The Shake-Ups
Tariffs took center stage, while athletic firms' culture issues were in the spotlight
From female Nike staffers circulating an internal survey in hopes of boosting gender equity to major brands pulling the Chapter 11 trigger, 2018 marked a year of tough but meaningful change across the shoe industry. ➵ As digital integration became the new normal and earnings reports evidenced that previously challenged traditional retailers — Macy’s, DSW and Kohl’s among them — had found their omnichannel stride, footwear’s key players endured disruption of a new variety. ➵ The downfall of mega big-screen producer Harvey Weinstein in late 2017 created a watershed moment for Hollywood that would, in effect, give birth to #MeToo as well as the Time’s Up initiative. As expected, the domino effect would hit a range of industries in 2018. ➵ In March, the movement — which emboldened women to speak out about instances of inequity, harassment and mistreatment at work — took aim at footwear’s athletic sector.
Nike, Under Armour and Adidas Grapple With Cultural Challenges
Three months into 2018, news circulated that two of Nike’s most powerful executives had abruptly departed the brand. As speculation built across the industry, an April exposé by The New York Times purported internal behavior challenges at the company, including a “boys club” culture that left female employees feeling disenfranchised. (The revelations reportedly followed the circulation of a survey among those women, who then routed the feedback to CEO Mark Parker.)
All in all, the controversy would see about a dozen high-profile executive departures at the Swoosh, which employs around 70,000 staffers. For its part, Nike admitted that it had fallen short in promoting women and people of color, and in July, it announced a plan to raise salaries for 10 percent of its workforce to help correct pay inequity. (Nike also won acclaim when it casted polarizing ex-football player Colin Kaepernick — who took a knee during the national anthem at games to protest racial injustice — in its “Just Do It” campaign in September. See page 18 for more.) Still, at least two lawsuits and one complaint alleging race and gender discrimination with Oregon’s Bureau of Labor and Industries would result from the executive departures fallout.
In November, following a report in The Wall Street Journal that made known a yearslong practice of expensing visits to strip clubs on corporate cards, Under Armour had its turn under the #MeToo microscope.
In a letter obtained by FN, CEO Kevin Plank and president Patrik Frisk told employees that the WSJ report — which also alleged that top male executives behaved inappropriately with female subordinates and that women were invited to an
annual corporate event “based on their attractiveness to appeal to male guests” — was “tough to read.” Plank further pledged that the company “can and will do better.”
That same month, FN obtained a copy of a letter addressed to Adidas North America president Zion Armstrong.
The memo, purporting to represent the views of minorities at the company, urged the new leader to “diversify representation” in the firm’s upper ranks, alleging racial and ethnic tensions at the Germany-based brand. Speaking to FN, several minority employees at the firm cited what they see as cultural challenges at the company, which had previously faced criticism for maintaining its partnership with Kanye West after he made controversial comments about slavery.
In response to the accusations about its treatment of minority employees, Adidas told FN in a statement that it is “committed to maintaining a respectful and inclusive environment for all Adidas employees around the world. It’s crucial that we have and support a diverse workforce that represents a variety of ideas, strengths, interests and cultural backgrounds.”
Tariff Tales
A global back and forth — initiated by President Donald Trump in March — has seen the U.S. slap tariffs on $250 billion in Chinese imports this year, while Beijing retaliated with levies on $110 billion of American goods. Although a 90-day financial ceasefire was announced this month — following a meeting between Trump and Chinese President Xi Jinping — it has not done much to quell the anxieties of retailers, who have said they’re waiting for the next shoe to drop.
PVH chairman and CEO Manny Chirico, for example, warned in November that the global clothing business — parent to Tommy Hilfiger and Calvin Klein — would have to raise prices to make up for the mounting tariffs. Meanwhile, retail behemoth Walmart and department store chain J.C. Penney expressed their concerns in letters addressed to U.S. Trade Representative Robert Lighthizer in September. “Either consumers will
“Either consumers will pay more, suppliers will receive less ... or consumers will buy fewer products or forgo purchases altogether.”
pay more, suppliers will receive less, retail margins will be lower or consumers will buy fewer products or forgo purchases altogether,” Walmart’s memo read.
Gap, Columbia Sportswear, Vans and Steve Madden have also indicated a need to drive up costs due to tariffs — with the latter even looking to shift production to Cambodia.
The stock market has also borne the pressures of mounting trade war fears: The Dow, Nasdaq and S&P 500 reversed their 2018 gains in recent months as Trump fired off tweets referring to himself as “Tariff Man.”
Bankruptcies Rage On
In previous years, footwear companies — save Payless Shoesource in 2017 — were largely spared from the wave of Chapter 11 filings. But 2018 was the year the shoe industry joined the fray, with Charlotte Olympia, The Walking Co., Nine West Holdings Inc. and The Rockport Group among the companies to seek bankruptcy court protection.
In February, a decade after British designer Charlotte Dellal launched her whimsical footwear label Charlotte Olympia, the company’s U.S. holding arm, Pinktoe Tarantula Ltd., filed a Chapter 11 petition in Delaware. Still, a spokesperson for the brand later told FN that despite shuttering its retail stores in the U.S., Charlotte Olympia’s wholesale business remains intact.
Following months of speculation over its financial struggles resulting from a debt-laden private equity buyout, Nine West Holdings Inc. in April filed for protection. Two months later, it sold off the Nine West and Bandolino brands to Authentic Brands Group for $340 million at a bankruptcy auction.
In March, comfort footwear maker The Walking Co. took its financial woes to bankruptcy court for the second time in 10 years, citing the company’s struggle to develop its brand between 2013 and 2017 amid the consumer shift to online spending.
Rockport, home to the Aravon, Dunham, Rockport and Cobb Hill collections, filed for bankruptcy in May, blaming — among other things — a timely and costly separation from previous owner Adidas. When it filed, the firm noted that it entered into an asset purchase agreement with CB Marathon Opco LLC, an affiliate of Charlesbank Capital Partners LLC, to acquire virtually all of its assets.
On the retail side, Sears Holdings Corp. — owner of the Kmart and Sears chains — and BonTon Stores Inc. also submitted bankruptcy court declarations in 2018.