Payless ShoeSource has emerged from Chapter 11 bankruptcy after closing approximately 700 stores and eliminating more than $435 million in debt. When the restructuring officially is complete, Paul Jones will retire as CEO.
In merely four months after filing for bankruptcy in April, Payless paid off nearly half of the $847 million of debt it had built up under its private equity ownership. The massive debt elimination in such a short period of time is a good sign for the footwear retailer in an environment where other traditional brands are struggling to pay off significant debt. As part of the restructuring, Payless has a much cleaner balance sheet to work with, as well as improved terms on leases and vendor contracts worldwide.
Despite the closures, Payless is still bullish on brick-and-mortar, particularly on a global scale. The retailer is planning to open more stores across Latin America and develop new franchises in Asia. The retailer also plans to invest $234 million over five years on systems that will allocate inventory quickly in response to customer demand and improve its competitiveness online, according to a report from Reuters.
Already operating 400 stores in Latin America, Payless plans to add 22 locations across Peru, the Dominican Republic, Costa Rica, Honduras, and Nicaragua in 2017. In 2018, the retailer plans to continue its Latin American expansion.
It may be considered a risk to jump into new regions and new brick-and-mortar stores so soon after a restructure. But the fact is Latin America contributed nearly 40% of the company’s $95 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2016.
Payless has appointed a new Executive Committee to take on Jones’ responsibilities, which includes:
Michael Schwindle, CFO;
Mike Vitelli, COO; and
Martin R. Wade, III, Chairman of Payless’ post-emergence Board of Directors and interim CEO.