Bikes USA will close its 21 stores by year's end, finding no clear path out of bankruptcy protection in an industry suffering from deflated consumer interest.
The Alexandria-based chain of bicycle stores filed for Chapter 11 bankruptcy protection earlier this month after an expansion binge left the company with a heavy load of debt as bike sales nationwide were slowing. Adding to the company's woes were the rising popularity of in-line skating and a brutally hot summer that kept many casual bikers in their air-conditioned homes.
"The company has always been over-leveraged, but the problem was exacerbated by the weather," Randy Gillett, Bikes USA's chief financial officer, said yesterday. "We just ran out of liquidity."
A bankruptcy judge in Alexandria approved Bikes USA's liquidation yesterday, although executives with the privately held company were negotiating to sell some stores to an unidentified bike retailer, Gillett said. Gillett blamed Bikes USA's lender, Paragon Capital LLC, for pressuring the retailer to begin early going-out-of-business sales.
Stewart Cohen, Paragon's chief executive, said "it's not in our tactics to pressure anybody." But he added that it made little sense for Bikes USA to continue operating and hemorrhaging money.
"The company either had to be sold or liquidated," Cohen said.
In court papers, Bikes USA listed assets of $2 million to $10 million and liabilities of $10 million to $50 million. Its largest creditors included manufacturers Trek Bicycle Corp., Specialized Bicycle Components and Bell Sports.
Bikes USA began as the Bicycle Exchange in 1978 and opened its first Bikes USA superstore six years ago in Gaithersburg. The chain employs about 200 people and operates 11 stores in the Washington area; four in Atlanta; three in Miami; two in Raleigh, N.C.; and one in Orlando.
Yesterday, managers at the Bikes USA in Woodbridge were bemoaning their fate after hearing that they would lose their jobs at a store with full racks of bikes, and signs bearing the slogan, "We Beat All Competitors' Prices."
"I'm losing all my profit sharing," said store manager Jim Hawkes, 26, who has worked for Bikes USA for five years. "Guess it's time to dust off that degree."
Hawkes said the store had revenue of about $1 million last year. But talk of the company's impending demise hasn't helped recent sales, he said.
"People see that we offer lifetime adjustments, but we're almost dead," Hawkes said.
Bikes USA is the latest area bike retailer to close up shop. In recent years, avid bicyclists have mourned the demises of Metropolis Bicycles and Nova Cycles, which once was a chain of eight stores. Other local chains, including Washington Bike Center and Big Wheel Bikes, have downsized.
"The weeding-out already has been occurring," said Michael Sendar, owner of Big Wheel stores in Alexandria, Georgetown and Bethesda. "Now the company that did the weeding-out is being weeded out."
The bike retail industry is trying to pedal its way out of a decline that some experts blame on the boom in in-line skating. The number of bicyclists nationwide has fallen 21 percent to 43.5 million in the past decade, according to the National Sporting Goods Association. Meantime, the number of in-line skating participants soared from 3.6 million to 27 million during the same period.
"If there aren't as many people biking, there aren't as many people buying bicycles," said Thomas B. Doyle, the organization's vice president of research.
Sales of bicycles and related equipment last year grew 2 percent from 1997, to $5 billion, Doyle said. But he said the increase is probably related to higher-priced bikes--not to growing interest in cycling.
Some bike retailers believe large chains such as Wal-Mart and Sports Authority have been able to swipe more sales from independents by offering more-expensive bike lines.
"Manufacturers have broken down the barriers and are selling to mass marketers," Sendar said.
Area bicyclists say they have been left with fewer options--and longer trips to the stores. Capitol Hill, for instance, used to have several bike stores; now it has none, said Eric Gilliland, project assistant for the Washington Area Bicyclist Association.
"I know a lot of bicycle messengers, and if you break down on Capitol Hill, you're really out of luck," Gilliland said.