Thompson Law Group, P.C.

Luxury retailer enters bankruptcy to adjust its marketing plan

Even luxury product manufacturers have a right to attempt reorganization in a business bankruptcy. The current example is the filing of a Chapter 11 bankruptcy by the Tamara Mellon brand of luxury shoe products. Although filed in a neighboring state, the action will impact the brand that is sold in Pennsylvania as well as nationally.

Currently, the company has been selling its high-end shoe in boutique stores and in some of the big luxury retailers, such as Saks and Nordstrom.  Started in 2013, the filing tries to explain that the company may have started off with not enough capital to support its marketing model. After emerging from the bankruptcy, its model will change emphasis to online sales. In court papers, the company explained its philosophy of bringing luxury shoes to buyers for significantly reduced prices.

The company says that it focuses on bringing fashion lines to market during the time when they are emerging rather than two seasons earlier. The company has a survival plan to raise $12 million from investors, including the bulk of it from New Enterprise Associates, a venture capital leading fundraiser. The plan is to give investors a 30 percent portion of the shares. Ms. Mellon will retain 10 percent and will receive other benefits and options.

The product's namesake issued a statement saying that the "brief" reorganization period will give a chance for the company to take advantage of its new growth strategy and to assure long term vibrancy to the brand. Indeed, the plan exemplifies how a company with promise can get a "breathing spell" through bankruptcy reorganization, and emerge from it stronger and more focused on a solid marketing plan. This same process is open to businesses in Pennsylvania and throughout the country, but each case must be tailored to the specific circumstances and needs of the company that is filing.

Source: The Wall Street Journal, "Shoe Queen Tamara Mellon Puts Luxury Line in Bankruptcy", Katy Stech, Dec. 3, 2015

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