Golfsmith Might File for Bankruptcy

[DeadMan]

Boy, I do hope that we still have some specialty golf retailers around in the future. I know you can get stuff online pretty easily, but I really don't like buying a golf club without at least trying it out first. It's also great to have a place to get clubs regripped quickly and cheaply close by. I'd obviously survive without a Golfsmith in town, but it would make getting golf stuff more difficult.

On the other hand, if this turns to be true, then I will be there looking for some deals in the near future. Not necessarily on clubs, but definitely some apparel. You can never have too many golf socks!

[Liko81]

On 9/14/2016 at 8:02 AM, gregsandiego said:

Truth be told, if it wasn't for the free practice areas I'd have little reason to visit a big box golf store. It's true you can buy most of this stuff cheaper and easier online. 

Where do you get your clubs fitted/adjusted? GS isn't the best, I grant you, but it is a good option to have for the odd regrip or lie adjustment. That's one thing you really can't do online unless you exclusively shop Ping (and even then...).

[skeedawg]

Well my go to store is closing and the golftec I used for lessons as well. Got the letter below late last night. Also, just got notice that there is a 30% off all merchandise for stores that will close. Excludes Ping/Titleist.

 

GolfTEC Client Notification – Important Message (Plano)
 
900 N. Central Expressway 
Plano, TX 75074 
(972) 398-8000
 
September 15^th, 2016
 
First, I wanted to take this moment to say a large “THANK YOU” for being a loyal client of ours. Your passion for improvement and commitment to GolfTEC is what truly propels our business, and I don’t get enough opportunities to personally thank you for this.
 
Second, as you may have seen today in the press, Golfsmith International has filed for bankruptcy with the intent to emerge alongside a planned restructuring of their business which includes closure of several of their stores. This includes the Golfsmith store in Plano where you most recently have taken a lesson from GolfTEC.  
 
What You Need To Know:

• While Golfsmith is, and will continue to be, a great partner with GolfTEC, we are a completely separate and independent golf instruction business, and simply lease co-located space in some locations.
• The Golfsmith-Plano location will be closing effective late October, 2016. You can continue taking lessons at that location until late October, 2016.
• We are pleased to inform you we have several GolfTEC Improvement Centers in your area:
  • GolfTEC-West Plano, within 10 minutes (7.9 miles) of GolfTEC-Plano.
  • GolfTEC-North Dallas, within 14 minutes (12.7 miles) of GolfTEC-Plano.
  • GolfTEC-Park Cities, within 15 minutes (14.7 miles) of GolfTEC-Plano.
• Everything will remain exactly the same, including your Coach, current lesson plan and account & login information.
• Given we are as dedicated to you as you are to your golf game, your first lesson at the new location will be free of charge.

GolfTEC has just finished a record year within our 21-year history! We’re a strong, healthy company excited to continue our mission of helping people play better golf. We sincerely appreciate your understanding surrounding the coming transition with Golfsmith, and proudly look forward to continue helping you reach your specific goals of playing better golf.
 
In the meantime, as always, we are here to make sure you receive the best possible golf improvement experience possible. Your Coach will remain permanently employed with GolfTEC and we will be in touch in the next several weeks on the timing of their transfer. You can also call any of the GolfTEC locations above for questions you may have.
 
Best regards,
 
 
Joe Assell
President & CEO, Co-Founder
GolfTEC

[zero]

All these brick & mortar retailers need to seriously get with the times. I love Golfsmith, but honestly have spent very little money there. Bought everything online. Fix the reasons why that is and I'd buy there! It's easy, partner with an awesome online retailer (i.e. global golf) and provide a variety of purchasing choices. We all want to try clubs before we buy, talk to people, read reviews, get fitted maybe, etc. so there's definitely a need for physical locations. Omnichannel retail and customer-centricity, it's not rocket science.

[Hiway1tele]

33 minutes ago, skeedawg said:

Well my go to store is closing and the golftec I used for lessons as well. Got the letter below late last night. Also, just got notice that there is a 30% off all merchandise for stores that will close. Excludes Ping/Titleist.

 

same here, Dawg...I am 5 minutes away from that store...Guess I'll have to go to the PGA superstore if I resume playing again...They offer lessons as well...and have an indoor practice area...

[newtogolf]

1 hour ago, zero said:

All these brick & mortar retailers need to seriously get with the times. I love Golfsmith, but honestly have spent very little money there. Bought everything online. Fix the reasons why that is and I'd buy there! It's easy, partner with an awesome online retailer (i.e. global golf) and provide a variety of purchasing choices. We all want to try clubs before we buy, talk to people, read reviews, get fitted maybe, etc. so there's definitely a need for physical locations. Omnichannel retail and customer-centricity, it's not rocket science.

