KANSAS CITY, Mo. -- Payless ShoeSource, one of the largest specialty family footwear retailers in the country, is the latest retail chain to seek protection from its creditors while it reorganizes in federal bankruptcy court.
The company, based in Topeka, Kan., said April 4 it will immediately close nearly 400 poorly performing stores in the U.S. and Puerto Rico. It hopes to modify leases for some other stores or evaluate them for closure.
According to the corporate website, the Kent Road store in Stow and the State Road store in Cuyahoga Falls are not on the list to close; however, the Chapel Hill Mall store was listed as closing.
In a statement, W. Paul Jones, CEO of Payless, said, "This is a difficult, but necessary, decision driven by the continued challenges of the retail environment, which will only intensify."
Payless said it expects to continue to operate its business, honoring employees' wages, health care coverage and other benefits without interruption. It also said customers' existing gift cards with Payless stores and Payless.com will be honored. Future obligations to vendors and suppliers also will be honored, the company said.
In its filing, Payless said its assets were worth no more than $1 billion but that its liabilities were at least that large and could be as high as $10 billion. The Chapter 11 filing was made in federal bankruptcy court in St. Louis.
Its largest unsecured creditor, listed in the bankruptcy filing, is Morgan Stanley Senior Funding Inc. It is owed $145 million, according to the filing. It lists 12 other creditors owed more than $4 million each for merchandise.
Payless was founded in Topeka in 1956 and currently has about 4,400 stores in more than 30 countries and employs more than 25,000 people. It offers fashionable shoes and accessories for the family at moderate prices.
The retailer hired law firm Kirkland & Ellis LLP to look at options for Payless' $600 million debt load, according to Bloomberg News.
Some retail chains are struggling because of the quickening shift to online shopping offered by competitors led by Amazon.com. Other large retailers to enter bankruptcy proceedings include The Limited, Wet Seal, Gordmans and BCBG Max Azria.
Payless was bought by private equity firms Golden Gate Capital and Blum Capital Partners in 2012 as part of a split of Collective Brands Inc. Moody's Investors Service and Standard & Poor's both recently cut the ratings of Payless' loan, pointing to revenue declines and mounting debt.
Consumers will have full access through the Payless corporate website www.paylesscorporate.com.