BOULDER – GoLite co-founder Demetri Coupounas said he’s still trying to raise capital to keep his company going even as a federal bankruptcy judge in Denver on Thursday approved the outdoor apparel retailer’s motion to begin liquidating assets.
Boulder-based Coupounas LLC, which does business as GoLite, filed for Chapter 11 bankruptcy protection on Oct. 13 to try and reorganize amid what Coupounas said this week was an over-ambitious retail store model and too rapid of an expansion into casual apparel. On Oct. 24, the company filed an emergency motion to hold the going out of business sale, noting that apparel retailer Timberland had terminated its license for the GoLite name and that the company would no longer be able to sell products under the brand after March 31.
But Coupounas said in a phone interview that he’s hopeful he can find investors in time to keep operating once the liquidation sale is completed, or, or that he can resurrect the company at a later date.
“I’m trying to raise capital for going concern still,” Coupounas said.
Under Thursday’s ruling, court documents show that Hilco Merchant Resources will act as GoLite’s agent in conducting liquidation sales at the company’s six stores in Colorado and its distribution center in Gunbarrel. Hilco will pay GoLite a guaranteed payment of 65 percent of the cost value of the merchandise being sold, an amount estimated to be between $780,000 and $877,500. Hilco will also cover expenses of the sale and receive a 6 percent sales commission. Included in the sale will be fixtures, furniture and equipment.
The proceeds would help GoLite pay off its single secured lender, GemCap Lending I LLC, which is owed more than $816,000.
As part of Thursday’s court order, Timberland owner VF Corp. has five days to object to the liquidation sale. However, Timberland spokeswoman Leslie Grundy said her company has no plans to block the sale.
The relationship with Timberland has been rocky for years, Coupounas said. His company sold the GoLite brand name to Timberland in 2006 with the intention that Timberland would help sell and market GoLite footwear. Coupounas LLC would license the brand back in perpetuity for apparel and other products. The idea, Coupounas said, is that his company would also be able to leverage Timberland’s sales and distribution networks around the globe.
But Timberland sold the footwear license to New England Footwear in 2008. It was also around that time that Coupounas said Timberland stopped working with his company as it related to the sales synergies.
“It wasn’t the deal we signed up for at all,” Coupounas said.
Coupounas did not blame the bankruptcy filing on Timberland’s action then, but said that it did lead eventually to GoLite changing its model to focus on selling at its own retail stores.
“If that first strategy had been successfully executed on, we would never have gone to retail stores,” Coupounas said. “But there’s been many twists and turns since then.”
In an email, Grundy said she couldn’t provide many insights into the licensing agreement due to confidentiality issues. But in terms of history between the two companies, she wrote, “Over time, we have made numerous efforts to work with Mr. Coupounas to arrive at a mutually beneficial resolution. We believe we have been more than fair. At the same time, VF Corporation is a publicly traded company with a fiduciary responsibility to maximize value for our shareholders. That includes any strategic decisions related to the GoLite trademark portfolio.”
Earlier this year, Timberland – shown in court documents as a creditor owed $15,600 – terminated the licensing agreement with Coupounas LLC, a move Demetri Coupounas said his company “has the right to object to, and that’s all I’m going to say about that.”
Founded in 1998 by Coupounas, his wife Kim and his father, GoLite’s original model was to sell its gear through third-party retailers. The company became noted for its technical gear like jackets, backpacks, tents and sleeping bags.
But in 2012, the company shifted focus, zeroing in on online sales and aggressively opening retail stores across the West. GoLite reached a high of 20 stores before closing many of those over the past year to get to the current six in Boulder, Fort Collins, Denver, Durango, Lakewood and Silverthorne.
According to court documents, GoLite pulled in $14.4 million in revenue in 2012 and $17.7 million in 2013. As of Sept. 30, the company had $8.8 million in sales this year with the holiday season still to come. But costs had become too much to cover. Court filings show that the company owes nearly $5.8 million in unsecured claims to a broad list of creditors that ranges from suppliers to landlords and others.
Coupounas said the retail store model worked but that his company had made mistakes, including leasing stores that were too large. At some of their former locations, he said the same sales could have been achieved in spaces one-third the size. If he can keep the company going, he said the model would be to use smaller stores like the ones in Denver and Fort Collins.
The other misstep, he said, was expanding too rapidly into casual apparel like sweaters and corduroys, products that the company’s client base wasn’t ready for despite the popularity of its technical gear.
A company spokesman said last month that GoLite has about 50 employees, including 30 between its Gunbarrel headquarters and Pearl Street store in Boulder.
“If we hadn’t made those two mistakes, it would have gone smoothly,” Coupounas said.
Thursday’s court filing shows that the liquidation sale is to last only until Dec. 31, and Coupounas said he’s doing everything he can to have a new deal in place by then so he can keep operating without interruption.
He said it could also be resurrected at a later date if investors can be found, but uncertainty around the GoLite trademark has made it difficult to find new backers.
Court documents filed in the bankruptcy show that the company’s management and advisors early this year performed an analysis of GoLite’s operations and financial performance to identify potential capital sources or seek a sale of the company.
In March, investment summaries were sent to 60 potential institutional investors. Seven engaged in due diligence, court documents show, but GoLite received no bids by the initial April 30 deadline. From April 1 to Aug. 31, 40 additional potential investors were identified, including some strategic partners like existing retail apparel companies. But of the 10 non-disclosure agreements signed from that group, nothing came to fruition. Direct discussions with one potential investor fell apart in July.
Not long after, court documents show, the company “realized that pursuit of a new capital infusion needed to be coupled with a potential sale of the company as a going concern or a liquidation sale of the debtor’s asset.”
GoLite filed for bankruptcy in October to help complete that process and also, court documents note, because the company “needed the protection of the automatic stay because its bank accounts were about to be garnished by a judgment creditor.” The company is facing lawsuits in Colorado and Oregon from landlords and other creditors.