Payless ShoeSource the chain of discount footwear filed for bankruptcy protection on Tuesday announcing it would shutter up to 400 stores after increased competition from retailers online and other problems.
The footwear chain announced that under its reorganization plan the company would shed some debt, bring in new capital, boost its efforts in e-commerce and emerge more competitive and stronger.
Coming amidst a series of other bankruptcies in the retail sector as well as hundreds of closings of stores, Payless filed its reorganization petition for Chapter 11 in Missouri that said it had assets of up to $1 billion, liabilities of $10 billion and over 100,000 creditors.
Payless, which is privately-held, released a statement that said it would optimize its footprint of stores by immediately closing close to 400 locations that are underperforming in both the United States and Puerto Rico.
Currently the company operates approximately 4,400 stores across 30 countries. Payless, as well as other traditional brick and mortar retailers, has encountered many tough competitors online such as Amazon and Zappos.com, which slashes is costs through having less employees and lower costs related to real estate.
CEO of Payless Paul Jones said the footwear retailer’s competition will get even tougher moving forward.
However, he added it is a tough, but a necessary decision to file for bankruptcy that is driven by the challenges that continue in the retail sector, which are going to intensify.
Payless in addition announced it has been facing some challenges that are unique over the last few years. They included a number of months delay in receiving deliveries of products during the West Coast port strike, unspecified purchasing as well as inventory issues, while also not having the capacity to invest sufficiently in new technologies and advertising.
A strong dollar also ate into its profit margins related to sales in Latin America, Australia and Canada. That is due to customers buying shoes with local currencies that Payless obtained with U.S. dollars and when converted into dollars the amount is less.
Payless announced plans to seek new terms for its portfolio of real estate leases or evaluate possibilities of more closures.
The company, based in Topeka, Kansas, was in negotiations to shutter up to 1,000 locations prior to filing for bankruptcy.
Together with the restructuring supervised by the court, Payless announced it would reduce debt by close to 50% under a plan approved by parties who hold as much as two-thirds of the company’s first and second lien term debt.
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