HERE’S What Happened to Golfsmith (How They Lost Millions of $)

Do you know how bad it feels when your favorite restaurant closes down permanently and you can’t have their dried sushi anymore? It hurts. 

That’s exactly what the golfing world experienced when Golfsmith, one of the pioneers of custom-made golf products, declared bankruptcy. The company launched some brilliant products and offered good service as well. 

The customer and community relations of its retail stores with the public were amazing as well. If everything was so superficially smooth, what happened in the subsequent years that Golfsmith had to take the ultimate leap?

If you’re sitting in your room, polishing a dusty old golf club, reminiscing about your favorite golf company, and wanting to find out what happened to it, you’re in the right place. 

Just sit back, relax, and maybe get a can of juice as we caddy into the rich history of Golfsmith, the once-foremost name in the golfing industry.

What Happened to Golfsmith

What is Golfsmith? A Brief Introduction and Whereabouts

Every company has a surname, unfortunately. Golfsmith International Holdings Inc., or as customers used to call it, “Golfsmith” started as a customized golf retailer in Austin, Texas.

It launched hundreds of stores across the country, each filled to the brim with some of the most amazing golf-related products, including golf bags and gift cards, the two instruments most suited to seduce a golf freak. 

But that’s not all. Golfsmith soon became a specialty retailer, producing customized goods based on customers’ demands.

For instance, their vast product line included golf clubs of different designs, shoes in all sizes, colorful and colorless apparel, gadgets, and everything else that you might use at a golf club. 

Except perhaps a caddy. 

But Golfsmith was more than just a retailer. They built strong community relations with their customers.

Each store also offered customized club fitting along with other lessons and services that a golfer might want. 

As you might have imagined, the company experienced tremendous success. 

Golfsmith was established in 1967, by Carl and Barbara Paul. Apart from recording website sales, the company had set up over 100 retail stores across the United States by 2014.

In the fiscal year 2009, Golfsmith calculated a net revenue of over $338 million, a whopping figure for that economic period. 

Everything was going well. The company was growing at a rapid pace. But it all came to an abrupt halt in 2016, when Golfsmith had to declare bankruptcy to make way for new owners. 

What happened, and why? The intriguing backstory of Golfsmith is only a shadow of what followed towards its end. 

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When Does a Company Go Bankrupt?

Before we move to the technical part of the article, it’s good for the readers to acquaint themselves with the Bankruptcy Law of the United States as well as the process of Liquidation. 

Doing so will allow you to understand the situation and history of Golfsmith better. 

Let’s start with the path that Golfsmith chose to tread on – filing a bankruptcy under Chapter 11. The Bankruptcy Law of the United States allows any company to undergo reorganization when it cannot pay its debt to creditors. 

From here on, there are two pathways that a company can take – Chapter 11 or Chapter 7.

If an entity files bankruptcy under Chapter 7, then the company will cease all its operations. In such a case, the trustees will need to sell off the assets of the organization and use the money to pay the creditors.

Whatever money is left will then go to the owners of the company. We call this process liquidation. 

Under Chapter 11, the debtor can continue with the operations of the business. But he will only remain an owner as a debtor in possession, meaning that the creditor will enjoy an appropriate security interest over the company. 

After invoking Chapter 11 of the Bankruptcy Law, a company can either undergo reorganization, have its file changed to Chapter 7, or have its suit dismissed. 

That is all that you would need to know about the epic tale of how Golfsmith had to force itself to find a new owner by filing bankruptcy. 

The Bankruptcy Saga – Golfsmith Goes Mum 

It was in the winter of 2016 that Golfsmith was fogged by an unforeseen set of circumstances. They incurred some losses and were heavily in debt to several creditors. There was only one escape route. 

The company filed for bankruptcy under Chapter 11 to plan a future course of action. 

That made way for a new owner to swoop in and take control of the company. So who bought/purchased Golfsmith?

It was a company named Dick’s Sporting Goods. The acquisition took place after more than two months of intense searching for a new owner and a way to pump cash in and release all the debt. 

Now comes the interesting part – how much did Golfsmith sell for? The reported price is around $69 million.

What’s humorous about this figure is that the total sum is more than $26 million less in comparison to the price that Canada’s Golf Town paid when it acquired Golfsmith in 2012. 

Talk about a bad investment. Anyway, it was as good an ending as it could’ve been for Golfsmith, especially after it incurred a reported debt of more than $200 million.

The worse outcomes could’ve been a clash between the creditors and the stakeholders, ultimately resulting in a large case/law/sue, whatever you want to call it to soften the blow.

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What Happened After the Acquisition?

Let’s make one thing clear – Dick’s Sporting Goods only purchased the assets and goods of Golfsmith. The company does not operate under its former name anymore. 

But if you do want to experience a tinge of nostalgia, you can purchase Golfsmith’s products from their acquirer’s official website.

