With Restructuring, Toms Shoes Suffers Fate Common to Mall-Based Retailers
Summary
Toms Shoes was saddled with a roughly $300 million loan due in 2020, according to credit rating agency Moody’s Investors Service. That debt was acquired when founder Blake Mycoskie sold half of his business to private equity firm Bain Capital in 2014, a transaction that reportedly valued the company at $625 million. The company’s philanthropic approach, which was also the centerpiece of its marketing and tied to founder Mycoskie’s personal history, ultimately propelled it to rapid growth. Crucially, the philanthropic efforts that provided most of the company’s marketing and differentiated it from competitors invited imitation, diluting Toms Shoes’ appeal. Leverage at Toms Shoes grew to 10 times Ebitda (earnings before interest, taxes, depreciation and amortization) as of the second quarter of 2019, according to Moody’s, while revenue for the 12 months ended June 30 declined to $299 million.