Shoe Queen Tamara Mellon Puts Luxury Line in Bankruptcy

Footwear luminary Tamara Mellon, who co-founded the Jimmy Choo designer shoe label, has put her namesake brand into bankruptcy.

Bankruptcy lawyers Wednesday laid out a survival plan that would give the company, which sells Italian-made shoes and other luxury items at cheaper prices than the typical high-end retailer, access to $12 million early next year. Out of chapter 11, the new brand would focus on online sales. Tamara Mellon-brand items are now sold at small boutiques and high-end department stores like Neiman Marcus, Saks Fifth Avenue and Nordstrom, according to its website.

Ms. Mellon, once called the “first lady of footwear, founded the company in November 2013. Company officials use a supply chain model that enables them to respond to trends quickly thanks to shorter manufacturing times and to “deliver its products direct to customers without the manacles of the traditional, rigid fashion calendar,” according to documents filed in U.S. Bankruptcy Court in Wilmington, Del.

Under the new model, a shoe with a luxury fashion label that costs more than $800 would be priced closer to $450, court papers said. The vision was described in bankruptcy-court papers:

Whereas traditional fashion labels release their collections months in advance of the wearing season (for example, showing fall runway collections in the spring), [the company] targets a “shop now, wear now” model where new collections debut in the season they are meant to be worn. This season-relevant approach reduces the risk associated with the vagaries of forecasting fickle fashion trends months before they happen-reducing the potential for obsolete or unwanted inventory, and cutting the amount of items that need to be sold off price.

But company officials realized a year into the business that they needed more money to “work through its initial seasons” to eventually profit. Finding that money was a struggle, court papers said.

The company owes more than $4 million to investors and Ms. Mellon.

“We will use this brief period of reorganization so we can position ourselves to take advantage of our new growth strategy and ensure the long term vibrancy of our brand,” Ms. Mellon said in a statement.

The bankruptcy is designed to give the retailer access to $12 million from investors, both new and old. Of that amount, $10 million will come from an affiliate of New Enterprise Associates, one of the venture capital industry’s leading fundraisers.

In exchange, the New Enterprise Associates affiliate will get more than 30% of the company’s shares. Ms. Mellon will remain a shareholder, controlling more than 10% of shares while getting options and warrants on top of that, court papers said.

The plan’s fine print makes it clear that company lawyers will have the power to sue J. Choo USA Inc. after the bankruptcy concludes. Court papers didn’t say why the company would sue Ms. Mellon’s ex-employer, but since her departure in 2011 with a reported payout of $135 million, she hasn’t been shy about sharing her frustrations about her old job.

In 2013, Ms. Mellon called Mr. Choo “a cobbler” on the Today show, taking the credit for designing shoes that symbolized trendiness and indulgence on Sex and the City.

Earlier this year, a letter surfaced that accused her former employer of telling luxury shoemakers in Florence, Italy, not to work with Ms. Mellon.  A representative for Choo told a Page Six reporter that the complaint “has no merit and will be vigorously contested.”

Write to Katy Stech at [email protected]. Follow her on Twitter at @KatyStech