"Although it’s a mess, it’s a great opportunity," says Dick's CEO.

By Phil Wahba
May 24, 2016

The Sports Authority will begin its going-out-of-business sales at all 463 of its stores on Wednesday after failing last month to find a bidder in a bankruptcy auction willing to keep it going as a smaller retailer, according to court documents filed this week.

The debt-laden retailer filed for Chapter 11 protection in federal bankruptcy court in Delaware in March, saying initially that it would only close about 140 of its stores. But earlier this month, The Sports Authority gave up hope it could re-organize under bankruptcy protection, opting instead to auction itself off for whatever it could get. The company ultimately was bought by liquidators, Hilco Merchant Resources, Gordon Brothers Retail Partners and Tiger Capital Group, LLC, who will conduct close-out sales at all Sports Authority stores starting May 25 and going no later than August 31.

The liquidators won court permission on Monday to start putting up signs touting “store closing,” “sale on everything,” “everything must go,” “going out of business”, and “liquidation sale” at Sports Authority stores.

This is likely to be a bonanza for consumers looking for cheap hiking boots or running shirts. But it is likely to inflict a lot of pain on archival Dick’s Sports Goods dks as shoppers are likely to flock to Sports Authority through the summer.

On top of the Sports Authority closings, City Sports in Boston and the West Coast-based 50-store Sport Chalet chain are also going out of business. Last week, Dick’s said that all this led it to lower its 2016 profit and sales forecast: the company now expects same-store sales to fall 1% this year. At the same time, the elimination of its biggest direct rival, which only ten years ago was equal in size, will be a boon for the company after the liquidation of Sports Authority ends, Dick’s CEO Ed Stack told Wall Street analysts last week.

“Although it’s a mess, it’s a great opportunity for Dick’s Sporting Goods,” Stack said. Dick’s may buy a dozen or two Sports Authority locations, but not more than that. “There is a small group of stores that we would love to get,” the CEO added.

Sports Authority, which was owned by private equity firm Leonard Green & Partners, was hampered by $1.1 billion in debt, and ill-equipped to adapt to the shift online of a lot of sports goods sales. What’s more, Dick’s has invested heavily in updating its stores.

Dick’s could ultimately win 12% of Sports Authority’s business, or 25% in directly overlapping markets, Credit Suisse said in a research note this week. That would mean nearly $400 million in annual sales, once this liquidation storm passes.

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