Fitness Resource, with 15 stores in Virginia, Maryland and Georgia, has declared Chapter 11 bankruptcy reorganization.
The Sept. 9, 2011, filing with the U.S. Bankruptcy Court, Eastern District of Virginia, indicated the Sterling, Va.-based fitness retail business, founded and headed by President David Nees, planned to reorganize the company by closing 13 of its 15 existing stores and two of its warehouses “immediately” and reopen eight stores and one warehouse “under more favorable leases.”
In preliminary court documents, Fitness Resource estimated its liabilities between $10 million and $50 million with assets between $1 million and $10 million. It has between 100 and 199 creditors. It employs 99 people.
Company “revenues were approximately $35.4 million for 2009, $25.2 million for 2010 and $15.6 million for the first seven months of 2011,” Nees stated in the filing. “Net losses for the same periods were $2 million, $4.4 million and 1.2 million, respectively.”
Fitness Resource has yet to file its full reorganization plan, but noted in its preliminary filings that it wanted the court to allow it to reject most of its unexpired leases at its current locations to help it get back on its feet.
“This action alone will result in a substantial reduction in operating expenses by eliminating rent, inventory staffing costs, and general overhead expenses for those locations and is a significant step in the debtor’s return to profitability,” Nees said in the court documents.
The company’s top 20 unsecured creditors filed with the court are mostly landlords, including $2.7 million owed to Street Retail Inc. in Rockville, Md., $937,356 owed to Good Earth Investment LLC in Sterling, Va., and a combined $1.67 million owed to an additional eight landlords.
Fitness suppliers are also on the unsecured creditors list, including:
- Johnson Health Tech, owed $1.8 million
- PaceMaster, $330,980
- Octane Fitness, $279,927
- Landice, $216,748
- Hoist Fitness, $182,045
- Lemond Fitness, $155,019
- Hampton Fitness, $117,793
In all, Fitness Resource owes its top 20 creditors, which also includes several banks, nearly $10.5 million.
Fitness Resource began its current retail business in 1985, according to its website, although in court documents Nees said he founded the overall business in 1971.
In 2009, the company began selling bicycles to increase sales during the fitness equipment off-season. In 2010, Nees told SNEWS it would take three to five years for the new business strategy to settle in. The company ranked No. 4 on the SNEWS FitBiz report in total number of stores among specialty fitness retailers with 19 locations at the close of 2010 after shuttering seven. It had hit a high of 26 stores in 2007 and 2008.
-- David Clucas