Golfsmith, the world's largest golf retailer, has filed for Chapter 11 bankruptcy, the company announced on Wednesday.
The move will precipitate a broader corporate restructuring that includes the selling of Canada-based business Golf Town to a group led by Fairfax Financial Holdings Limited and CI Investments.
The Austin-based retailer intends to shutter "certain underperforming stores" and sell excess inventory as well as close whatever Golf Town locations are not acquired in the sale. The reorganization is intended to make Golfsmith more attractive to potential buyers, and its debtors are currently negotiating with "one or more" undisclosed suitors. If Golfsmith fails to attract a buyer by October 31, the company could face immediate liquidation.
In a statement, Golfsmith CEO David Roussy focused on the future.
"Today represents a significant step forward for the long-term viability of the Golf Town and Golfsmith businesses," Roussy said. "We will continue in our commitment to provide our customers with the exceptional service and high-quality golf products they have come to expect from us."
Golfsmith has struggled under the weight of nearly $200 million in debt, partially the result of a roster of retail outlets "disproportionate to market demands" as golf's popularity has continued its decline throughout North America. The company owes millions to several major golf equipment companies. According to court papers, Callaway Golf is its largest unsecured creditor at nearly $5.5 million, and company spokesman Scott Goryl told GOLF.com the equipment maker was prepared for trouble.
"Callaway Golf has been for some time carefully managing its net financial exposure to Golfsmith and Golf Town, which are both significant customers, and expects to be able to collect substantially all of the outstanding accounts receivable balances owed by Golfsmith and Golf Town either through the bankruptcy process or through its trade credit insurance. Golfsmith and Golf Town remain valued partners."
Some industry insiders remain optimistic. When reached by GOLF.com for comment on Golfsmith's bankruptcy filing, Dick Sullivan, President and CEO of PGA Tour Superstore, said his retail business will continue its efforts to expand.
"We continue to believe the golf business has a lot of positives and this announcement, while unfortunate, isn't a reflection of the overall health of the golf industry," Sullivan said. "Retail consolidation is ultimately healthy in any sector, and at PGA Tour Superstore we are bullish about our continued growth plans."
GOLF Magazine equipment editor Rob Sauerhaft contributed to this report.