Payless Will Reportedly Close 1,000 Stores as it Edges Closer to Bankruptcy

Speculation that Payless ShoeSource Inc. is on the verge of bankruptcy is heating up yet again.

The debt-saddled retailer is in talks with its lenders over a restructuring plan that includes closing approximately 1,000 stores, those with knowledge of the matter reportedly told Bloomberg this week.

Payless may consider filing for bankruptcy if it’s unable to reach a deal with the creditors, the sources told Bloomberg, and a decision whether to restructure in or out of court may be reached as soon as this month.

This news follows a series of decisions by Payless over the past few months that seemed consistent with a retailer on the path to bankruptcy.

In January, the company announced that it had laid off 165 employees, or 2 percent of its total associate base, while several of Payless’s major vendor partners came forward to tell Footwear News exclusively that the retailer had fallen months behind on its bills with their respective firms. That revelation came just days after Reuters reported that the Topeka, Kan.-based firm has been meeting with debt-restructuring attorneys to address its approximately $665 million debt.

Payless ShoeSource regularly reviews its organizational structure to ensure that we continue to meet the needs of our business, our customers, our community and our associates,” a company spokesperson told FN via an email statement in January following the layoffs. “While today has been a difficult one for the Payless team, we believe these are the right decisions for the company to be successful in a dramatically evolving retail landscape.”

FN also exclusively revealed in September Payless’s plans to close between 350 and 500 of its 4,400 stores within the next three years. At the time, Payless CEO Paul Jones said the company’s resolve to shutter several hundred doors was a proactive one.

FN reached out to Payless today for an update on whether the number of planned store closures has changed and for a confirmation of the restructuring plan, but has not yet received a response.

Payless’s challenges come at a time when brick-and-mortar retailers are struggling with high real estate costs, intense pressure from e-commerce and consumer shifts toward experiential spending. Meanwhile, the rise of off-price retailers such as DSW Inc. and TJX Companies Inc. — owner of the TJ Maxx and Marshalls chains — has taken away significant market share from the firm.

Last year, mall staples Pacific Sunwear of California Inc. (PacSun) and Aéropostale Inc. filed for Chapter 11 protection in a bid to address their mounting debt. While both would emerge from the process and move forward with their operations, sporting goods stores The Sports Authority, Sport Chalet and City Sports were casualties of the bankruptcy process.

After 16 years as a publicly traded firm, Payless went private in 2012 under the ownership of private equity firms Blum Capital Partners and Golden Gate Capital.

The retailer sells several private label brands including Champion, Fioni, Airwalk and American Eagle.

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