Olympia Sports files for bankruptcy as it works towards liquidation

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Diving brief:

  • Olympia Sports filed for Chapter 11 bankruptcy on Monday after beginning a process of full liquidation of the store this summer.
  • After deciding to close several of its stores earlier this year, the company drew up a plan in July to reduce its entire footprint. With 35 stores still in operation, Olympia plans to complete the liquidation of its stores by September 30.
  • CEO Mark Coffey said in court documents this bankruptcy was necessary to retain employees and ensure smooth operation throughout the closing and liquidation process.

Overview of the dive:

Founded in 1975 by Ed Manganello, Olympia Sports began in Portland, Maine before spreading throughout the Northeast and Mid-Atlantic. At its peak, it operated more than 230 stores, before closing some of its unprofitable stores during the seven-year period between 2013 and 2019, Coffey noted.

Private equity firm CriticalPoint Capital acquired Olympia in the fall of 2019 through specialty running retailer JackRabbit which CriticalPoint acquired from Finish Line in 2017. After the deal, Olympia was left with 75 stores in all.

The acquisition marked an expansion of CriticalPoint’s sporting goods assets, collectively held under the Running Specialty Group (RSG), part of the Chapter 11 debtor group. It also marked the start of a turbulent times for the business, in part due to the disruptions caused by the pandemic.

In 2020, RSG purchased Shoebuy.com from Walmart as the latter sought to rationalize its e-commerce assets. Coffey said the year before RSG bought Shoebuy.com from Walmart, the online shoe retailer lost about $19 million on $131.4 million in sales. Even so, Olympia’s parent company believed that Shoebuy could be profitable by moving from its “in-house” e-commerce platform, which required a large staff to operate, to a more streamlined platform.

RSG companies, including Olympia, contracted Salesforce in 2021 for what Coffey called an “extended” e-commerce package. In total, RSG management expected gross sales to exceed $400 million once everything was running on Salesforce. But Coffey said “it didn’t materialize”.

In fact, Shoebuy.com’s average gross sales per day dropped by nearly $140,000. Coffey said a new Salesforce order management system was to blame, which resulted in duplicate and unfulfilled orders being sent to the wrong recipients. Along with declining sales, the company was spending money trying to fix its problems and continued to weather the lingering effects of COVID-19.

More money was diverted from Olympia as management focused on the performing Jackrabbit, which was sold to Fleet Feet in 2021 for $47.7 million. That helped pay down debt, but, with some executives leaving with Jackrabbit, challenges were left behind for new management, said Coffey, who stepped into the CEO role in March.

Among the issues was the Salesforce contract, which Coffey said the company was unable to renegotiate even after losing Jackrabbit, a key user of the Salesforce platform. With Shoebuy.com still struggling, RSG sold its inventory and intellectual property, which includes the Shoes.com domain name, to DSW’s parent company, Designer Brands, for $4.6 million in April.

After bringing in advisers, RSG decided to close many of Olympia’s remaining stores, and by the summer had decided to close them all. This plan is still in place. Coffey said the company’s bankruptcy acts were necessary for Olympia, which has 324 employees, to maintain its obligations to its employees and customers through the liquidation process.

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