Included within our 2016 Predictions for Industry Supply Chains (Available for complimentary downloading in our Research Center) are specific industry focused predictions. For the B2C and Retail industry, we predicted more challenges this year related to permanent shifts in consumer shopping behaviors, leading to another challenging year. We stated:
“While brick and mortar retailers have now begun to figure out how to leverage physical stores into an overall merchandising strategy that enhances the advantages of both a physical and online presence, when the dust settles in early 2016, retailers who have not effectively done so will find themselves in peril. We predict more challenges for the retail industry in the coming year, unfortunately to include some high visibility bankruptcies.”
That latter sentence was a prediction reluctantly added.
Unfortunately today’s business headlines include a report that retailer Sports Authority has filed for Chapter 11 bankruptcy protection which includes an intent to close or sell 140 stores and two existing distribution centers.
Characterized as one of the largest sporting-goods retailers, the retailer has, according to The Wall Street Journal, been weighted down with debt from a prior leveraged buyout a decade ago. The retailer indicated $1.1 billion in debt that includes $717 million in bank loans and over $200 million in trade debt owed to suppliers.
According to reports, lenders have given the retailer up to the end of April to find a buyer or another investor, or close any remaining stores. Over $500 million in Bankruptcy Bridge financing comes due on June 30th.
In a court filing, Sports Authority’s CFO indicated that the retailer accumulated substantial losses as sales shifted from traditional brick and mortar retailers to online resellers. Moody’s Investor Service pointed to bad weather, weak execution, poor margins and high shipping costs contributed to the retailers current situation. That should be a familiar refrain for those residing in the retail industry today.
Candidly, while Sports Authority was not specifically what we had in mind in our prediction, it has occurred. That leaves the open question as to whether any more will follow.
We also emphatically state that we do not make such predictions to score points. We know all too well that people’s livelihoods and supplier’s and lender’s balance sheets are all impacted.
Thus is the current state of retail and B2C, reflecting a very difficult and tough industry environment that can penalize firms not agile enough to adapt to permanent shifts in market behavior and required supply chain response.
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