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Thread: Performance Bike Is Done, Son

  1. #1
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    Default Performance Bike Is Done, Son

    https://www.bicycleretailer.com/indu...ile-chapter-11

    Reportedly going out of business very soon.

    **************



    Breaking: ASE, owner of Performance Bicycle and ASI, to file for Chapter 11

    ASE, owner of Performance Bicycle and ASI, to file for Chapter 11
    Published November 16, 2018
    by Stephen Frothingham
    Store closings expected. CEO says ASI brands, including Fuji, SE, Kestrel and Breezer, "will survive."

    CHAPEL HILL, N.C. (BRAIN) — Advanced Sport Enterprises, the 2-year-old company that is parent to the Performance Bicycle retail chain, Bike Nashbar and distributor ASI, plans to file for Chapter 11 bankruptcy protection Friday morning. The move is likely to lead to the closure of at least 40 Performance stores in the coming months; the chain currently has 104 locations.

    It also could dismantle one of this industry's most vertically integrated large-scale organizations, with direct ties from Asian manufacturing through to brick-and-mortar and online retail sales, as well as wholesale sales to other retailers.

    ASE was created as the parent corporation after Philadelphia-based ASI acquired Performance and Nashbar in August 2016. ASI owns and distributes the bike brands Fuji, Breezer, SE Bikes, Kestrel and Tuesday Cycles, and the component brand Oval Concepts. The entire organization has 1,944 employees, including 1,662 who work for the Performance retail operation.

    Patrick Cunnane, the CEO of ASE, said the ASI distribution business is profitable but the company was unable to turn around the retail business, which has seen sales declines for the last six years.

    "We tried to be more local and less national" — Pat Cunnane

    "We were undercapitalized from the start," he told BRAIN. "We bought (Performance) because two years ago Performance was heavily in debt to ASI. If Performance had failed then, ASI would have failed. So we would have been in this same position but two years ago."

    Cunnane told employees, suppliers and ASI's retailer customers about the plans on Thursday. Retail employees were told on a conference call that some stores would be closing within the next 60-90 days. Employees at some stores told BRAIN that they had already received liquidation signage from a third-party liquidation company. ASE has hired Gordon Brothers Retail Partners to conduct store closing sales.

    Cunnane said the business has been listed for sale since May. "I've talked to many, many, many potential buyers." D.A. Davidson & Co., an investment banker, has been marketing the business to potential buyers, including "private equity funds and family offices, 17 strategic parties and seven liquidators," according to court filings. "Potential strategic buyers include both domestic and international bicycle wholesalers and 17 retailers, sporting goods retailers, and other consumer products companies," the filing says. Davidson prepared information to sell the entire company, its wholesale division, or some of its brands.

    Chapter 11 protection will allow the company to renegotiate its leases. "When you look that the retail footprint of the business, it's sort of a perfect candidate for reorganization under the protection of Chapter 11," Cunnane said. "We will emerge with fewer retail locations."

    The structure of ASE. The structure of ASE.

    He said that under the current store leases, 40 locations are unprofitable and are set to be closed. But Cunnane said leases on some of those stores could be renegotiated to make the stores profitable and more likely to stay open.

    "We've been trying to renegotiate those leases since we bought (Performance)," he said. "It's hard to have any kind of leverage because we have about 100 landlords." Cunnane said Performance doesn't own any of its stores. The company owns its office in Philadelphia and its offices and warehouse in North Carolina.

    Since the 2016 merger, the new leadership has made some successful changes at Performance, he said. Stores were given more autonomy to cater their inventory to their local market and manage their own social media, for example.

    "We tried to be more local and less national," he said. Stores raised some retail prices to match the market and improve margins, and developed procedures to turn inventory better.

    ASE was able to integrate the Performance and Nashbar back end and warehousing, but was unable to fully integrate the retail and wholesale back ends. "Sometimes you have to spend money to save money, and we didn't have the money to invest to achieve the savings we wanted," he said.

    Under Chapter 11, ASE's assets will be auctioned off in parts or as a whole. "That's the fact of bankruptcy and that's why we worked so hard to do this without bankruptcy, but we were unable to achieve that," Cunnane said.

    The company would have run out of money to operate in January if it did not file Chapter 11, he noted.

    "In order to control our destiny, we had to do this before we ran out of money," he said.

    Cunnane said Advanced Sports Europe GMBH, based in Germany, an Advanced Sports Asia, in Taiwan, will operate normally and are not directly affected by the Chapter 11 filing.

    The location of Performance's 104 stores.The location of Performance's 104 stores.

    Fuji and the other bike brands are owned by ASI in the U.S. but generate total sales of almost $50 million outside the U.S., he said. "The brands will survive this," Cunnane said.

    The filing will be seen as the latest in a series of bankruptcies of retail chains, from Sears and Toys R Us to Sports Authority and Sport Chalet. Cunnane told BRAIN he still believes retail chains can survive if they are not saddled with debt. Dick's Sporting Goods and REI, for example, appear to be thriving, he noted.

    "For us, it was not one thing. It was not the bank, not de minimis, not the landlords. It was just a combination of factors in a difficult environment and being undercapitalized," he said.

    In a news release, Cunnane said the business will continue as usual under the Chapter 11. "Orders will be fulfilled and Performance Bicycle stores will continue operating. Until the process of reorganizing our company before a bankruptcy court with counsel from Clear Thinking Group and Gordon Brothers is complete, I'm unable to announce any further actions. Employee layoffs and store closings are inevitable, but at this time I do not have enough information to announce those plans. My goal is to continue to work through this process and keep our business intact. My vision for ASE is to become a profitable, vertically integrated, omnichannel bicycle manufacturer, wholesaler and retailer."

