What happened to Sports Authority?

  • Sports Authority was an American sports retailer founded by a group of venture capitalists and founding executives in 1987. Increasingly burdened by debt, the company filed for bankruptcy in 2016.
  • Sports Authority experienced intense competition from big-box retailers and eCommerce giants. Its tired stores and high prices could not compete with online shopping.
  • Sports Authority also could not identify and then capitalize on trends. This was due to a combination of poor corporate leadership and insufficient investment capital.

Background

Sports Authority was an American sports retailer originally founded by Nathan Gart in 1928. 

Gart opened the first store, called Gart Brothers, with $50 in fishing rod samples. Sports Authority as most people know it was founded in 1987 by a syndicate of venture capital groups and several founding executives. 

At its peak, the company was the largest sporting goods store in the United States with over 460 stores and 14,000 employees.

In March 2016, Sports Authority filed for Chapter 11 bankruptcy protection with debts topping $1 billion. Proceedings were then converted to Chapter 7 some months later, with Dick’s Sporting Goods acquiring the company’s brand name and intellectual property.

Let’s discuss some of the key factors behind the demise of Sports Authority below.

Competition and brand differentiation

Sports Authority suffered intense competition from Dick’s Sporting Goods, Walmart, Target, and Amazon, with the latter taking market share away from many big-box retailers.

Competition from omnichannel merchants and individual brands such as Nike was also high. This made it exceedingly difficult for the underdeveloped Sports Authority brand to stand out.

eCommerce presence

Although not alone, Sports Authority failed to capitalize on the growing eCommerce movement. 

The company was unable to compensate for its lack of online presence with hundreds of physical stores in dire need of a refresh. Customers also complained of high store prices with the company not honoring coupons for popular brands.

As a result, consumers went online to competitors with greater product range, price transparency, and convenience.

Failure to recognize trends

The company also failed to identify and capitalize on trends.

One example was the so-called “athleisure” trend of casual wear inspired by workout clothing.

Competitors such as Lululemon and Under Armour quickly gained market share, with Dick’s Sporting Goods and Nike joining later. Each company offered a blueprint for success that Sports Authority was not interested in replicating.

Lack of innovative thinking

In an interview about the downfall of Sports Authority, brand and strategy consultant Lee Peterson was critical of the lack of vision at the corporate level. “Any time you see a company move slowly on trends, it’s usually a lack of leadership, which creates bureaucracy, [which] creates stagnation. I know Sports Authority opened some ‘new look’ stores with interesting names, but when you went inside, there was actually nothing new.

The lack of forward-thinking limited the company’s ability to identify trends and develop a strong and recognizable brand

Debt

Another factor that hindered the flexibility of the company was debt.

Through a series of mergers and acquisitions, Sports Authority took on a mountain of debt that it would struggle to repay. In 2006, the company was sold to Leonard Green & Partners. Typical of such a deal, the private equity firm then placed the debt it had incurred in making the purchase back on Sports Authority.

In March 2016, it failed to make a $20 million debt repayment and then declared bankruptcy two months later.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"