When the failing Golfsmith stores were purchased by Dick’s Sporting Goods in a bankruptcy auction on October 24th, it was clear that a change to the golf retail landscape was coming, including here in Northeast Ohio.
But the initial story didn’t outline the timing or the strategy of the bid.
It was originally reported that Dick’s, which sells golf equipment in its stores and is also the parent company of Golf Galaxy, bid $70M to buyout the assets of Golfsmith. Speculation ensued whether any of the Golfsmith stores would be folded into the buyer’s company, what name they would use, etc.
But a key piece of that initial information was not featured. The stories did not mention that the buyout also included a separate bid of $20M by a liquidation company, making the bankruptcy purchase price $90M total for Golfsmith. That additional $20M was bid to buy-out and then sell-off all of the inventory held by Golfsmith.
Liquidating inventory in a bankruptcy proceeding is not uncommon; it’s how the creditors get their pennies-on-the-dollar. And moving Golfsmith inventory into Dick’s or Golf Galaxy stores was not a good option, as doing so could open claims for payment from the creditors and cause all kinds of legal headaches.
So heading into the 2016 holiday sales season with Black Friday just 10 days away, the timing of these actions will rock the golf retail landscape.
Signs have already gone up on the fronts of the Golfsmith stores in both Fairlawn and Harvard Square indicating they are closing and big discounts are being given. According to a source at one Golfsmith store, the discounts are set at 20% off just about everything right now, but are headed to 30% starting this weekend.
Discount amounts will rise every 10 – 14 days until the inventory is completely sold.
But that’s the rub. Also indicated by this store source is that Golfsmith has a series of distribution centers across the country used to replenish inventory to the the stores. At the time of the auction, those distribution centers were stacked to the ceiling with even more merchandise. Now, those products must also be liquidated per the court agreement.
So what’s in the stores now is just some of the merchandise that will be sold off cheap. Even more is coming. And that means there will be a huge number of golf products available to the market during the key holiday season, all priced at huge discounts.
This flood of give-away priced products will greatly affect all of the other golf retailers trying to make their fourth quarter numbers. In fact, it may make them non-competitive since they can’t match going-out-of-business prices.
And since two of Golfsmith’s biggest competitors are the very retailers who purchased the assets in bankruptcy, Dick’s and Golf Galaxy, the timing of the liquidation is a bit of a head-scratcher. (Of course, getting out of store leases before January 1 might be a driving factor.)
Regardless, it now appears that Dick’s bought Golfsmith to take ownership of their ‘house brands’ of merchandise, to keep open the stores in areas where they have none, and shut down all of the rest.
So bottom line, if Santa is supposed to bring you some new golf gear for Christmas this year, you might want to go see the elves over at Golfsmith to fill up your stocking. The prices will be so low, even your Mrs. Claus will be okay with it…