Dive Brief:
- After filing for Chapter 11 on Friday, Nine West said it has a $200 million stalking horse bid from Authentic Brands Group for its intellectual property tied to its namesake Nine West brand and Bandolino brands, according to a court filing. Interim CEO Ralph Schipani said in the filing that the company has sold or removed "substantially all" inventory and vacated 71 of its remaining 72 stores.
- The company has also received $300 million in bankruptcy financing and entered into a restructuring agreement with creditors controlling most of its secured and unsecured debt, Nine West said in a press release Friday. The agreement would give lenders ownership of the reorganized company's equity. Nine West said the deal shows "the support of the company's lenders and their confidence in the go-forward businesses" and also provides "a clear path to emergence from Chapter 11 on an expedited basis."
- The remaining business would include the One Jeanswear, Kasper and Anne Klein apparel brands as well as Nine West's jewelry business, all of which the company said were profitable and growing, according to the release.
Dive Insight:
"Headwinds" is a word you find in the majority, if not most, retail bankruptcy filings these days.
In the case of Nine West — which was founded in the 1970s by Jerome Fisher and Vince Camuto, who had the idea of manufacturing shoes on the cheap overseas and selling them in New York at lower prices — the company made 80% of its sales as a wholesaler.
Unfortunately, Nine West made many of those sales to department stores, including Bon-Ton, Sears and Macy's — one of which is bankrupt, another has been teetering on the edge of financial disaster for years and the other is in relatively healthy shape but still closing stores by the dozens.
In other words, Nine West's wholesale business ran face-first into the retail "headwinds" of a declining department store sector. Meanwhile, Nine West's own stores have been a drag on profitability as well, according to Schipani.
Many a bankrupt retailer over the past year has cited slowdowns in mall traffic and quickening shifts to e-commerce as the source of their financial woes. There is also, however, the simple matter of debt. Nine West went into bankruptcy with about $1.6 billion in debt and had paid more than $150 million in interest on its secured and unsecured debt.
That debt was a legacy of private equity firm Sycamore Partners' leveraged buyout of The Jones Group in 2014, which created Nine West as currently constructed, and also left a ton of debt on the company's books.
Toys R Us is the sad poster child of what a leveraged buyout can do to a retailer. Saddled with some $5 billion in debt from a 2005 buyout by Bain Capital, KKR and Vornado, the toy seller was paying $400 million in annual interest payments by the time it filed for bankruptcy. Meanwhile, the company had also paid more than $100 million in fees and various other payments to its owners over the years, according to unsecured creditors who have been investigating the payments during bankruptcy.
That was all money Toys R Us wasn't using to invest in prices, omnichannel technology or on simple maintenance of its stores. While the company marketed to millennial nostalgia, its competitors thoroughly outperformed the toy retailer. It all culminated in a holiday season so disastrous for Toys R Us that it forced the retailer to wind down its U.S. business.
Some Nine West stakeholders are also scrutinizing the company's buyout and management under a private equity firm. Last week, Reuters reported that some Nine West creditors plan to file claims against Sycamore for the sale of Kurt Geiger and Stuart Weitzman, divestitures that in their view "made Nine West insolvent."
