The comfort shoe store filed for bankruptcy protection in Wilmington, Delaware on Tuesday along with its Big Dog USA and FootSmart subsidiaries. Prior to filing, the company had already secured a $10 million equity investment and $50 million in financing to keep the doors of its 208 locations open during the process and allow the chain to exit as a stronger company from an investor group led by Richard Kayne of Kayne Anderson Capital Advisors, LP and including TWC CEO Andrew Feshbach.
According to the court documents, the shareholders are anxious to move into and out of bankruptcy as swiftly as possible, ideally in no more than 90 days. Once TWC emerges from bankruptcy, ownership of the company shares would be split between Feshbach (17 percent), Richard Kayne (33 percent) and Fred Kayne (50 percent).
The plan falls through however if the chain can’t negotiate “substantial” rent reductions from its landlords, bringing them in line with market rents. Those talks, which began in February, are ongoing. The retailer has filed a motion to secure approval from the courts to reject give leases in three states.
While shopping center owners had been more willing to negotiate lease terms during the height of the so called “retail apocalypse,” some have started to push back. Most notably, Simon Properties filed suit in an attempt to stop Starbucks’ Teavana chain from closing all doors. Ultimately Simon and Starbucks settled and the dispute stands as an example of an A mall owner that has more options and therefore less reason to negotiate with current tenants.
Ultimately, TWC said it succumbed to the same challenges that have felled other mall-based retailers, namely online competition and slowing consumer traffic. Despite efforts to bolster its online sales and launch private labels like ABEO, those issues left the company vulnerable. By the time Deckers Outdoor, which makes UGG, pulled the brand from TWC in late 2016 the result was a loss in sales that the retailer was never able to replace.
“This recap is the final step in transforming The Walking Company into a more vertically integrated, omni-channel retailer that can not only survive but thrive in the current retail environment,” Feshbach said in a statement. “The Walking Company has been very successful in developing its ABEO brand, which we have integrated with the sale of other leading comfort footwear brands from around the world. We also have made great progress in integrating our mall-based chain with our other channels of distribution, including internet, wholesale sales to independent comfort shoe retailers, and international expansion.”
This is the second Chapter 11 filing for The Walking Company. The first came in late 2009 after an unsuccessful attempt to secure lower rents after suffering from plummeting foot traffic brought on by overexpansion and exacerbated by the Great Recession.