Payless Suppliers Getting More Aggressive As Concerns Mount They Won’t Get Paid

Payless, the soon-to-be-bankrupt shoe retailer, is seeing hostility from its vendors grow more broadly as suppliers are growing more concerned they won’t get paid for the good they supply to Payless.

As a result, Bloomberg reported suppliers are engaging in more aggressive actions to protect themselves, with some saying they are owed hundreds of millions of dollars.

“Vendors are getting extraordinarily nervous,” said Hilldun Corp. Chief Executive Officer Gary Wassner, whose firm finances fashion suppliers in the report with Bloomberg. He said he received two or three extra calls daily from concerned manufacturers that sell to retailers and not only low-end ones. As more consumers are turning to online marketplaces like Amazon to get their shopping done, American retailers are closing their doors at a record pace. According to Bloomberg, while high-end stores are still performing well, the Class C and D shopping centers are suffering. Some of the latest casualties include Payless, which recently filed for bankruptcy and announced plans to close 400 locations; Ralph Lauren, which is shutting down its flagship Fifth Avenue Polo store; and teen-apparel retailer rue21, rumored to be filing for bankruptcy sometime this month. More recently Bebe Stores is gearing up to close all its stores and Sears Holdings warned investors there was “substantial doubt” about its ability to keep operating, noted Bloomberg.

Those bankruptcies hit suppliers a lot because they are down low in the order when it comes to who gets paid. Secured creditors get paid before vendors.

“Their unsecured status pushes them down the line,” said Steven Ruggiero, head of research at financial firm R.W. Pressprich & Co. in the Bloomberg report. As for Payless, Bloomberg reported that people with knowledge of the matter said dozens of Chinese factories have been seeking payments for products they shipped as far back as August. Payless owed lenders around $838 million when it filed for bankruptcy protection earlier in April with an additional $240 million owed to trade creditors, which typically means suppliers.