You know, I was driving through the suburbs the
other day, just running some errands, and I passed
one of those massive, sprawling strip malls,
the kind that feels like it goes on for miles.
And right in the middle, there was this giant,
empty, concrete box. The parking lot in front
of it was all cracked, weeds coming up through
the asphalt. Right. But the thing that really
caught my eye was the facade. You can see the...
ghost label the ghostly yeah you know what i
mean the sun had bleached the paint on the building
for decades except for the spots where the giant
red letters used to be oh okay i'm with you so
even though the sign was totally gone the outline
was just burned into the wall and i knew exactly
what it was immediately it was the sports authority
that is a very specific and a very american kind
of archaeology isn't it it really is and it hit
me this wasn't just a store For a solid 25 years,
that shape on the wall represented the absolute
center of the universe for anyone who played
a sport. Yeah, it was ubiquitous. Totally. If
you needed a baseball glove, you went there.
If you needed running shoes, you went there.
It was plastered on the Denver Broncos stadium,
for crying out loud. It was an empire. An empire.
And now it's just a stain on a stucco wall. It's
a haunting image, but it's also the perfect starting
point for our deep dive today. Right. Because
the story of Sports Authority isn't just about
a store closing down. I mean, if we really dig
into the source material, the financial filings,
the history of all the mergers, the bankruptcy
court documents. What we find is a perfect case
study for the entire life cycle of American retail.
It's like a timeline of how business has changed
over the last century. Precisely. It starts with
the American dream phase, you know, a scrappy
founder back in the 1920s. Okay. It moves into
the corporate consolidation of the 80s and 90s.
Then we get into the financial engineering era
of the 2000s, which is where things get really
dark. And that leads to the end. And finally,
the retail apocalypse. If you understand why
sports authority died, you understand exactly
how the modern economy works and more importantly,
how it doesn't work. Well, I want to understand.
Because looking at the outline, the scale of
this collapse was just massive. We're talking
about billions of dollars that just vaporized.
Gone. But before we get to all that destruction,
we have to start with the creation. And frankly,
the origin story is shocking. Considering how
corporate and, you know, soulless it eventually
became. It is shocking because before the private
equity firms and the skyscrapers, it was just
a guy named Nathan in Denver, Colorado. Nathan
Gart. Nathan Gart. The year is 1928. You have
to set the scene. This is the tail end of the
roaring 20s. The stock market is booming. Speculation
is wild. Right. The party before the crash. Exactly.
But Nathan isn't a Wall Street guy. He isn't
some kind of tycoon. He is a newspaper carrier
for the Denver Post. A paper boy. I love that.
He's literally out there hustling on the street
corner. He is. And the legend, which is really
well documented in the company's own historical
archives, is that he started the company, Gart
Brothers, with exactly $50 in his pocket. $50.
Okay. We always have to do the inflation check
because $50 back then is not $50 today. I ran
the numbers before we started. In 1928, 50 bucks
has the buying power of roughly $916 in 2024.
Okay. So let's pause on that. 900 bucks. Yeah.
That is not start a national empire money. That's
buy a decent laptop money. It's buy a used couch
off Facebook marketplace money. Right. It really
emphasizes just how bootstrapped this operation
was. He didn't have angel investors. He didn't
have a line of credit from Chase Bank. He had
his savings from throwing newspapers. So what
does he do with his 900 bucks? Does he rent a
storefront? Put a down payment on a little shop?
No, he can't afford a storefront yet. Not even
close. He invests the entire $50 into samples.
Samples of what? Specifically, fishing rod samples.
Fishing rods. So that's the seed. The whole billion
dollar empire started with fishing rods. That
was the seed. You have to remember, Colorado
in the 1920s was really establishing itself as
this outdoor playground. The Rockies were right
there. People were fishing, hunting, hiking.
Nathan Gart saw that the leisure economy, even
though they didn't call it that yet, was the
future. So he starts selling these rods, probably
leveraging his contacts from his paper route.
It's the ultimate side hustle. It was. And from
that tiny, tiny seed. Gart Brothers, or Gart
Bros, as it became known, starts to grow. But
it grows the old -fashioned way. Organically.
Organically. Slowly. They survived the Great
Depression, which is frankly a miracle for a
company selling what are essentially luxury items
like fishing poles. Absolutely. They survived
World War II, and by the time the post -war boom
of the 1950s hits, Gart Bros is a Denver institution.
