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Debt-Laden Nevada Bob's Files for Bankruptcy

November 10, 2000|JAMES F. PELTZ | TIMES STAFF WRITER

Nevada Bob's Golf Inc., the nation's largest specialty retailer of golf equipment, has filed for bankruptcy reorganization for the second time in two years. But the company's woes don't reflect a sudden downturn in the overall market for golf gear, industry officials said Thursday.

Nevada Bob's, named after its first store, which opened in Las Vegas in 1974, now has 83 company-owned stores and 152 franchised stores. There are about 30 Nevada Bob's in California.

The company is headquartered in Calgary, Canada, and its U.S. operations are based in Dallas, but only the company and its corporate-owned stores are involved in the bankruptcy proceedings, not the franchised stores. The entire Nevada Bob's system has annual sales of $50 million to $60 million.

The company--hobbled by operating losses and a heavy debt burden--filed for reorganization under the U.S. and Canadian bankruptcy laws late last month. The company then hired Ozer Group, a Needham, Mass.-based restructuring specialist, to sell the company-owned stores and other assets to pay back Nevada Bob's creditors and create a company that's entirely franchised.

Many of Nevada Bob's problems appear self-inflicted, but they weren't helped by lackluster demand for clubs, apparel and accessories that plagued the $3-billion U.S. golf-retail industry in 1998-99.

One problem: America's 26 million golfers already had stocked up on the new and often expensive drivers and other clubs now produced by the likes of Callaway Golf Co. and Taylor Made, a unit of German sneaker maker Adidas-Salomon.

Last year, for instance, U.S. club sales dropped 6.6% to $2.5 billion, and sales of bags, shoes and other "soft goods" fell 3.7% to $979 million, according to a recent report from the National Golf Foundation, a trade group.

But as Nevada Bob's reorganizes, golf-equipment sales are rising again in part because of new drivers and other clubs being introduced by the manufacturers, said Zack Smith, a spokesman at Taylor Made's headquarters in Carlsbad.

"The market has been absolutely picking up," he said. "There's a lot of excitement around the new products," and high-profile golf stars such as Tiger Woods also continue to spur additional purchases by consumers, he added.

Taylor Made sells about 68% of its merchandise through specialty chains such as Nevada Bob's, about 10% through sporting-goods stores and 14% through golf-course pro shops, with the rest through miscellaneous outlets. And it said the breakdown is similar for most major club manufacturers.

Other specialty retailers such as Worldwide Golf Enterprises, a Santa Ana-based firm that runs the Roger Dunn, Golf Mart and Vans Pro Shops in California and Arizona, also report solid sales gains.

"We've had a very successful year," said Al Morris, Worldwide's general manager. His company--which owns 25 stores and franchises 10--has closed a few under-performing stores but also plans to expand in its more successful markets next year, he said.

Callaway, also based in Carlsbad, is also making a comeback after slumping badly in the late-1990s. In the first nine months of this year, its sales jumped 17% from a year earlier, to $705 million.

And Nevada Bob's problems "are not at all" indicative of golf-retail trends, said Mick McCormick, Callaway's executive vice president of global sales. "We're seeing a change to newer retailers that are doing a better job" than older chains such as Nevada Bob's by providing bigger stores, more selection and better service, he said.

The new chairman of Nevada Bob's, Izzie Abrams, also said "the market for golf equipment is still pretty strong." He said "there were certain issues that were unique to Nevada Bob's in terms of its focus and direction" that mainly led to the company's bankruptcy filing.

Without going into details, Abrams--who is also in charge of the company's restructuring effort--said Nevada Bob's put too much focus on building its corporate-owned store network, whereas "its core competency is developing and marketing a strong franchise system." The company itself "didn't have the ability to develop a strong retail" presence, he added.

Nevada Bob's franchise network "is very successful," Abrams said. About half of the franchise stores are in the United States, and the other half in Canada.

One of the company's major creditors is Foothill Capital Corp. in Los Angeles, which is owed about $10.5 million, according to the Ozer Group. Foothill didn't return a call seeking comment.

Stephen Miller, a principal of Ozer Group, said his firm's job is to package and market Nevada Bob's company stores and other assets and solicit bids. "Part of the plan is to sell corporate stores to new buyers or existing franchisees," he said.

The process probably will be completed within the next few weeks, he said. "The company is in a dwindling cash position and it needs to make immediate decisions," Miller said.

Nevada Bob's is a publicly held company whose stock now trades for pennies on the Toronto Stock Exchange. In the quarter ended July 30, the company reported a net loss of $19.5 million, and its debts outweighed its assets by $30 million as of July 30.

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