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Specialized in Dispute Over $412,000 in Inventory

Published October 16, 2007

SAN DIEGO, CA (BRAIN)--A dispute between Specialized and a retailer with five stores in the hyper-competitive San Diego market sparked a lawsuit in June over $412,000 in inventory that’s either been sold or is still on the floor.

Mike Simmons, who owns the Bicycle Warehouse, said he had no problem paying back the $412,000, but that he was looking for a sensible payment plan. The lawsuit, he claims, is simply an attempt by Specialized to put Bicycle Warehouse out of business.

But John Thompson, U.S. sales manager for Specialized, said he gave Simmons more than 100 days notice before terminating their dealer agreement and extended him credit terms to close out the account. Simmons failed to make payments even after selling off Specialized products, Thompson said, in a written statement sent to Bicycle Retailer and Industry News.

“We only filed (the lawsuit) when negotiations failed to result in an agreement to be paid as originally promised,” Thompson said.

Simmons said he had been encouraged by Specialized over the last few years to open three new locations but then Specialized failed to supply one of those stores, claiming it was too close to another Specialized dealer. The Morgan Hill, California, company later opened a Specialized concept store less than four miles from Simmons’ main outlet, Simmons said.

Simmons sells five other brands—Diamondback, Felt, Giant, Raleigh and Santa Cruz—and those brands also compete with Specialized sales at Bicycle Warehouse.

In terminating its dealer agreement with Simmons, Thompson said he had placed “insufficient” emphasis on Specialized’s products.

See a more detailed article on the dispute, including John Thompson’s letter, in the Aug. 15 issue of Bicycle Retailer and Industry News. –Jason Norman

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