UPDATE: Golfsmith files for Chapter 11

Dive Brief:

UPDATE: Golfsmith International, the world's largest specialty golf retailer, Wednesday filed for court protection from its creditors under Chapter 11 in the U.S. District Court for Delaware to restructure its debt, close underperforming stores, and sell its Canadian subsidiary, Golf Town Inc., the Austin Business Journal reports. Fairfax Financial Holdings Ltd. and CI Investments Inc., both based in Toronto, have both agreed to buy Golf Town and support Golfsmith's restructuring.
UPDATE: With more than 164 retail stores nationwide, between its Golfsmith and Golf Town units, the retailer owes between $100 million and $500 million, including to some of the world's largest golf equipment manufacturers, according to court documents cited by the Business Journal. The company owes its 30 largest creditors a total of $29.9 million. Creditors include Callaway Golf Co. (owed $5.5 million), Taylormade Golf Co., ($5.1 million), Nike USA ($3.5 million), PING Inc. ($2.3 million), and Titleist/Acushnet Co. ($2.1 million), according to court documents.
The Austin, TX-based chain is loaded with debt and wasn't able to find a buyer to rescue it, according to news outlets, though Dick’s Sporting Goods may be interested in acquiring Golfsmith and its some 100 U.S. stores under bankruptcy, sources told the New York Post. Neither Golfsmith nor Dick’s have responded to requests for comment by media outlets.

Dive Insight:

The 2012 acquisition of Golfsmith by private equity investor Ontario Municipal Employees Retirement System did the sports retailer no favors, considering the $97 million leveraged buyout saddled the retail chain with debt just as interest in golf was ebbing. “There’s just too much debt,” a source told the NY Post about Golfsmith, saying that the retailer might actually be profitable without the interest payments it faces on some $200 million in loans.

"Recently, economic downturns, industry trends, and global shifts in consumer behavior all have put significant pressure on GSI’s operational performance. Beginning in 2008, the golf industry experienced a steady decline as golf participation slowed during the recession," according to the court filing in the case cited by the Austin Business Journal."This period also marked the beginning of a consistent shift by consumers away from shopping in traditional 'brick and mortar' retail stores toward a preference for the convenience provided by shopping on e-commerce platforms. At the same time, the enthusiasm underpinning the 'Tiger Woods Phenomenon' significantly waned."

Indeed, the bankruptcy comes at a time when 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 specialty Golf Galaxy stores. But the retailer continues to emphasize the sport. Nike, by contrast, has thrown in the towel altogether, exiting the space this year after sales within its golf division last year dropped 8% to $706 million, according to Business Insider.