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Is There Life After Bankruptcy For Payless?

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Is There Life After Bankruptcy For Payless?

Payless has filed for Chapter 11 bankruptcy protection and announced plans to close all of its roughly 2,500 North American stores. Payless’ second bankruptcy filing in two years and the store closure announcement may spell the end of the line for the long-lived American shoe retailer.

Case Of Deja Vu

Several retailers that seemed dead in the water were ultimately resurrected following bankruptcy filings.

Yet in eight of the 10 largest bankruptcy declarations of all time in which the company re-emerged following the proceedings, the company eventually filed for bankruptcy again, according to BankruptcyData statistics.

“We intend to use the Chapter 11 process to implement a comprehensive path forward to meaningfully enhance our growth profile and profitability, positioning us to continue to thrive as a sustainable business in the face of the retail industry’s radical, unprecedented transformation,” Payless said in a press release last week.

That quote may have a seemingly optimistic tone about the company’s future, but Payless shoppers have heard it all before.

Payless itself filed for bankruptcy previously back in 2017. At the time, the company closed 900 stores and said the filing was a “difficult but necessary part” of repositioning for future success.

“We will build a stronger Payless for our customers, vendors and suppliers, associates, business partners and other stakeholders through this process,” the company said in 2017. Yet less than two years later, Payless followed the route of KMart, Hills Department Stores and Payless Cashways and succumbed to bankruptcy a second time.

A Problem Bankruptcy Can’t Solve

Neil Saunders, managing director at GlobalData Retail, told Benzinga bankruptcy will only solve Payless’ immediate financial problems — not the larger issues with its struggling business.

“Bankruptcy may allow Payless to get rid of some of its debt and to close unprofitable stores. However, it is less clear how the process will help it create a compelling proposition that stacks up well against the off-price players like TJMaxx and Ross. These retailers, along with the discount offers of Nordstrom Rack and Macy’s Backstage, mean that Payless has become a less attractive destination for consumers,” Saunders said.

If Payless emerges from bankruptcy and survives in the long run, Saunders said it likely won’t be the Payless of old.

“The chain may survive, but if it does the price will be a much smaller business with a much greater emphasis online. The days of Payless as a shoe retail powerhouse are well and truly over.”

Related Links:

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Photo by Dwight Burdette/Wikimedia. 

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