Dive Brief:
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Dick's Sporting Goods Inc. said Thursday it won the auction for the intellectual property of bankrupt competitor Sports Authority with a $15 million bid, which edged out the $13 million proposal by U.K. sports gear retailer Sports Direct International Plc.
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Shares of Dick's, the country’s largest athleticwear retailer, rose 6% on the news, Reuters reports. Final approval for the deal is scheduled for July 15.
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Dick's also said it will take on leases for 31 Sports Authority stores for another $8 million, with other companies, including Best Buy, grabbing other leases. Naming rights to the Denver Broncos’ Mile High Stadium remain available.
Dive Insight:
It looks like the end for Sports Authority, a once robust retailer in the sportswear space that was hobbled by debt and a failure to keep up with e-commerce and changing styles.
The auction went past midnight, sources told the Wall Street Journal, with the winning bids still up for approval by the U.S. Bankruptcy Court in Wilmington, DE. Sports Direct and Modell's Sporting Goods were reportedly in talks to acquire some 200 Sports Authority stores earlier this month, but the Journal reports that the deal dissolved after the two companies failed to close by the June 23 bid deadline.
Sports Authority was once the largest sporting goods chain in the U.S., and in 2006, when the retailer was acquired by private equity firm Leonard Green & Partners for $1.3 billion, its future was bright. But mounting debt, weak e-commerce returns and increased competition, including from general merchandise brands like Wal-Mart, Target, and, of course, Amazon, and from apparel retailers like Gap, took it down. The retailer filed for bankruptcy protection in March.
Matt Powell, a sports industry analyst at the NPD Group, said that the Sports Authority stores could provide Dick’s a natural way to create an off-price chain using the Sports Authority name, according to Reuters. Off-price retail, led by TJX Cos., is a thriving area in retail, though there’s some evidence that retailers with flagship brands suffer some cannibalization by their off-price efforts.
The deal also provides Dick's with Sports Authority's customer data, including 28.5 million members of its loyalty program and 114 customer files. This information will be highly valuable to Dick's, which can use it in marketing efforts for both physical stores and the retailer's online site.
