Sunny's files for bankruptcy

Retailer to close eight stores, including three in metro area

`We're regaining focus'

Observers doubtful that chain can find a profitable niche

Surplus stores

January 20, 2000|By June Arney | June Arney,SUN STAFF

Sunny's Great Outdoors Inc. has filed for Chapter 11 bankruptcy protection and plans to close eight of its 26 stores, pointing to an overzealous expansion plan and unseasonably mild winters as the main causes of its financial woes.

The 52-year-old company, which sells military surplus goods, camping equipment, Boy Scout and Girl Scout supplies, work wear and outdoor clothing, has stores in Maryland, Washington, Virginia and Delaware. The company reported $7.4 million in assets and $6.8 million in liabilities.

"We are going to stay in business," said Stephen A. Blake, president and chief executive officer. "The 18 stores we're keeping in business are very profitable stores and will continue to be. We know what mistakes we've made and how to correct them."

Blake, who led the company from 1990 to 1997 while revenue grew from $9 million to $25 million, was re-hired to lead the company during the summer. During his absence, the company moved into new areas, including running shoes and golf products -- a move that has been abandoned, he said.

"We lost a little bit of our focus," he said. "Now we're regaining that focus."

The eight stores that will close, according to Blake, are: Golden Ring; Owings Mills; downtown Baltimore; Gaithersburg; Sterling, Va.; Fairfax, Va.; Woodbridge, Va.; and Fredericksburg, Va.

Blake said Sunny's has about 300 employees, and he expects that any employee who wants to remain with the company will be able to do so.

In order to raise revenue to satisfy its creditors, Sunny's will launch an inventory sellout at 20 percent to 50 percent off starting Jan. 27.

"It was a local player that tried to get too big, too fast, and they ran into major competition in their category from companies like Dick's Sporting Goods, the Sports Authority and even Target and Kmart and Wal-Mart," said Mark Millman, president of Millman Search Group Inc., a national retail consulting and executive search firm in Baltimore.

"They didn't have the advertising dollars and marketing support to compete effectively in markets where they were coming up against the giants of the industry," Millman said.

In recent years, e-commerce added a new layer of competition, he said.

"They had changed philosophy too, every time they had a management change," he said. "That had a major adverse impact on the bottom line."

Millman gave Sunny's a 50 percent chance of survival if company officials can establish a market niche and stay with it.

Howard L. Davidowitz, chairman of Davidowitz & Associates Inc., a retail consulting firm in New York City, was less optimistic.

"When a company of this size files Chapter 11, the chances of survival are very small," he said. "They're not only going to have to close stores, they're going to have to operate dramatically better in the stores they're keeping. They're going to have to do it at a time when there are multiple competitors, when they're spending almost every waking hour working on the bankruptcy and when they have very little capital to use."

Davidowitz put the chances that Sunny's would be in business in five years at 5 percent, pointing to a downturn in the overall market segment of sporting goods and equipment.

Running shoes, which Davidowitz said are a big piece of that market, have been under price and margin pressure lately, he said.

Tom Saquella, president of the Maryland Retailers Association, said he has long maintained that it is not only the independent retailer that may be hurt by the intrusion of large national chains.

"I've always thought that the greater or an equal threat is to regional retailers," he said. "They can't develop that personal identity that a local store can, but they don't have the financial resources that a major national chain does."

Yet until a few years ago, he used Hess Shoes and Sunny's as examples of regional chains that seemed to be doing well and growing in spite of his theory. Hess announced in November that it would close its remaining stores.

Saquella agreed that multiple factors probably contributed to Sunny's troubles, with competition topping the list.

"That little niche that Sunny's thought they had suddenly went away," he said.

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