Payless ShoeSource succumbed to the weight of its debt and filed for Chapter 11 with a plan to close 400 stores.
That only dims an already bleak picture on the retail front, where big names — from Macy’s Inc. and Sears Holdings Corp. to Abercrombie & Fitch Co. and Bebe Stores Inc. — have already laid out plans to shutter nearly 1,500 stores since the beginning of the year.
Payless, which bills itself as “the largest specialty family footwear retailer in the Western Hemisphere,” said it filed “to facilitate the financial and operational restructuring necessary to strengthen its balance sheet and position the company for long-term success.”
The company’s North American entities as well as two Hong Kong-based companies involved in logistics and supply chain were included in the filing, in St. Louis federal court.
The bankruptcy, which had been anticipated, comes as part of a wave of bankruptcies that has seen Nasty Gal, The Limited, Wet Seal Inc. and others throw in the towel.
Payless reached an agreement with creditors holding about two-thirds of its first-lien and second-lien term borrowings that will allow it to cut its debt load nearly in half and give it the capital to make its stay in bankruptcy a short one.
The firm said it plans to use the Chapter 11 process to among other changes, “Optimize its store footprint, with the immediate closure of nearly 400 underperforming locations in the U.S. and Puerto Rico and work to aggressively manage the remaining real estate lease portfolio either by modifying terms, or evaluating closures of additional locations.”
W. Paul Jones, chief executive officer, said: “This is a difficult, but necessary, decision driven by the continued challenges of the retail environment, which will only intensify. We will build a stronger Payless for our customers, vendors and suppliers, associates, business partners and other stakeholders through this process.”
Payless has about 4,400 stores in more than 30 countries and was founded in 1956 in Topeka, Kan., where its headquarters remains.
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