Dick’s Sporting Goods might be a good company for the sports industry. However, not all golf lovers are happy about the bittersweet ending of their favorite American golf retail store. 

For one, Dick’s Sporting Goods does not pay a special emphasis on golf. On the other hand, Golfsmith was all about the club and the caddy.

Everything they offered – from the product to the service – specifically targeted the golf community, something that the customers loved. Honestly, the reason we prefer Golfsmith is that their name is so easy to type! 

Now, it was time for Dick’s Sporting Goods to take over. Before even acquiring the company completely, they had laid down a strategic plan to revive its business.

They decided to shut down a large number of the erstwhile company’s retail stores as well as carry out a ginormous lay-off of employees. 

From over 100 stores, Dick’s Sporting Goods only selected 30 of them that could remain operational. They also decided to retain only 500 employees across the country to take care of the business, including online and offline work. 

It was a mastermind move from the sports retailer company. After the acquisition, they had a firm grip in the golfing industry as well, something that they lacked earlier.

According to projected trajectories, Dick’s Sporting Goods is on a path to becoming the monopoly-holder when it comes to sports retail in the United States. 

Is Golfsmith The Same as Golf Galaxy? Is Golfsmith Still Around?

As we have mentioned earlier, Dick’s Sporting Goods is not primarily a golf retailer. Instead, they focus on all kinds of sports including football, baseball, basketball, and so on. 

When they acquired the golf market from Golfsmith, they decided to rebrand the stores not after the parent company’s name, but into a subset of their brand called Golf Galaxy.

So Dick’s Sporting Goods converted the 30 Golfsmith stores that it acquired into Golf Galaxy stores. Everything is almost the same, except perhaps the brilliant service and connection that Golfsmith had with its customers. 

Nevertheless, Golf Galaxy is still operational, both at the store and e-commerce levels. 

What Led to the Crushing Debt?

Since the time we started writing the articles, we’ve done nothing but praise the quality of products and services that Golfsmith offered. 

So if the company was doing so well, and producing such good products, why did it need to file a bankruptcy to save face and repay the creditors? 

The reasons are both intriguing as well as a lesson to all rapidly growing businesses on how to remain level-headed while expanding. 

Here’s what happened.

1. Aggressive Expansion: 

Golfsmith oversaw a fairly successful decade in the 2000s, with the company recording ginormous profits during certain fiscal years. 

As a result, they got the motivation to expand their business into something larger. They no longer wanted to be a niche retail chain, available only for the most enthusiastic of golfers.

They wanted to expand their presence in each corner of the United States. For the said expansion, they took out huge loans and started working on their strategy.

However, they got too aggressive with wanting to get to more and more customers.

The business strategies, although optimal on paper, were not practical in such a short amount of time. 

Golfsmith, therefore, became the living embodiment of the old Greek fable – the story of how Icarus flew too high on his metal wings and the sun melted the wax off, leading to his early demise.

2. Brick-and-Mortar Strategy:

The other glaring hole in Golfsmith’s business strategy was the pace at which they were opening new retail stores. 

In an attempt to tackle the growing dominance and monopoly of bigger companies like Dick’s Sporting Goods and PGA Tour Superstore, Golfsmith decided to set up more and larger retail stores in areas where they previously didn’t operate. 

It got to a point where the company had too many stores in a similar location, affecting the business drastically.

Golfsmith also set up their operation in areas where they didn’t receive a lot of traction in terms of revenue. 

Thus, they miscalculated their expansion strategy in every aspect. While the number of stores kept growing, the profits did not keep pace.

Moreover, the cost of construction, maintenance, workforce, and lease kept mounting. 

Ultimately, it became too much for Golfsmith to handle. They owed a lot of money to some very prominent figures.

It looked bad on their portfolio, and they didn’t have any money to restructure their strategy either.

What started as a move to topple the dominance of Dick’s Sporting Goods became the very instrument that led to Golfsmith’s acquisition by them. 

3. Bad Timing:

A lot of Golfsmith’s investments also failed because they chose an unsuitable time to cash in on their expansion.

It was always a wrong move to generate funds for growing their business by taking in loans and debt. But when coupled with bad economic periods like the 2008 recession, the damage became irreversible. 

Golfsmith’s expansion strategy came into play when they realized that customer trends are taking a drastic shift in terms of brick-and-mortar retail.

Similarly, the company felt that it needs to do a lot more to keep the focus channeled on golf as the “Tiger Woods Phenomenon” dimmed to non-existence.

Final Thoughts 

In a way, Golfsmith made a lot of panic-stricken decisions to try and retain their position at the top. They projected that Golf, as a sport, in the United States might be dwindling in popularity, and took some rash decisions. 

Ultimately, it cost them their business. More importantly, it cost millions of enthusiastic golfers their dream company. 

Nevertheless, the company had a solid run, and we can only hope that Golf Galaxy takes the legacy forward appropriately. 

Happy golfing.