Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comCity Sports Files for Chapter 11 Bankruptcy Protection
Author: Joel R. Glucksman|November 12, 2015
City Sports files Chapter 11
City Sports Files for Chapter 11 Bankruptcy Protection
City Sports files Chapter 11
On Oct. 5, City Sports, a Boston-based athletic gear retailer, announced that it had filed for Chapter 11 bankruptcy protection. According to the Wall Street Journal, City Sports plans to liquidate eight of its 26 remaining store locations.
The 32-year old company has recently fallen on economic hard times due to a failed expansion strategy that saw City Sports locations move to expensive, high foot traffic locations. According to a Boston.com report, City Sports cited the fact that it had decided to aggressively expand beyond the Boston area into the biggest cities in the U.S. to ensure urban pedestrian access. However, the expansion plan was derailed by several factors that proved to be too much for the company to remain solvent.
Factors in City Sports’ decline
In court papers, the company also cited the fact that the Northeast had experienced one of the worst winters in its history, which led to unprecedented decreases in sales revenues. However, City Sports also stated that the increasing competition from larger athletic retailers like Sports Authority, Dick’s Sporting Goods Inc., Wal-Mart Stores Inc., Target Corp. and Lululemon Athletica Inc. as one of the main reasons for the company’s drop in business.
This slip in revenues led the company to cut costs by reducing store hours, employee hours, its workforce and its shipping costs. These changes did not prevent the company from hemorrhaging losses in recent years due to its exorbitant lease contracts. City Sports was forced to seek bankruptcy protection because the savings it achieved from leasing cost reductions was not enough to keep the company from insolvency.
City Sports listed $38.6 million in assets and $39.6 million in liabilities in court documents. According to the Boston Business Journal, City Sports’ list of creditors includes unsecured claims from Nike USA Inc. for $1.27 million, Under Armour Performance Apparel for $1.04 million, Asics America Corp. for $1.03 million, Patagonia Inc. for $1 million and The North Face for $968,300.
The company has requested approval from the court for an asset auction. City Sports is also in the process of negotiating a deal with Tiger Capital Group to facilitate closing sales at eight of the company’s remaining 26 stores throughout the Northeast. For the other 18 store locations, City Sports is negotiating with potential buyers who will choose whether to continue operations at these locations or liquidate all of their remaining assets. In the event that no financing or sale agreements are reached for the remaining 18 locations by Nov. 1, City Sports will be forced into liquidation.
In its bankruptcy petition, the company stated that it is currently discussing the store locations with several prospective buyers that have expressed interested in maintaining operations.
City Sports stated that it intends to emerge from the bankruptcy period as a viable business, and that it does not intend to close any of its Boston locations. The company explained in court papers that it will continue to operate each of its store locations as well as its online retailers because the reorganization process is only expected to take up to three months.
There is no word yet as to the number of store closures that will take place after the initial sales of the eight underperforming locations.
Are you a creditor in a bankruptcy? Have you been sued by a bankrupt? If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.
City Sports Files for Chapter 11 Bankruptcy Protection
Author: Joel R. Glucksman
On Oct. 5, City Sports, a Boston-based athletic gear retailer, announced that it had filed for Chapter 11 bankruptcy protection. According to the Wall Street Journal, City Sports plans to liquidate eight of its 26 remaining store locations.
The 32-year old company has recently fallen on economic hard times due to a failed expansion strategy that saw City Sports locations move to expensive, high foot traffic locations. According to a Boston.com report, City Sports cited the fact that it had decided to aggressively expand beyond the Boston area into the biggest cities in the U.S. to ensure urban pedestrian access. However, the expansion plan was derailed by several factors that proved to be too much for the company to remain solvent.
Factors in City Sports’ decline
In court papers, the company also cited the fact that the Northeast had experienced one of the worst winters in its history, which led to unprecedented decreases in sales revenues. However, City Sports also stated that the increasing competition from larger athletic retailers like Sports Authority, Dick’s Sporting Goods Inc., Wal-Mart Stores Inc., Target Corp. and Lululemon Athletica Inc. as one of the main reasons for the company’s drop in business.
This slip in revenues led the company to cut costs by reducing store hours, employee hours, its workforce and its shipping costs. These changes did not prevent the company from hemorrhaging losses in recent years due to its exorbitant lease contracts. City Sports was forced to seek bankruptcy protection because the savings it achieved from leasing cost reductions was not enough to keep the company from insolvency.
City Sports listed $38.6 million in assets and $39.6 million in liabilities in court documents. According to the Boston Business Journal, City Sports’ list of creditors includes unsecured claims from Nike USA Inc. for $1.27 million, Under Armour Performance Apparel for $1.04 million, Asics America Corp. for $1.03 million, Patagonia Inc. for $1 million and The North Face for $968,300.
The company has requested approval from the court for an asset auction. City Sports is also in the process of negotiating a deal with Tiger Capital Group to facilitate closing sales at eight of the company’s remaining 26 stores throughout the Northeast. For the other 18 store locations, City Sports is negotiating with potential buyers who will choose whether to continue operations at these locations or liquidate all of their remaining assets. In the event that no financing or sale agreements are reached for the remaining 18 locations by Nov. 1, City Sports will be forced into liquidation.
In its bankruptcy petition, the company stated that it is currently discussing the store locations with several prospective buyers that have expressed interested in maintaining operations.
City Sports stated that it intends to emerge from the bankruptcy period as a viable business, and that it does not intend to close any of its Boston locations. The company explained in court papers that it will continue to operate each of its store locations as well as its online retailers because the reorganization process is only expected to take up to three months.
There is no word yet as to the number of store closures that will take place after the initial sales of the eight underperforming locations.
Are you a creditor in a bankruptcy? Have you been sued by a bankrupt? If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.
