Why Did Payless go out of business 2024?

Did Payless go out of business

In 2019, Payless closed all 2,300 of its locations in North America after declaring bankruptcy for the second time in less than two years. The company’s foreign outlets in Asia, the Middle East, and Latin America were unaffected. In April 2017, the company declared bankruptcy for the first time. Payless is renowned for its reasonably priced footwear and accessories. It includes the house brands AirWalk and American Eagle.

In 2020, the retailer announced its intention to open 300 to 400 independent outlets nationwide within the next three to five years. Payless CEO Jared Margolis admitted that the company is choosing an exceptional time for a relaunch.

The business believes now is an excellent time to draw in buyers on a tight budget. It planned to sell sneakers, boots, and formal shoes for as little as $10 per pair. Instead of its initial headquarters in Topeka, Kansas, the business now has a presence in Miami. Let us view this company in detail in this article.

Overview of Payless

Payless is an international chain of discount shoe stores formerly known as Payless ShoeSource Inc. Payless describes itself as “the largest specialty family footwear retailer in the Western Hemisphere.” It was established in 1956 with a focus on cheap footwear. It combined with May Department Stores and went public as the Volume Shoe Corporation in 1961. By running self-service outlets with few staff, it was able to keep prices low.

The more creative approach was to create its footwear, which led to private labels dominating its mix starting in the 1970s. Creating in-house brands “enabled Payless to maintain tight oversight over quality and design.” As per fundinguniverse.com, these are the two issues that have driven clients away from many discount retailers.

Its final year as a publicly traded firm was 2011 before it underwent a leveraged buyout and went private. The company purchased 65 per cent of its goods directly. It bought the remaining 35 per cent via outside agents. Payless targeted lower-income customers at the time, who made an average yearly household income of around $65,000. It also looked at non-athletic footwear sold to women and their children for less than $30 a pair.

It appears that Payless has started to blend in with its nearby, inexpensive rivals. This included Walmart and Target, whose in-house shoe selections kept growing and improving. Shoe discounters like Famous Footwear, DSW, Shoe Carnival, Kohl’s and TJX Cos. grew to bring prestigious shoe brands within Payless’s prized customer base.

According to Footwear News, efforts to “democratize fashion” in the mid-2000s through new trends and innovation saw some success. The chain declared bankruptcy in April. 

2017. It paid off $400 million of its creditors and emerged in August 2017. Yet, a former employee from Payless’s digital marketing team who worked there in 2018 told the press that:

 “The business suffered from ongoing management turnover at that time.”

Where did Payless go wrong?

In 2019, Payless filed for Chapter 11 bankruptcy. Less than two years had passed since it had finished its previous bankruptcy when it happened. The business needs more stores and more debt. Additionally, it needed more time to be ready for online shopping. As a result, it closed its stores in the U.S. and Canada and fired 16,000 workers. Back then, the business declared that it would continue operating its stores outside North America.

According to CNBC, the chain was reportedly getting ready for a probable impending bankruptcy. It had been looking for a buyer for large portions of its domestic real estate to keep some stores operating. But, sadly, no deals were made.

In April 2017, Payless filed its initial bankruptcy, shutting out over 700 stores and incurring $435 million in debt. Its return four months later was noteworthy. It’s because many businesses, like Toys R Us, have been unable to prevent total financial ruin. Yet Payless eventually became one of the meagre survivors that boomed back into bankruptcy court.

As more consumers shop online and expect better services, the retail sector has experienced disruption. The adjustments favour big firms like Walmart or smaller, local companies. But it had crushed those businesses in the centre. Local merchants can cater to local tastes. Also, larger retailers can invest in supply chains and online operations.

TJX Companies, the parent company of T.J. Max, has a market value of $62 billion. The shoe retailer DSW has a market capitalization of $2.2 billion. Larger rivals like these have specifically fought against Payless.

According to Chief Restructuring Officer Stephen Marotta,

“The obstacles facing retailers today are widely known. Payless emerged from its prior reorganization ill-equipped to thrive in today’s retail environment.”

