Vestis Retail Group, the operator of the Eastern Mountain Sports, Bob’s Stores, and Sport Chalet retail chains, has filed for Chapter 11 bankruptcy protection.
The company said the move is necessary to remove the burden of its failing Sport Chalet brand and better focus on its two other more promising chains.
As a result of the bankruptcy, Vestis has begun winding down all of its Sport Chalet stores, and plans to close eight Eastern Mountain stores and one Bob’s location.
“EMS and Bob’s are now delivering solid performance but have been burdened by limited financial flexibility due, in part, to the unique competitive pressures facing Sport Chalet,” said Mark Walsh, CEO of Vestis in a statement. “We determined that the best path forward is to separate the businesses and confront the challenges that have been hindering our overall progress.”
In its Chapter 11 petition, Vestis listed as much as $500 million in liabilities and less than $50,000 of assets.
The company also blamed shifting shopping trends. Though Eastern Mountain has fared much better than Sport Chalet, the retailer has felt the pinch from rival REI’s aggressive expansion and what are seen as more up-to-date stores. Other chains like Dick’s Sporting Goods (DKS) are also stepping on its toes. The bankruptcy filing comes just a few weeks after fellow retailer The Sports Authority filed for bankruptcy too, something that has hurt EMS.
“The continuing shift in consumer behavior away from traditional brick-and-mortar retailers and toward online-only stores, together with increased competition from big-box and specialty sporting goods retailers, have contributed to an industrywide weakness,” Walsh said in the filing. “Ongoing store-closing sales at certain Sports Authority locations have created unusual competition.”
Vestis has proposed to the court that its existing owner Versa Capital Management LLC keep ownership of the chains. The filing shows that Versa has offered to pay $1.5 million in cash for EMS and Bob’s and forgive $35 million in debt. The company hopes to complete the proposed sale in midsummer, in time for the back-to-school and holiday shopping seasons.
Vestis said existing lender Wells Fargo Capital Finance has agreed to provide $125 million in bankruptcy financing so it can continue to pay staff and vendors. What’s more, the company said it would maintain EMS and Bob’s customer loyalty programs, and honor all EMS and Bob’s customer gift cards. EMS and Bob’s have combined annual sales of $400 million, out of a total of $660 million in annual consolidated revenue for Vestis, according to court records.
EMS, which sells camping equipment and gear for hiking, skiing, and adventure sports, and Bob’s Stores, a family clothing and footwear chain, operate primarily in the northeastern U.S.
The Eastern Mountain stores closing are as follows: Christiana, Del.; Dulles, Va.; Foxborough, Mass.; Moorestown, N.J.; North Brunswick, N.J.; University of Pennsylvania in Philadelphia; Warwick, R.I.; and West Hartford, Conn.
Vestis specializes in buying distressed companies, and Versa bought Bob’s in 2008 from TJX Cos (TJX). Eastern Mountain Sports was founded in 1967 by two New England rock climbers. At last count, it had about 69 stores.