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Sporting Goods Chain Looks to Recover in Private

In retrospect, Sport Chalet Inc.’s sale to a retail-focused investment firm may have been the best way to end the chain’s difficult stint as a publicly traded company. Earlier this month, Vestis Retail Group LLC in Meriden, Conn. acquired the La Canada Flintridge sporting goods retailer for about $17 million plus accumulated debt that valued the sale at $70 million minimum. Sport Chalet had bank debt of about $52.5 million, according to its latest annual report, and it had not been profitable since 2007. The company developed a business model of selling top-line gear across all sports segments, a strategy that worked in good economic times but has proved a hard sell since the Great Recession. Although the company owns 50 stores in four states, it started as a family venture and remained closely held even as a public company. Family of late founder Norbert Olberz and upper management together own about two-thirds of the company, according to regulatory filings. Alexander Cappello, chief executive of boutique investment bank Cappello Global LLC in Santa Monica was hired last fall to help Sport Chalet explore a range of options to reboot itself after several tough years. At the time, the company announced the hire was part of its strategy to identify partners to accelerate the growth. Cappello declined to comment on terms of the sale, but Neil Stern, senior partner with retail consulting firm McMillan Doolittle in Chicago, thinks this is probably the best option for the company. “They have been aggressively trying to improve the core business, and even opening a new prototype store,” Stern said. “They could sustain the business a while longer, but it was also clear that a strategic partner is the right long-term solution.” Shares of Sport Chalet jumped about 37 percent following announcement of the sale, with the price rising from 84 cents to $1.15 per share on the Nasdaq. The Vestis offer will pay $1.20 a share. Vestis, which is owned by funds advised by Versa Capital Management LLC, is also parent of Bob’s Stores and Eastern Mountain Sports. Combined, the three chains had about $800 million in sales last year across 150 stores nationally. “For Vestis, gaining a foothold and real estate in California is incredibly valuable – a good strategic move for them,” Stern added. The deal is expected to close before the end of the third quarter. Sport Chalet and Vestis declined to be interviewed for this article, but the companies released an announcement stating there are no expected store closures and that Craig Levra will remain the company’s chief executive. “We believe Vestis is the ideal partner given its base of stores in the eastern U.S. and synergistic vendor relationships, marketing focus and inventory platforms,” Levra said in a statement. Levra addressed the transition from being a public company to becoming private in a correspondence to employees. “In general, becoming a privately owned company should have little effect on our day-to-day responsibilities or how we conduct business,” he said. “Being a private company should reduce expenses and free up capital and management time to invest in growth initiatives.”

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