Shoe retailer Payless to explore options, including sale

U.S. discount retailer Payless ShoeSource Inc has hired an adviser to help evaluate strategic alternatives, including a sale or restructuring, less than 18 months after it emerged from bankruptcy, people familiar with the matter said on Tuesday.

The action underscores the efforts Payless is making to avoid a second bankruptcy, as the popularity of online shopping on websites such as Amazon.com Inc continues to challenge the viability of many brick-and-mortar retailers.

Payless has hired investment bank PJ Solomon, the sources said. The chain, a fixture in malls and strip malls known for its shoes costing less than $30, is also considering shuttering at least one-third of its approximately 3,000 stores, one of the sources added.

The retailer may also consider filing for bankruptcy, the sources said, cautioning that no decisions on the company’s future have been made. Payless exited bankruptcy in 2017 with about $400 million in loans, after slashing its debt pile from over $800 million, according to court papers.

The sources asked not to be identified because the deliberations are confidential. Representatives for Payless and PJ Solomon did not respond to a request for comment.

Payless is not the first retailer to face bankruptcy for the second time in almost as many years. Reuters reported late last year that kids clothing store Gymboree Group Inc was also considering filing bankruptcy again, one year after exiting court protection from creditors.

Payless bucked a trend because it managed to successfully emerge from its 2017 bankruptcy, while many others had to liquidate. As part of the bankruptcy, a group of creditors, including hedge fund Alden Global Capital LLC, took over ownership, according to bankruptcy court records.

The chain exited bankruptcy with a plan to focus mainly on bricks-and-mortar sales, with an emphasis on Latin America and Asia, Reuters reported at the time.

It aimed to open four mega stores in the United States and invest $234 million over five years in systems improving its management of inventory, Reuters reported.