What’s In Store for Payless?

What's In Store for Payless?
A Payless ShoeSource store

Turnaround efforts continue at Collective Brands Inc.’s Payless ShoeSource division as it prepares to move forward under new ownership with Golden Gate Capital and Blum Capital.

Payless CEO LuAnn Via told Footwear News last week the team is both pleased and energized by the growth opportunities this transaction presents.

“We held a town hall meeting [last Tuesday] with associates,” she said. “Golden Gate, with its strong track record and experience in specialty retail, is a great fit for Payless, and it will be exciting to leverage that rich knowledge in Payless’ business. Blum has been a longtime investor in our company and knows our organization and the business model well. These are truly great strategic and financial partners.”

Via added her goal is to keep the team focused on the current needs of the business and the Payless turnaround initiatives.

The retailer’s overhaul consists of pursuing a more value-focused assortment and elevating the in-store experience through a number of tactics, including segment-specific assortments supported by incremental inventory; increased region-specific marketing; store remodels; intensified product displays and presentation standards; and additional payroll hours. Via said on the firm’s fourth-quarter call she has already seen a lift in most metrics, including sales, traffic and margin dollars.

In a statement last week, Payless’ new private-equity owners, who have equal stakes in the operations of both Payless and the Collective Licensing International division, said they look forward to the continued turnaround of their new investment.

“Payless is exactly the type of company in which we seek to invest — a strong brand with unparalleled global scale at an important inflection point in its evolution,” said Josh Olshansky, a managing director at Golden Gate Capital. “We look forward to … supporting the leadership team as they continue the successful turnaround that is already under way.”

David Chung, a partner at Blum Capital, added, “Having been a core investor in Collective Brands for many years, we are excited about the prospect of continuing our relationship with the company as it moves into its next chapter.”

Blum Capital was Collective’s largest shareholder, holding 6 percent of shares at a recent filing, before the acquisition. It was Blum Capital that headed the bid for Collective, with Wolverine World Wide Inc. as a strategic partner.

But some industry observers were skeptical last week about Payless’ outlook.

Michael Katz, president of Matisse Footwear, said, “The [stores] are so horribly rundown. [The investors] will probably breathe some newness into them with the thought of flipping them at some later day.”

Chuck Gordon, owner of Gordon’s Shoes in Pittsburgh, agreed: “They’re not going to pay X amount and sit around and follow the status quo. They will [likely] take Payless to the next level and regain their investment by re-selling it.”

Payless was founded in Topeka, Kan., in 1956. It went public in 1996 and acquired Stride Rite Corp. in 2007, changing its name to Collective Brands Inc. at the time. Matthew Rubel, who joined Payless in 2005, resigned last June as chairman, president and CEO of Collective Brands, after the firm felt shareholder pressure from continued struggles with the domestic Payless unit.

Since last year, Michael Massey has headed Collective as interim CEO. While his future with the firm is unclear, he expressed satisfaction with the deal. “This transaction represents a strong path for our company to deliver shareholder value, which was our main aim in the strategic review, and long-term growth for Collective’s businesses and brands,” he said.

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