Payless ShoeSource closing remaining U.S. stores in bankruptcy

by Ike Obudulu Posted on February 15th, 2019

U.S. discount retailer Payless ShoeSource Inc plans to close all of its approximately 2,300 stores when it files for bankruptcy later this month for the second time in as many years, people familiar with the matter said on Thursday.

The move would make Payless one of the most high-profile victims of the string of bankruptcies that have hit the brick-and-mortar retail sector as more shopping is done online. Toys “R” Us and The Bon-Ton Stores are among the retailers that shut their stores in liquidations in the last 12 months.

Payless had been trying unsuccessfully to find a buyer. After no such deal could be clinched, the Topeka, Kansas-based company has decided to initiate preparations to liquidate, the sources said.

There is still a small chance a buyer could emerge after Payless files for bankruptcy, the sources said. In the meantime, the company is preparing to run going-out-of-business sales at its shops in the next week, one of the sources said.

The sources asked not to be identified because the liquidation preparations are confidential. Payless declined to comment.

The retailer is seeking a loan to get through bankruptcy proceedings and discussing plans to shutter a significant portion, and potentially all, of its North American stores, said the people, who weren’t authorized to speak publicly. A representative for Topeka, Kansas-based Payless declined to comment.

Payless would become the latest in a wave of retail bankruptcies during the past two years as online rivals and heavy debt overtake once-iconic brands like Toys “R” Us and Sears. There’s no letup in sight, with at least half a dozen names going bust so far this year, including Shopko, FullBeauty Brands, Charlotte Russe, Things Remembered and Gymboree. The latter sought court protection for a second time last month and is liquidating most of its business.

Payless was founded in 1956 with the goal of selling affordable shoes in a self-service setting and says it’s the largest specialty footwear chain in the Western Hemisphere.

The company struggled to manage debt taken on in a 2012 leveraged buyout by Golden Gate Capital and Blum Capital Partners, filing for bankruptcy protection in April 2017. It emerged with fewer stores, its debt cut in half and creditors owning the company. The chain employs more than 18,000 globally and operates about 3,600 outlets worldwide, according to its website, with more than 2,700 in North America.

Payless filed bankruptcy once before in April 2017, and exited 18 months ago, with about $400 million in loans, after slashing its debt pile from over $800 million, according to court papers. A group of creditors, including hedge fund Alden Global Capital LLC, took over ownership, according to bankruptcy court records.

The news for Payless comes as Sears and Kmart look to regroup under slimmer footprints and as Toys “R” Us and The Bon-Ton Stores closed within the last year.

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