Karmaloop Inc., a 15 year-old online retailer specializing in streetwear, action sports and music-inspired clothing for 18-35 year old males, has begun a formal restructuring and set a sales auction process.
The restructuring and new funding provides an opportunity to address existing debt that was incurred to support the launch of four new business divisions and development of television content between 2011 and 2013, according to a statement from Karmaloop. Over time, these ventures proved not to be economically feasible and the debt that remained as a vestige of these past efforts was hindering working capital for the core business. The main property, Karmaloop.com, "has continued to dominate the streetwear space, with more than 500 brands and close to 4 million monthly unique visitors."
The company, subject to court approval, has secured debtor-in-possession "DIP" financing from a lending group led by Comvest Partners to support reorganization efforts and a forthcoming 363 sale process. The Comvest-led lending group has also submitted an offer to convert a portion of its debt to equity to own the business should no higher or better offer emerge through the Section 363 sale process. Karmaloop has retained retail and consumer products investment bank specialist Consensus to assist in marketing the company for sale.
"Comvest is a big believer in Karmaloop and we are excited to partner with management to restructure and grow the business," said Daniel Lee, Managing Director of Comvest Partners. "The Karmaloop team has built a unique, market-leading platform through its 15-year history, and will now be poised to continue building the company without the strain of debt."
Said Karmaloop CEO and Founder Greg Selkoe, "The Karmaloop brand is solid and powerful, we simply have been carrying too much debt from past ancillary business startups that were discontinued. We're excited to be able to restructure Karmaloop to focus on and enhance our core business strategy and continue to execute on our plans for profitability. This restructuring will assist with our strategic move to vendor direct."
Karmaloop's eponymous website will continue full operations during this process, as will the company's wholly-owned European website StreetAmmo, the Company's PLNDR division, its off-price members-only sale section, and its Kazbah division, the company's underground brand marketplace.
Said Consensus's CEO Michael O'Hara, "Karmaloop provides a buyer with the unique opportunity to immediately gain access to an established online platform with real scale that has an unusually passionate customer base. Karmaloop has few if any direct competitors, and its core demographic is increasingly influential and affluent."
Karmaloop filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. The company received an investment of $3 million led by Comvest Partners along with co-lender CapX Partners to support the restructuring.
Founded in 2000, Karmaloop is an authentic and dominant cross-platform lifestyle ecommerce and media site selling hard to find and unique streetwear brands selling footwear, apparel and accessories to 18-35 year old (primarily male) consumers. The target audience is made up of hard to reach and high spending cultural influencers and alpha consumers. Karmaloop receives over 4 million monthly unique visitors, 65% of which are unpaid and organic, and their cost to acquire a customer is an industry low of $10. The Karmaloop rep program consists of 250,000 consumer evangelists driving over 25 percent of sales. The site has millions of fans / followers on social media, popular apps and large opt-in email list. Karmaloop's brand val
