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Experts: LI workers will be hurt by closing of Payless

While the chain's bankruptcy won't affect local landlords - who are expected to be able to easily re-lease the shoe store's locations - employees may have a harder time finding new jobs.

Payless will be closing down locations including this

Payless will be closing down locations including this store on Jerusalem Avenue in Massapequa. Photo Credit: Andrew Theodorakis

Kathie Heloskie rushed there as soon as she could, after hearing the news.

Payless ShoeSource is closing all its North American stores, leaving the Seaford resident in a bind for finding affordable, comfortable shoes for work, she said on Tuesday afternoon while standing outside the chain's location in the North Massapequa Shopping Center.

“I work five days a week, eight hours a day, sometimes longer. These are the best shoes for me,” said Heloskie, 67, a front-desk attendant at a hotel, as she held a bag containing  two new pairs of Dexflex Comfort flats she had bought from Payless.

The discount shoe retailer's 30 stores on Long Island will be among the 2,500 North American stores the chain will close starting in March, following  Chapter 11 bankruptcy protection filing by Payless Holdings LLC on  Monday in the U.S. Bankruptcy Court for the Eastern District of Missouri.

Experts expect the losses on Long Island to have a bigger impact on jobs than on long-term store vacancy rates or shoe shopping options.

“The shoes will be bought elsewhere, that’s easy. But the jobs lost to be replaced — not as easy. Tax revenue lost is minimal as footwear sale  and the tax on it will be shifted to other stores,” said Marshal  Cohen, chief industry adviser for the NPD Group Inc., a market research firm in Port Washington.

“So all in all, [a] big loss for LI? Jobs-wise, yes. Revenue-wise, no, except for e-commerce business replacing store business,” Cohen added.

Founded in 1956 in Topeka, Kansas, Payless Holdings employs about 13,700 people in the United States, Puerto Rico, the U.S. Virgin Islands and Guam, as well as about 2,400 people in Canada, according to this week's bankruptcy filing. Only the chain's U.S., Puerto Rico and Canada stores are closing. The vast majority of Payless stores employees work part-time.

Payless Holdings declined to comment on its employee numbers, but Cohen said the stores average five workers per location.

Kimco Realty Corp., based in New Hyde Park, has 39 Payless stores in its tenant portfolio in several states, including four local stores at the North Massapequa Shopping Center, Centereach Mall, Bridgehampton Commons and a small retail center on Merrick Road in Bellmore, said Dave Bujnicki, Kimco’s senior vice president of investor relations and strategy.

When Payless filed for bankruptcy previously, in April 2017, the company modified its rents, so the chain pays Kimco just under $21 per square foot for its stores, while average small-shop rent is $28, Bujnicki said.

“They’re about 25 to 30 percent below market average. And with the high demand for small-shop [locations] from health and wellness, restaurants … we feel good about the ability to re-lease these spaces,” he said.

The vacancy rate for Long Island shopping centers between 10,000 and 350,000 square feet in the fourth quarter of 2018 was 7.5 percent, the highest since the second quarter of 2000, according to economic analyst Cody Bond of Manhattan real estate information company Reis Inc.

But most of the Payless stores on Long Island are in shopping centers with strong traffic and high demand from potential tenants, including the Garden City Park Shopping Center, Expressway Plaza in Farmingville and Southport Shopping Center in Shirley, said Kenneth R. Schuckman, president of Schuckman Realty Inc. in Lake Success. That firm markets Expressway Plaza for leasing.

Malls, however, such as Sunvet Mall in Holbrook, will have a tougher time placing new tenants in their Payless stores because those properties have lost many of the anchor stores that drive traffic and they have higher occupancy costs, he said.

Payless' 2017 bankruptcy reorganization was not effective enough to stave off a shutdown, Stephen Marotta, who was appointed in January as Payless’ chief restructuring officer, said in a statement.

"The prior proceedings left the company with too much remaining debt, too large a store footprint and a yet-to-be realized systems and corporate overhead structure consolidation,” he said.

Payless facts

Founded: 1956

North American stores: 2,500

Long Island stores: 30

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