The affordable footwear retailer announced Tuesday that it has filed for Chapter 11 bankruptcy to restructure its North American business and its two Hong Kong-based logistic and supply chain entities. The company is closing 400 underperforming stores in the U.S. and Puerto Rico immediately.
“This is a difficult, but necessary, decision driven by the continued challenges of the retail environment, which will only intensify,” said Paul Jones, Payless ShoeSource CEO, in a statement. “We will build a stronger Payless for our customers, vendors and suppliers, associates, business partners and other stakeholders through this process.”
In a statement, Payless said it intends to use the Chapter 11 process to reduce its debt by half and to invest in omnichannel initiatives and expansion in Latin America. The company has negotiated agreements with certain of its existing lenders to provide Payless access of up to $385 million of debtor-in-possession financing, which includes access to $305 million of ABL financing and up to $80 million of new term loan financing.
“We are confident that this process will also enable us to leverage Payless’s existing strengths to succeed,” said Jones. “These strengths include our ability to produce significant free cash flow and, even last year, flat EBITDA despite unprecedented challenges and in contrast to many retailers; our portfolio of strong proprietary brands, along with unique licensing agreements with premier brands and partners; our best-in-class design and sourcing capabilities that enable the company to offer customers high quality products at a significant discount to peers; our strong and growing Latin American business, and a lean and scalable franchise model for other markets.”
Since 1958, the Topeka, Kansas-based retailer has offer footwear with the mission: Become the Go To, Get More, Payless shoe store for our customers. The company has approximately 4,400 stores in more than 30 countries.