Dive Brief:
- Dick’s Sporting Goods and a team of liquidators won a bankruptcy auction on Friday to take over Golfsmith International’s U.S. business with a bid for $70 million, sources told Reuters. Dick's and Golfsmith did not respond to requests for comment from Reuters.
- Dick’s will keep at least 30 Golfsmith stores open and shutter the rest with the help of liquidators from Hilco Global and Tiger Capital Group, while continuing to employ about 500 Golfsmith employees. The athletic retailer also won the rights to Golfsmith’s intellectual property.
- The auction is awaiting the approval of a U.S. bankruptcy court judge and the results of the auction are not yet public, Reuters reports. Shares of Dick’s rose in mid-afternoon trading on Friday afternoon after Reuters released news of the bid, according to The Street.
Dive Insight:
The world’s largest specialty golf retailer will be sticking around in some way, but it likely won’t hold onto its title.
Golfsmith, currently owned by OMERS Private Equity, the buyout arm of one of Canada’s largest pension funds, operated 109 U.S. stores when it declared bankruptcy just last month and spun off its Canadian subsidiary Golf Town to Toronto-based creditors Fairfax Financial Holdings and CI Investments.
It looks like much of its store footprint will be lost in liquidation, but at least 30 stores will remain open under Dick’s ownership. Over the last month, the retailer has already begun closing poorly performing stores. According to court documents, Golfsmith has blamed its demise on tough economic times, which it began to see during the Great Recession in 2008 when interest in the expensive sport waned. Statistics from a participation report by the National Golf Foundation show that even while more people are trying out the sport, they’re not sticking with it.
The lack of commitment to the sport has hurt Dick’s golf sales too, including at its own specialty Golf Galaxy stores. Nike, by contrast, has thrown in the towel altogether, exiting the space this year after sales in its golf division last year dropped 8%, according to Business Insider.
Golfsmith owes between $100 million and $500 million to some of the world's largest golf equipment manufacturers, according to court documents cited by the Austin Business Journal. Its 30 largest creditors, including Callaway Golf, Adidas' Taylormade and Nike USA, are due a total of $29.9 million. Many of these brands will also lose sales due to many of the store closings. Under Armour is Golfsmith’s biggest apparel supplier, Nike is its top supplier of footwear and Callaway supplies much of the specialty golf equipment.
It's unclear how Golfsmith will fit into Dick’s future plans, but the retailer has been on a buying spree as of late: Earlier this summer, Dick’s acquired Sports Authority’s intellectual property with a $15 million bid, as well the leases to 31 stores for another $8 million. The deal also gave Dick’s access to valuable customer data from 28.5 million members of Sports Authority’s loyalty program.