This is the era of the regional powerhouse. I
feel like we don't have these anymore. Everything
is national or global now. But back then, every
big city had their store. Exactly. If you were
in Chicago, maybe you went to a different local
chain. But if you were in the Rocky Mountains,
you went to Gart's. It was part of the local
identity. It meant something. It did. And they
cemented that identity in 1971 with a move that
I think is one of the most brilliant. real estate
decisions and retail history. We're talking about
the Sports Castle. The Sports Castle. Just the
name tells you everything you need to know, doesn't
it? It's epic. I looked up photos of this place.
It's incredible. It doesn't look like a store.
It looks like some kind of government building
or a museum. It's grand. It was located at 10th
Avenue and Broadway in Denver, but they didn't
build it from scratch. They took over a building
that had been a Chrysler automobile dealership.
in the 1920s an auto dealership that's an odd
choice well think about the architecture of a
1920s dealership it wasn't a parking lot with
a trailer right It was a palace for the automobile.
Sure. High ceilings, big windows, stained glass,
ornate detailing. And crucially, it had these
massive internal ramps so they could drive the
cars from the showroom floor up to the service
levels. And Gart Bros kept the ramps. I kept
everything. Imagine walking into a sporting goods
store and instead of taking an escalator, you're
walking up this wide concrete ramp that was designed
for a Model T. Wow. They filled the different
levels with different worlds. One floor was just
for tennis. Another was all skiing. Another was
camping. So it sounds like an experience. It's
not just shopping. That's the key word, experience.
We talk about experiential retail today, like
the Apple Store, those massive base pro shops
with the aquariums inside, as if it's some new
invention to fight Amazon. Right. Gart was doing
this in 1971. You were doing it before the internet
even existed. Exactly. You didn't just go to
the sports castle to buy a tennis racket. You
went to hang out. You went to see the new gear.
It became a destination. And that must have just
crushed any competition. It established their
physical dominance in Colorado. If you were a
competitor trying to enter the Denver market
in the 70s or 80s, good luck. You were fighting
against a literal castle. So they owned Colorado.
And then in the 80s, they start to expand a bit,
right? I see here they acquired Hagen Sports
LTD and Stevens Brown. Yes. The 1980s were a
period of careful regional expansion. They moved
into Utah. They moved deeper into the Rockies.
But... And this is critical. They were still
fundamentally a local company growing outward.
Brick by brick. They were building brick by brick.
But while Gart is carefully laying bricks in
the mountains, something completely different
is happening down in the swamps of Florida. The
complete opposite side of the country and the
complete opposite business philosophy. Enter
the sports authority. Now, unlike Gart. The Sports
Authority, or TSA as it was known internally,
wasn't started by a paperboy. It wasn't started
on a shoestring budget of 50 bucks. No. It was
engineered in a boardroom. This is the corporate
timeline starting. This is the other track. 1987,
Fort Lauderdale, Florida. A syndicate of venture
capital firms comes together. We're talking about
William Blair Venture Partners, First Chicago,
and a name that I think everyone knows, Bain
Capital. Bain Capital. OK, that's heavy hitting.
That's Mitt Romney's old firm. That's not let's
sell some fishing rods. That's let's dominate
an entire industry. Precisely. They teamed up
with a guy named Jack A. Smith, who was a seasoned
executive. He'd been the COO of Herman's World
of Sporting Goods, another chain. So he knew
the business. He knew the business inside and
out. And they all looked at the landscape and
said, there is no single national player. They're
just a bunch of regional guys like Gart. Let's
build a category killer. Category killer. Yeah.
I hear that term thrown around in business news
all the time. Usually we're referring to the
90s. Toys, Aras, Home Depot, Staples, places
like that. But what does it actually mean strategically?
How do you kill a category? It's a strategy of
overwhelming force. The traditional model was
the department store. You know, a Sears or a
JCPenney. They sold a little bit of everything.
A few baseball bats, a few gloves. Sure. Or you
had the mom and pop shop, which had... Great
personal service, really high prices and very
limited stock. The category killer builds a massive
warehouse, 40 ,000 square feet or more, and fills
it with only one thing. So if you're Sports Authority.
You don't just have three baseball bats from
Louisville Sucker. Yeah. You have 300. You have
every brand, every weight, every material from
T -ball to pro. And because you are buying in
such massive volume from the manufacturers, you
get much better pricing. The volume discount.
