The store closing bug has claimed its latest victim, with Payless ShoeSource reportedly shuttering as many as 1,000 stores as part of a restructuring plan, according to Bloomberg.
The discount shoe retailer may file for bankruptcy if it’s unable to reach a deal with creditors, and a decision on whether to restructure in or out of court could be reached as soon as late February.
Brands including The Limited, Wet Seal, American Apparel and Aéropostale have all filed for bankruptcy within the past year, with Limited and Wet Seal shutting all stores to boot. Payless faces many of the same challenges as these mall-based retailers, but it may also simply have expanded beyond its capabilities.
Payless has more than 4,400 stores in 30 countries, a much more extensive store footprint than the other retail brands experiencing turmoil. Closing 1,000 stores would leave the brand with more than 3,000 locations, but that’s still a lot of square footage for a company carrying more than $600 million in debt.
In September 2016, the brand said it would close 300 to 500 stores in the next three years, intending to concentrate on larger, more omnichannel-focused “Super Stores.” But with plans to close 1,000 stores, it’s unclear how far Payless could expand the “Super Store” concept going forward.
With off-price competitors such as TJX and shoe warehouse DSW gaining steam, Payless stores of all sizes are simply having a harder time staying profitable.
The retailer hired law firm Kirkland & Ellis LLP to mull options for handling its $600 million debt. The company’s largest remaining debt commitment is a $520 million term loan due in 2021, according to data compiled by Bloomberg.
Payless isn’t the only retailer teetering at the edge of potential bankruptcy; U.S. hunting and fishing chain Gander Mountain is preparing to file for bankruptcy as early as this month, according to a report from Reuters.
Gander has been under immense financial pressure from the pending $5.5 billion merger of outdoor rivals BassPro Shops and Cabela’s.