Payless ShoeSource announced late Tuesday that the company has filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Payless joins nine other retailers that have filed for bankruptcy in the first three months of 2017.
In addition to the stores that have filed for bankruptcy, several other major retailers have announced store closures as competition from online retailers and discount merchants has squeezed revenues and profits. J.C. Penney has announced that it will close 138 stores this year; Macy’s is closing 68 stores; Sears is closing 150 Sears and Kmart stores; Abercrombie & Fitch is closing 60 mall stores; GameStop is closing more than 150 stores; and the list goes on.
Payless, which operates approximately 4,400 retail stores in more than 30 countries, said it will close 400 stores and a list of the store closures will be posted at the company’s restructure website at 11:00 a.m. ET Wednesday, April 5.
The company also has reached agreements with certain creditors to reduce its debt load by almost 50%, materially lower its annual cash interest costs, secure “significant additional capital” and map out a path for an expedited emergence from Chapter 11 with a “sustainable capital structure for the future.” Payless has reached agreements with some of its existing lenders for up to $385 million of debtor-in-possession financing.
Payless CEO Paul Jones said:
This is a difficult, but necessary, decision driven by the continued challenges of the retail environment, which will only intensify. … While we have had to make many tough choices, we appreciate the substantial support we have received from our lenders, who share our belief that we have a unique opportunity to enable Payless — the iconic American footwear retailer with one of the best-recognized global brands — to remain the go-to shoe store for customers in America and around the globe.
Retail industry research firm Clark noted that retailers closing stores or filing for bankruptcy are “not giving people what they want in terms of things like price, fashion, and selection”:
The reality is that America has been overstored. We have far too many retail locations, shopping centers and branches of different chains. But stores that are meeting your needs with low prices will continue to thrive.
Payless is owned by private equity firms Golden Gate Capital and Blum Capital and is operated as a subsidiary of Collective Brands Finance Inc.