Footstar Files for Bankruptcy

Kmart's Chapter 11 reorganization only adds to the footwear retailer's accounting woes.
Stephen TaubMarch 5, 2004

Shoe retailer Footstar Inc., currently embroiled in an accounting scandal, announced that it had filed for Chapter 11 bankruptcy protection.

The company, which is being investigated by the Securities and Exchange Commission, said it had nearly completed work to restate earnings for fiscal years 1997 through 2002 and was continuing to work with accounting firm KPMG.

The company also announced that it had secured $300 million in debtor-in-possession financing from a group led by Fleet National Bank and GECC Capital Markets Group, pending bankruptcy court approval.

Footstar, based in West Nyack, New York, operates stores under the Footaction and Just For Feet names. According to Reuters, the company also operates about 2,500 footwear sections in Kmart and Wal-Mart stores under the Thom McAn brand.

In addition to its accounting problems, Footstar has been hurt by the closing of about 600 Kmart stores as part of the giant retailer’s own Chapter 11 reorganization, according to the Associated Press.