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What is 2nd Swing Up to Now!!!

Like the Phoenix rising from the ashes, 2nd Swing is back in business. According to a feature story in my local paper Star Tribune, the new 2nd Swing has got one store open in Minneapolis and a second is slated to open in Minnetonka on April 2nd.

Before the internet, eBay and sites like www.callawaypreowned.com, 2nd Swing had a lock on the used golf equipment market. But it didn’t last long. To keep ahead, 2nd Swing added new equipment to it offerings and expanded like mad until it had opened more than 50 stores. As quickly as it grew, it also added debt at an alarming rate. By the summer of 2006, the chain was gone. A victim of overzealous expansion and $10 million in debt.

According to the article, founder Simon Kallal is back in the saddle again as well as much of his original management “Kallal and a group of five other investors stepped in earlier this year and bought 2nd Swing’s intellectual rights for $50,000. The purchase gave them the right to use 2nd Swing’s name, logo, website, software and customer database consisting of more than 250,000 names.”

As well as wash its hands of any misdeeds, missteps or screw ups by previous management.

I wrote a posting in early September that the company had been liquidated and 17,700 customers with credit balances got screwed. Well, things haven’t changed. If you check the website www.2ndswing.com, they already have a disclaimer that says “If you are seeking information regarding the old 2nd Swing, including credit or gift card balance redemption, please seek claims through the bankruptcy court. All balances were handled through the closing of the company. Zero balances were transferred to the new 2nd Swing.”

Let’s do some math. If we make the assumption that the average credit balance was only $50, then 2nd Swing was able to dump $885,000 worth of credits for only $50K ($50/customer X 17,700/customers = $885,000).

Meaning, tough luck Mr. Former Customer.

Although they have modest goals this time around, I don’t believe that the new 2nd Swing has any more chance of being successful as did the old one. The company is going back into the used golf equipment market when the market stinks. Real growth in golf equipment hasn’t occurred for six years and doesn’t look to do so very soon.

One of the chain’s former rivals, Golf Galaxy, was quoted in the Star Tribune article as saying “the pie isn’t any bigger than it was a year ago,” said Randy Zanatta, chief executive of Golf Galaxy. “It’s all a market-share game, now. It’s about how big of a slice you can get.” Now owned by Dick’s Sporting Goods, in 2003 Golf Galaxy sold almost no used clubs. Now they represent 7 to 8 percent of the chain’s overall business.

In addition, the threat of used equipment showing up on eBay and all over the Internet is very real. One online retailer I spoke with said that he buys directly from Titleist, TaylorMade and others and sees new equipment show up on eBay at retail for less than he pays for it at wholesale. Also, online websites like those operated by Callaway and others sell used or refurbished equipment, thereby competing with companies like 2nd Swing. When they first opened in 1996, none of these competitive factors existed. Today, all of them combine to make this a much different market than before.

For a paltry $50K, 2nd Swing gets to rise again and hopefully, not get themselves into the same mess as before. I remain a big skeptic.

Update on 2nd Swing Liquidation

A reader asked about cashing in a credit he has available at 2nd Swing, the Minnesota-based retailer that filed for bankruptcy liquidation in September. It appears that customers are out of luck.

I found an article from the Milwaukee Journal from September that outlined 2nd Swing’s credit policy.

I checked their website and it is no longer functioning. I called a location near me and the phone is disconnected. For those of the 17,700 customers with credits on the books, you’ve got a piece of paper that has the same value as my Excelsior Henderson Motorcycle stock — worthless.

RIP 2nd Swing.

2nd Swing Golf Files for Chapter 11

I just found out that 2nd Swing Golf based in Minnetonka, Minnesota (my home state) declared Chapter 11 bankruptcy on August 23rd. Founded in 1997, they’ve expanded to more than 50 stores selling used golf equipment. It looks like the end for these guys. According to the Minneapolis/St. Paul Business Journal “The company has retained an investment banker Morris Anderson & Associates of Chicago, and is seeking a party to buy 2nd Swing as an ongoing business or handle a shutdown”.

As cutthroat as golf retailing has become, these guys are probably going to fall victim and be liquidated. When a company announces they are trying to sell themselves or close down, it can’t be good. They would have tried to unload the company privately and avoid the negative publicity associated with a bankruptcy.

If the financials were even halfway decent, a chain like Nevada Bobs, Edwin Watts, Austad’s or even Dick’s Sporting Goods would swoop them up in their time of need. Even for just the real estate.

Unfortunately, 2nd Swing couldn’t pretty up their balance sheet when they tried to do an IPO in 2003 (three times actually) and just a year ago they laid off 1/3 of their corporate staff and closed about 20 stores. Their demise shouldn’t come as a surprise with a flat golf retailing market for the last five years.

I alluded to the weak state of the industry in a previous March, 2006 posting Clubbuilding War Breaks Out as well as Dick’s Sporting Goods opening its prototype standalone golf concept store.

I’ll continue to explore the state of golf retailing in a future posting as well as on my podcast.

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