Right. So you can sell that bat for cheaper than
the mom and pop store can even buy it for from
their distributor. You crush the small guys on
price and you crush the big department stores
on selection. Exactly. You become the authority.
That's the brilliance of the name. Yeah. It wasn't
sports warehouse or sports world. It was the
sports authority. It implies that there is no
other legitimate place to go. It's aggressive
and it clearly works. They opened the first store
in November 1987. But then, looking at the timeline,
something weird happens almost immediately. 1990.
The Kmart chapter. Kmart. I have to admit, when
I was reviewing the notes for this, I totally
forgot Kmart ever owned them. It feels like a
glitch in the matrix. It does seem bizarre now,
especially given that Kmart has largely vanished
itself. But in 1990, Kmart was a titan. They
were the second largest retailer in America,
right behind Sears. And they were terrified of
Walmart. Absolutely terrified. Walmart was the
shark in the water. So Kmart's leadership realized
their main discount stores were losing ground.
Their strategy was diversification. To why buy
a sporting goods store? Is it just about adding
revenue? It was about buying into these new high
growth category killer concepts. They bought
Borders books. They bought Office Max and they
bought the Sports Authority. So Kmart becomes
this. Big holding company for all these different
specialty giants. Exactly. And for Sports Authority,
this was like winning the lottery. Kmart had
incredibly deep pockets. They just poured money
into TSA. Fuel for the fire. Rocket fuel. They
took their existing sports giant stores, which
was a Kmart -owned brand in Detroit, and converted
them all to Sports Authority. They funded a blitzkrieg
of expansion across the country. How fast are
we talking here? In 1990, there were just a handful
of stores in Florida. By 1995, just five years
later, they had 136 stores in 26 states. That
is insane speed. Gart took 50, 60 years to conquer
the Rockies. The Sports Authority took five years
to conquer half the country. That is the power
of capital. But it's also the danger, right?
When you grow that fast, you aren't building
a culture. You aren't building deep roots in
the community like Gart did. You're just planting
flags on a map. You're just planting flags. And
then, just as quickly as it started, the parent
company gets tired of the child. 1995, what happens?
Kmart started to implode. Their core business
was getting hammered by Walmart and Target. They
needed cash to save their own sinking ship. So
they sell off the assets. They spun off the sports
authority. They took it public in a big IPO.
So now TSA is an independent public company again.
They're huge. They're national. And they're hungry.
And this brings us to the late 90s. The board
is set on one side of the country. You have Gart
Bros, the historic service oriented king of the
West. On the other side, you have the sports
authority, the corporate big box beast of the
East and in the middle. a whole lot of other
regional chains that are about to get eaten.
This is the era of mega mergers, the consolidation
phase. It is. The industry just realized there
were too many players. You had Gart, you had
TSA, Sportmart, Oshmans, Copelands, Models. It
was way too crowded. So it was inevitable. Everyone
knew that eventually there would only be two
or three left standing. It's a game of musical
chairs. with billions of dollars on the line.
And Gart Bros decided they were not going to
be the ones left without a chair. They started
a very aggressive acquisition spree. Okay, let's
talk about the other players, because they bring
a lot of their own history to the table, too.
Let's start with Sportmart. Sportmart was a major
player in the Midwest, specifically out of Chicago.
It was founded by the Hochberg and Cantor families.
So another family business, kind of like Gart?
Very similar to Gart Family Run. deep roots in
their community. They grew to about 60 stores
across the Midwest. I see a note here that they
tried to expand to Canada at one point. Briefly,
in the 90s, it's a classic example of what you
might call retail hubris. They thought, hey,
we know sports. Let's go north of the border.
And it didn't work. International expansion is
incredibly difficult. You have different supply
chains, different labor laws, completely different
customer tastes. It was a disaster. They failed
within two years and had to pull out. Ouch. So
they were treated back to the U .S., bruised,
and probably short on cash. And vulnerable. In
1998, Gart Bros swooped in and acquired them.
Okay, so now Gart controls the West and the Midwest.
