Payless ShoeSource Will Emerge From Bankruptcy This Week

Image courtesy of Mike Mozart

Congratulations to Payless ShoeSource, the nation’s #1 source of light-up sneakers with Disney characters on them. The chain has filed for Chapter 11 bankruptcy during the current retail apocalypse that has survived the process without closing all of its stores and going out of business.

Bricks and Kicks

Payless ultimately closed around 700 of its 4,000 stores, but is keeping its plans for the near future pinned on bricks-and-mortar sales, according to Reuters. The company plans to invest in inventory management in the coming years, and improve its e-commerce operations.

However, its plans lean heavily on selling from its stores, and not so much online. Otherwise, it would have shed a lot more stores in the U.S., and wouldn’t be planning to franchise stores in Asia and open more of them in Latin America.

Payless doesn’t release information about its online sales, as a privately owned company, but competitors DSW and Famous Footwear do. They make 16% and 5.2% of their sales online, respectively.

It could be that mall-based shoe retailers haven’t made much headway in e-commerce, or perhaps shoes are something that most people still feel that they have to try on and buy in person.

More Competition

Other retailers, especially popular off-price retailers like Ross and Marshalls, sell plenty of shoes even if they aren’t shoe specialty stores.

“There are dozens of other retail chains that sell shoes, and they have taken much of that business a little at a time,” one industry consultant told Reuters. Between that and online shoe sellers, Payless’s plan for the next few years may not work.

“An extremely loyal Payless customer”

Part of the reason why Payless is sticking with its current business model is that it knows who its core customers are, and that they haven’t yet turned to shopping online.

“There’s an extremely loyal Payless customer, who is basically a mother, who knows she can go into a store at any time and find a quality product at a reasonable price,” the chain’s restructuring lawyer told Reuters.

Other sources within the restructuring operation told Reuters that the company was able to get rent concessions of 30% to 50% and longer periods to pay suppliers.