7 Shoe Companies Feeling the Impact of Retail Bankruptcies

A wave of Chapter 11 filings has brought new challenges and opportunities for key industry players. Here, Footwear News highlights seven firms being impacted by recent retail bankruptcies.

Steve Madden

As a maker of private-label footwear for Payless ShoeSource, Steve Madden has been feeling some heat from the retailer’s bankruptcy, as well as its nearly 400 planned store closures. Madden’s management recently suggested, however, that the company had been anticipating some challenges stemming from Payless’ financial struggles for a while and had prepared accordingly. (Payless filed for bankruptcy on April 4.)

“We included a pretty substantial [impact from Payless] last time [we provided guidance], so I still think that our current forecast looks pretty similar — there’s no meaningful change there,” Steve Madden CEO Ed Rosenfeld said during the firm’s first-quarter conference call on April 21.

Still, if the number of store closures for Payless creeps up, Rosenfeld cautioned, the implications could be different.

“Depending on how many stores they close, could that impact what our business looks like in 2018 and beyond? That’s possible, but we’re really not there yet,” he said.

Skechers USA Inc.

Citi Research analyst Corinna Van der Ghinst has pegged the Manhattan Beach, Calif.-based brand as the biggest beneficiary of bankrupt Payless ShoeSource’s store closures, given “its competitive advantages in the $40-price-point range.”

“Skechers [does] high-quality takedowns of nearly every key style released by the major footwear brands, [has] faster speed to market than peers and a strong brand connection with value and mid-tier consumers,” Van der Ghinst wrote in an April 6 memo. “With Skechers’ new segmentation strategy [targeted toward] recapturing some of the $40-price-point business they had migrated away from in recent years, we believe that [its] expanded Bobs line this year will be well positioned (and well-timed) to capture share from the Payless closures.”

Dick’s Sporting Goods

It’s been a mixed bag for sporting goods retailers since The Sports Authority filed for Chapter 11 protection in March 2016. By and large, Dick’s Sporting Goods has been the biggest beneficiary of the retailer’s demise. In June 2016, Dick’s successfully bid on Sports Authority’s intellectual-property assets and the right to acquire 31 store leases. Dick’s also later took advantage of Golfsmith’s Chapter 11 filing, purchasing the company’s assets at a bankruptcy auction in October 2016.

In the most recent quarter, Dick’s opened three former Sports Authority stores as new Dick’s Sporting Goods and started the process of converting 30 Golfsmith stores into Golf Galaxy locations.

Hibbett Sports

Even though Hibbett Sports operates in the same category as bankrupt sporting goods retailers, analysts have been doubtful regarding its ability to capture the market share left behind by its defunct competitors. “We do not believe Hibbett has or will benefit from the Sports Authority’s bankruptcy, as its locations were not close to a Sports Authority’s,” Canaccord Genuity Inc. analyst Camilo Lyon wrote last year.

In fact, some market watchers have suggested that Dick’s Sporting Goods’ ability to snap up lagging market share may further hurt Hibbett, which has struggled in recent quarters.

Under Armour

The Baltimore-based brand said last year that Sports Authority’s bankruptcy would take a bite out of its financial performance. Specifically, Under Armour had planned to bring in $163 million in revenues from Sports Authority in 2016, but instead it only saw $43 million. The brand also recognized an impairment charge of $23 million during the second quarter.

But the effects of Sports Authority’s demise — as well as new Chapter 11 filings from MC Sports and Gander Mountain — are taking new forms in 2017.

“Last year, the bankruptcies of Sports Authority and Sports Chalet took away 300 domestic distribution points for Under Armour, and this year MC Sports is liquidating, and Gander Mountain is on the brink of disappearing,” Susquehanna Financial LLLP analyst Sam Poser wrote.

While Under Armour opened distribution to Kohl’s Corp. this year, “it appears as if the revenue expected from Kohl’s will not make up enough of the sales lost from the four aforementioned retailers,” Poser added. “Under Armour may be replacing some of the revenue lost from Sports Authority, Sport Chalet, MC Sports and Gander in the near term, but the inability to replace the sporting goods business will harm the Under Armour brand in our view.”

Fila USA

Payless — which has included its North American entities, as well as two Hong Kong-based entities involved in logistics (CBL) and supply chain (DAL), in its restructuring plan — has a hefty list of unsecured creditors that are owed large sums. Factories in Taiwan, Hong Kong and parts of China make up the majority of the list of Payless creditors with the largest unsecured claims, but New York-based Fila USA Inc. has the 11th-largest unsecured debt and the largest of any U.S. creditor. It remains uncertain how the debt — which sits at $5.2 million — will be handled as Payless works through its reorganization.

DSW Inc.

DSW announced in March that the bankruptcy of century-old discount department store Gordman Stores Inc. would spell trouble for its business.

“Gordmans, one of our affiliate business partners, filed for Chapter 11 protection and announced its plans to liquidate its assets,” DSW CFO and SVP Jared Poff told investors during DSW’s fourth-quarter conference call. “As a result of this action, we have begun our efforts to clear inventory at 106 locations that will remain open through the proposed liquidation event. We have been managing our inventory exposure proactively, and we are working hard to mitigate the impact of the transition out of Gordmans.”

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