Competing in the footwear space has traditionally been incredibly hard.
That's because in the casual and sneaker space, Nike has dominated so thoroughly. It's a situation where to be a successful shoe company you need a niche.
The challenge of filling a niche is that you're still competing for mindshare and shelf space with much larger players. It's a very competitive market where there have been a lot more British Knights and LA Gears than there have been companies that have made it.
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Skechers and Crocs, for example, managed to stake out territory that was underserved by Nike and other casual footwear players. Both companies had to spend a lot of money to carve out their niche, and it's fair to say that both remain financially vulnerable.
It's a market that has been littered with failures and companies that have invested millions, sometimes hundreds of millions to not make much of a dent. Under Armour (UA) , a challenger to Nike in many areas, has failed to make its mark in sneakers despite a high-profile partnership with Steph Curry,
Breaking into the market presents huge challenges, but it can be equally difficult to stay afloat. A handful of brands, like the aforementioned British Knights, had viral moments, but then quickly fell out of fashion.
That's not exactly what happened with Shoes for Crews, a brand founded in 1984 that found a niche and filled it well. The company, however, has hit a major inflection point where its survival is not assured.
Image source: Pixabay
Shoe company fills a need
Shoes for Crews may not be a name everyone knows, but it has been a strong player that provides much-needed products. The company may not be as high-profile as other footwear makers, but it serves a major need for its customers.
"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," the company shared on its website.
Any company that has operated that long and Shoes for Crews has built a large 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 around the world," the company added.
Shoes for Crews files Chapter 11 bankruptcy
Shoes for Crews 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 transaction 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.
Shoes for Crews Chief Financial Officer Christopher Sim said “a confluence of factors” led to the Chapter 11 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 reported.
“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.
Shoes for Crews shared in its bankruptcy filing that it has the support of its first lien-secured lenders and that it has entered an agreement to receive $30 million of debtor-in-possession financing. That would, according to a press release 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 new ownership," the company shared.
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In the "Stalking Horse" process, the court will supervise the sale process to make sure Shoes for Crews gets the "best bids" possible to maximize value for all stakeholders. The process is expected to take two months.
