Firearms distributor United Sporting Cos. loaded up on guns ahead of the 2016 U.S. presidential election, expecting a surge in sales that would likely follow the election of a Democrat. Then Hillary Clinton lost.
The miscalculation sparked a multi-year decline that has reached the courthouse steps in Delaware, where United filed Chapter 11 bankruptcy on Monday.
When Republican Donald Trump emerged victorious in the election, United posted lower-than-expected sales as well as high inventory carrying costs, Chief Executive Officer Bradley P. Johnson said in a court declaration.
United, which sells an array of outdoor equipment, is seeking protection from creditors while it sorts out more than US$270 million of debt secured by liens on its assets, court papers show. The company, whose subsidiaries include Ellett Brothers LLC and Jerry’s Sports Inc., reported Ebitda of US$4 million on net sales of US$557 million last year — well below its average of US$885.3 million in sales from 2012 to 2016.
The company had to discount its bloated inventory to stay competitive, trimming already thin margins, court papers show. It also lost discounts and volume rebates from top vendors as its heavy debt burden pressured the company’s balance sheet.
United isn’t the first gun-industry player to run into trouble in recent years. Remington Outdoor Co. filed last year while share prices of peers fell on declining sales.
United last year bought a distribution center in Ohio from bankrupt competitor AcuSport Corp, and outdoor gear giant Gander Mountain Co. filed for bankruptcy in 2017.
United tried to sell itself this year, hiring Houlihan Lokey in January to find a buyer, court papers show. Multiple parties expressed interest, but United failed to draw an attractive enough offer.
Founded in 1933 as Ellett Brothers, the company had about 321 employees when it filed for bankruptcy. Wellspring Capital Management, Prospect Capital Corp. and Summit Partners together own more than 90 per cent of the equity of SportCo Holdings Inc., the parent company of South Carolina-based United.
The equity owners didn’t immediately responded to requests for comment.
The case is SportCo Holdings, Inc., 19-11299, U.S. Bankruptcy Court District of Delaware.