City Sports Inc., the retailer launched more than 30 years ago in Boston by a pair of high school friends, plans to shut eight of its 26 stores and sell the rest after filing for bankruptcy protection on Monday.
If a buyer cannot be found the chain will be liquidated, acccording to documents submitted to US Bankruptcy Court in Delaware.
The filing came less than three months after the struggling chain brought in longtime retail executive Marty Hanaka as chief executive to help with a turnaround. City Sports, which is controlled by the Cambridge venture capital firm Highland Capital Partners, said that cost-cutting was not enough to offset a decline in sales caused by competition and bad weather last year.
City Sports was founded by high school buddies and tennis partners Mike Kennedy and Eric Martin on Massachusetts Avenue in Boston in 1983. It has nine stores in the Boston area, according to its website, with others in locations from Vermont to Virginia. It specializes in active wear and equipment for activities such as running, cycling, swimming, and yoga.
The company said it had $45 million in revenue from January 2015 through the day of its bankruptcy filing. It has about 815 employees, according to a declaration submitted to the court by Andrew Almquist, chief financial officer.
Despite cutting back employees’ hours, reducing shipping costs, cutting hours at several locations, and trying to bargain with its landlords for rent reductions, Almquist said the company couldn’t reduce its costs enough. His declaration did not disclose profits or losses.
Almquist told the court that it seeks to close eight stores and sell the remaining 18 by Oct. 30 to any of several buyers that have expressed interest. If no agreement is struck by the end of the month, the company will have Tiger Capital Group LLC liquidate the chain’s inventory in November and early December to “take full advantage of the upcoming holiday shopping season,” Almquist said.
Highland Capital Partners bought an 80 percent stake in the company in 2008 and owned 84 percent of it at the time of filing. When it acquired the chain, Highland said it anticipated expanding to 50 stores by 2013. Tom Stemberg, founder of the Framingham-based office supply chain Staples Inc. and a managing general partner at a Highland affiliate, said at the time that he anticipated the chain could grow to include 300 locations.
Almquist cited an “extremely competitive market” for athletic apparel, especially for products made by Nike, Under Armour, and Asics, as a reason for the company’s drop in business. City Sports stores also tend to be smaller and carry fewer products than big-box stores like those run by Dick’s Sporting Goods Inc., which has added more than 120 locations in the past three years, and Sports Authority.
“We are actively seeking financial partners for the purpose of moving the company forward,” Hanaka said in a statement. “This filing gives us the opportunity to continue as a viable going concern.”
Hanaka previously served as chief executive of Sports Authority Inc. and as chief operating officer of Staples.
The company declined to make anyone available for an interview. A City Sports spokeswoman said in a statement that it “[does] not intend to close any stores in the Boston area,” but she would not release a list of stores it plans to close.
Nike USA Inc. holds the largest unsecured claim, with City Sports owing it $1.3 million, according to the filing. Under Armour, Asics, and Patagonia are each owed just over $1 million, court documents show.