“The prior proceedings left the business with too much outstanding debt. Also, it left an excessive store footprint, a yet-to-be-realized system, and corporate overhead structure consolidation,” says the statement.

Its former parent, Collective Brands, was sold to Wolverine Worldwide for almost $2 billion. Also, the private equity companies Blum and Golden Gate contributed to its initial loans. While Wolverine seized ownership of Collective’s other brands, including Sperry Top-Sider, Stride Rite, and Keds, Blum and Golden Gate kept control of Payless.

It blamed its original bankruptcy filing on “antiquated” inventory control procedures. Also, West Coast port strikes slowed shipments before the important Easter holidays. These all resulted in an excess of off-season shoes.

The firm pledged to rely on its strong brand identity in the United States and expansion in Latin America when it made a comeback. According to court records, it was the biggest speciality footwear retailer in the area at the time.

But over the last two years (2017 and 2018), Payless has experienced “unanticipated” delays from its suppliers. The retailer claimed in court documents that, as a result, it was once again compelled to sell off its inventory at low prices. Payless experienced losses of $4 million in 2017 and $63 million in 2018.

Due to a lack of funding, it could not invest in and provide the altogether “omnichannel” experience that would have combined online and offline purchasing. It launched its unified shopping capabilities in 200 U.S. locations or 8% of its total.

Payless is back!

Payless plans to return after filing for bankruptcy protection for the second time and closing all 2,100 of its stores in the U.S. In June 2019, Payless shuttered all remaining locations in this nation. In the future, Payless will return in time for the start of the new school year with a new name and a new website. It plans for hundreds of physical stores.

The footwear retailer’s new website, Payless.com, went live in January 2020. It happened after it had successfully emerged from bankruptcy a second time. In January 2020, the comeback was initially revealed.

In addition to dropping “ShoeSource” from its name, the business revealed in a news release that it will open its prototype store in Miami, Florida. It is the location of its new headquarters.

Over the following five years (as of 2020), Payless intends to open 300 to 500 free-standing stores. There are 700 outlets worldwide. This includes 298 franchises and 412 locations in Latin and Central America unaffected by the bankruptcy.

Payless stated that the company intends to work with well-known individuals and businesses as part of its comeback plan. The company has hired a new top management team.

In 2020, it announced that it would reveal its plan to turn the business around and resume growth in the United States later this year. According to CEO Jared Margolis, the U.S. still represents the “biggest growth opportunity” for Payless. But how the business plans to return there still needs to be determined.

“We aim to make use of Payless’ existing infrastructure, which is best in class. It also includes existing manufacturing and design of goods, distribution, marketing, and strong connections with major footwear manufacturers,” Margolis added. Before this, he served as the CAA-GBG licensing company president.

Five hundred stores may be less than the 2,500 it had operated. But Lee Peterson, executive vice president of thought leadership and marketing at W.D. Partners, believes this is still a sizable footprint. The 700 existing foreign stores will be supplemented by 300 to 500 new locations, per the press statement.

In total, 25 million pairs of shoes were sold in the preceding 12 months. This is according to a January statement from Payless about its foreign locations.

Thus, Payless.com was live, this time with a message saying “Payless is back” on its main page.


Payless CEO Jared Margolis stated, “We saw a chance for the brand to relaunch into the U.S. market. Thus, we can provide our community with the accessible, value-driven products they’ve always sought. This time, it’s going to be across various categories, at a time when value couldn’t be more important.” “Payless is for everybody, and the world deserves to pay less now more than ever.”

The new website sells a variety of brands. This includes Aerosoles, AirWalk, American Eagle, K-Swiss, and Kendall + Kylie. Returns are permitted, but customers “want to cover the costs for the shipping of your return item(s) back to Payless.com,” according to the website. Also, a purchase of $65 is necessary to receive free shipping.

According to the company’s press release, the stores would “reinvent the way we shop.” They will include touchscreen wall panels and smart mirrors in an enhanced store design.

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