Payless Shoes caught on the back foot by shoe downturn and placed in administration

Payless Shoes has become the latest corporate victim to succumb to poor consumer confidence, with the 220-plus strong discount footwear chain now placed in voluntary administration.

The collapse of the business highlights turmoil not only in the fashion industry and footwear, which have suffered collapses and poor sales during the past year, but also the downturn in retail overall.

WHK principal David Gordon says while there are some categories of footwear that are doing extremely well, others in the discount space are struggling to make an impact.

“One of the other issues is that the stores are a bit old, and because of financial difficulties you haven’t seen them put much money into the stores.”

“They’ve just reached a point where problems continue to get worse and worse … and it all catches up with you.”

The move comes after two other significant retail chains, Darrell Lea and GAME, were also placed in administration during the past few months. Both companies announced plans to close all stores.

Insolvency group Jamieson Louttit & Associates was called in last week, following the resignation of the managing director. Deloitte partners David Lombe and Vaughan Strawbridge were appointed as administrators on Friday.

Both were contacted this morning, but neither was available to comment before publication.

The company is one of the largest footwear businesses in the country, with more than 220 locations across the country.

Gordon says it isn’t necessarily the footwear industry that’s suffering, but rather the space of retail Payless Shoes had carved out for itself.

“There are certain categories in footwear that are doing quite well. Those include retailers that are catering for the older market who require more footcare, including people over 45 who need decent shoes, and they’re not afraid to spend more.”

“The others that are doing well are the fashion types, and that includes even the less expensive fashion stores.”

Payless, Gordon says, operated in a “discount no man’s land”.

“The only real factor they have to offer is that they’re offering shoes at a very good price. But if that’s all you’ve got, people aren’t going to spend.”

Westfield recently reported footwear sales are down 1.8% for the 12 months to June 2012, and were down 2.3% in the second half of that same year. Given shoes can often be a discretionary purchase, many customers will opt to wait for longer than usual when deciding to purchase new shoes.

Payless Shoes faces stiff competition, not only from cheaper players like Kmart and Target, but specialised retailers like Athlete’s Foot – which has been one of the strongest performing retailers in the past few years.

Gordon says the connection to the customer is simply lost.

“The message was, come to us and we’ll give you cheap footwear. But people don’t see that as a trigger to purchase shoes anymore.”


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