USA’s Advanced Sports Ent. Files for Chapter 11
PHILADELPHIA, USA – Last week Advanced Sports Enterprises (ASE) CEO Pat J. Cunnane informed his customers in a letter that ”The company has taken action to restructure and better position itself for future success by filing voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code”. The move is intended “to facilitate the company’s long-term, strategic goals of enhancing profitability and reaffirming its commitment to its employees, vendors and the communities it serves”.
Important to note is that the request for amendment under Chapter 11 concerns only ASE business in the United States. “Advanced Sports Europe and Advanced Sports Asia will continue to operate normally,” says Cunnane.
”We – Advanced Sports GmbH alias Advanced Sports Europe – are a financially and legally independent company. For the distribution of our brands for the model year 2019 in Europe, the request submitted by ASE in the U.S. for Chapter 11 will have no effect,” assures Advanced Sports Europe Managing Director Armin Hoogstraten in a response to Bike Europe questions. For him and his team, this comes at an unfavourable time: “Our brands are doing well. So much so that we have just hired two new employees in our Mutlangen headquarters in Germany.”
On ASE’s Chapter 11 in the U.S. Hoogstraten also points out that Advanced Sports Incorporated (ASI) did not apply for Chapter 11 but Advanced Sports Enterprises (ASE). ASE is the roof company of ASI (as a wholesaler distributing the brands Breezer, Fuji, Kestrel, SE Bikes, Tuesday Cycles as well as the P&A brand Oval Concepts) and the American retail chain Performance Bicycle (PB). ASE was formed in August 2016 after ASI acquired PB’s retail business operating nationwide 104 stores including the online businesses Performancebike.com and BikeNashbar.com. As a result, ASE overlooks ASI’s wholesale and PB’s IBD business.
Serious problems on retail side
“It’s the Performance Bicycle retail business that’s causing serious problems leading now to ASE’s Chapter 11 claimant. The current U.S. bicycle retail market is experiencing a serious crisis. Unlike in many European countries, the high-priced “e“-topic cannot (yet) offset the generally declining number of bicycle units being sold in USA.
“As you are aware, ASI merged with PB a little over two years ago. Since that time, I’ve been trying to learn retail – and what I’ve learned is that I have tremendous respect for what you do,” says ASE boss Pat Cunnane in his letter, “it’s not an easy business and especially right now with an ever-changing retail landscape, with consumers shopping differently and with competition from unexpected places.”
No sales improvement
While ASI’s bicycle brand sales are doing well, neither PB nor BikeNashbar.com would have developed as they had hoped “We expected retail sales would improve in the 2018 season beginning in May and continue through the summer, but sales did not improve. We were unable to get the sales lift in retail that we needed. We were unable to turn around many of our stores.”
Since the PB takeover, all kinds of steps have been taken to improve the business. “We needed to gain sales and generate cash to make investments back into the business. We began in earnest to look for investors and while we’ve had numerous conversations with many different potential investors, we have been unsuccessful to date,” says Cunnane in his letter.
Long-term success with ‘committed buyer’
Patrick Cunnane and his team went through a comprehensive review of alternatives but have come to the conclusion that extensive Chapter 11 restructuring is the best way to ensure ASE’s long-term success. Cunnane hopes for a possible buyer. Looking into the future, Cunnane says, “As ASE goes through the Chapter 11 process, we will continue working as usual. Orders are fulfilled, and Performance Bicycle stores continue their business. I cannot announce any further action until the restructuring of our company to a bankruptcy court.”
Layoffs and store closures inevitable
While at the time of writing no further details have been announced employee layoffs and store closures are inevitable. US industry observers assume that in the next few months close to the 40 PB stores will shut down.
The ultimate goal is to restructure the ASE business. “My vision for ASE is to become a profitable, vertically integrated, omnichannel bicycle manufacturer, wholesaler and retailer.” Cunnane firmly believes that the deal will look good at the end of the restructuring process “Once a committed buyer has been found I expect our brands and sales to prosper by providing our customers with the high-quality services and products they are accustomed to receiving from us.”