Eastern Mountain seeks bankruptcy as shopping habits change

VESTIS RETAIL Group LLC, the operator of Eastern Mountain Sports, filed for bankruptcy protection after failing to adjust to changes in U.S. shopping habits, especially among young people.
VESTIS RETAIL Group LLC, the operator of Eastern Mountain Sports, filed for bankruptcy protection after failing to adjust to changes in U.S. shopping habits, especially among young people.

Vestis Retail Group LLC, the operator of Eastern Mountain Sports, filed for bankruptcy protection after failing to adjust to changes in U.S. shopping habits, especially among young people.

Vestis, which also runs the Sport Chalet and Bob’s Stores chains, is owned by Philadelphia-based private equity firm Versa Capital Management. The Chapter 11 petition filed Monday in Wilmington, Delaware listed as much as $500 million in liabilities and less than $50,000 of assets.

Fifty-six stores will be closed including Eastern Mountain Sports (EMS) locations in Warwick; Christiana, Del.; Dulles, Va.; Foxborough, Mass.; Moorestown and North Brunswick, N.J.; University of Pennsylvania in Philadelphia; and West Hartford, Conn.; the Portland, Maine, Bob’s store and all 47 Sport Chalet stores, court papers show.

In Rhode Island, there still will be a location in Middletown.

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Opening bid

The company said Vestis BSI Funding II LLC, funds advised by Versa, has agreed to purchase substantially all of its remaining assets. Vestis will seek approval of a court-supervised auction process with the Vestis BSI offer as the opening bid, according to court papers.

“At the completion of the process, the combination of EMS and Bob’s will be a stronger business partner with a renewed focus on the core successful operations in the eastern U.S., where they will continue to operate an approximately $400 million multi-channel retailer,” Mark Walsh, CEO of Vestis, said in court papers.

Vestis will seek approval of up to $125 million in debtor-in-possession financing from its pre-petition lender Wells Fargo Capital Finance LLC to help fund operations while the company restructures.

The retail scene is changing fast and established specialty stores are losing customers to big-box chains and online behemoths like Amazon.com Inc. Pacific Sunwear of California Inc. went bankrupt in April, and Sports Authority Inc. sought creditor protection the month before. American Apparel went into Chapter 11 last year, as did youth-oriented clothing chain Quiksilver Inc.

“Ongoing store-closing sales at certain Sports Authority locations have created unusual competition,” Walsh said in court papers.

Team sports

Fewer teenagers are participating in team sports, increasing pressure on the $41 billion sporting goods industry, according to a report by the financial advisory firm Gordon Brothers Group. Meanwhile, the National Retail Federation predicts U.S. retail sales will grow just 3.1 percent in 2016 as people spend more on travel and dining out, rather than trips to the mall.

Vestis specializes in buying distressed companies, and Versa had built it into a portfolio of outdoor-oriented retailers, buying the money-losing Bob’s chain in 2008. Bob’s, which is known for casual clothing and sports-team apparel, operates 35 stores, mostly in the northeastern U.S.

Eastern Mountain Sports is an outdoor clothing and backpacking-gear retailer started by two Massachusetts rock climbers in 1967. By the time of its 2012 takeover by Versa, EMS had grown to 69 stores in 12 eastern states.

Two years later, Versa expanded to the West Coast with Sport Chalet, a California ski shop that started in 1959 and grew into a regional chain with more than 50 locations in three states.

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