Golfsmith International Holdings, operator of 109 stores in the United States, filed for Chapter 11 bankruptcy protection on Wednesday in Delaware. It plans to continue to operate many of its U.S. stores as it seeks a buyer.
The Austin, Texas-based Golfsmith was purchased by Canada’s Golf Town in 2012. Together they became one of the largest golf retailers in the world. Golfsmith and Golf Town together are owned by OMERS Private Equity Inc., part of the Ontario municipal employees’ pension fund, according to a Bloomberg report.
Golfsmith’s leveraged growth attempts earlier this decade led to debt approaching $200 million, according to multiple reports. The company stated in the Chapter 11 filing that it has assets and debts of as much as $500 million.
The company’s timing with its debt – and the ensuing interest payments – couldn’t have been much worse, as participation in the sport declined. National Golf Foundation data shows the number of U.S. golfers has declined from 25.7 million in 2011 to 24.1 million last year.
Numerous retail competitors, such as Sports Authority, have closed, and others such as Dicks Sporting Goods have scaled back in golf. Nike in August stepped away from the hardgoods golf market, and German multinational Adidas has announced efforts to sell TaylorMade Golf, Adams and Ashworth.
Golfsmith is expected to shutter an undisclosed number of stores in the United States and attempt to refinance its debt. The company hopes a streamlined Golfsmith will attract a buyer, but according to the Chapter 11 filing, it plans to liquidate if nobody steps forward to save the company.
Fairfax Financial Holdings Ltd. and CI Investments Inc. have joined in an offer to the buy the Canadian arm of the business, which operates 55 Golf Town locations. A Canadian court must approve that transaction. The Golf Town sale is expected to help Golfsmith deleverage and acquire better terms on its debt.
Golfsmith was founded in 1967 in New Jersey, and the company focused on custom clubs and components mostly as a catalog business. The company expanded into brick and mortar in the 1990s.
GolfTEC, an independent provider of golf lessons with 204 locations, leases space in about 80 Golfsmith stores. GolfTEC, which employs about 500 PGA of America teaching professionals worldwide, said the Golfsmith bankruptcy plans should have little impact on its business. GolfTEC announced plans to open stand-alone fitting centers to replace its locations in any Golfsmith that closes or transition students to existing GolfTEC locations.