Debtwire: Payless lenders prep for downward spiral
Payless, which emerged from bankruptcy last August, may be heading back down a financial spiral. Lenders are reportedly in the early stages of organizing, two sources familiar with the situation told Debtwire. Payless did not immediately respond to Retail Dive's request for comment.
Since exiting bankruptcy, the shoe retailer's earnings have fallen short of its forecast, the sources told Debtwire. For the fiscal 2018 quarter ending Aug. 5, sales plummeted $15 million year-over-year to $426 million, while sales in the quarter fell short of budget by $26 million, the sources also said.
Same-store sales rose in the quarter by just 3.3%, far lower than the 9.9% projected increase, with reduced traffic particularly in North America, Debtwire reports.
Payless is still struggling to regain its footing in life after bankruptcy, but its financial situation may be masked to consumers by recent efforts to pump up its image. Late last month, the shoe retailer launched the first of nine holiday pop-up stores in large industrial spaces with "a more modern look and feel than traditional Payless brick-and-mortar stores." It's also getting media buzz for a recent prank that involved taking over a former Armani store with a "luxury" store concept called Palessi. But shoppers and creditors may not be punk'd in the long run as its financial stability crumbles.
Last year, the retailer emerged from bankruptcy with a plan agreed to by lenders, who now largely own the company. Payless is among the more than 15% of retailers acquired by private equity firms over the past 15 years that have filed for bankruptcy.
In 2012, the company’s former parent, Collective Brands, was taken private in a $1.3 billion transaction involving private equity firms Golden Gate Capital, Blum Capital Partners and Wolverine Worldwide. That left the retailer with a debt pile of $838 million going into bankruptcy. As it exited, the retailer said it would close 900 stores and shed $435 million in debt. With a much smaller footprint going forward, Payless is struggling to drive the kind of results it needs to stabilize the business.
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