Shoe seller Rockport files for bankruptcy
- Shoe retailer and wholesaler Rockport Group filed for Chapter 11 bankruptcy protection on Monday with a plan for private equity firm Charlesbank to take over ownership of the company, according to a release.
- As part of the agreement, Charlesbank would acquire Rockport's global wholesale assets, e-commerce platform and retail operations in Asia and Europe. It would also have the option to take over the company's North American retail operation. The retailer would use the bankruptcy process to close stores not picked up by Charlesbank, the company said in the release.
- In the U.S., Rockport currently operates eight full-price and 19 outlet stores, according to a filing from interim Chief Financial Officer Paul Kosturos. It operates another 33 stores in Canada. At the time of filing, the company had $287 million in debt liabilities. Rockport said it has obtained $20 million in new bankruptcy financing from existing lenders to maintain its operations through the court process.
Since its founding in 1971, the comfort footwear brand has changed hands several times. Reebok bought the company in the 1980s. Adidas in turn acquired the brand when it bought out Reebok in 2005. Ten years later, Adidas sold Rockport to New Balance and Berkshire Partners, who, last year, sold it again to the company's noteholders.
Today the company's wholesale business accounts for about 57% of all sales, with a modest retail footprint on the continent. The company competes with other retailers and wholesalers, as well as department stores, e-tailers and brand outlet stores.
In that competitive footwear sector, Rockport accounts for just "a fraction of the total market for men's and women's footwear," Kosturos said. At various times of the year, any of those competitors might offer up footwear at "substantial markdowns, which further intensifies the competitive nature of the industry," he added.
When the company separated from Adidas, it eventually had to unwind itself from the shoe giant's logistics chain network, which Kosturos said "proved to be more complex, took meaningfully longer, and was significantly more expensive than planned." Rockport also experienced its own supply chain disruptions in 2016 as three foreign factories it relied on closed.
This year, a North American logistics provider served Rockport notice of default that "[alleged] that Rockport was in material breach of the expeditor agreement for failure to pay certain charges disputed by Rockport," according to Kosturos. He added that in May Rockport paid the disputed amount "under duress and protest" with provisions for clawback.
All this helped tip Rockport into bankruptcy, as did underperforming stores, which Kosturos attributed — as many execs at bankrupt retailers before him have — to the growth in e-commerce.
Rockport's filing indicates it has a plan to take it through bankruptcy, which puts it on better footing than retailers like Bon-Ton and Toys R Us, which entered the process in free fall and failed to find backers to take them out of bankruptcy. The process for those retailers has not ended well.
Follow Ben Unglesbee on Twitter