Canada: Receiver appointed for Shoes.com

 

British Columbia Supreme Court on February 3 appointed Alvarez & Marsal Canada as the receiver responsible for sorting out Shoes.com’s debts and trying to ensure that the failed online shoe retailer’s creditors get paid.

The company, which officially conducted business as Shoeme Technologies Inc., halted operations on January 27 with no notice to customers.

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The shutdown included the company’s three e-commerce properties – Shoes.com, OnlineShoes.com and Shoeme.ca – as well as its two bricks-and-mortar stores, which are in Vancouver and Toronto.

Deans Knight Capital Management Ltd., which is a creditor, filed a petition on February 2 seeking that Alvarez & Marsal be appointed. The filing also noted that Deans Knight, in 2014, secured $10 million in convertible debentures for Shoeme and that, as of February 2, Shoeme owed Deans Knight $10,098,630.14 plus interest and costs of enforcement.

The parent company of Shoeme, 1006903 B.C. Ltd., and U.S. guarantors, separately owe bank Wells Fargo National Association US$3.8 million, according to the petition.

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The petition did not estimate what Shoeme assets are worth, nor did it attempt to pin a value on the company’s inventory.

To fund the receivership, Alvarez & Marsal is allowed to borrow up to $500,000.

Shoes.com has its roots in CEO Roger Hardy’s acquisition of  Vancouver’s Shoeme.ca and Seattle’s OnlineShoes.com in mid-2014. Bought simultaneously, the companies were run under one umbrella. Hardy financed those acquisitions from money generated by selling Coastal Contacts to French eyewear giant Essilor for $430 million.  He founded Coastal Contacts in 2000 and later took the venture public on Nasdaq.

In December 2014, Hardy bought Shoes.com, which was then the online division of St. Louis-based Brown Shoe Co. (NYSE:BWS).

Hardy then merged all the brands in 2015.

His penchant for acquisitions was also on display when Shoes.com bought socks manufacturer Richer Poorer in late 2015.

Hardy has not returned numerous requests for an interview from Business in Vancouver.

BIV reported on layoffs, lawsuits and delayed bricks-and-mortar store openings at Shoes.com in November.

BIV then reported, on January 15, that recent moves by Walmart to compete with Amazon.com for online shoppers could make life more challenging for mid-sized e-commerce players, such as Shoes.com.

Walmart (NYSE:WMT) announced January 5 that it had shelled out US$70 million to buy Shoebuy.com – a move that many interpreted as a shot across the bow of Amazon.com (Nasdaq:AMZN), which operates the shoe e-commerce division Zappos.com.

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Zappos stopped shipping to Canada in 2011 but has a foothold on a sizable chunk of the U.S. online shoe market.

Walmart would not reveal how much Shoebuy generates in annual revenue, but, in 2013, Internet Retailer magazine estimated its sales to be around US$315 million.

That is likely a similar size to Shoes.com, given that Hardy told BIV in mid-2015 that his company had an annual revenue run rate of $320 million and that he aimed for that rate to rise to $1 billion by 2020.

Shoeme had about 200 employees when it stopped operating. That was down from about 650 staff more than a year ago with many of the eliminated positions coming from the company contracting out warehouse operations, Shoes.com president Bradley Wilson told BIV in November.

 

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