Bankrupt Payless Holdings LLC is asking a St. Louis Bankruptcy Court for permission to shutter another 408 stores.
The footwear retailer, along with 28 affiliated debtors, filed its Chapter 11 petition for bankruptcy court protection on April 4. On May 17, it received the court’s nod to shutter the 389 stores it had planned to close when it filed its voluntary petition. Since then, the company said in court papers that it not only recognized the need to remodel its brick-and-mortar business to align it with worsening retail-industry conditions, it also analyzed whether it needed to close any additional stores to align with its broader financial and operational restructuring. The company, excluding the 389 stores set for closure, still has 3,000 unexpired leases in North America. In the macro picture, Payless has 4,000-plus stores across more than 30 countries.
Among the criteria for whether a store should be closed, the company considered profitability on an earnings before interest, taxes, depreciation, amortization and restructuring basis; opportunity for rent concessions from landlords; cash flow, and ability to transfer sales to nearby locations.
Payless said in the court document filed last week that it could close fewer stores if ongoing negotiations with landlords result in consensual modifications to rent obligations. The retailer also said “further rationalization” of its store footprint may continue, depending on “other ongoing negotiations.”
A hearing date is set for June 8 on the request to close a second round of stores.
At the time it filed for bankruptcy court protection, Payless said it intended to use the “Chapter 11 process to implement a comprehensive path forward to meaningfully enhance our growth profile and profitability.” The retailer is operating with a $305 million debtor-in-possession financing facility provided by a lender group led by Wells Fargo.
The company operates under the nameplate Payless ShoeSource. The filing was part of a wave of retailer filings earlier this year that include Nasty Gal, The Limited, Wet Seal, BCBG Max Azria and Rue21.
So far, the tally for store closures this year, including those that are not part of the group in bankruptcy proceedings, is almost 1,900. And the expectation is that the list will continue to grow as the year progresses.