There are overhead costs, buildings, inventory, staff, upkeep, payroll taxes, benefits, electricity, etc that brick and mortar businesses have to cover so they require greater profit margins compared to internet businesses.   Consumers want the best of both worlds, they want to be able to go into a store and look at the products or in the case of golf clubs, test the clubs they plan to buy but don't want to pay the price the store is charging so they order online.  The brick and mortar incurs all the costs and receives nothing for their efforts while the online business books the revenue and profit.

Eventually, if these behaviors continue, all the brick and mortar companies will fail and the option of testing clubs will be limited to demo days and the few pro shops within golf country clubs that remain open.  

[zero]

Complicated business problem for sure, but there are strategies that are working. Walmart and Amazon are a good example. One physical retailer pushing into digital http://www.zdnet.com/article/walmart-ceo-outlines-omnichannel-retail-strategy-to-shareholders-associates/ and the other online retailer pushing into physical http://www.wsj.com/articles/amazon-plans-hundreds-of-brick-and-mortar-bookstores-mall-ceo-says-1454449475

[newtogolf]

6 minutes ago, zero said:

Complicated business problem for sure, but there are strategies that are working. Walmart and Amazon are a good example. One physical retailer pushing into digital http://www.zdnet.com/article/walmart-ceo-outlines-omnichannel-retail-strategy-to-shareholders-associates/ and the other online retailer pushing into physical http://www.wsj.com/articles/amazon-plans-hundreds-of-brick-and-mortar-bookstores-mall-ceo-says-1454449475

Amazon doesn't have any stores currently, time will tell if they are successful with brick and mortar to supplement their online presence.  

Walmart makes their profit by getting better discounts than anyone else due to the quantities of product they order.  Sam's Club and Walmart negotiate price based on quantity ordered, that's why they are putting all the smaller stores out of business.  

[Joey G]

2 hours ago, Hiway1tele said:

same here, Dawg...I am 5 minutes away from that store...Guess I'll have to go to the PGA superstore if I resume playing again...They offer lessons as well...and have an indoor practice area...

Yup, just got the same 30% Off email today...I guess there's always the PGA store and Club Finders right across the street...

[gregsandiego]

9 hours ago, Liko81 said:

Where do you get your clubs fitted/adjusted? GS isn't the best, I grant you, but it is a good option to have for the odd regrip or lie adjustment. That's one thing you really can't do online unless you exclusively shop Ping (and even then...).

Good point. I have been getting all regrips done at GolfSmith and I couldn't do that online.

Actually to support them (since they provide that great indoor area) I try to do all golf related spending there now: tees, gloves, clubs, new club etc. Even if it is cheaper on Amazon. 

[newtogolf]

What some people may not realize is the Golfsmith Chapter 11 filing will have a ripple effect for all the manufacturers as it's likely whatever outstanding invoices and inventory that Golfsmith owed will either not be paid or paid pennies on the dollar.  

As the graphic shows, Callaway is going to take a major hit on golf clubs while others get hit on soft goods.  In addition to the loss in payables, the manufacturers will have to replace the revenue driven through the Golfsmith stores as even if Golfsmith emerges from Chapter 11 as a viable company there will be a number of store closings that will impact the overall revenue numbers for Golfsmith and the manufacturers.  

[Ron]

Sadly, it really seems unfair that "Bankruptcy" allows people or corporations who do not know how to properly manage their money or run their  business to; not have to pay their debts.  They reorganize and just go on their merry way.  I'm not well versed in this but, don't they get penalized in some way?  Just seems unfair.

[WUTiger]

On 9/13/2016 at 6:26 PM, newtogolf said:

My guess TM is going to take a big hit along with Callaway.  

A regional Callaway rep reports that Callaway has changed its equipment release scheme. Calla has club designs in development, but doesn't release them until the previous version pretty well sells out.

In the short run, I noticed this with the MD2 wedges - not very many showed up on clearance.

Also, the new XR Steelhead irons didn't come out until the XR and XR Pro models had run their course.

It will be interesting to see if this scheme delivers system-wide benefit for Callaway. Like many other OEMs, Calla is meeting the customer halfway by offering a variety shafts in its models - at no upcharge.

[newtogolf]

6 minutes ago, WUTiger said:

A regional Callaway rep reports that Callaway has changed its equipment release scheme. Calla has club designs in development, but doesn't release them until the previous version pretty well sells out.

In the short run, I noticed this with the MD2 wedges - not very many showed up on clearance.

Also, the new XR Steelhead irons didn't come out until the XR and XR Pro models had run their course.

It will be interesting to see if this scheme delivers system-wide benefit for Callaway. Like many other OEMs, Calla is meeting the customer halfway by offering a variety shafts in its models - at no upcharge.

On paper it makes sense but the timing has to be close to perfect or you lose sales due to lack of product availability.  

