Privately held sneaker seller Shiekh Shoes is searching for financing to avoid bankruptcy, Reuters reports.
The Ontario, California-based chain, catering to "sneakerheads" and street styles, has 79 locations in California, five in Nevada, 11 in Arizona, 11 in Texas, two in New Mexico, one in Oregon, six in Illinois, eight in Michigan and five in Washington, according to the company's website.
Last year the company bought Boston-based hip-hop apparel e-retailer Karmaloop, which drew interest from Kanye West during its bankruptcy auction in 2015, but was ultimately purchased by Comvest Partners and CapX Partners, which were the sole bidders.
The retailer is in talks with four or five banks about garnering funding to avoid filing for bankruptcy, owner Shiekh Ellahi told Reuters. The company isn't in default with any creditors or landlords but it is struggling. It's a tough place to be in with the holidays approaching, when inventory levels must be optimal to meet rising demand.
The company's purchase of Karmaloop last year was decidedly on brand, and brought the brick-and-mortar retailer an established online channel. Karmaloop was a struggling enterprise from the get-go, however, and made many of its sales by heaping massive discounts onto its merchandise.
Shiekh Shoes has also invested in its stores, remodeling 61 in the last three years with more planned, under pressure from suppliers to feature items in more upscale environments, according to Reuters' report. Ellahi also said he's working to renegotiate rents outside of bankruptcy, a good possibility considering that malls are swiftly losing tenants, including anchors like Macy's, Sears and J.C. Penney that are leaving gaping holes in their footprints.
Mall property values are also shrinking in many areas of the U.S. From January to November 2016, 314 loans secured by retail property — totaling about $3.5 billion — were liquidated for a loss of $1.68 billion, a rise of 11% from the same period in 2015, according to data from Morningstar Credit Ratings. Mall landlords are increasingly amenable to re-negotiations of their leases, Debtwire associate editor Reshmi Basu told Retail Dive earlier this year.
Some malls have gone so far as to salvage a retailer from liquidation themselves. Teen apparel retailer Aeropostale last year was acquired for $243.3 million by a consortium of entities led by landlords Simon Property Group and General Growth Properties, and in the process rents were slashed at 171 Aeropostale stores, saving some 5,300 jobs.