Payless Inc Files for Chapter 11 Bankruptcy

The rumors that predicted Payless ShoeSource would go bankrupt in the near future are true: the major shoe retailer officially filed for Chapter 11 bankruptcy protection on April 4, 2017.

However, this footwear business isn’t alone. According to CNBC, the number of retailers filing for protection is on its way to reaching the highest since the Great Recession.

Restructuring plans for Payless

By facilitating the financial and operational restructuring of the company, Payless hopes that the bankruptcy process lets it position the company for growth in the future. In a statement, Paul Jones, Payless chief executive officer, expressed his awareness of the change in shopping patterns that has occurred recently, and he further acknowledged that he knows the decision to file for bankruptcy protection is the only option available to the company.

“This is a difficult but necessary decision driven by the continued challenges of the retail environment, which will only intensify,” he said. “We will build a stronger Payless for our customers, vendors and suppliers, associates, business partners and other stakeholders through this process.”

The company stated that it’s seeking immediate relief from the court to pay pre-filing wages, salaries, benefits, vendors and suppliers, and honor customer programs. It has also negotiated agreements with some of its existing lenders, providing Payless with up to $385 million of debtor-in-possession financing.

Is the end of retail shopping near?

It’s no surprise that Payless has filed for bankruptcy. According to CNBC – before the shoe store finally filed – nine big retailers had already filed for protection since the beginning of the year, which is the same amount that filed in 2016. If this pace keeps up, 2017 may be the year that surpasses 2009 – when 18 big retailers filed for protection.

The explanation is simple: We’re living in the digital age, where technology offers more convenience to many of life’s daily tasks than ever before. Shopping is one of them. In 2016, comScore and UPS’ annual survey found that 51 percent of shoppers polled make their purchases online. This is a 3 percent increase from 2015, and a 4 percent increase from 2014. With the amount of brick-and-mortar stores that have already filed for bankruptcy, it isn’t unrealistic to anticipate 2017’s number of online shoppers will be even higher.

Stores must strategize before it’s too late

Additionally, research by Moody’s Investors Service found that 19 companies in the agency’s retail portfolio owe nearly $5 billion in debt through 2021. Of the debt, roughly 40 percent of it is due by the end of next year. The shift in shopping trends is likely to blame, but the current rise in interest rates isn’t helping. If they continue to grow, companies will have a harder time finding ways to reconstruct business, according to Murali Gokki, managing director in AlixPartners’ retail practice.

“If interest rates do go up it’s going to be harder for them to find more favorable options,” he warned CNBC. “The clock is ticking.”

Even though statistics show that more consumers are choosing to shop online, that doesn’t mean there aren’t people out there who love shopping in brick-and-mortar stores. To keep up with the change in shopping trends, retailers must prioritize e-commerce sales, but they also need to find ways to keep in-store shoppers engaged. For example, Sephora, a high-end cosmetics retailer, gives customers the option to try out cosmetics before making a purchase, according to Fortune. Wegman’s, a privately-owned grocery store chain, trains its employees at a degree that ensures customers have the best experience possible while sifting through the aisles. For those distressed retailers to stay afloat, they must develop strategies that allow them to create a unique experience for shoppers while developing a strong online presence.

Are you a ?  Have you been sued by a bankrupt?  If you have any questions about your rights, please contact me, , at 201-806-3364.