Modell's Sporting Goods has again turned to strategic advisory firm Berkeley Research Group and law firm Cole Schotz for restructuring advice after a rough several months, CEO Mitchell Modell told Retail Dive, confirming a Tuesday Debtwire report. However, he also said that a bankruptcy filing is off the table for now.
The Northeast sporting goods retailer closed nine stores just this year and is considering other closures as leases expire, he said. He has been on the phone with vendors this week, will turn to landlords next, and said he is garnering a level of support from them that he believes will allow the company to avoid a Chapter 11 filing.
Modell is also looking for outside investment. Last year, he loaned the business $6.7 million, making himself the retailer's largest unsecured creditor, he said. "I did it to show the landlords and the vendors: If I'm going out of business, why would I put that kind of money into it when I could have bought an apartment in Florida?" he said in the interview Wednesday.
Modell's continues to feel some of the fallout from last year's round of reports, which he said on Wednesday spooked vendors to the point of depriving stores of needed merchandise for several months.
"When you turn the faucets off and get no merchandise, you don't get sales," he said, adding that it took until December to finally reach appropriate inventory levels.
Modell, who is also the great-grandson of the retailer's founder, said it's been "11 months to the day yesterday" that the Wall Street Journal published the first in a series of press reports about the company's difficulties that started a fateful ball rolling. Other forces only made a bad situation worse, he said.
"We also had a long, dry winter, and all our teams were horrible," he said, indicating a common reason for sports-related merchandise to get left on the racks. The convergence of those factors, plus competition from Amazon, "put us in a tough situation. But, listen, everybody goes through a tough situation at times."
Debtwire on Tuesday said that the company had re-hired Berkeley Research Group "for a full-fledged balance sheet restructuring" and Cole Schotz for legal advice, with plans "for a potential in-court restructuring."
As he works the phones to explain the situation to merchandise vendors, factories and landlords, Modell said he is being transparent about the company's predicament. Technically, "all options are on the table," although going to court for restructuring is not being considered for now, he said.
He called vendors so far "incredibly supportive."
Shuttering underperforming stores is a necessary aspect of nurturing a retail company, he also said. "It's like pruning a tree," he said. "If you don't prune a tree, it can't grow."
Indeed, despite his placement of Amazon into his list of woes and the retailer's closure of nine stores in January and February, Modell believes that his company, and retail in general, still needs stores.
"Stores are not going away," he said. "You know, I was in the stores on Saturday. You still see kids coming in, pounding on the baseball gloves. You can't get that on Amazon."