Last week, one of the world’s biggest skateshops–perhaps THE biggest–went belly up and filed for Chapter 11 bankruptcy protection (1). Chalk it up to a sign of the times, right? Not necessarily…

Over the past 5-10 years, Active has become a force to be reckoned with in the skateboarding industry. In addition to their 25 retail locations, they are also one of the largest online skateboarding retailers. Their team is a literal who’s who of skateboarding, littered with high-profile names like Paul Rodriguez, Andrew Reynolds, Erik Ellington and Daewon Song–just to name a few. Clearly, this is no ordinary local skateshop–it’s a beast.

But, even beasts are not immune to the forces of nature. Skateboarding has experienced an insane rate of growth over the past 10 years, and, along with it, retailers like Active have ridden the wave to true retail legitimacy. There was a time not too long ago that most local skateshops could barely keep their doors open, but that all changed during the early millenium–until now.

Lest we forget, skateboarding is a fickle business with fickle customers and an extremely volatile expansion/retraction history (see the rapid rise and fall of the 80’s). Why Active thought that the Starbucks model of self-cannibalization and total world domination would be sustainable in skateboarding is anyone’s guess. How quickly the sands of time sweep over our collective memory…

Now, as is the destiny of so many who neglect to learn from the past, they’re learning the hard way. As of today, Active is closing 10 of its 25 retail locations due to unprofitability (2). And, it’s not much of a stretch to imagine that they’ll soon jettison several members from their 19-man pro roster. It costs a lot of money to keep true pros peddling your wares, especially those with established sponsors for whom free schwag means nothing.

Hopefully, the bankruptcy will provide Active with ample time to scale back, restructure and repay their creditors so that they may continue on. But, there are a lot of roadblocks. As Jeff Harbaugh points out in a recent Transworld Business Article, “It takes some cash to file a successful chapter 11. Any company thinking about it should be hoarding some in advance” (3). Is Active adequately prepared? That’s yet to be seen. They will certainly have a lot of inventory to unload from those closed stores (probably at a significantly reduced margin), which should free up some capital to fund the proceedings.

What happens from there is up to the market, which I hear is in a recession. It’s going to be a tough road ahead for Active…

References:
1. http://business.transworld.net/2009/03/23/active-ride-shop-filed-for-chapter-11/

2. http://business.transworld.net/2009/03/16/active-rideshop-to-close-shops-before-april-1st/

3. http://business.transworld.net/2009/03/24/market-watch-chapter-11-bankruptcy-what-does-that-mean-exactly/

via David Mongan, 1 April 2009 1:22pm | 7 |