Golf industry critics have some new fodder this week as Golfsmith International Holdings Inc. filed for Chapter 11 bankruptcy on Wednesday. However, this latest domino to fall may not be quite the death knell the doom and gloomers are making it out to be, especially if The New York Post‘s sources prove correct.
(Golfsmith), which is also battling an overall downturn in sales of golf equipment, could end up in the arms of Dick’s Sporting Goods if it files for Chapter 11 protection, sources said.
Dick’s puts a great emphasis on golf equipment sales.
Private equity investor Ontario Municipal Employees Retirement System owns Golfsmith and shanked the 2012 investment by acquiring it in a $97 million leveraged buyout, which put the company in deep debt at the same time interest in golf waned.
Moreover, the problems (if in fact they are problems) with Golfsmith and to an extent with Nike may actually be problems specific to those companies and not to the larger game and business itself. Nike made a strategic decision to compete in its core strengths, rather than continue to fail in hard goods. It’s no different than the company’s failure with Bauer in hockey, a market with similar traditional barriers to entry as golf. Nike acquired the Canadian hockey skate powerhouse in 1994 but 13 years later put it up for sale.
Golfsmith’s issues may relate as much or even more to real estate investments as driver sales, and they may also reflect changes to the golf retail business model. According to a report from Bloomberg, Golfsmith, with 150 stores in North America, is considering an option for bankruptcy protection. Owned by OMERS, a municipal employees pension fund based in Canada, Golf Town acquired Golfsmith to form the largest golf specialty store retailer in the world in 2012 for a reported $96 million. The Bloomberg report indicates OMERS has been looking for a buyer for the combined Golfsmith International and that a Chapter 11 filing could be part of a sale.
At the end of a tumultuous week, it’s worth remembering that the game is more than a few corporations. And there is a difference between companies in golf making bad business decisions and golf being a bad business.
Breathe a little easier, golf fans. The end — still — is not near.