Payless Shoes to File for Bankruptcy and Plans to Close 500 Stores

Payless Shoesource, Inc., a mall staple and go-to shoe supplier for consumers across the country, has announced that it will file for bankruptcy as soon as early April 2017 to address its $655 million debt. Much of this debt is outstanding payments to Chinese factories, which sparked protests at a container freight station in Xiamen, China. Allegedly, this debt is hurting the manufacturers, and when they reached out to Payless to collect the payment, Payless refused to comment on when the payment would come. The company also threatened to cease doing business with them if they did not continue to produce shoes for the retailer.

Payless, which was founded in 1956, currently operates more than 4,000 locations in 30 different countries. Originally, the company planned to close approximately 1,000 stores, but that number has now been reduced to a planned 400-500 closures over the next three years. However, it is not guaranteed that the company will not opt to close more stores in the future, bringing its number of shuttered locations closer to its original estimate.

What Hurt Payless?

Payless’ bankruptcy is one of the many bankruptcies that have shifted America’s retail apparel environment in the past few years. Payless plans to reorganize its operations, but has not commented on the strategies it plans to implement. The company was purchased by Golden Gate Capital and Blum Capital Partners in 2012.

Payless is suffering from many of the same woes that are affecting other apparel brands like Aeropostale and Pacific Sunwear: Reduced mall traffic and changing consumer tastes that favor fast fashion brands like Zara and H&M. Today’s consumers, particularly millennials, frequently choose online retailers over brick and mortar shops. Online shoe retailers like Zappos have capitalized on this tendency. Certain companies, such as Walmart, adapted their retail strategies to include a strong focus on online sales. Walmart’s strategy includes acquiring successful online retailers like jet.com.

Although Payless is reducing its physical footprint, it is not necessarily on its road to complete closure. Chapter 11 bankruptcy gives struggling companies the opportunity to restructure and try new strategies, which can include a greater focus on ecommerce. Payless originally carved its niche by providing affordable, on-trend shoes for men, women, and children. Today, it employs approximately 22,000 people.

Work with an Experienced Mundelein Bankruptcy Lawyer

The changing ways American consumers shop have had a significant impact on existing retail stores. Some have adapted to these changes and continued to be successful, even becoming more successful than they had been previously. Others have not. Through Chapter 11 bankruptcy, struggling companies can reorganize their operations and repay their debts, not unlike how Chapter 13 can be a way for individuals to repay theirs through careful budgeting and repayment plans. To learn more about bankruptcy, speak with one of the experienced bankruptcy lawyers at Newland & Newland, LLP. Contact our firm today to set up your initial consultation in our office. We serve clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas.

(image courtesy of Damir Bosnjak)

  • Newland & Newland LLP, Attorneys, Arlington Heights, IL
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