Edwin Watts Files For Bankruptcy

[SloverUT]

So much competition out there. Golfsmith and Golf Galaxy and even Dick's in the brick and mortar space plus online like Rockbottom. I dunno about everyone else, but Edwin Watts was way down on my list when looking to buy things golf. Rockbottom is so competitive on pricing, even with the shipping costs. Not surprised this happened.

This.  In Knoxville Edwin Watts is the last place I'll go for Golf stuff.  I generally will go to Dick's for Golf equipment and Academy for golf apparel.  The pricing was just always more expensive at Edwin Watts.  The only thing I enjoyed at Edwin was a couple of guys who gave really good customer service.

[Golfingdad]

I wouldnt hold my breath waiting on that one.

I've seen several large chains file bankruptcy and most of them come out stronger when it is done.

I would imagine that there will be some store closings. There may be some deals at closing stores, but it will more than likely be the garbage that has no value - I am sure the *good* product will be moved to other locations.

Plus, don't all of the prices come from the actual manufacturers anyway?  It can't be a coincidence that every single store sold Callaway X-hots (as an example)for 249 when they were new, and then 179 now, can it?

[Hotrodjrd]

I know I'm the minority but I play left-handed and the locations around me hardly ever have any clubs in left handed.  Dicks is usually the main place I can walk in and they have left handed clubs.

[meenman]

Plus, don't all of the prices come from the actual manufacturers anyway?  It can't be a coincidence that every single store sold Callaway X-hots (as an example)for 249 when they were new, and then 179 now, can it?

Exactly - every place has the same price on everything. But I get everything at my pro shop for 10% over cost - I guess the club can do it because it is a private club.

[Lihu]

I know I'm the minority but I play left-handed and the locations around me hardly ever have any clubs in left handed.  Dicks is usually the main place I can walk in and they have left handed clubs.

Agreed. Life is tough for us.

[SloverUT]

Plus, don't all of the prices come from the actual manufacturers anyway?  It can't be a coincidence that every single store sold Callaway X-hots (as an example)for 249 when they were new, and then 179 now, can it?

I think this is true to an extent.  The Manufacturer does set the price, however, I think some brands allow stores to run store specials where as others do not.  I know PING is one that does not allow this.

When I use rewards from the Dick's rewards card it specifically says I can't use them on PING equipment, but there are other brands that I can use them on.

[cipher]

It goes into accounts receivable until the bill is payed. Then it goes into operating cash flow.

Exactly.  Accrual accounting is very common.  In this case it could be accrued revenue and is perfectly fine to record it as such.

[mvmac]

Gotta be tough to compete against Golf Galaxy/Dick's and Golfsmith.  I've never been in an Edwin Watts so I don't know how they try to differentiate themselves.  In California and Arizona we have Golf Mart/Roger Dunn where you get 90 days to return your stuff for full credit and I think  you can do it up to two times.

[SloverUT]

Gotta be tough to compete against Golf Galaxy/Dick's and Golfsmith.  I've never been in an Edwin Watts so I don't know how they try to differentiate themselves.  In California and Arizona we have Golf Mart/Roger Dunn where you get 90 days to return your stuff for full credit and I think  you can do it up to two times.

Edwin Watts does have demo clubs that you are allowed to use for a certain amount of time and it is free of charge as long as you return them by their time line.  Other than that I don't know that they differed much from the others.  Maybe more knowledgeable golf personnel in comparison to Dick's.

[LaffertyDaniel]

wow

[nevets88]

And don't forget Amazon, eBay, 2ndswing, craigslist, deals of the day sites etc... Edwin Watts was besieged on all sides.

[Golfingdad]

I think this is true to an extent.  The Manufacturer does set the price, however, I think some brands allow stores to run store specials whereas others do not.  I know PING is one that does not allow this.

When I use rewards from the Dick's rewards card it specifically says I can't use them on PING equipment, but there are other brands that I can use them on.

