Sports Authority confirmed on Wednesday that it filed for Chapter 11 bankruptcy protection and that it will close 140 stores in an effort to adapt its business to the demands of modern retail.
In a statement Wednesday, Sports Authority CEO Michael E. Foss said, “We intend to use the Chapter 11 process to streamline and strengthen our business both operationally and financially so that we have the financial flexibility to continue to make necessary investments in our operations.”
The announcement comes as no surprise since rumors have been circulating about preparations for bankruptcy since the start of the year. On Tuesday news came out that the company might even sell its stores and intellectual property to Dick’s Sporting Goods.
Sports Authority said all of its 450 stores are still operating on normal schedules, and apart from the 140 stores and two distribution centers in Denver and Chicago slated to shutter “in the coming months,” stores will operate as usual throughout the Chapter 11 process.
Sources familiar with the matter said, however, that Sports Authority could shut down in the approaching weeks if it doesn’t find a buyer for the rest of its business, The Wall Street Journal reported.
Sports Authority has been having a tough time competing with major retailers like Walmart, Target and Amazon, and other athletic-focused brands like Lululemon and Gap’s Athleta. The retailer has already cut 100 employees—mostly from its corporate headquarters—this year, and opted to skip a $20 million interest payment on its subordinated debt.
In total, the company’s debt could be upwards of $643 million. With the Chapter 11 protection, Sports Authority expects to have access to $595 million in bankruptcy financing.
Papers filed with the U.S. Bankruptcy Court in Wilmington, Delaware, showed that Sports Authority owes $48 million to Nike and $23 million to Under Armour—two of its biggest trade creditors, the Journal reported.
Sports Authority said its bankruptcy decision was due in part to the increasing amount of online shopping and the shifts in consumer buying patterns. As a result of those changes, the company determined that it doesn’t need as many stores in the long-term.
Some store-closing sales have already begun, with others sure to follow shortly at the 140 axed locations. The store-closing process is expected to take up to three months.
“We are taking these actions to ensure that we can do an even better job of meeting our commitment to provide our customers with a broad range of high quality sporting goods and apparel and an outstanding shopping experience, whether in our stores or online,” Foss said.