Payless, a nationwide discount shoe retailer, has won approval from a bankruptcy court to begin closing its 2,500 stores in North America, effectively putting 16,000 employees into eventual unemployment, according to reports.
The court approved the shoe company’s first day motions related to the bankruptcy filing. Payless has stores in the U.S., Canada and Puerto Rico, and also a robust online operation. The company’s stores outside of North America are not part of the proceedings.
The company was previously in bankruptcy two years ago, but cut debt amid court protection to survive. This time the court also allowed the company to buy more inventory for a going-out-of-business sale, and approved some of the company’s requests to continue operating during the liquidation.
The current plan is to close all Canadian operations by April 30, and all U.S. locations by May 21. In order to retain some workers through the closings, the company will spend about $8.6 million in bonus pay to workers.
Payless will honor gift cards and store credit until March 11, and it will allow returns and exchanges that were made before Feb. 17 until March 1.
“We are pleased that the Court has approved our First Day motions, which are a crucial step in our execution of an efficient wind-down of our North American stores and e-commerce operations, and to maximize the value of the merchandise being sold,” said Stephen Marotta, chief restructuring officer for Payless.
Stephen Zide, a lawyer who represents short-term lenders, said the firm’s operations since it previously filed for bankruptcy were a “total failure,” according to Bloomberg.
“We have no idea how this happened,” Zide said, calling for an investigation. He said that Alden Global Capital, the majority stockholder in Payless, didn’t replace key personnel when old ones left, or replaced them with unqualified Alden workers.
Allan Brilliant, a lawyer representing Alden said, “Alden is part of the solution, is the most disappointed, and did nothing wrong.” The lawyer said Alden kept a good distance from Payless and the agreement between the two companies “benefited the company more than Alden.”