Nine West slashes Philly presence, edging closer to bankruptcy

With bankruptcy looming, shoe maven Nine West's footprint in the Philadelphia region is quickly disappearing.

Last Friday was the final day of business for the Nine West Outlet at the mall inside Sands Casino Resort Bethlehem. It offered discounts throughout the store of up to 70 percent and shut for good after 10 p.m.

"We were told a few weeks ago that we were closing," said a sales clerk who asked not to be identified. "That's all we were told."

The Nine West at the Shops at Liberty Place in Center City closed last fall and has since sat dark, while the retailer's space at Gloucester Premium Outlets in Blackwood, N.J., closed in December. Two weeks ago, the Nine West at Philadelphia Mills Mall in the Northeast boarded up. All that remained this weekend was inventory packed up behind a gated storefront.

King of Prussia Mall's Nine West closed more than six years ago.

Within a 60-mile radius, a Nine West Outlets still exists at Philadelphia Premium Outlets in Limerick and at Tanger Outlets – the Walk in Atlantic City.

Reports last week in trade journals, such as Chain Store Age, predicted that the brand known for women's shoes and accessories — along with  jeans, jewelry, and handbags that it sells to department stores and in its own locations — will be filing for bankruptcy before a March 15 loan payment comes due.

Wall Street retail analysts say Nine West Holdings Inc. is choking on debt, has been stung by recent fashion misfires, and is struggling against online competition and other footwear rivals. It has been closing stores because of declining sales and traffic in department stores, its main strength and biggest vulnerability. Several chains, such as Macy's and Sears where Nine West items are sold, continue to close hundreds of stores.

A representative for Nine West and its private equity owner Sycamore Partners L.L.C. out of New York declined comment on the predicted Chapter 11 filing.

Those tracking the brand say its executives are finalizing a plan to restructure about $1.5 billion of debt that will include selling assets, closing more stores, and unloading brands to pay off creditors. It sold off the Easy Spirit brand last year.

Nine West, led by interim chief executive officer Ralph Schipani, is one of the most leveraged chains in the industry, with debt exceeding 19 times adjusted earnings, according to Moody's Investors Service.

Moody's called the retailer's trajectory "unsustainable and its probability of default … is very high over the near term."

Moody's also cited "the company's high exposure to the challenged moderate-price department store sector, which we believe will make revenue growth difficult."

Nine West shoe competitors include Aldo and Steve Madden, but it is increasingly facing heat from such value fast fashion brands as H&M and Forever 21, which also sell shoes, clothing, and accessories.

Struggles for the 40-year-old Nine West brand, named for its original Manhattan address, resulted in its purchase by Sycamore as part of its $2.2 billion acquisition in 2014 of Jones Group Inc., once owned by legendary retailer Sidney Kimmel. Sycamore is known for going after distressed properties with the mission of making them profitable again, usually through deep cost cutting.

Since 2011, Sycamore has snapped up struggling retailers such as Staples, the Belk department-store chain, and Talbots. Last year it acquired the women's clothier the Limited when it filed for bankruptcy.

Sycamore last fall relaunched the Limited as strictly an online retailer. While Nine West has an aggressive online business, it  still maintains a strong department-store presence, which would make going online-only unlikely, said Moody's apparel analyst Mike Zuccaro.

Since taking on so much debt in Sycamore's 2014 leverage buyout, Nine West has had "weak operating performance with all channels  – including the concentrated department stores, footwear, etc. — some fashion misses where in certain instances, products did not resonate well with consumers, and general weak traffic in department stores has been the trend," he said.

"Sycamore is looking to cut costs by restructuring and culling certain brands which caused declines in sales for several years," he said.

Revenue for the 12-month period leading to September 2017 was $1.4 billion, down from $1.6 billion from the previous year. Revenue reached $1.8 billion in 2015.

Since privately held Sycamore took over, Nine West no longer trades on the New York stock exchange. But its bonds were trading at a record low last week.

"But it still has meaningful scale in the wholesale business," Zuccaro said. "They still have a strong presence in department stores, which is the bulk of their sales."