Payless shuttering 2,500 stores as it declares bankruptcy—again

The chain’s recently installed chief restructuring officer said the company ‘emerged from its prior reorganization ill-equipped to survive in today’s retail environment.’

Constant promotions and a viral marketing campaign weren’t enough to help Payless ShoeSource lace up for another retail run.

On Saturday, the bargain footwear chain announced it would close all locations across the United States, including Puerto Rico, adding up to roughly 2,500 stores. On Sunday, Payless filed for bankruptcy—the chain’s second in only a few years.

The New York Times reported:

The retailer, which filed for bankruptcy two years ago, had already closed hundreds of stores in recent years as its brand lost luster among women searching for deals on shoes. It is the latest mass-market retailer to vanish from the retail landscape.

On Sunday, the retailer also began liquidation sales, which will continue through May, though some Payless locations will close as early as March. The company’s stores in Latin America, along with its international franchises, will remain open.

Reuters reported:

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.

The New York Times reported:

The Payless liquidation comes as more people are opting to shop online rather than in stores, which were at the core of the shoe company’s strategy. But e-commerce explains only part of Payless’s challenges. While Payless struggled to stay relevant with shoppers, other retailers catering to bargain conscious shoppers, like TJ Maxx and Nordstrom Rack, are thriving.

Because Payless relied on its brick-and-mortar locations for most sales, other retail closings also affected its ability to survive.

Vox reported:

… The shuttering of mall department stores across the country also hurt Payless — these bigger retailers serve as “anchor stores” that drive people to malls and other shopping centers, and closing them hurts foot traffic for smaller stores with more specific offerings like Payless. The discount shoe retailer also had trouble competing with other bargain stores, especially those that sell marked-down versions of pricey name brands, as well as with Amazon and Zappos.

Payless admitted that its “substantial efforts” weren’t enough to overcome its “too large a store footprint” in the face of the growing e-commerce trend and other obstacles in the retailer landscape, including steep competition.

In a press release, Payless said:

Stephen Marotta, appointed in January 2019 to serve as Chief Restructuring Officer of Payless, said, “We have worked diligently with our suppliers and other partners to best position Payless for the future amidst significant structural, operational, and market challenges. Despite these efforts, we now must wind down our North American retail operations under Chapter 11 and the CCAA. … As we move through the process, we will work to minimize the impact on our employees, customers, vendors and other stakeholders.

“The challenges facing retailers today are well documented, and unfortunately Payless emerged from its prior reorganization ill-equipped to survive in today’s retail environment. The prior proceedings left the Company with too much remaining debt, too large a store footprint and a yet-to-be realized systems and corporate overhead structure consolidation. As a consequence, despite our substantial efforts, we were ultimately unable to operate the North American retail and e-commerce operations on a sustainable basis.”

Mr. Marotta continued, “On behalf of the entire company, I’d like to express our deep appreciation for the hard work of our dedicated employees and their commitment to Payless customers, who have shown us tremendous loyalty for more than 60 years. We are also grateful for the many years of support by our suppliers and vendors, and we look forward to continuing to work with them to support our remaining operations.”

Additional retail chains stand to join Payless and other retail chains shuttering their doors unless they quickly adapt their business models to consumer preferences.

CNN Business reported:

“The pace of disruption in retail is widely acknowledged,” Greg Portell, a partner at consulting firm A.T. Kearney, told CNN Business. “Yet, the pace of change inside retailers continues to lag. Many retailers find themselves trapped in a cycle of continuing to chase consumer trends … Without bold action, the retail landscape will continue to be scattered with bankruptcies.”

(Image by: Mike Mozart, via)

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