One of the nation’s largest outdoor retailers, Gander Mountain, petitioned a bankruptcy court for Chapter 11 protections, confirming rumors that surfaced last month about the direction the company was heading.
The St. Paul-based retailer issued a statement last week saying it is taking steps to “preserve the value of the company and position it for long-term success.”
Gander attributes its economic woes to changes in consumer habits. With more people relying on Internet transactions, brick-and-mortar locations were underperforming and unproductive, so “excess inventory hampered efforts to create a sustainable path forward,” the company says.
According to court documents, inventory levels leftover from fiscal year 2016 were valued at $583 million. The initial petition lists estimated assets as between $500 million to $1 billion, and liabilities as $500 million to $1 billion.
For the fiscal year, which ended Jan. 28, Gander shows $1.323 billion in annual sales, of which retail stores brought in $1.137 billion, and online and catalog sales another $185 million.
By the company’s own assessment — which confirms early reports by Thomson Reuters — the key issue that led to financial challenges was rapid growth. Since 2012, Gander added approximately 50 new stores, bringing to a total of 160.
Along with the bankruptcy plans, the retailer announced that it will be closing 32 underperforming locations, but expects the remaining stores to continue normal business operations throughout and after bankruptcy proceedings.
Court records show the company’s secured debt obligations totaling $424.5 million, with the majority, more than $380 million, owed to lenders. The company lists total number of creditors between 10,001-25,000.
To the 20 largest creditors, Gander owes $48.2 million and 69 percent of that sum is owed to gun or gun-related companies.
Gunmakers include Vista Outdoor, which is listed as the biggest creditor, owed $15.2 million; Sig Sauer owed $2.9 million; Remington owed $2.6 million; Benelli USA owed $1.22 million; and Smith & Wesson owed $1.2 million.
Distributors include Ellett Brothers, which owed $3.03 million; Bill Hicks & Co. owed $1.7 million; and Sports South Inc. owed $1.4 million.
Accessories companies include Vortex Optics, which owed $2.1 million; Liberty Safe & Security owed $2.01 million; and Magpul Industries owed $1.03 million.
Hunting and shooting represents 53.5 percent of sales, while the other half is divvied up between fishing, outdoor and footwear, court documents show. According to data from the federal background check system, gun sales in 2016 were up 11 percent and accounted for the biggest year in the system’s history.
Gander says it currently has parties interested in a “going-concern sale” — an accounting term meaning it should be able to generate funds to operate without selling off assets. The company expects to solicit bids up until an auction in late April and closing by May 15.
Under the advisement of restructuring firm Houlihan Lokey Capital, financial advisor Lighthouse Management Group, and Fredrikson & Byron as legal advisors, Gander will continue filing documents regarding the transition with the U.S. Bankruptcy Court for the District of Minnesota. Filings and other updates will be hosted by the website Donlin Recano.