Who's next on their shopping list? Oshman's Sporting
Goods. Now, Oshman's, I remember, they were huge
in Texas and the South. They were the Texas sporting
goods store founded way, way back in 1919 by
Jake Oshman in Houston. So they were actually
even older than Gart. Wow. 1919? That's a century
of history. And they were innovators, too. Back
in the 60s and 70s, they built these massive
Super Sports USA stores that had, like, batting
cages and indoor ski decks inside. So they also
understood the experience part of it. They absolutely
did. They were another regional powerhouse with
a very loyal following. But by 2001, even these
giants were getting tired of fighting alone.
The pressure to consolidate was immense. So Gart
merged with Oshman's in 2001. Now let's pause
and look at the map. Gart Sports, as Combined
Company was called, is now this three -headed
monster. It's Gart in the Rockies, Sport Mart
in the Midwest, and Oshman's in the South. They
are a massive, sprawling, regional powerhouse.
But they still aren't number one nationally?
No. The sports authority is still the revenue
king. They own the East Coast. They have a huge
presence in California. They have that national
brand recognition from the Kmart days. So we
have two heavyweights left in the ring. Godzilla
versus King Kong. And instead of fighting to
the death, which would have been bloody and expensive
for both, they decided to get married. The merger
of equals. That's what the press release called
it. August 4, 2003. Gart Sports merges with the
Sports Authority. I always find that term merger
at equals a little suspicious. In business, usually
someone is the windshield and someone is the
bug, you know. It's rarely 50 -50. And this merger
was, well, it was complicated. On paper, they
took the name the Sports Authority because it
was the better known national brand. Mid -sense.
But they decided to move the corporate headquarters
to Inglewood. To Gart's backyard. Right. And
the CEO of the new combined company was Doug
Morton, who was the Gart CEO. So you had this
really weird situation where the brain of the
company was Gart, the old school service oriented
relationship driven culture. But the face of
the company was Sports Authority, the big. corporate
transaction -driven brand. That sounds like an
identity crisis waiting to happen. It was a massive
one. They spent the next several years just trying
to integrate the different systems. You have
to imagine Gart used one computer system for
inventory, Sportmart used another, Oshman's used
a third, and TSA used a fourth. What a nightmare.
Just merging those databases is a nightmare that
costs millions and takes years. And while all
the executives are staring at spreadsheets trying
to merge four companies into one, the customer
is getting confused. The experience is probably...
suffering. And the culture is getting diluted.
By 2006, they made the final move and rebranded
all the stores. The famous Sports Castle became
just another sports authority. The Oshmans in
Houston your family went to for 50 years became
a sports authority. That's got to hurt if you're
a local. Yeah. You grew up with Oshmans, it was
your store, and suddenly it's this generic red
sign from Florida. It completely erodes that
local loyalty. You aren't my store anymore, you're
just a store. And if you're just a store, then
I'm going to shop wherever it's... cheapest or
most convenient. Exactly. And speaking of money,
this brings us to the pivotal moment. The moment
where, according to most analysts, the fate of
the company was sealed. 2006, the private equity
era. Okay. This is where the story shifts. Up
until now, we've been talking about retail strategy
mergers, store counts, branding, things like
that. Now we have to talk about financial engineering.
Okay, lay it on us. What happened in 2006? In
January 2006, the newly merged Sports Authority,
a publicly created company, agreed to be purchased
in a leveraged buyout, an LBO, by a private equity
firm called Leonard Green and Partners. LBO,
the term we hear all the time, usually followed
by the word bankrupt. But let's really unpack
the mechanics of it, because I think a lot of
people don't realize how this actually works.
It sounds innocent, like someone is just buying
the company. It does, but the method is everything.
The deal was valued at $1 .4 billion. In today's
money, that's over $2 billion. A huge number.
Huge. Now, Leonard Green, the private equity
firm, didn't just write a check for $1 .4 billion
from their own bank account. They borrowed a
massive amount of that money, hundreds of millions
of dollars, to fund the deal. Okay, so they took
out a loan. That's normal. I take out a loan
to buy a car. But here's the trick. Here's the
move that defines an LBO. When you buy a car,
you are responsible for paying back the loan.
Right. In a leveraged buyout, the debt used to
purchase the company is placed on the company
that was just purchased. Wait, run that by me
again. Leonard Green borrowed money to buy Sports
Authority, and then they made Sports Authority
responsible for paying back that loan. Let me
see if I can use an analogy here. That's like
me buying your house. But I take out a mortgage
in your name to pay for it. And then I tell you
that you have to work extra shifts at your job
to pay the monthly bill for the house that I
now own. That is a simplified but functionally
accurate way to view the burden. Suddenly, Sports
Authority, which was a profitable company with
manageable liabilities, had this massive anchor
of debt tied around its neck. So before the deal.
their profits went to shareholders or to reinvestment,
like fixing up stores. After the deal, a huge
chunk of their profits went to paying interest
on the debt used to buy them. Correct. And this
changes everything about how you run the company.
