this year before the tumble.
Not every athletic supplier is suffering, though. Under Armour Inc. said last week that it didn’t expect its receivables to be materially affected by the Sports Authority bankruptcy. The company reiterated its annual forecast, calling for sales of $4.95 billion and operating income of $503 million. Though Under Armour plans to continue to sell to Sports Authority, it will cope with the bankruptcy by shifting goods to other channels and customers.
Dick’s said about 100 of its locations overlap with the 140 stores that Sports Authority will shutter and that it will spend more on labor and marketing in those areas to take advantage. In the short term, the Sports Authority closings will actually hurt nearby Dick’s stores. That’s because liquidation sales will flood the market with discounted merchandise. But Dick’s should start to benefit in the second half of this year and 2017, the company said.