Payless reportedly eyes bankruptcy filing, up to 500 store closings
Discount footwear chain Payless ShoeSource reportedly may seek bankruptcy court protection and close as many as 500 stores as the Kansas-based company joins other retailers struggling with a consumer shift to online shopping.
Payless initially plans to shut down 400 to 500 stores as part of its latest reorganization plan. That number is fewer than the projected 1,000 locations eyed earlier, Bloomberg News reported, citing people familiar with the issue.
Company spokeswoman Cristi Allen in an email Wednesday declined to comment on the report.
Founded in Topeka in 1956, Payless offered a new retailing experience, enabling customers to self-select footwear with affordable prices. The company says it now is the largest specialty family footwear retailer in the Western Hemisphere, with more than 4,000 locations in 30 countries and nearly 22,000 employees.
The company is owned by Golden Gate Capital and Blum Capital Partners, San Francisco-based private equity firms that took over the retailer in 2012 as part of the $2 billionbreakup of Collective Brands. The transaction included the assumption of Collective Brands debt.
The report of the potential bankruptcy filing comes amid grim financial news for other major retailers.
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Sears Holdings, the company that operates Sears and Kmart stores, warned Tuesday it faces "substantial doubt" about its ability to stay in business unless it can borrow more and get cash from more of its assets.
Payless last year tried to boost profits with a new master plan based on opening more of the company's Super Stores — larger locations with deeper stocks of footwear brands and styles, as well as an added focus on shopping experience — according to a Footwear News report. That plan called for closing 350 to 500 smaller stores within three years, the report said.
Company officials also said Payless was undertaking aggressive moves to deal with consumer shifts to e-commerce.
"I recognize that we have to deliver omnichannel capabilities with a sense of urgency," Payless CEO Paul Jones told Footwear News. "Almost every IT (internet technology) capital project underway at Payless relates to some sort of capability that the project will unlock for us."
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As shoppers increasingly buy online, Payless in January worked with debt-restructuring legal experts on plans to deal with roughly $665 million in company debt, Reuters reported.
Moody's Investors Service in February downgraded a Payless debt rating, saying the decision reflected "weaker than anticipated operating performance."
Follow USA TODAY reporter Kevin McCoy on Twitter: @kmccoynyc