The number one priority is no longer selling
baseball gloves or serving the customer. It's
servicing the debt. it becomes the only thing
that matters. How much debt are we talking about?
We're talking hundreds and hundreds of millions
of dollars. And the interest payments are relentless.
They come every quarter, no matter what. This
means you have a lot less free cash flow. And
free cash flow is the money you actually use
to run the business. The money you use to fix
the roof, or buy new carpet, or upgrade your
ancient computer systems. Or, and this is the
most important part. The money you use to build
a world -class e -commerce website to fight Amazon.
Right, because the year is 2006. This is exactly
when Amazon is starting to... Eat everyone's
lunch in every category. Precisely. So at the
exact moment in history when sports authority
needed to be nimble, when they needed to invest
hundreds of millions into digital infrastructure
and renovating their stores to compete, they
were handcuffed. They simply couldn't spend the
money because they had to pay the bank. That
is just tragic timing. It's the black box era
because once they went private, they stopped
filing their financial statements with the SEC.
We couldn't see the books anymore. The public
had no idea how much trouble they were in. But
we could see the stores. I remember going into
a sports authority around, say, 2010 or 2012,
and it just felt tired. It felt neglected. The
lighting was dim. The carpets were stained and
curling at the edges. The employees were scarce
and seemed unhappy. That is the physical manifestation
of a leveraged buyout. Every dollar that could
have been spent on a cleaner carpet or a better
training program was instead being sent to the
lenders. And yet, even while they were drowning
in this debt, they kept eating. I see here that
later in 2006, they acquired parts of Copeland
Sports. It's almost pathological, isn't it? Copeland's
was another chain that had filed for bankruptcy,
and Sports Authority came in and picked up the
leases for seven of their locations. It's like
a corporate reflex. We are a shark. We must keep
moving forward and acquiring, even if the shark
is bleeding out. So they're cutting costs in
the stores, making the experience worse. But
they also started changing what they sold. And
this is something I definitely noticed as a customer.
The brands changed. This is the private label
strategy. Explain the economics of that for us.
a house brand that nobody's ever heard of. It's
all about profit margin. Let's say you sell a
pair of Nike running shoes for $100. You, the
retailer, might have to pay Nike $55 or $60 for
those shoes. Your gross profit is $40. Okay,
makes sense. Now let's say you go to a factory
in China and manufacture your own shoes. You
call them... Aspire or something. You pay the
factory maybe $15 to make them. You sell them
for $80. So they're cheaper for the customer.
Cheaper for the customer, but your profit is
$65. So you make way more money per sale. Much
more. So when that debt pressure mounted, sports
authority leaned heavily, heavily into private
labels. They were desperately trying to capture
that higher margin on every sale. I recognize
some of these names in a list. Alpine Design.
I definitely had a sleeping bag from them at
some point. I just assumed it was a real outdoor
company. Nope. It was a house brand. They also
owned Sims snowboards. Now that one hurts my
soul a little bit. Tom Sims was a legitimate
pioneer. He basically co -invented the modern
snowboard. He did. But somewhere along the line,
the brand name ended up in the Sports Authority
portfolio. So by 2012, if you bought a Sims board,
you weren't buying from some cool indie skate
shop. You were buying a mass -produced house
brand. What about Tommy Armour golf clubs? House
brand. Ram golf. House brand. Parkside trampolines.
All house brands. They were trying to be the
manufacturer and the retailer for everything.
The problem is, as a consumer, I'm not stupid.
I know that Aspire isn't Lululemon. I know that
Alpine Design isn't the North Face or Patagonia.
Exactly. You dilute the brand equity of the store
itself. People used to go to the sports castle
to find the best, most authentic gear in the
world. Now they are walking into a dingy strip
mall to find a bunch of knockoffs. So let's recap
the situation around, say, 2012. They're losing
the cool factor because the house brands. They're
losing the service factor because they cut staff
to save money. And they're losing the price factor
because Amazon is undercutting them on everything.
