Golfsmith International Holdings Inc. has filed for bankruptcy with plans to sell part of the chain and reorganize the rest to pay off a nearly $500 million debt. The company blames the decline in the popularity of golf as a major sport in North America for the financial position that they now find themselves in. In 2011 Golfsmith implemented a plan in which they began opening bigger, more expensive stores around the country. This plan backfired as golf began to lose national popularity around the same time. Annual numbers for new players to golf are actually up this year, however, the numbers for player retention have been steadily declining over the last couple of years. This means that people are trying the sport but not sticking with it for very long. The effect of this decline in popularity in combination with the company's expansion efforts has resulted in a situation where bankruptcy is the most valid option for Golfsmith moving forward.
The company is hoping that someone will buy the brand and save the remaining stores from closing down. The United States branch of the company is not the only one suffering from the current apparent lack of interest in golf. The company's canadian branch, Golf Town, is also filing for bankruptcy. A joint venture between Fairfax Financial Holdings and CI Investments has offered to purchase the canadian branch of the company, which will be handled in a separate bankruptcy proceeding from Golfsmith. The sale of Golf Town has little to no impact on the U.S. branch of the business.
Golfsmith is attempting to solicit bids for the purchase of the U.S. branch of the company, and if that fails the company ownership will be transferred to the senior noteholders. The business is attempting to restructure in a sustainable way by closing low performing stores and by refinancing as much debt as possible. The goal of this plan is to maintain the company and pay off debts while suffering as few losses as possible.
Golf has suffered popularity losses as a result of the lack of interest from young and millennial players. This lack of interest could be attributed to any number of things, including antiquated rulesets, high cost of entry, and lack of modern media coverage. If the sport doesn't find a way to gain the attention of this large group of consumers soon, it may spell disaster for the commercial success of many golf courses and businesses worldwide. Golfsmith may very well be the first of many bankruptcies to come.Bankruptcy Attorney