Payless ShoeSource is looking to double the number of store closures that it had originally considered. The company filed for bankruptcy in early April and is asking the federal bankruptcy court in St. Louis, Missouri to be allowed to take steps to further rationalize its store network in the U.S. and Puerto Rico. The retailer plans to close 112 stores and possibly up to another 296 as it struggles with high rents and brick-and-mortar lease obligations. The growing list of store closures is available at www.paylessrestructure.com.
The company has however suggested that it fully intends to emerge from bankruptcy and continue operations, even though with a smaller number of stores. Payless included its North American entities and two Hong Kong-based entities involved in supply chain and logistics in its restructuring plan.
The company listed the value of its assets at between $500 million and $1 billion and its liabilities at between $1 billion and $10 billion. Most of the creditors with the largest unsecured claims are factories in Hong Kong, Taiwan and parts of China. Payless' first-lien secured creditors will be paid in full, collecting $506.3 million plus 91 percent of the new equity due to be issued by the group. Second-lien secured creditors will get the balance of the new equity plus $145 million. Unsecured creditors will get a pro rata share of the remaining recovery pool, whose amount will depend on the outcome of an investigation into dividend payments of about $350 million taken by the original shareholders in February 2013 and March 2014.
Payless is just one in many traditional retailers that have recently been forced to massive number of store closures or to file for bankruptcy in the U.S., in connection with the exponential growth of e-commerce and changing consumer habits. Michael Kors Holdings has just announced it plans to close up to 125 stores over the next two years.