Toms has donated well north of 60m pairs of shoes to people in need around the world. But make no mistake, the charitable shoemaker is a for-profit company… in theory.
According to Bloomberg, they’re more of a nonprofit on the balance sheet — as in, they aren’t making much cash these days.
In Q4 of last year, Toms booked $91m in revenue, but according to sources close to the company, only $8m of it was profit.
When Wall Street does something nice
Toms Shoes LLC landed a $313m investment from private equity giant Bain Capital back in 2014, giving it a valuation of more than $600m. The 50% partnership was meant to help Toms grow faster and donate shoes more frequently.
Since the buyout, though, the only thing they’ve grown is their debt. Typical struggling retailers average debt loads of 5x to 6x their annual earnings. But Toms has $350m in total debt — close to 15x their annual earnings.
Analysts believe their biggest issue comes down to one thing:
Failure to diversify. Classic.
Since it was founded in 2006, the company has done little to expand beyond their flagship $54 slip-on shoe — which still draws 50% of its business — leaving it vulnerable to imitators ripping them off.
And rip them off they did: Companies like Sketchers flooded the market with knock-off Toms slip-ons for half the price. Now, with no other products to excite consumers, laceless Toms is feeling tied up.