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Payless store
A Payless location.
Payless store

Will Payless ShoeSource Inc. become the first major retailer to add its name to the bankruptcy court docket in 2017?

The evidence has certainly been mounting in that direction.

This week, several of Payless’ major vendor partners told Footwear News exclusively that the retailer has fallen months behind on its bills with their respective firms. That news came just days after Reuters reported that the Topeka, Kansas-based firm has been meeting with debt-restructuring attorneys to address its approximately $665 million in debt.

And, today the company announced that it has laid off 165 employees, or 2 percent of its total associate base.

Payless ShoeSource regularly reviews its organizational structure to ensure that we continue to meet the needs of our business, our customers, our community and our associates,” a company spokesperson told FN in an email statement. “While today has been a difficult one for the Payless team, we believe these are the right decisions for the company to be successful in a dramatically evolving retail landscape.”

FN also exclusively revealed in September Payless’ plans to close between 350 and 500 of its 4,400 stores within the next three years. At the time, Payless CEO Paul Jones said the company’s resolve to shutter several hundred doors was a proactive one.

High rental costs haven’t impacted us as much in terms of putting pressure on company sales or driving pricing changes,” Jones said in September. “But it does make us look a little harder at profitability at the store level. Stores have to be more productive now to remain viable locations in our portfolio, or rent rates have to be more competitive for us to remain in a particular location.”

Payless’ challenges come at a time when debt-saddled brick-and-mortar retailers are struggling with high real estate costs, intense pressure from e-commerce, and consumer shifts toward experiential spending. Meanwhile, the rise of off-price retailers such as DSW Inc. and TJX Companies Inc. — owner of the TJ Maxx and Marshalls chains — has taken away significant market share from the firm.

Last year, mall staples Pacific Sunwear of California Inc. (PacSun) and Aéropostale Inc. filed for Chapter 11 protection in a bid to address their mounting debts. While both firms would emerge from the process and move forward with their operations, sporting goods firms The Sports Authority, Sport Chalet and City Sports were casualties of the bankruptcy process.

After 16 years as a publicly traded firm, Payless went private in 2012 under the ownership of private equity firms Blum Capital Partners and Golden Gate Capital.

The retailer sells several private label brands including Champion, Fioni, Airwalk and American Eagle.

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