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How a Pandemic and a Recession Created the Climate for a Payless Comeback

It’s an ironic setup: A pandemic-plagued retail landscape and a macroeconomic backdrop that’s as challenged as it’s ever been — somehow these less-than-ideal circumstances create prime soil for a former footwear juggernaut’s comeback.

Payless, the everyday low-price family footwear retailer that filed bankruptcy twice in the past couple years, is ready to make its return to the U.S. market.

On Aug. 11, the company went live with its e-commerce site, featuring its usual staple of private label wares and popular brands like American Eagle and Airwalk. To follow, says CEO Jared Margolis, is its first new brick-and-mortar location, debuting in Miami this November.

Payless Airwalk
Payless Airwalk sneakers.
CREDIT: Courtesy

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“With the economy being what it is, we feel like we owe it to the people to [make our U.S. return now],” Margolis told FN.  “It’s tough out there and we’re really heavily focused on being a part of the community. We know that people need to feel confident that we’re going to be cautious about how much they are able to spend. That’s the thing we’ve always stood for: value.”

Despite its bankruptcy and U.S. liquidation last year, Payless had continued to operate its roughly 400 stores across Latin America, the U.S. Virgin Islands, Guam and Saipan, and it maintained its 370 international franchisee locations across the Middle East, India, Indonesia, Indochina, the Philippines and Africa. Today, Payless and its franchisees own and operate roughly 710 physical stores in over 30 countries within those regions and is manufacturing upwards of 30 million shoes annually.

Payless white sneakers womens
CREDIT: Courtesy

In January, the company announced its hiring of a new executive team, with Margolis — who previously served as president of CAA-GBG, a joint venture between Global Brands Group and Creative Artists Agency — at the helm of the larger organization and Justo Fuentes, who previously served as president of BATA Latin America, leading the Latin America division.

Ahead of its first bankruptcy in 2017, Payless had more than 4,000 stores, of which only 1,000 were profitable, said Margolis. Now, Payless’ chief said he’s able to use data to plot a more meaningful brick-and-mortar presence.

“I’m not looking to open any more than 350 to 500 stores over the next three to five years,” said Margolis. “We know the omnichannel experience in the price point we’re selling into is very important. We know what did well and what [did not] perform. And we’re going to be very, very selective in making sure that we’re setting up these stores for success.”

Margolis said the company has been disciplined in the areas of rent and lease negotiations — weighing the value of fixed rents versus percentage leases — and is committed to staying asset-light.

Payless, noted Margolis, is also going trying its hand at several rising retail trends, including augmented reality and heightened in-store experience.

We partnered with multiple technology companies that have experiences that are a smart pairing with us,” he said. “For example, we’re working with an augmented reality and tech company that will allow our shoppers to scan their feet on their phones and be able to find their correct shoe size as they shop.”

Payless
Payless is returning to the U.S.
CREDIT: Courtesy

In addition to its typical brand roster, Margolis said Payless will continue to dabble in collaborations with brands like Aerosoles, L.A. Gear and K.Swiss.

Looking further ahead, Payless’ top exec said customers can also expect some mashups with boldface influencers and an expansion outside the company’s core footwear offerings, into other categories.

“I can’t give too much away,” he said. “But, there’s a reason I dropped ‘Shoe Source’ from the company’s name, the day I started working here. Why should we limit ourselves to just shoes?”

Despite his optimism, as the COVID-19 pandemic pushes scores of retail firms to add their names to the bankruptcy court docket — JCPenney, Neiman Marcus, J.Crew and Modell’s among them — Margolis said he’s not altogether oblivious to the challenges that could lay ahead.

“I just know we have a great plan and strategy in place,” he said. “The only thing that stands in the way is execution.”

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