Following what Retail Concepts COO Frank Stanley told SNEWS® was the company's worst year in 22 years, the company is fighting to keep from filing for Ch. 11 bankruptcy protection. This would not be a first for the company, parent to Sun & Ski sports, a 24-store chain based in Texas. Sun & Ski last filed for protection in 1990. The company is attributing the troubling economic climate coupled with the warmest winter in 100 years and, to some extent, fall-out from Sept. 11 for its woes.
"We are Texas-based and half of our sales are ski-based," said Stanley. "Most of our customers rely on planes to go skiing and most of those decide on their winter travel plans in September and October."
On June 7, Sun & Ski formed an unofficial creditors committee made up of 14 of the retailer's larger creditors including Trek, The North Face, Terramar, Marker, Salomon North America, Giant, Cannondale, Marmot, Calvert Apparel, Burton, Ho Sports, Raleigh, Columbia Sportswear, and Benetton.
At the time of that meeting, Sun & Ski was asking all creditors from taking any legal action against the company to collect on indebtedness that existed prior to June 7. The company also reported that it would not be making any payments on debts that existed as of June 7 until at least July 10, the end of the requested "standstill period."
Stanley reported to SNEWS® that the retailer has received good support from the committee and that a letter just went out to creditors outlining the retailer's plans as it moves forward. It is Sun & Ski's intention to have all three parts of its plan in place by Sept. 30, or filing for Ch. 11 will become more likely.
The first part of the deal is working with the bank. Part of what led to the difficulty, Stanley reports, is that the company's lender, Wells Fargo, reduced its advanced rate 20 points from 85 percent to 65 percent on April 1. At this point, it looks as though Capital Source will step forward to provide financial backing for Sun & Ski.
The second part of the deal is the trade, which Stanley told us is being more than understanding in the matter. He told SNEWS® that it is the company's intention to treat all creditors equally, whether it is large or small, and to pay each one more than they would likely receive if Ch. 11 were to occur.
Finally, Sun & Ski is seeking to close two stores and renegotiate the leases for more favorable terms on nine others -- all considered under-performers by the company. For that to happen though, landlords have to be willing to negotiate.
SNEWS® View: It's a tough call to be sure. We talked with a number of creditors of Retail Concepts and they appear torn as to whether they should sit and wait or take legal action to recoup debts owed. The trouble with situations such as this is there are no winners and everyone loses -- including customers. Unpaid debts just don't wash from books. They can result in higher prices for gear down the road as a company seeks to make up for profits lost. We wish Sun & Ski well, to be sure. But we also feel for those smaller companies who need the money Sun & Ski is not paying right now to make payroll, continue with R&D, and pay for its own bills. We would hope that Sun & Ski would recognize that and make good, should the company survive, at a later date. We would also suggest that perhaps Sun & Ski might want to re-evaluate its business model. Getting into such deep trouble that bankruptcy becomes the solution twice in just over a decade is not a stellar track record in any book.