Payless Shoesource bankrupt, closing Los Banos store

Payless ShoeSource has filed for bankruptcy and will close nearly 400 stores, including locations in Los Banos, Modesto and Fresno, the company said.

“This is a difficult, but necessary, decision driven by the continued challenges of the retail environment, which will only intensify,” CEO W. Paul Jones said in a statement.

As part of its filing for Chapter 11 bankruptcy protection, the Topeka, Kansas-based retailer said Tuesday that it will shutter nearly 400 “underperforming” stores. It has approximately 4,400 stores in more than 30 countries and was founded in 1956.

Local stores included on a closure list include the location at the Los Banos Creek Shopping Center, the Ceres Plaza Shopping Center and three locations in Fresno: Manchester Center; Fulton Mall; and the store at 3235 N. First St., near Shields Avenue.

The list did not include either of the two locations in Merced or the store in the Applegate Ranch Shopping Center in Atwater.

As of Wednesday, the store in Los Banos was open, according to an employee who answered the phone but was not authorized to speak on behalf of the company.

Payless has not announced store closure dates, which will vary depending on the liquidation process, corporate spokeswoman Meghan Spreer said in an email Wednesday. The company has hired a third party to oversee the process for the closing locations, including specific discounting and promotional plans, she said.

The stores are honoring gift cards, according to Payless’ statement about the bankruptcy.

Payless’ plan for reorganization including steps to reduce its debt by almost 50 percent and lower its interest payments. It said some of its lenders have agreed to make available up to $385 million to keep the stores running.

"We are confident that this process will also enable us to leverage Payless' existing strengths to succeed," Jones said.

Brick-and-mortar locations such as Payless’ stores have been among the retailers hurt by continuing growth in online shopping. A 2016 study by HRC Advisory found operating earnings as a percent of sales had declined by up to 25 percent due to a shift from in-store to online sales.

“Retailers haven’t yet figured out how to grow and maintain brick and mortar profitability while trying to keep up with the likes of Amazon in today’s increasingly digital environment,” Anthony Karabus, CEO of the retail advisory firm, told the industry publication Chain Store Age.

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 rate since 2009 and named Payless as one of the retailers, according to an Associated Press report.

Already this year, The Limited closed all 250 of its remaining stores and teen retailer Wet Seal said in January it would close its 171 stores.

This story was originally published April 5, 2017 at 5:29 PM with the headline "Payless Shoesource bankrupt, closing Los Banos store."