NEW YORK—Shoe chain Payless ShoeSource has filed for Chapter 11 bankruptcy protection, becoming the latest retailer to succumb to increasing competition from online rivals like Amazon.
The Topeka, Kansas-based retailer said Tuesday that it will be immediately closing nearly 400 stores as part of the reorganization. It has over 4,400 stores in more than 30 countries and was founded in 1956.
Payless plans to reduce its debt by almost 50 percent, lower how much it pays in interest, and line up funds. The company says some of its lenders have agreed make available up to $385 million to keep the stores running.
“This is a difficult, but necessary, decision driven by the continued challenges of the retail environment, which will only intensify,” said Payless CEO Paul Jones in a statement.
In the press release announcing the Chapter 11 filing, the company said: “We intend to use the Chapter 11 process to implement a comprehensive path forward to meaningfully enhance our growth profile and profitability, positioning us to continue to thrive as a sustainable business in the face of the retail industry’s radical, unprecedented transformation.”
Shoppers are increasingly shifting their buying online or going to discount stores like T.J. Maxx to grab deals on designer brands. That shift has hurt traditional retailers, even low-price outlets like Payless.
In fact, Moody’s Investor Service said earlier this year that the number of “distressed” retailers—those with cash problems and lots of debt that are facing strong competition—is at the highest since 2009. It named Payless as one of them.
The local branch of Payless declined to provide a comment, referring Saipan Tribune to their main office. An email message to the head office generated the following response:
“On April 4, 2017, Payless’ North American entities, as well as two foreign Hong Kong-based entities involved in logistics (CBL) and supply chain (DAL), filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the Eastern District of Missouri to facilitate the financial and operational restructuring necessary to strengthen its balance sheet and position the company for long-term success. Payless is also filing for recognition of the U.S. Chapter 11 proceedings under Part IV of the Companies’ Creditors Arrangement Act in the Ontario Superior Court of Justice.
“Payless will continue to operate its business in the ordinary course in terms of its customers, vendors, partners and associates and, subject to Court approval, expects to continue:
• Providing associate wages, healthcare coverage, and other benefits without interruption;
• Honoring pre-petition obligations to customers, including all gift cards with Payless stores and Payless.com; and
• Paying vendors and suppliers in the ordinary course for all authorized goods and services provided on or after the date of the Chapter 11 filing.”
Several retailers have closed stores or gone out of business in 2017. The Limited closed all 250 of its remaining stores early this year. It had operated nearly 400 stores at the end of 2000. Teen retailer Wet Seal in January said it would close its 171 stores. (CBS/AP/With Saipan Tribune)