M Den co-owner blames pandemic for retailer's bankruptcy

Oct 16, 2024

The retailer formerly known as The M Den shuttered two more stores Monday in the wake of its recent bankruptcy filing and a co-owner described in court documents how the debt problems began spiraling with the COVID-19 pandemic.

The longtime official sports merchandise retailer of the University of Michigan athletics, the retailer announced that its store in downtown Detroit at 55 W. Columbia St. and another in Briarwood Mall in Ann Arbor are now closed.

The closures following that of The M Den store at Twelve Oaks Mall in Novi, which went dark last week, and the company's official declaration Friday of Chapter 11 reorganization bankruptcy.

The retailer is now down to just two permanent store locations, both in Ann Arbor: its flagship on State Street and a Main Street store.

Monday's announcement said the store closures are part of the business' reorganization and anticipated sale.

The company has yet to identify its prospective buyer, although the U-M athletic department recently told U-M licensees it is in talks with Legends Global Merchandise, part of a multifaceted New York-based sports business firm, to be the athletic department's next "Official Team Store" and operate under "The M Den" name.

Also Monday, a co-owner and president of the Ann Arbor retailer, Scott Hirth, described in a 22-page declaration for the bankruptcy court how the business went from skyrocketing sales after the U-M football team's 2023 national championship season to financial ruin only months later.

More:Claims of unpaid bills piling up for The M Den

According to Hirth, the university demanded last Thursday that the retailer cease and desist from using "The M Den" name and give up the website Mden.com.

On Friday, the retailer filed for bankruptcy under the name Heritage Collegiate Apparel — a name it began using in late May, after U-M first attempted to terminate the "official team store" deal.

The retailer's bankruptcy petition estimated its liabilities as between $10 million and $50 million and number of creditors as between 100 and 200. It employed 151 people as of last week.

The largest unsecured claim — $8.8 million — was for royalty payments owed to the U-M athletic department.

In his declaration to the bankrupty court, Hirth said the retailer funded three large capital improvements in 2019 out of its operating capital and reserves, including building out its downtown Detroit and Ann Arbor Main Street locations, which left it with less cash on hand than usual.

Then the pandemic hit in March 2020, which closed down the U-M campus and meant that "virtually all of (M Den's) customers were removed from Ann Arbor for an entire year."

Sales promptly nosedived, Hirth said in the declaration. Even though sales still happened through the Mden.com website, those online sales had "much lower" profit margin than in-store sales, Hirth said, and in addition to the shipping costs, the retailer owed significantly higher royalty to U-M for online sales than for in-person sales.

The retailer went on to purchase roughly $6 million in inventory for the fall 2020 football and 2020-21 basketball season. But that merchandise didn't sell well, according to Hirth, because COVID-19 restrictions remained in place, classes stayed remote and college football and basketball games played without fans.

The retailer began taking out high-interest loans because "traditional financing" wasn't available, Hirth's declaration says. And then the company took another hit from costs associated with implementing its then-new name, image and likeness program for student athletes starting with the 2021 football season.

More problems emerged once the retailer's vendors, facing pandemic-related supply chain issues of their own, struggled to meet ordinary timelines for delivering merchandise. The vendors started requiring The M Den to order inventory a year or more in advance, according to Hirth.

In December 2022, M Den received a deluge of over $5 million in pre-ordered merchandise, which arrived too late to successfully sell for that fall's football season.

"The vendors went largely unpaid and some initiated lawsuits and obtained judgments which (M Den) could not pay," Hirth said.

Last year was better for football merchandise sales. But even though M Den's sales "skyrocketed" in late 2023 during the team's historic season, it wasn't enough to save the retailer from ruin, according to Hirth.

"The royalties due to the university on championship merchandise were even higher and (M Den's) profit margin was slim," he said.

A U-M athletic department representative did not respond Monday to a message seeking comment for this article.

The Ann Arbor retailer was started in 1976 by Scott Hirth's late father, David Hirth, and his father's friend, Doug Horning, who bought the former Stein & Goetz Sports Goods and later refocused it on U-M sports apparel.

The business has been the U-M athletic department's official merchandiser since the early 1990s, when it started doing business under the name M-Den Inc., with the exception of a short break in 2009 when it lost the deal for about a year.

Bankruptcy documents says ownership of the retail business is split between Scott Hirth, Julie Corrin and Steve Horning.

The filings also say the business owes more than $265,000 to the Ilitch organization for past due rent for the Detroit store location, over $206,000 for rent at Twelve Oaks Mall and more than $614,000 in various debt owed for Briarwood Mall.

Contact JC Reindl: 313-378-5460 or [email protected]. Follow him on X @jcreindl