Posted by Andres Garcia.
On Wednesday March 2, 2016, Sports Authority decided it was time to file for bankruptcy and close almost a third of its total locations. Sports Authority has been crowned the fourth largest U.S. sports store.
The decision came after the company failed to pay a $20 million payment of January. In the next couple months, numerous stores will be closed and leases associated with those locations will be removed. The company disclosed more than one billion in liabilities and assets that have been estimated between $500,000 and $1 billion dollars. The business organization has planned to borrow almost $595 million to maintain its operation during the time of bankruptcy.
This is an unfortunate situation for Sports Authority, filing for bankruptcy under Chapter 11, suggests that the company has a concrete plan for the future. Sports Authority believes it is best to reorganize and pay its creditors in the near future.
The company understands that if it borrows money today in the long run they will turn that debt into net profits. It is difficult to measure the factors that influenced the business to go through a down sloping hill. However, the company must adjust to new marketing techniques in order to be successful in the coming years. It may also want to adopt to new consumer expectations and change in taste. If Sports Authority exceeds the techniques of its key competitors, it will be able to return to business and create desired profits.
Andres is an accounting major at the Feliciano School of Business, Montclair State University, Class of 2019.