Sports Authority in SLO among 140 to be closed nationwide

Empty racks and bare shelves filled the San Luis Obispo Sports Authority store Thursday, a day after the sporting goods retailer announced it was closing nearly a third of its stores, including the local outlet.

Saddled with debt and unable to upgrade its stores, the Englewood, Colo., retailer said it plans to get rid of about 140 stores — including 19 in California — over the next three months as part of its filing for Chapter 11 bankruptcy protection.

At the San Luis Obispo store, much of the inventory hung in sale sections. The store is in the Madonna Plaza Shopping Center, neighbored by Best Buy and Kohl’s.

The store had a disappointing selection, said shopper Lalo Quintero, who had come to browse the sales after receiving an email from Sports Authority about the closures. The email didn’t specify which stores were closing, but he said he had a good idea the San Luis Obispo store would be shutting its doors after noticing a lack of new merchandise.

Quintero said he visited the store about two to three times a month. He added that he preferred Sports Authority to other sporting goods shops around the county because of the store’s low prices. He’ll be heading online to purchase sporting goods once the store closes.

Sports Authority moved into the 23,826-square-foot space in the Madonna Plaza Shopping Center in May 2012, according to Tribune archives. It was previously at Chorro and Marsh streets in downtown San Luis Obispo.

The Madonna Plaza Shopping Center is owned by Ohio-based Schottenstein Property Group.

The Shopping Center Group, a retail real estate group that manages the space, had not been officially notified by Sports Authority of the San Luis Obispo store’s closure, said Phillip Kyle, a retail broker at The Shopping Center Group.

He added that the firm was aware of the situation and had already begun compiling a list of potential tenants.

Kyle said the company was looking forward to getting the space back and had a number of retailers considering the location.

‘Changing dynamics’

Sports Authority said in a statement Wednesday that the closures allow it to adapt to the “changing dynamics” of the retail industry, especially the growth of e-commerce. As part of the restructuring, the company said it will also close two distribution centers, in Denver and Chicago.

Sports Authority has 463 stores in 41 states and Puerto Rico.

Of the stores set to be closed or sold, 87 leases are already listed for sale, according to A&G Realty Partners, which is managing the sale of store leases.

The company is also leaving the Texas market and listed 25 store leases for sale. It has listed eight store leases in Florida. The company said that because of the growth in e-commerce, it will not need as many brick-and-mortar stores in the future.

In a statement, Sports Authority CEO Michael Foss said the Chapter 11 process will give the company the “financial flexibility to continue to make necessary investments in our operations.”

Though Sports Authority controls about 5.6 percent of the sporting goods retail market, according to market research firm IBISWorld, it has struggled to upgrade its in-store experience and online presence.

The company took on a large amount of debt when it was acquired in 2006 by Los Angeles private equity firm Leonard Green and Partners.

“I think that was the biggest catalyst for them,” said Matt Powell, a sports industry analyst with the NPD Group, a market research company. “They just weren’t able to service that debt or find another way to mitigate that overhang.”

Without adequate funds, the company was unable to take advantage of the thriving sporting goods retail market. Between 2010 and 2015, industry revenue grew at a rate of 2.4 percent per year, to $49.3 billion, according to IBISWorld. That growth is expected to continue at an annual rate of 1.6 percent to 2020, to $53.3 billion.

The growth in sporting goods has been driven by sneaker sales and athletic apparel in the past few years, especially as sports participation has increased.

“You have millennials that are really concerned about fitness and health,” Powell said. “They’re living healthy lifestyles.”

Competitors have enhanced their brick-and-mortar stores to include more interactive experiences, such as rock climbing walls or putting greens, and more customer service to encourage foot traffic, according to IBISWorld.

Powell described the in-store experience at Dick’s Sporting Goods, which has 14.9 percent of the market, as “upscale.” Dick’s has a San Luis Obispo store on Los Osos Valley Road.

“The stores are beautifully laid out and well maintained,” he said.

The majority of Sports Authority’s stores are expected to operate “without change or interruption” during the Chapter 11 process, the company said.

The Los Angeles Times contributed to this report.

This story was originally published March 3, 2016 at 12:48 PM with the headline "Sports Authority in SLO among 140 to be closed nationwide."