    Who owns ASI?

    Jadeland Pacific Limited, a company started in 1998 to buy the Fuji brand, owns 55 percent of ASE. The company is registered in the British Virgin Islands. Cunnane owns 24 percent of its shares. Ideal, A Taiwan bike maker, owns 17 percent of ASE. York Street Mezzanine Partners owns 21 percent and other minority partners own a total of 7 percent. In addition to his stake in Jadeland, Cunnane owns 3.1 percent of ASE's stock.

    What does ASI owe, and to whom?

    The company made five separate Chapter 11 filings Friday, which will likely be combined soon. They are for ASE, ASI, Bitech (the corporate name of the Performance retail chain), Nashbar Direct (Nashbar's e-commerce business), and Performance Direct (Performance's e-commerce division).

    ASE's principal secured debts are owne to First Lien Credit Facility ($37.9 million), Advance Holdings Loan ($7.4 million), Trade Creditor Loans ($37 million) and York Street Loans ($20 million), totaling $102 million.

    Unsecured debts owed to trade suppliers include:

    Accell NA: $219,000 (owed by Performance); $61,000 (owed by Nashbar)
    Aptos: $212,000
    Clif Bar: $131,000
    Eliptigo: $200,000
    EN-R-G Food: $82,000
    J&B: $178,000
    Marin Bikes: $71,000
    Last edited by VikingMariner; 11-16-2018 at 11:41 AM.

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    Any other current/former employees of Performance here? Me: '93-'97, Annandale shop on Little River Turnpike (which they eventually closed then opened the Bailey's XRoad store). Full time sales then assistant manager. The most important lesson I learned is how little most employees in the bike shop industry make, which prompted me to finish college

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    Quote Originally Posted by VikingMariner View Post
    Unsecured debts owed to trade suppliers include:

    ...
    Eliptigo: $200,000
    ....
    I'm going to go ahead and mentally blame Eliptigo for this.

    In seriousness, this is really too bad. Performance Bike has a reputation for being a "budget" shop and maybe for their sales staff having less expertise than the high-end shops, but their prices were always really great and I always had good experiences with their customer service. And if their sales people may have been less informed they were also not jerks; I'd always choose that over a knowledgeable, condescending jerk.

    And honestly, some of their stuff (e.g. their bib shorts and carbon road pedals) are really excellent value. I already have a spare set of pedals (back before I realized these road pedals would be happily humming along 12k miles later). But I'd better go stock up on shorts.

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    I just got two pair of winter tights, two jackets and a pair of winter gloves from Nashbar for $100. Going to try to make it out to Performance in the new few days.

    I'm kinda sad about this - performance brand clothes have always been a good value.

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    The article is a little confusing, but I read it as indicating that Performance will try to keep most of its stores open. So maybe they will recover, or maybe they will die a slow death like Sears, I've found the persons who work therer to be generally fairly nice, although I stopped getting repair done there because of the wait.

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    I hope some of the local shops aren't on the closure list. I really appreciate how Performance stores have an actual women's apparel section with a variety of items, and not just 1-2 tiny racks of just road riding stuff that many of the other local shops have. Their house brand was also a great value.

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    I was at their Bailey's Crossroads location today, and it has 70% off everything(75% off clothing, limited number left), including bikes, but the store is half empty. You don't have to be a member to get the discount. Only 4 road bikes left(see below), and about 10 to 15 Schwinn-type bikes. Most of what's left are helmets, sunglasses, two Planet Bike fenders, one set of Forte Titan II Wheels, U-Locks, all OnGuard brand. No winter gloves, just fingerless gloves, bike seats, seat posts, seat bags. No panniers. Most bike tools are gone. 10-Speed Forte Dropbar Shifters(2 or 3 left, $33 per set after the discount).

    Road bikes left:

    Fuji Touring Disc Road Bike - 2018(Size 58) $1,080($324 after the discount)
    Fuji Finest 2.5 Road Bike - 2018(Size 50 and 53) $495($149 after the discount)
    Fuji Finest 2.3 Women's Road Bike - 2017(Size 56) $450($135 after the discount)

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    This is not a good sign for cycling as a whole when one of the biggest bicycle retailer in the country cannot not be sustained. Perhaps this also suggests that DC's rather vibrant cycling scene does not truly reflect the health of the bicycle retailing business. I really hope PBS can turn the corner.

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    Quote Originally Posted by f148vr View Post
    This is not a good sign for cycling as a whole when one of the biggest bicycle retailer in the country cannot not be sustained.
    They're only one of the biggest because so many others already failed. I don't think "budget bike store" is a desirable market--you get squeezed by the big box stores on one side and the internet on the other. The only way to differentiate yourself is service, but "budget bike store" precludes that. So you're basically paying rent to be amazon's showroom. I don't see that model as sustainable.

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    Thanks for the heads-up, re: the Bailey's location; they close for good at COB Sunday 11/18/2018. I went today and got a cheapie knockaround bike (but complete with Chomoly frame/steel fenders/rear rack/bell/kickstand/Simano rear/braze-ons) for $299.97, -209.98 = $89.99. The Breezer Downtown EX.
    Also got a variety of inner tubes since I'm the default go-to guy for repairs of kids' bikes from the block. Also got:
    OnGuard Bulldog U-lock 34.99 - 24.50
    Xport universal bike mount 24.99 - 17.50
    Spin Doctor Quickshot inflator w/ CO2 cartridge 24.99 - 17.50
    Sundry socks/bungees/bell.

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