Nike, Puma and Adidas Among Bankrupt Shoe City Creditors
Click here to read the full article.
Sneaker and lifestyle retailer Shoe City is shutting down after 74 years in operation.
The retailer’s parent ESCO, Ltd. filed a Chapter 11 petition in a Maryland bankruptcy court in Baltimore on March 31. ESCO does business under the trade names Shoe City and YCMC, the acronym for Your City, My City.
All 39 store locations across Maryland, Virginia and Washington, D.C. are conducting going-out-of-business sales under the oversight of Gordon Brothers. The liquidator is starting price reductions at up to 30 percent off on athletic footwear and apparel, including new merchandise from sought-after brands.
The store leases are also up for sale, with the doors ranging from 2,000 to 9,000 square feet across street front, regional mall and strip center locations. In addition, the YCMC operation, including its online site YCMC.com, will cease operations by May 31, according to court documents.
“These leases offer a fantastic opportunity for retailers looking to expand their footprint,” James Avallone, senior managing director, real estate at Gordon Brothers, said. “The stores offer high-traffic locations with attractive co-tenancy and favorable lease terms with options.”
While sneakers were the must-have item during the COVID pandemic, the post-lockdown trend has shifted to shoes as consumers began heading outdoors and attending social events again.
In a court document filed by Stanley W. Mastil, ESCO’s chief restructuring officer, the company began operations in 1949 as Eileen Shores and rebranded as Shoe City in 1980. “Today, the company is an urban-inspired footwear, apparel, and accessories retailer offering men’s, women’s, and children’s products from consumer brands such as Nike, Adidas, and Puma,” he said.
Mastil said that over the last several years, the chain suffered declines in sales and increasing losses. During fiscal year 2020 and 2021, it posted operating losses of $280,00 and $1.76 million, respectively. He noted that in May 2022, The Athlete’s Foot parent Arklyz Group inked a deal to acquire the chain, but never closed on the transaction. He also noted that beginning in 2020, certain key vendors began changing the allocation of goods and ESCO “failed to receive certain high-end goods and new sneaker releases at the levels from previous years that are critical to this industry.” Mastil further noted that in Fiscal Year 2022, comparable-store sales fell by $8.5 million from the prior year,” and in the current fiscal year, “sales continued to decrease by almost $5 million through January 2023,” which impacted ESCO’s liquidity and efforts to improve its cash position.
About 161 full-time employees and 233 part-time staffers will be impacted by the shut down of operations.
The Chapter 11 petition listed estimated assets and liabilities each in the range of $10 million to $50 million. The company has a pre-petition credit facility in which it owes $3.2 million.
The company has about $16 million of outstanding unsecured debt, mostly owed to trade vendors. Of its 20 largest unsecured creditors, New Balance Athletic Shoe in Boston, Mass., heads the list with an unsecured claim of $1.6 million. Other trade vendors on the list include: Timberland, VF Corp, Stratham, N.H, $1.4 million; Puma North America Inc., Somerville, Mass., $1.4 million; Nike USA Inc., Beaverton, Ore., $664,023; Under Armour Inc., Baltimore, Md., $622,897; New Era Cap LLC, Buffalo, N.Y., $470,656; Adidas America Inc., Portland, Ore., $360,630; Fila USA Inc., Sparks, Md., $199,897; Asics America Corp., Irvine, Calif., $137,351, and Reebok Int’l Ltd., Boston, Mass., $134,457.
Unsecured lenders include Funding Circle USA, Denver, Colo., for $1.4 million on a PPP loan, and The CIT/Commercial Services, N.Y., N.Y., for $289,518 for factored payables.