Right.  Callaway and Taylor Made have sales all the time, but it seems like they always come directly from them.  Whenever I see a sale at one store, the sale is at all of the stores.  (The sales of clubs and balls after Ernie won the Open last year comes to mind)

And, like you said, Ping doesn't have sales, nor do they allow coupons be used on their equipment.  Same is true for Titleist.

This is why I think that there is zero chance that Edwin Watts has some sort of crazy fire sale.  The big companies, probably on behalf of the rest of their vendors, wouldn't allow it.  They'll probably just buy back all of their stock.

[Stretch]

Retail is hard. Golf retail is even harder. EW ****ed themselves pretty soundly with a couple of big strategic decisions that went South. They sank a ton of money into a new point of sale system that turned into a complete disaster. And they bet big on a shop-in-shop partnership with Sears that never worked out either. In a thin-margin business, two strikes can be out.

[newtogolf]

Right.  Callaway and Taylor Made have sales all the time, but it seems like they always come directly from them.  Whenever I see a sale at one store, the sale is at all of the stores.  (The sales of clubs and balls after Ernie won the Open last year comes to mind)

And, like you said, Ping doesn't have sales, nor do they allow coupons be used on their equipment.  Same is true for Titleist.

This is why I think that there is zero chance that Edwin Watts has some sort of crazy fire sale.  The big companies, probably on behalf of the rest of their vendors, wouldn't allow it.  They'll probably just buy back all of their stock.

Ping, Mizuno and Titleist enforce MAP (Minimum Advertised Pricing) control.  They do not allow their distributors or resellers to advertise discounts even in the form of additional trade-in value.  Callaway, TM, Adams, Cobra, Cleveland do not enforce MAP so while most discounts originate from the manufacturer each store has flexibility in the prices they advertise.

Some stores have stock on consignment while others purchase their inventory so that will impact the discounts you see from different stores on older models from Callaway, TM and others.

[Golfingdad]

Ping, Mizuno and Titleist enforce MAP (Minimum Advertised Pricing) control.  They do not allow their distributors or resellers to advertise discounts even in the form of additional trade-in value.  Callaway, TM, Adams, Cobra, Cleveland do not enforce MAP so while most discounts originate from the manufacturer each store has flexibility in the prices they advertise.

Some stores have stock on consignment while others purchase their inventory so that will impact the discounts you see from different stores on older models from Callaway, TM and others.

Interesting.  Thanks for the info.

So, then, do you think there could be a scenario where Edwin Watts would be able to, and would want/need to, have some sort of liquidation sale for Callaway/TM, Adams, Cobra or Cleveland at crazy low prices?

[newtogolf]

Interesting.  Thanks for the info.

So, then, do you think there could be a scenario where Edwin Watts would be able to, and would want/need to, have some sort of liquidation sale for Callaway/TM, Adams, Cobra or Cleveland at crazy low prices?

I'm not an attorney, nor do I have any insight beyond what's public regarding Edwin Watts.  It appears they went into Chapter 11 to protect themselves from any legal action initiated by their creditors like Callaway.  Someone from the bankruptcy court will be assigned to oversee the business with their management and assess the business.  If all parties agree there's potential to stay in business they will have to present a plan to the courts for approval.

The inventory and assets prior to November 4th are locked to protect the creditors which is why EW secured financing that will allow them to continue to operate through Chapter 11.  Anyone that provides credit or products to EW during Chapter 11 are secured creditors so there is minimal risk doing business with them while they are in Chapter 11.

I would GUESS that EW has identified stores it wishes to close, those stores would likely ship any inventory of value to the stores they plan to keep open.  The remaining inventory will likely be sold off on a discount schedule that is agreed to by EW, the bankruptcy court and EW creditors.

If EW stays in business I would doubt you're going to see any great deals on the current golf club lines but you might get some good deals on older clubs, tees, gloves and floor models.  With MAP, EW can't advertise Ping clubs 30% off but they can be sold in the stores at discounted levels, especially older models so if you're looking for something specific it would be best to visit or call the store(s) in your area.

