Payless ShoeSource enters bankruptcy for the second time

New York – The US-based affordable footwear chain filed for bankruptcy protection on Monday. The previous day Payless ShoeSource had started the shutting down of its 2,500 U.S. stores. About 400 more will be closed across Canada, according to the Chapter 11 filing.

The liquidation will not impact its franchised or Latin American stores, where it is the region's largest specialty footwear retailer. Payless said in court documents that is looking to reorganize its Latin American and franchise businesses, which include looking for capital to support those businesses.

Stores outside North America were not included in the Chapter 11 filing and will continue operations, the retailer added. As published by Reuters, Payless said it intends to seek protection for its Canadian subsidiaries under the Companies’ Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice.

Second bankruptcy in less than two years for Payless ShoeSource

It’s worth recalling that the struggling retailer filed for Chapter 11 bankruptcy protection a first time in April 2017, closing hundreds of stores as part of its reorganization. Back then, reported the CNBC, it had over 4,400 stores in more than 30 countries.

Marotta noted that the prior Chapter 11 proceedings left the company with too much debt and with too many stores. As a matter of fact, it emerged from restructuring four months later with about 3,500 stores and having cut down their debts by 435 million dollars.

"The challenges facing retailers today are well documented, and unfortunately, Payless emerged from its prior reorganization ill-equipped to survive in today's retail environment," said Stephen Marotta, the company's chief restructuring officer, in the documentation filed with the bankruptcy court earlier this week. The company further said in court documents that many of its stores did not generate enough cash to support the costs of sourcing, design and merchandising.

Image:Payless ShoesSource. Courtesy of Bentley Mall