The Walking Company is seeking bankruptcy protection for the second time in a decade, and this time the blame goes to UGGs shoes. Following a 2009 bankruptcy declaration and reorganization, the company is again seeking more advantageous lease terms on its 200+ stores. The retailer already has worked out a Chapter 11 plan with key creditors that includes a $10 million equity investment and $50 million in bankruptcy and exit financing, which will allow its stores to stay open during the restructuring period.
In 2009, the retailer was feeling the effects of the Great Recession. This time, its problems stem from a more specific source: the decision late in 2016 by UGGs maker Deckers Outdoor to pull the popular brand from the Walking Co. “As a result of the difficult environment for store-based retailing in 2017, Walking Co. could not replace the lost UGG sales fast enough,” said CEO Andrew Feshbach in a court declaration.
The loss of UGGs resulted in the retailer’s inventory getting appraised at lower levels, leading lender Wells Fargo & Co. to reduce the amount of capital under a credit line, according to Bloomberg.
“We’re definitely seeing brands take control of the selling process, going directly to consumers thanks to the rise of digital,” said Katie Smith, director of retail analysis and insights at fashion industry analyst Edited, as reported in Bloomberg. “It protects the brand when so much margin erosion has occurred thanks to endless store discounting.”
The Walking Co.’s proposed restructuring plan is backed by its current shareholders, CEO Feshbach and two investors from Kayne Anderson Capital Advisors. The three investors have agreed to put $10 million of fresh capital in the reorganized company, according to the Wall Street Journal.
The plan still requires court approval, and Walking Co. said it seeks to hold a final hearing by June 12, 2018.