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Payless ShoeSource to Close All 2,100 U.S. Stores

Topeka, Kan. — Payless ShoeSource will close all 2,100 of its stores in the United States and Puerto Rico as it moves toward liquidation. According to a statement by the company provided to USA Today, which first reported the news on Feb. 15, Payless expects all stores to remain open through March.

The announcement comes nearly two years after the Topeka, Kan.-based shoe retailer filed for Chapter 11 bankruptcy protection, a move that coincided with the shuttering of 673 American stores at the time. The company is also in the process of de-commissioning its online sales platform, but it remains unclear whether Payless stores in Latin America will remain open.

Payless had undergone an aggressive expansion plan that required taking on a greater debt load. After filing for bankruptcy in April 2017, the company restructured its finances to eliminate $435 million in debt and whittle its store count to 3,500 locations worldwide.

According to longtime retail consultant Jeff Green, Payless’ financial woes can be traced in part to the lack of name-brand shoe offerings, a product segment that is especially popular with millennial shoppers.

“Even after Payless restructured its debt, the changing nature and growing competition from the off-price shoe market made it difficult for the company to survive,” says Green, who recently rolled his firm, Jeff Green Partners, into Hoffman Strategy Group, which specializes in mixed-use feasibility analysis. “Nordstrom Rack, Marshalls, T.J. Maxx, even Target — they’ve all improved and expanded the quality of their shoe offerings.”

Green notes that other shoe retailers, most notably Designer Shoe Warehouse (DSW) and Foot Locker, have survived the e-commerce assault by offering name brands at affordable price points. In doing so, DSW and Foot Locker have branded themselves as specialty shoe providers in the minds of consumers.

Rick Scardino, principal at Lee & Associates of Illinois, points to the combination of high-quality real estate and the ease of shopping afforded by department stores as instrumental to Payless’ downfall.

“One can assume that the company’s sales volume did not support the usually very visible real estate it chose,” says Scardino. “Consumers have less time than ever to make separate shopping trips for individual clothing, and other department stores created a convenience factor that was too difficult to overcome.”

Payless operated out of a variety of retail settings, including regional malls, power centers and neighborhood centers. Owners of these properties, many of which can ill-afford continued dips in occupancy, must address how to create smaller, more efficient retail spaces as they adjust to the infringement of e-commerce.

“The biggest concern lies with malls and power centers; neither of them can afford to lose any more tenants,” says Green. “These landlords have to go back to the drawing board and understand the highest and best use for those properties. They have to right-size the retail, then figure out what to with the additional space.”

Just six weeks into 2019, Payless has become the fourth soft goods retailer to either announce or close a significant number of American stores. Children’s clothing retailer Gymboree recently decided to shutter 749 stores, while Wisconsin-based Shopko filed for Chapter 11 bankruptcy in January. Earlier this month, women’s apparel retailer Charlotte Russe announced it would close 94 stores as it worked to restructure its debt amid lagging sales.

— Taylor Williams

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