Payless Prepares for Bankruptcy Filing, Store Closures

Payless Inc. is preparing for its second trip to bankruptcy court with a plan that could drastically shrink the size of the discount shoe chain, according to people with knowledge of the matter. 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. Payless joins a growing list of retail companies that have filed for bankruptcy protection this year, including including Shopko, FullBeauty Brands, Charlotte Russe, Things Remembered, and Gymboree. The retailer filed for bankruptcy protection in April 2017 and closed nearly 400 stores. Payless currently has more than 2,700 North American stores, according to its website.

Total Retail's Take: The challenges of overleveraged brick-and-mortar retailers have been well documented, with brands trying to shed unprofitable stores in an effort to remain financially viable. In the case of Payless, the company has also had to contend with debt taken on in a 2012 leveraged buyout by Golden Gate Capital and Blum Capital Partners. A bankruptcy filing and significant downsizing of its store footprint or a sale of the company appear to be the last resorts for Payless. Many legacy retail brands such as Payless have folded due to overexpansion and an inability to evolve their businesses quickly enough to account for changing consumer behaviors. Let's hope Payless isn't the latest example.