Chapter 11 Watch: Sports Authority Sends Shockwaves, Gap Pulls Back

When a retailer goes under, it’s usually a problem for that company and its investors alone. A mom and pop shop putting a “Going Out Of Business” sign on its front door might send ripples down Main Street, but mom and pop shops and their limited inventory haven’t been the default state of retailer ever since things became a bit more global.

Now, though? Now, when a retailer with regional and sometimes even international reach crumbles under the weight of its own lagging financials, the shockwaves it sends across the industry can be enough to throw its competitors – otherwise ecstatic about the loss of a rival – onto unbalanced footings of their own.

Bankruptcies
You wouldn’t guess it from the gloomy picture that the retail headlines paint, but there were no major bankruptcies over the past week. That doesn’t mean the effects of bankruptcies aren’t being felt across the industry, just like it doesn’t mean that Dick’s Sporting Goods is completely positive over the sinking of its once-competitor Sports Authority.

Like a double-edged sword, though, from Dick’s perspective, the initial benefits of Sports Authority’s fall from grace might be wearing thin. Sports Authority is officially gearing up to begin a widescale going-out-of-business sale that could see metric tons of low-priced, ready-to-move athletic apparel flood the market. With upwards of 460 stores spread across the U.S., this is a fire sale of the highest order.

A sudden influx of cheap products on the market has brought down retailers before. In fact, Mark Walsh, CFO of recently bankrupt Vestis Retail Group, noted in court filings that “ongoing store-closing sales at certain Sports Authority locations have created unusual competition” for Vestis’ Sport Chalet and Eastern Mountain Sports locations. It wasn’t the iceberg that ripped a hole in Vestis’ oceanliner, but Sports Authority’s going out of business sales certainly didn’t help them get more women and children into the lifeboats.

No matter how thoroughly Dick’s gets rocked by Sports Authority’s liquidation sales, odds are incredibly thin that they’ll even approach bankruptcy, but as reports suggest that Dick’s may have lost upwards of 10 percent annual profits, according to its most recent filings, the odds are better that the hit will still be bigger than they’d like.

Store Closures
A bankruptcy announcement from an apparel retailer that doesn’t claim to be a member of the fast fashion set is hardly news anymore. Rather, announcements on store closings, like the one made by Gap this week, are positively optimistic in comparison.

Gap CEO Art Peck explained that the brand’s entire footprint in Japan – 53 stores from Hokkaido in the north to Okinawa in the South – will be shuttered by the end of fiscal year 2016. Gap is also planning on pulling the plug on an extra 22 stores scattered across the globe in an effort to take “every opportunity to exploit [its] strategic advantages.”

“As the pace of change across the apparel industry increases, now is the time to accelerate our transformation by scaling our product and operating capabilities across our global portfolio,” Peck said in a statement.

Staying on the international retail beat, banking giant HSBC Holdings also announced a pull-back to its 50 branch locations in India. Due to “changes in customer behavior, who are increasingly using digital channels for their banking,” HSBC said, 24 brick-and-mortar branches will be boarded up as they only provide services for what HSBC says are 10 percent of its consumer bases’ needs.

Layoffs
If it seems like international retail is taking the brunt of store closures lately, a few thousand employees (or, more accurately, former employees) in Microsoft’s charge would beg to differ. Just a few days after selling off its smartphone development division, Microsoft announced Wednesday that 1,850 workers previously in smartphone hardware manufacturing are no longer employed thusly. About 1,350 jobs will be cut from Finland’s Microsoft Mobile Oy branch, while 500 jobs globally will round out the depressingly high figure.

While these layoffs might prove to be a cost-saving measure down the road, they’re the furthest thing from it at the moment. Microsoft will pay out around $200 million in severance payments, with an additional $750 million to be paid as part of impairment and restructuring charges.

At least that will help those axed pay their phone bills, which from now on probably won’t be for Windows smartphones.