NEW YORK - Shoe chain Payless ShoeSource has filed for Chapter 11 bankruptcy protection, becoming the latest retailer to succumb to increasing competition from online rivals like Amazon (AMZN).
The Topeka, Kansas-based retailer said Tuesday that it will be immediately closing nearly 400 stores as part of the reorganization. It has over 4,400 stores in more than 30 countries and was founded in 1956.
Payless plans to reduce its debt by almost 50 percent, lower how much it pays in interest and line up funds. The company says some of its lenders have agreed make available up to $385 million to keep the stores running.
“This is a difficult, but necessary, decision driven by the continued challenges of the retail environment, which will only intensify,” said Payless CEO Paul Jones in a statement.
In the press release announcing the Chapter 11 filing, the company said: “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.”
Shoppers are increasingly shifting their buying online or going to discount stores like T.J. Maxx (TJX) to grab deals on designer brands. That shift has hurt traditional retailers, even low-price outlets like Payless.
In fact, Moody’s Investor Service said earlier this year that the number of “distressed” retailers -- those with cash problems and lots of debt that are facing strong competition -- is at the highest since 2009. It named Payless as one of them.
Several retailers have closed stores or gone out of business in 2017. The Limited closed all 250 of its remaining stores early this year. It had operated nearly 400 stores at the end of 2000. Teen retailer Wet Seal in January said it would close its 171 stores.