Popular Shoe Brand Files For Chapter 11 Bankruptcy After 40 Years In Business

Bankruptcy is a state that nobody ever wants to consider. The idea of being in so much debt or so behind on your finances that the only option is, essentially, starting all over, is very uncomfortable for many Americans.

Sometimes it’s the only option, though, and both citizens and businesses are currently feeling the financial squeeze that is leading to the consideration of this most desperate option. 

Some Industries are Vulnerable

Some industries are more vulnerable to financial scares than others. Some stores are safer from the risks of economic downturn, such as grocery stores. Other types of retail, though, are often at risk for greater variability in income. 

The footwear industry is one such niche. Competing in the footwear space has, traditionally, been incredibly difficult. There have been many who have tried to create a brand that was recognizable and widespread, but unfortunately simply didn’t hit the mark for one reason or the other. 

Famous Brands Dominating

This is, in large part, due to one of the most famous brands in the footwear space. Nike, as a brand, has thoroughly dominated both the casual and sneaker space. This means that other companies have had to rely on finding a niche in order to succeed.

Filling a niche is a challenge, because it means that you’re competing for mindshare and shelf space with much larger players. It is an incredibly competitive space, where there have been far more failures than there have been success stories. 

Staking Out Niche Territory

For instance, Skechers and Crocs both managed to stake out territory that was underserved by both Nike and other casual footwear companies. They both had to spend a significant amount of money in order to carve out their niche, though, and both remain fairly vulnerable to swings in the market.

These two companies are some of the most high-profile examples of success, in an industry that’s littered with failures. Trying to make it in shoewear can mean spending millions, sometimes hundreds of millions of dollars, and ending up not making any sort of dent or impression on the market at all. 

Failing to Challenge Nike

Under Armour, for instance, attempted to set itself up in footwear as a challenger to Nike. While they’ve made an impression on other clothing markets, UA failed to make any sort of impression against Nike, despite a high-profile partnership with Steph Curry.

This is just one story of the myriad different companies that have tried and failed to succeed in shoewear. British Knights and LA Gears and Under Armour, the list could go on and on. And for those companies that do make an initial impression, the challenge of remaining relevant is often a journey that they’re not cut out for. 

A Pressure Point for a Company

One company is now facing an inflection point in the shoe industry, though they haven’t quite followed the above standard pitfalls. Shoes for Crews is a company that was founded in 1984, and found a niche that needed to be filled in a shifting shoe market.

They’re not a name that everyone knows, but Shoes for Crews has been an important and significant player that provides much-needed products and competition in an increasingly consolidated market. They’re not high profile, but they serve a major need for their customers. 

A Company History

The company explains their story on their website. “40 years ago, our founder Stan Smith noticed a rise in workplace injuries caused by slip and falls and discovered a need to create a solution that would eliminate the problem. In 1984, the Shoes For Crews brand was formed, and our slip-resistant outsole technology was invented.”

Shoes For Crews, therefore, is far from a young company. They’ve withstood their growing pains, and held their own as other companies have come and gone, trying to push them around in the space that they created. Maintaining status for so many years means that Shoes For Crews has garnered a fairly large following of loyal supporters. 

Millions of Loyal Followers

The website continues on to boast about their following. “Since then, we’ve protected millions of workers and lowered workers’ compensation costs for thousands of businesses across the globe. Today, Shoes For Crews is the industry standard and trusted leader in safety footwear solutions for more than 150,000 companies across the world.”

This is a significant success for the company. Working worldwide is no small feat, especially after so many years of existence and thriving. However, as mentioned before, the footwear industry is a fickle beast, and Shoes For Crews has found themselves in hot water that has forced the company to make some challenging decisions. 

Filing for Bankruptcy

Shoes For Crew recently filed voluntary petitions for Chapter 11 relief in the United States Bankruptcy Court for the District of Delaware. The filing includes a plan for a “value-maximizing sale translation that will allow for the continued operation of the business, with the resources to invest in growth across key markets globally.”

The company reported in the filing that it had $100 million in assets, and $500 million to $1 billion in liabilities. This creates a significant financial burden on niche companies such as Shoes For Crews, and economic downturn can lead to financial advisors within companies to suggest such a drastic action as bankruptcy. 

Explaining Reorganization Bankruptcies

Chapter 11 bankruptcies are what are known as a “reorganization” bankruptcy. This usually means that the debtor remains “in possession” of their company or assets, has the powers and duties of a trustee, may continue to operate its business, and may, with court approval, borrow new money to keep the business afloat.

Once the bankruptcy paperwork is filed, a plan of reorganization is then filed with the courts. Creditors whose rights might be affected are allowed to review, and then vote on the plan, and the plan may be confirmed by the court if it gets the required votes and satisfies certain legal requirements. 

A Statement From the CFO

Christopher Sim, the Shoes For Crews Chief Financial Officer, said “a confluence of factors” led to the bankruptcy filing. “They include inflation; a general downturn in retail; a shift away from brick-and-mortar shopping to online buying; and the pandemic, which forced retailers to eat the expense of supporting brick-and-mortar assets,” Retail Dive added.

“Over time, these factors have tightened the Debtors’ liquidity and complicated their vendor relationships, culminating in a liquidity crisis by the fourth quarter of 2023, when the Debtors faced dwindling cash flows and the inability to access even incremental liquidity,” Sim said. 

Securing Additional Financing

Shoes For Crews revealed in the bankruptcy filing that they had already secured the support of its first lien-secured lenders, and that it has entered into an agreement to receive $30 million of debtor-in-possession financing.

According to a press release, that would allow the company to continue its normal operations. “The company intends to enter into a stalking horse asset purchase agreement with its first lien-secured lenders to sell the business and enable the continued operation of the business as a going concern under the new ownership,” the company said. 

Court Supervising the Sale

The “stalking horse” process means that the court will supervise the sale process to make sure that Shoes For Crews gets the “best bids” possible, in order to maximize the value for all stakeholders. The process is expected to take two months.

While this is an unfortunate setback for a company that provides such significant value for its loyal customers, it is hopeful at the same time. Many companies who successfully restructure under bankruptcy are able to come back bigger and better than ever, and if all goes to plan, there’s no reason that the same cannot be true for Shoes For Crews. 

Hopefully a Stepping Stone to a New Beginning

Business is a fickle mistress, and it’s important to remember that what might seem like a dire situation might merely be a small setback. Bankruptcy is by no means the ultimate goal for any business, but it can be a tool in the financial plan just like any other decision.

The hope is that Shoes For Crews will come out on top after their restructuring occurs, and that they’ll continue to provide the same great service to their customers that they always have. It would be a shame for such a solid company to fall to the pages of history, but that’s sometimes just how things go.