Dive Brief:
- For the second time in five years, shoe company Rockport Group filed for Chapter 11 bankruptcy on Wednesday. Despite generating over $203 million in revenue in 2022, the company was “left with an inadequate liquidity cushion to survive further economic challenges,” according to court documents.
- Rockport claims liabilities and assets of $50 million to $100 million and says it owes its top five creditors– all vendors or suppliers — nearly $47 million, according to the bankruptcy petition filed in federal court in Delaware. The company also reports that it has nearly $100 million in funded debt obligations; about $61 million of that is due in August.
- In May, the company notified state officials that it may close its Massachusetts headquarters by July. That move could eliminate about 150 jobs, The Boston Globe reported.
Dive Insight:
Rockport is best known for its rubber-soled casual shoes. The company claims it was the first to introduce that type of design to the market in an era when other shoemakers still exclusively focused on leather-soled shoes. It also sells sneakers, boat shoes and sandals.
The company’s 50-plus-year history began in 1971 in Massachusetts when father and son Saul and Bruce Katz founded the company. Saul Katz had served as president of New Hampshire-based Hubbard Shoe Co. until that company closed in the late 1960s.
In 1986, the Katz’s sold Rockport to Reebok for $118 million. Rockport remained part of Reebok for over 30 years. It later became an independently operated subsidiary of Adidas. That company, in turn, sold Rockport to a joint venture of Berkshire Hathaway and New Balance in 2015.
But the separation from Adidas was costly and caused the business to lose its financial footing. In 2017, the joint venture gave its interest in Rockport to a group of secured lenders. After the 2018 bankruptcy sale, Rockport restructured itself by expanding its casual product offerings, trying to attract younger customers and simplifying its business model. The court closed that case in 2020.
Part of that restructuring included closing all Rockport retail stores in the U.S. and shifting to a more e-commerce-based model of retail. The company also worked to build its e-commerce wholesale channels.
Despite those efforts, Rockport’s business still struggled with high overhead costs and weakened demand for its core products due to the COVID-19 pandemic. In 2020, the company said its revenue fell to $162 million from $275 million in 2019.
Rockport’s financial situation reached a critical moment about a year ago. Last spring, the company significantly increased its inventory purchases for the fall and winter seasons anticipating a back-to-work increase in sales.
“Unfortunately, that sales bump never materialized. Instead, in response to inflationary pressures and weakening economic conditions, the Debtors’ wholesale customers and distributors canceled or materially cut back on orders, leaving Rockport holding significant excess inventory,” Joseph Marchese, chief restructuring officer of CB Marathon Midco, Rockport’s parent company, said in a court filing.
“This, combined with supply chain challenges and higher interest rates, has made it increasingly difficult for the Debtors to service their funded debt obligations and satisfy trade payables in a sustainable manner,” Marchese said.
The company defaulted on some of its borrowings and later entered into a forbearance agreement, which it also defaulted. In May, Rockport signed a non-binding letter of intent to sell some of its assets. The company and its counterparty remain in negotiations to enter a stalking horse asset purchase agreement.
Rockport said it plans to continue operations during the Chapter 11 proceedings. The company operates internationally and says it has 30 distributor partners in over 60 countries with more than 1,100 points of sale. Its inventory is sourced from manufacturers in China, India, Bangladesh, Vietnam, and Brazil. Together, those partners manufactured over 4.8 million pairs of shoes in 2022, the company said.