They were stuck in what retail analysts called
the muddy middle. They did try to pivot, though,
right? I see SA Elite in the notes here. What
was that? This was in 2010. And to give them
credit, they correctly identified the problem.
They knew their big box warehouse model was dying,
so they launched SA Elite. These were much smaller
stores, usually in more upscale shopping centers.
So no kayaks or basketball hoops, just expensive
yoga pants and high -end running jackets. Exactly.
They were trying to segment the market. They
wanted to capture that affluent shopper who doesn't
want to wander through a 40 ,000 square foot
warehouse to find a pair of leggings. It sounds
like a smart play, honestly. It was a logical
play. But here's the problem. Scale. They only
opened a handful of these stores. It was an experiment.
But when you have 450 massive underperforming
warehouses dragging you down, five nice little
boutiques aren't going to save the show. They
just didn't have the capital to do a full scale
pivot. Because of the debt. Because of the debt.
It always, always comes back to the debt. And
while all this is happening internally, while
the stores are rotting and the pivot is failing.
They decide to make the biggest, loudest, most
expensive marketing move possible. The stadium.
Sports Authority Field at Mile High. Home of
the Denver Broncos. They bought the naming rights
in 2011. That is hallowed ground in Colorado.
That's John Elway's house. It is. And the deal
costs them roughly $6 million a year. Why do
that? Why spend $6 million a year on a sign when
you can't afford to fix the air conditioning
in your stores? It's a vanity play. It projects
strength and stability even when there is none.
If your name is on the stadium or an NFL team
plays on national television every Sunday, surely
you must be doing well. So it's a way to keep
the vendors happy. It keeps the vendors' shipping
product. It keeps the lenders calm. It's a mask.
But the mask can only stay on for so long. And
in 2016, it slipped off for good. Let's talk
about the collapse. Section 6. The timeline of
destruction. Because it happened shockingly fast.
Incredibly fast. February 2016. What was the
trigger? What was the first domino to fall? It
wasn't just one thing, but the immediate trigger
was a missed interest payment. They had a massive
payment due on that LBO debt load and they just,
they couldn't make it. The checking account was
empty. So the bill finally came due. But there
was a second trigger. One that is unique to the
world of retail. The suppliers. The people who
actually make the gear. Right. Nike, Under Armour.
The North Face, Wilson, Rawlings, these companies
aren't charities. When they heard rumors that
Sports Authority was insolvent, they got very,
very scared. Because if I'm Nike, and I send
you a million dollars worth of Air Jordans on
credit, and then you go bankrupt next week...
I might never get paid for those shoes. Exactly.
So what did they do? They stopped shipping. Or
they demanded cash up front for any new deliveries.
Which Sports Authority obviously didn't have.
Right. And for a lot of the winter sports gear,
it's even worse. A lot of that expensive ski
and snowboard gear is sold on consignment. That
means the manufacturer, like Burton or K2, still
technically owns the coat while it's sitting
on the rack in the store. Oh, wow. When bankruptcy
looked likely... Those brands sent letters demanding
their inventory back immediately. So the shelves
start to go empty. The shelves go empty. And
when the shelves are empty, the customers stop
coming in. It's a death spiral. March 2, 2016.
They make it official. They file for Chapter
11 bankruptcy. Now, can you explain the difference
for the listener, Chapter 11 versus Chapter 7?
Sure. Chapter 11 is reorganization. It's the
emergency room of the business world. You go
in. The court puts a shield around you to protect
you from your creditors for a little while. And
you try to come up with a plan to fix the business.
You close the worst performing stores. You try
to renegotiate leases and debt. And you hope
to come out the other side as a smaller but healthier
company. That was the plan. That was the initial
hope. They announced they were going to close
about 140 of the 450 stores and try to keep the
rest open. So what went wrong? Why didn't they
make it out of the ER? The doctors, in this case,
the lenders and the creditors, took one look
at the patient and decided it wasn't worth saving.
That is absolutely brutal. It's just cold math.
They ran the numbers. They looked at the liquidation
value of the inventory. You know, how much cash
could they get if they just sold everything for
50 cents on the dollar right now? And they compared
that to the risk and cost of trying to run the
business for another year. And the math said
to pull the plug. The math said dead is better
than alive. So in May 2016, just two months later,
the court converts the case to Chapter 7. Chapter
7, liquidation, the end of the line. The CEO
at the time, Michael Foss, has to make the announcement.
