The Marty Parrot Takes A Dive

Another Steve and Barry-esque Chapter 11. Signing long term rents at the top of a margin cycle is a bad idea.

Here’s a good early morning call out from FirstRain… Marty Shoes, Inc, filed for Bankruptcy late yesterday. Yet another sign indication of the number of marginally profitable retailers out there who have locked in properties in high-rent districts (NYC, in this case) at the top of the margin cycle who will feel the pain as sales roll, supply chain margin opportunity goes away, and cannot flex property terms to prevent negative leverage in their respective operating models.

This one is a close comp to Steve and Barry’s, as athletic footwear is a large part of its mix. Marty’s operates 47 stores in the Northeast.

Not a shocker…but one of the top 10 creditors is Skechers, in yet another sign of how the brand is increasingly showing up in marginal channels. The $172,934 in exposure accounts for about 20bps in margin to SKX. New Balance and Asics also have meaningful exposure. Nike and Adidas have marginal exposure.

Some will argue that this is good for DSW given overlap. I don’t buy it. Aside from not enough overlap, there will be stepped up clearance activity. Also, this highlights the challenges to this model – which DSW shares.