Popular Outdoor Outfitters, a chain of outdoor gear and clothing stores that had been in business in Arizona since 1952, was officially taken off life support as the company filed for Ch. 7 liquidation on Feb. 3 in Federal Bankruptcy Court, District of Arizona.
Court documents obtained by SNEWSÂ® show that when Popular Stores, Inc. converted to Ch. 11, it had 167 claims against it totaling $7,712,559. Most of the debts are unsecured, meaning there isn't going to be much restitution for many. There are a lot of outdoor industry company names on that list, as one might surmise, including: High Gear ($16,005), Hot Chillys ($63,690), Wolverine World Wide ($250,662), Yakima ($34,990), Life is Good ($17,053), Smith Sport Optics ($23,965), Manzella ($31,373), Petzl America ($22,753), Century Tool ($37,944), Fiskars ($31,726), Oregon Freeze Dry ($16,383), Garmin ($45,661), Deckers ($63,855), Princeton Tec ($19,228), The North Face ($25,074), Leatherman ($27,203), Wisconsin Pharmacal ($19,059), JanSport ($161,191), and Sportif ($29,786).
The most recent income statement filed with the court reported sales of $4,047,992 from Feb. 28-Nov. 27, 2005. Expenses far outstripped revenue leaving Popular with a loss of $1,057,148 for that same period. November sales were dismal, at only $260,582, leaving Popular reporting a $160,481 loss for that month alone.
As SNEWSÂ® reported in the Jan. 24, 2005, story, "Popular Outdoor Outfitters intends to convert Ch. 7 to Ch. 11" (click here to read), it has been a long downhill slide for the retailer that began in 2001. Back then, Popular boasted 22 storefronts in Arizona and New Mexico. It was down to 13 stores in 2004 and then down to eight immediately after a storewide sale just after Christmas in 2004. However, the company's unpaid debts continued to mount and when Popular decided not to talk to creditors, a few organized and took drastic action.
The organized group of creditors, including VF Jeanswear and Terramar Sports, filed a petition with the court to force an involuntary Ch. 7, primarily toÂ get Popular to open its books and begin talking openly with industry companies. The move worked, with Popular owner Kirk Lipson filing a motion to convert the Ch. 7 to a Ch. 11 reorganization in February 2005. Things were looking good at first, but quickly headed south again, we were told.
And now, it appears that Lipson did not adhere to the stipulations of the Debtor's Plan of Reorganization as approved by the Creditor Oversight Committee, as the committee, immediately after Lipson filed for a conversion to Ch. 7, filed its own "Emergency Motion Pursuant to 11 U.S.C. 105 and Local Rule 9013-1(h) for Expedited Hearing on Debtor's Motion to Convert to Chapter 7 Liquidation." Â
The papers filed with the court state, in part, that, "Kirk Lipson, the Debtor's CEO, has notified the Committee that he and the Debtor have failed to comply with material terms of the Plan, inter alia, the covenant against returning capital to the Debtor's shareholders, the covenant against selling any assets outside the ordinary course of business and in a value exceeding $10,000 within any calendar quarter, and the requirement that funds depositedÂ into the Creditor Funds Account be held for the benefit of the Debtor's general unsecured creditors."
Court papers also stated that the committee had learned Lipson had closed all of his stores without first notifying the committee and that the committee had no knowledge of inventory levels or an accurate picture of remaining assets.
Messages left for Lipson at his office, 602-343-2917, and at what a woman answering told us was the company headquarters, 602-343-2915, went unreturned.
Jim Clark, CEO for Yakima and an Outdoor Industry Association board member, told SNEWSÂ®, "This is most unfortunate news, and I feel very bad for Kirk, his family, for his investors, for his creditors, and, most of all, for the consumers, who now must find somewhere else to shop as the area was already relatively underserved.
"This is a constantly evolving market, and for specialty retailers to thrive and survive, they will need to consistently re-evaluate their business model to remain viable and fresh. They will have to develop a strong value proposition backed with great service and great assortment -- they have to commit. Average assortment and below average training just won't get it done anymore," Clark added.
SNEWSÂ® View: Underserved? Wow, that is an understatement. No disrespect to REI, but when REI is essentially the only outdoor store left standing of note in Phoenix, that is a sad day indeed!
As for what happened to Popular, might we just surmise that the company essentially allowed itself to get squeezed into the middle ground of a dead zone where you are neither competing on low price nor on high price, high margins and excellent service. Our eyes in the region confirmed several times over the last several years that Popular's stores had become boring, flat, uninspiring and essentially, non-compelling to an increasingly selective consumer.
Reorganization and focusing the company's efforts on saving the remaining eight stores was the right move. Trouble is, it was a move made three years too late.
The saddest part of the proceedings is the knowledge that Kirk Lipson is the one who will have to live with the legacy that he was at the helm when the family business, founded in 1952, sank beneath the waves of a stormy ocean of debt.