All stores will close by the end of August. 14
,000 employees, 450 stores, all gone in a matter
of weeks. And this brings us to the vultures,
or as you call them in our notes, the scavengers.
Dick's Sporting Goods. The arch nemesis. The
primary rival. For years, they had been battling
it out for market share, mall by mall. And Dick's
played the situation masterfully. How so? They
didn't try to buy sports authority as a going
concern. They didn't want the massive debt. They
didn't want the bad leases and all those dying
strip malls. They waited for the carcass to hit
the ground. They waited. June 2016, the bankruptcy
auction. Dick's Sporting Goods showed up and
bought the intellectual property. The IP. Not
the stores, not the inventory. Just the name
Sports Authority, the customer email lists, the
credit card data, and most importantly, the website
domain. They bought the URL sportsauthority .com.
For $15 million, which in the grand scheme of
things is pennies. So if I, as a customer, typed
sportsauthority .com into my web browser. in
July of 2016. It didn't take you to a liquidation
sale or a goodbye message. It redirected you
immediately and seamlessly to Dick'sSportingGoods
.com. That is the ultimate conquest. That's like
conquering a kingdom and replacing their flag
with yours on the castle. Your traffic is now
my traffic. It's total victory. In one move,
they erase their biggest competitor and absorb
their entire digital identity overnight. And
the physical stores. The sports castle. The sports
castle sat empty for years. It's still standing
in Denver. It's a protected historic landmark.
But the retail soul of it is gone. And the stadium.
Oh, the stadium. The Denver Broncos couldn't
get that sign down fast enough. It was an embarrassment.
It was. Their stadium was named after a bankrupt
company. They actually had to go to the bankruptcy
court and pay money to buy back the naming rights
from the liquidation estate just so they could
legally strip the name off the building. Talk
about a fall from grace. From owning the skyline
to being scraped off the wall like a piece of
old tape. So let's zoom out here. We've gone
from Nathan Gart's $50 investment in fishing
rods to a $1 .4 billion private equity deal to
a liquidation sale where the URL was the most
valuable asset. It's a tragic arc. But what is
the big takeaway? Why does this story matter
to someone who isn't a retail analyst? I think
it matters because it exposes the fundamental
fragility of that big box model in the modern
era. We talked about the muddy middle. Sports
authority got stuck there. They weren't the cheapest
Amazon and Walmart were. They weren't the best
experience or the most knowledgeable places like
REI or your local specialty running or ski shop
were. They were just big. And just there is the
kill zone in the modern economy. You have to
be exceptional at something. Price, convenience,
or experience. You can't just be mediocre at
all three. And the second lesson has to be about
the debt. It's the villain of the whole story.
Absolutely. The LBO model creates zombie companies.
It takes a business that might have been able
to navigate the changes, that might have been
able to shrink, pivot, and survive, and it ties
their hands and throws them in the deep end of
the pool. It's like sending a soldier into a
huge battle, but first you take away most of
his ammo and put 50 pounds of rocks in his backpack.
And then you act surprised when he loses the
fight. It really makes you look at the survivors
differently. I walk into a Dick's Sporting Goods
now, and it's oppressive. They have these new
house of sport concepts, rock climbing walls,
batting cages, putting greens. It feels, well,
it feels like the sports castle. They are relearning
the lesson that Nathan Gart taught us all the
way back in 1971. Experience matters. Community
matters. But it does raise a provocative question
for the listener. Are they safe? Is Dick's Sporting
Goods safe? In retail, no one is ever safe. That's
a comforting thought. It's the truth. Dix is
winning now, but this industry is cyclical. If
they stop innovating for a second, or more to
the point, if they get bought out by a private
equity firm that decides to load them up with
debt to extract value. They could be the next
ghost town. They could absolutely be the next
ghost label on a stucco wall. It's a sobering
thought. That massive concrete box in the strip
mall. It's not just an empty building. It really
is a monument. A monument to the category killer
era and a warning about the dangers of debt.
Well, next time you drive past one, now you'll
know the whole story. You'll know about the paperboy,
the fishing rods, the Kmart years, and the private
equity deal that brought it all crashing down.
And you'll know why you're probably buying your
next pair of running shoes online. Exactly. Thanks
for taking this deep dive with us. My pleasure.
Stay curious, and we'll catch you on the next
one.