Modesto's Valley Sporting Goods files for bankruptcy

Modesto’s 65-year-old Valley Sporting Goods has filed for bankruptcy protection so it can restructure its debts and downsize its business.

The McHenry Village store remains open, and its owners say they are committed to doing what it takes to make their company solvent again.

“We’ve got a really good plan,” assured Darren Daily, who owns Valley Sporting Goods with his wife, Crystal. “It’s such an iconic business that we’re going to do everything we can to get it through to the other side.”

The Modesto couple paid more than $1.5 million for the store in August 2007, when the local economy was strong and commercial business prices were relatively high.

“We had a great first year,” Daily recalled. Then the recession hit, and his store’s sales plummeted more than 50 percent. It is in the third year of declining revenues. “We simply cannot sustain this slide.”

Bankruptcy Court documents show Valley Sporting Goods has less than $500,000 in assets and more than $1 million in debts.

Its creditors list includes the company that manages McHenry Village, numerous sporting good suppliers, the bank that financed its purchase loan, the Internal Revenue Service, the U.S. Small Business Administration, California’s Franchise Tax Board, the State Board of Equalization, the Employment Development Department and the Stanislaus County Tax Collector.

“We’re going to look at all our options to find a responsible way to control our old debt so we can move forward,” said Daily, 38.

The store already has drastically reduced its staff. At its peak in December 2007, the company employed more than 60 people. Now it has 17 employees, including some who work only part-time.

By filing for bankruptcy protection, the company may be able to get out of its lease and renegotiate its debt payments.

Daily said Valley Sporting Goods needs to move to a much smaller location to lower its overhead. It currently has nearly 40,000-square-feet of retail space, anchoring McHenry Village’s back corner. Daily thinks his store would be better off with only 15,000-to-20,000 square feet in a more visible location.

“We’re going to be in open negotiations with the Village to see what we can do,” Daily said.

McHenry Village, however, may not be willing to make a deal with the sporting goods store.

“We’re going to evaluate the situation and do what’s best for the Village and the merchants there,” said Craig Walsh, senior vice president of the Standard Management Co., which runs the shopping center at 1700 McHenry Ave.

Walsh said his company must determine if Daily’s restructured company will be financially viable.

“We know they’ve been struggling,” Walsh said. “It’s been a trying time for McHenry Village the last couple years.”

Walsh noted how one of its other major tenants, Phillips Lighting & Home, recently moved into a smaller space to cope with the slower economy.

The sporting goods store is in one of the center’s largest spaces, so filling it will be important.

“We will replace it with a viable merchant that can contribute to the vitality of the center,” Walsh said.

Valley Sporting Goods has moved before.

It opened at 15th and J streets in downtown Modesto in 1946. Trevor Griffith and Joseph Gere were its original owners, and their store had just 800 square feet.

The company changed ownership several times before Darren and Crystal Daily purchased it from Sheldon and Sandy Spencer.

“We were the fifth generation of X-employees to buy the store (from our bosses),” said Daily, who stresses his ties to the local community. “We believe in Modesto and we believe in Valley Sporting Goods.”

Daily said his restructuring plan is “to focus on what we are experts in” — like meeting the needs of local athletic teams, winter sports and fitness gear, including shoes.

While the locally owned and independently run store does not have the discount-buying power of large chain outlets, Daily promised “we will be the experts on any products we carry.”

But competition is stiff for sporting good companies.

“Non-local businesses have come in and taken some of the share of the diminishing market,” Daily said.

That includes Dick’s Sporting Goods, which opened last month in Modesto and Bass Pro Shops, which opened a 120,000-square-foot Manteca store in 2008. Bargain-priced sporting goods also are widely available for home delivery via the Internet.

While Daily said he does not plan to liquidate his “million dollars worth of inventory,” he said Valley Sporting Goods probably will have a reorganization sale in the next couple weeks.

Bee staff writer J.N. Sbranti can be reached at (209) 578-2196.

This story was originally published June 14, 2011 at 7:02 PM with the headline "Modesto's Valley Sporting Goods files for bankruptcy."