Why Sports Authority filed for bankruptcy protection
Sports Authority, the big-box athletic apparel and equipment retailer, filed for Chapter 11 bankruptcy protection Wednesday. The company said it will close 140 stores, or about a third of its locations nationwide.
Papers filed with the U.S. Bankruptcy Court show that the company鈥檚 debts could be as high as $1.1 billion.
Sports Authority has secured access to up to $595 million that will keep the rest of its locations open for now. But if the company can鈥檛 find a buyer by April, it will close its remaining stores.
Company plans to regroup
Filing for bankruptcy protection can allow companies to restructure their debts聽or sell off some of their assets in order to regain profitability 鈥� and stay open. This appears to聽be Sports Authority鈥檚 motivation.
鈥淲e are taking this action so that we can continue to adapt our business to meet the changing dynamics in the retail industry,鈥澛燙EO Michael E. Foss said in聽聽posted on the company鈥檚 website.聽鈥淲e intend to use the Chapter 11 process to streamline and strengthen our business both operationally and financially so that we have the financial flexibility to continue to make necessary investments in our operations.鈥�
Consumers should resolve unfinished business
Companies in Chapter 11 bankruptcy can continue to operate. However, if Sports Authority can鈥檛 find a buyer and is forced into Chapter 7 bankruptcy, it will have to close all of its stores and liquidate its assets 鈥� which could leave customers in the lurch.聽
The company expects its customer loyalty program to continue without any changes for now, and will honor warranties on items purchased at its stores or online, Foss said in the statement. Customers can still make returns or exchanges and use Sports Authority gift cards.聽
But if you have a gift card, it鈥檚 best to use it as soon as possible, according to advice the聽聽provides to customers of stores in Chapter 11. The cards could be worthless if the company goes out of business. The same advice applies if you鈥檇 like to return or exchange an item: Take care of it now, or you might be left with unwanted goods.
This article first appeared at .