[dbuck]

Exactly.  Accrual accounting is very common.  In this case it could be accrued revenue and is perfectly fine to record it as such.

Accrual basis accounting is the most common method of accounting for corporations. In accrual basis accounting, revenues are recognized when earned and expenses when incurred. An expense is defined as a cost incurred in the production of revenue. Callaway "earned" the revenue when they delivered product to Watts, so on their income statement, they would have revenue equalling the amount of sales for the year, and a cost of goods sold section representing the cost of those goods (materials, labor, overhead). The entry to record the sale itself would be an increase to sales(income statement) and an increase to accounts receivable (balance sheet). The cash flow statement is separate from either of these, but in a corporation on accrual basis accounting, the income statement, not the cash flow statement is the basis for income taxes. Bad debt expense is a legitimate expense on the income statement but further down, but does effect net income and therefore taxes. It would go to EBITDA of course, and would reduce income and therefore taxes in the year recognized. Most likely, Callaway would have a policy regarding the aging and valuation of accounts receivable, and that would determine when they recognized bad debt. For instance, they might reserve 50% of all accounts over 90 days and 100% of all accounts over 360 days. The expense to bad debt would automatically be taken at those points in time, regardless of who the receivable was with. If the amounts are later collected, they would come back to revenue as recovery of bad debt, or more specifically as a reduction of bad debt expense in the year recovered, but the effect to the bottom line is the same. It is also possible that their accountants/auditors would make an additional reserve and expense at the end of the year for a specifically doubtful account, and again if later recovered it would come back in as recovery of bad debt. Most individuals employed by someone else are cash basis taxpayers. I get a paycheck from my employer, and a W-2 at the end of the year that shows how much I received from that employer. If I get a check on January 1, 2014, that income goes in 2014 even though I earned it in 2013. Likewise, anything I pay in 2013, is deducted in 2013, even if I paid it early. If i paid a house note on Dec 15, 2013, that is due Jan 1, 2014, I will receive a form from my bank that says the interest portion was paid in 2013, and will deduct it on my 2013 Taxes. Erik, in your example, I don't know why you paid taxes on the fees received in advance without knowing how your business is structured--I don't do advising and I am not trying to be nosy or anything--just using it as an example in this discussion. Many self employed individuals and some sub-S corps and LLC's are cash basis, so money is considered earned when received regardless of when the services are rendered. The upside is the next year you won't recognize that income, but would recognize anything you pay with providing the services.

[Golfingdad]

I'm not an attorney, nor do I have any insight beyond what's public regarding Edwin Watts.  It appears they went into Chapter 11 to protect themselves from any legal action initiated by their creditors like Callaway.  Someone from the bankruptcy court will be assigned to oversee the business with their management and assess the business.  If all parties agree there's potential to stay in business they will have to present a plan to the courts for approval. The inventory and assets prior to November 4th are locked to protect the creditors which is why EW secured financing that will allow them to continue to operate through Chapter 11.  Anyone that provides credit or products to EW during Chapter 11 are secured creditors so there is minimal risk doing business with them while they are in Chapter 11. I would GUESS that EW has identified stores it wishes to close, those stores would likely ship any inventory of value to the stores they plan to keep open.  The remaining inventory will likely be sold off on a discount schedule that is agreed to by EW, the bankruptcy court and EW creditors. If EW stays in business I would doubt you're going to see any great deals on the current golf club lines but you might get some good deals on older clubs, tees, gloves and floor models.  With MAP, EW can't advertise Ping clubs 30% off but they can be sold in the stores at discounted levels, especially older models so if you're looking for something specific it would be best to visit or call the store(s) in your area.

Interesting. I'm getting quite a business lesson on this thread. Unfortunately, it seems as though I forgot to take Bus 101 and jumped straight to the upper division courses. Much of your discussion is way above my head. I'm enjoying learning some of it though. Sadly for me there are no local EW stores ... Just online for me. :(