Unless one is committed to buy Callaway wedges, the salesperson will sell the customer a Vokey or Cleveland wedge if the Callways are out of stock.  

[Hardspoon]

1 minute ago, WUTiger said:

A regional Callaway rep reports that Callaway has changed its equipment release scheme. Calla has club designs in development, but doesn't release them until the previous version pretty well sells out.

In the short run, I noticed this with the MD2 wedges - not very many showed up on clearance.

It seems like all club manufacturers will move in that direction. Overall, it's going to be a good thing for retailers (online and bricks-and-mortar).

[Liko81]

On 9/18/2016 at 8:56 AM, Ron said:

Sadly, it really seems unfair that "Bankruptcy" allows people or corporations who do not know how to properly manage their money or run their  business to; not have to pay their debts.  They reorganize and just go on their merry way.  I'm not well versed in this but, don't they get penalized in some way?  Just seems unfair.

Would you rather have debtor's prisons, like in bygone ages, where if you didn't have friends willing to pay your debt or a creditor willing to forgive it, you'd spend the rest of your life in jail? And when it's a corporate entity that defaults on debt, not an individual, then who goes to jail? It's popular to say "upper management", but not really helpful in a situation like this.

Bankruptcy, as a concept, is a good thing, because it allows a person or a company who has failed to start over from scratch, instead of being burdened with past debts for the rest of their lives (and even burdening their next of kin with the same). Alternate forms like Chapter 11/13 reorganization encourage people/companies to file earlier, when they see themselves circling the drain, instead of when there's no other option and the damages to that person and their creditors is much higher.

As far as penalties, there are some. The market itself will be more hesitant to get in bed with a company that's newly reorganized; suppliers, distributors, investors etc will demand higher interest/fees and more control than a company that's never gone to bankruptcy court. Stock prices for that company will be low enough that the company could be targeted for a hostile takeover. The Bankruptcy Court itself will be watching that company's finances and management uncomfortably closely to ensure they're living up to the terms of their reorganization. If they don't, the court can order them into liquidation.

Edited September 20, 2016 by Liko81

[70sSanO]

I would think that a viable model would be a mix of few larger superstores, (depots), for fitting, in-store testing, etc.; and an online program that is similar to what tennis warehouse does.  Basically you get to demo any number of clubs (probably be a 6 or 7 iron) for a fee and they are mailed to you and you have a week to test them out and mail them back.  This would also work for a driver, fairways, hybrids, etc.  If you don't send the clubs back your credit card is charged.  If you decide to go elsewhere you still pay the demo fee.  If you buy the clubs from them, there would be some sort of credit to the purchase.

Having a limited number of superstores, allows them to stay in the brick and mortar business in areas with a population base sufficient to support the stores.  They may even offer a full set demo program at the stores and charge a fee, even a mix-n-match set, but you get to take them out on the course to test them.  They need to offer a program that will come close to the older style course pro shop, but with cheaper club prices but also without the free on-course testing.  It is no different that when the fitting goes to the purchase.  They would still be able to offer in store free testing in hitting bays, but with fewer stores there would be less overhead. 

I think what Callaway has done with their pre-owned program is a great option and that is another option for a Golfsmith.

I do believe that the days of free mass club testing at convenient brick and mortar stores and then going online to buy them will become a thing of the past.

John

[newtogolf]

5 hours ago, Liko81 said:

Would you rather have debtor's prisons, like in bygone ages, where if you didn't have friends willing to pay your debt or a creditor willing to forgive it, you'd spend the rest of your life in jail? And when it's a corporate entity that defaults on debt, not an individual, then who goes to jail? It's popular to say "upper management", but not really helpful in a situation like this.

Bankruptcy, as a concept, is a good thing, because it allows a person or a company who has failed to start over from scratch, instead of being burdened with past debts for the rest of their lives (and even burdening their next of kin with the same). Alternate forms like Chapter 11/13 reorganization encourage people/companies to file earlier, when they see themselves circling the drain, instead of when there's no other option and the damages to that person and their creditors is much higher.

As far as penalties, there are some. The market itself will be more hesitant to get in bed with a company that's newly reorganized; suppliers, distributors, investors etc will demand higher interest/fees and more control than a company that's never gone to bankruptcy court. Stock prices for that company will be low enough that the company could be targeted for a hostile takeover. The Bankruptcy Court itself will be watching that company's finances and management uncomfortably closely to ensure they're living up to the terms of their reorganization. If they don't, the court can order them into liquidation.

Poor management shouldn't be rewarded in any way and while stock prices and credit terms are negatively impacted short term it's hardly a sufficient penalty to account for the financial impact it has on the businesses that extended credit to the failed company and the losses they must absorb.  

IMO, all corporate executive management of any business that is permitted to file Chapter 11/13 should incur some pain as well.  We can't continue to have CEO's making $20M+ per year running a business into the ground and walk away without a mark.