It is clear that business is dying for the retail industry. Fewer and fewer people are visiting balls and are considering shopping for clothes, food, and other items online mostly through Amazon. On Tuesday, Payless Shoe Source filed for Chapter 11 bankruptcy protection. As part of the filing, Payless will close nearly 400 stores as the company attempts to balance their debts and restructure their business. The company has over 4000 stores in more than 30 different countries, according to their website.
In a statement, Payless CEO said that this is a “difficult, but necessary, decision.” The CEO continued by saying that the decision to file for bankruptcy only highlights the new challenges facing retail businesses.
“We are confident that this process will also enable us to leverage Payless’s existing strengths to succeed,” Jones said. “These strengths include our ability to produce significant free cash flow and, even last year, flat [earnings before interest, taxes, depreciation and amortization] despite unprecedented challenges and in contrast to many retailers.”
Rumors hit Wall Street and the business community that Payless will soon file for Chapter 11 bankruptcy due to the amount of debt the company has accrued as well as weak sales. Two months ago, Moody’s Investors Service downgraded company to a negative pointing out and over $500 million loan that will come to do in the next four years.
It is important to highlight the fact that Payless is the 10th retailer to file for Chapter 11 bankruptcy this year, illustrating how the industry is struggling to remain open since 2009. According to CNBC, 18 retailers have resorted to bankruptcy due to declining sales and high debt.
Payless listed liabilities to one to $10 billion and that the company currently has between $500 million-$1 billion in assets. As part of the company’s restructuring plan Payless has entered into an agreement with certain parties to reduce its debt by nearly 50%. This agreement has designed to lower their interest costs and provide additional capital to the company.
According to CNBC, here’s a list of business that filed for bankruptcy so far:
- Gordmans Stores
- Gander Mountain
- General Wireless Operations (formerly RadioShack)
- BCBG Max Azria
- Michigan Sporting Goods Distributors
- Eastern Outfitters
- Wet Seal
- Limited Stores