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Dive Brief:
- Olympia Sports filed for Chapter 11 bankruptcy Monday after starting a full store liquidation process in the summer.
- After moving to shut down many of its stores early this year, the company in July formed a plan to wind down its full footprint. With 35 stores left operating, Olympia plans to finish liquidating its stores by Sept. 30.
- CEO Mark Coffey said in court papers that bankruptcy was necessary to retain employees and ensure smooth operations through the closure and wind down process.
Dive Insight:
Founded in 1975 by Ed Manganello, Olympia Sports began in Portland, Maine, before spreading throughout the northeast and mid-Atlantic. At its height, it operated over 230 stores, before closing some of its unprofitable stores in the seven-year period between 2013 and 2019, Coffey noted.
Private equity firm CriticalPoint Capital acquired Olympia in the fall 2019 through the JackRabbit running specialist retailer that CriticalPoint acquired from Finish Line in 2017. After the deal, Olympia was left with 75 stores in all.
The acquisition marked an expansion for CriticalPoint’s assets in the sporting goods space, collectively held under the Running Specialty Group (RSG), which is part of the Chapter 11 case debtor group. It also marked the beginning of a period of turbulence for the company, in part because of the disruption from the pandemic.
In 2020, RSG bought Shoebuy.com from Walmart as the latter was looking to streamline its e-commerce assets. Coffey said that in the year before RSG took over Shoebuy.com from Walmart, the online shoe retailer was losing around $19 million on $131.4 million in sales. Even so, Olympia’s parent thought Shoebuy could be made profitable by switching from its “home grown” e-commerce platform, which required a large staff to run, to a more streamlined platform.
The RSG companies, including Olympia, entered into a contract with Salesforce in 2021 for what Coffey called an “extensive” e-commerce package. All told, RSG’s management expected that gross sales would top $400 million once everything was running on Salesforce. But Coffey said “this did not come to fruition.”
In fact, Shoebuy.com’s average gross sales per day fell by nearly $140,000. Coffey said a new order management system by Salesforce was to blame, one that resulted in duplicated and unprocessed orders sent to the wrong recipients. Along with sales declines, the company was spending money to try to fix its problems and still weathering the lingering effects of COVID-19.
More money was diverted away from Olympia as management focused on the well-performing Jackrabbit, which was sold to Fleet Feet in 2021 for $47.7 million. That helped pay down debt, but, with some executives leaving with Jackrabbit, challenges were left behind for new management, said Coffey, who stepped into the CEO role in March.
Among the issues was the Salesforce contract, which Coffey said the company was unable to renegotiate even after losing Jackrabbit, one of the main users of the Salesforce platform. With Shoebuy.com still struggling, RSG sold its inventory and IP, which includes the Shoes.com domain name, to DSW parent Designer Brands for $4.6 million this April.
After bringing in advisers, RSG decided to close a large chunk of Olympia’s remaining stores, and by the summer had moved to close all of them. That plan is still in place. Coffey said the company’s pleadings in bankruptcy was necessary so that Olympia, with 324 employees, can maintain its obligations to its workers and customers through the liquidation process.
via https://www.aiupnow.com
Ben Unglesbee, Khareem Sudlow
