Payless Bankruptcy Calls Into Question The Strength Of Discount Retailers
Despite the woes plaguing the retail industry as a result of e-commerce, shoppers still love a good in-store discount, making Payless Shoe Stores' planned bankruptcy somewhat of a surprise.
The discount footwear retailer is planning to file for Chapter 11 protection next week, according to people familiar with the matter, shuttering 400 to 500 stores before proceeding with the restructuring. That's roughly 10% of the retailer's 4,000-store portfolio, Bloomberg reports.
While major department stores like J.C. Penney and Macy's are on a shuttering frenzy, outlet malls that tend to sell products at a discounted price are thriving and expanding. This aligns with the growth experienced by discount retailers and grocers that as of late last year have been gaining market share.
U.S. discount retailers surpassed traditional retailers in sales/SF last year, JLL reports. T.J. Maxx and Marshalls pulled in roughly $304/SF as of October 2016, while traditional department stores like Macy's averaged roughly $158/SF. The same goes for German grocery store Aldi, which is experiencing an influx of customers thanks to prices that are about 40% cheaper than traditional grocers and big-box stores.
If the struggles of Payless are any indicator, discount stores may need to amend their business models to keep current and adapt to accelerating online trends.
