Sporting Goods Retailers Start to Consider New Lineups

For months Wall Street has speculated that sporting goods retailers would begin to merge or acquire one another, simply because there are too many of them. But the retailers seemed to resist, apparently convinced that they could make it on their own, even though Sports Authority Inc. was beating all the others over the head.

But now, several players have finally started merger talks, people close to the discussions said yesterday. Sports Authority, which is based in Fort Lauderdale, Fla., is talking with Sportmart Inc., a chain of 59 stores based in Wheeling, Ill., which in turn is also chatting with Jumbosports, these people said.

Indeed, Sports Authority and Jumbosports, which is based in Tampa, Fla., may also have been in contact, and Oshman's Sporting Goods Inc., which is based in Houston, may want a piece of the potential action as well.

None of the companies would comment yesterday, but several players clearly have something to gain from joining forces in a competitive market. The market capitalization for the biggest player, Sports Authority, is $558 million, and Sportmart, which perhaps has the most to gain from a merger or acquisition, is $33.7 million.

Sporting goods superstores -- stores that offer several thousand square feet of golf clubs, camping gear, Rollerblades, spandex leotards and more -- were one of the bigger-than-life retailing categories that captured Wall Street's fancy in the late 1980's. Money poured in, as the companies underwent rapid expansion and challenged one another, as well as the mom-and-pop stores, as they entered each new market.

The results were almost inevitable: As rivals moved in, prices were slashed to grab sales, and margins got squeezed. Earnings fell, and so did stock prices. Jumbosports, for instance, reached a high of $28 a share in 1994; it closed at $4.375 in Nasdaq trading yesterday. Oshman's, which averaged $16.50 a share in the late 1980's, closed yesterday on the New York Stock Exchange at $4.625. A few chains, like Herman's World of Sporting Goods, simply went out of business.

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