2 More Sporting Goods Companies File for Bankruptcy

If you or your kids participate in any sports or outdoor activities you know that all the gear that is required does not come cheap. You might think this means that the sporting goods retailers in your area are doing pretty well, but in just this past month, two well-known sporting and outdoor goods retailers have filed for bankruptcy.

MC Sports has seven stores in Wisconsin and all of them are closing. CEO Bruce Uller said in a court filing that “the rapid migration of sales from traditional brick-and-mortar retailers to online resellers,” competing distributors, specialty retailers and “changing consumer preferences” contributed to the company’s demise.

Gander Mountain has also filed for bankruptcy, although its filing was less of a surprise. Rumors had been circulating for about a month that it was planning on filing. It announced it is closing its stores in Eau Claire and Germantown, but plans to keep its other Wisconsin locations open while it seeks a buyer. It too cited the challenges of competing with online retailers in its filing.

Both companies filed for Chapter 11 bankruptcy, which allows filers to keep operating while they reorganize or find a buyer. However, Gander Mountain is the only one talking about doing so. MC Sports is liquidating their inventory and closing all of their stores.

These two are just the latest sporting goods chains with a presence in the Milwaukee area to declare bankruptcy or go out of business. Sports Authority, Golfsmith, Eastern Outfitters, and Sport Chalet have all previously closed some or all of their stores.

It will be interesting to see if Gander Mountain during its Chapter 11 process, and what happens to other retailers in this sector over the coming years. The two biggest players in the arena, Bass Pro and Cabela’s, are working on a $5 billion merger, which suggests there is still plenty of money to be made, but that efficiencies of scale are critical.

Online shopping is only becoming more popular, as all brick and mortar owners know, making it a threat to all sorts of retailers. The smart business owners out there are looking at their options, and for many, a reorganization bankruptcy is a good one.

 

Milwaukee YMCA Comes Out Of Bankruptcy Strong

We talk a lot about how bankruptcy provides people and organizations a chance to hit the reset button. But it is often difficult to find an example to illustrate what we are talking about because most people and businesses doesn’t want to share the gritty details of their finances with the public. So, it was exciting to read the recent Journal Sentinel story about the Milwaukee YMCA’s bankruptcy because it is the perfect example of how an organization can use bankruptcy to get a new lease on life.  

The YMCA’s Bankruptcy

In 2014, the Milwaukee YMCA filed Chapter 11 bankruptcy. At the time, the Y was around $30 million in debt due to a building spree started in the 1990s. Donations were declining, and the number of members kept falling, particularly after the 2008 financial crisis.   

Filing bankruptcy allowed the Y to sell off properties and right-size its workforce. The organization sold 8 of the 11 properties it owned, many of which were in the suburbs not Milwaukee proper. It also downsized from 365 full-time employees and 1,271 part-time workers to 140 full-timers and 580 part-timers.

If it had not filed for bankruptcy, the 155-year-old institution would have had to close. Because it filed for bankruptcy and took full advantage of the bankruptcy system, it had a budget surplus of around $650,000 in 2016, and it has a new plan for how to best serve the Milwaukee community.

Some Takeaways For The Rest Of Us

It would have been a real shame if the Milwaukee YMCA had closed. It’s not just a gym, it’s a modern-day piazza, a place where people can mix and mingle and grow the collective soul of our community. That is one reason why it is great that they chose to file for bankruptcy under Chapter 11.

Chapter 11 is often called a reorganization bankruptcy because the focus is not on shutting things down, but preserving what can be saved and setting the organization, or family, up for success in the future.

It is important for anyone who is filing under Chapter 11 to be willing to take a long, hard look in the mirror and decide what is important to them going forward. The Y had opened too many branches and was offering too many services. These properties were valuable assets though. Once the organization decided it needed to refocus its operations, selling off some properties allowed it to reinvest in the properties it was keeping.

Chapter 11 filers need to be willing to make tough decisions that allow them to move forward, and this typically goes beyond finances. Oftentimes the filer needs to do some soul searching to determine if the path they are on is just unusually rocky but will smooth out, or if it is a road to ruin. Bankruptcy is an opportunity to hit the reset button in a very broad sense, not just financially.

A lot of people think that filing for bankruptcy is the beginning of the end, but that is simply not true. As the success of the Milwaukee YMCA illustrates, bankruptcy can provide an opportunity to refocus, refresh, and come back stronger than before.