Iconic Canadian retailer Reitmans, which has been in existence for close to 100 years, has obtained protection under the Companies’ Creditors Arrangement Act to “facilitate its operational, commercial, and financial restructuring” as it reacts to the negative impact of the COVID-19 (coronavirus) pandemic.
The company, which is a leading ladies apparel retailer with retail outlets throughout Canada, employs approximately 6,800 people and operates 576 stores consisting of 259 Reitmans, 106 Penningtons, 80 RW & CO., 77 Addition Elle, and 54 Thyme Maternity.
“Filing for protection under the CCAA is truly the hardest decision we have had to make as an organization in our almost one hundred years of history, but this pandemic has left us no choice – we believe that this is the only course of action to ensure we remain successful in the future,” said Stephen Reitman, President and Chief Executive Officer of Reitmans, and grandson of the company’s founders, in a statement.
“We have many strengths: we’re the Canadian leader in specialty retail, we have a strong leadership team and talented employees, great national brands, an omnichannel retail strategy with robust online sales, and most importantly, loyal customers who have been shopping on our websites at a record pace since the start of the pandemic. We will dedicate ourselves to the restructuring of our business, and then we’ll carry on with what we do best: offering affordable fashion and great service to our customers and communities for many years to come.”
The news on Tuesday comes as many retailers across North America struggle with the devastating impact the pandemic is having on the sector. Also on Tuesday, Pier 1 Imports announced that it has filed a motion seeking Bankruptcy Court approval to begin an orderly wind-down of the company’s retail operations as soon as reasonably possible after store locations are able to reopen following the government-mandated closures during the COVID-19 pandemic. J.C. Penney also announced recently it will permanently close nearly 30 percent of its 846 stores as part of a restructuring plan under bankruptcy protection.
Bruce Winder, a retail analyst at Bruce Winder Retail, said this period is the acceleration of retail as a number of forces being felt in retail before the pandemic were hurting companies like the ones that are going bankrupt right now.
“What this has done is this has accelerated those changes. You look at some of the stores that are closed that are going for it (creditor protection and bankruptcy) they were weak anyways. The value proposition was weak. They were not best in class. A lot of them have huge debt on their balance sheet because they were owned by venture capital or private equity,” said Winder. “So they didn’t have the balance sheet to weather the storm. Their business model was outdated. In other words, it wasn’t sort of modern and contemporary.
“So they were going to fall anyway. All this did is push them over the edge quicker.”
Winder said more of this will be taking place in the coming days, weeks and months.
“Sadly you’re going to start to see more of this happen in the next few weeks and even months and it’s all a function of how strong is their balance sheet, how patient are their investors, and where do they fall from a category standpoint. This year will be the story of bankruptcies in Canada, in the U.S. and around the world where you’re seeing the brands who are weaker, the brands who have poor balance sheets, old business models, many of them, not all, are going to have to close down and enter Chapter 11 (U.S.) or in our case (Canada) CCAA.
“It doesn’t mean that they’re all gone. Some of them will come out of it leaner and meaner but I would suggest that most won’t.”
In a news release, Reitmans said the CCAA process will allow the company to implement a restructuring plan that addresses the impacts of COVID-19 in order to build a more resilient organization that will be positioned for long-term success.
“Throughout this process, the Company will remain fully operational through its brands’ e-commerce websites; all physical stores will re-open in conformity with provincial and regional governmental guidelines. As the restructuring gets underway, the Company will look to optimize its retail footprint in Canada to emerge from this process in a stronger state,” it said.
“The retail landscape has been in constant flux over the past several years, resulting in the evolution of consumer behaviour and purchasing patterns. Reitmans has implemented a successful digital-first strategy, amongst other omnichannel initiatives, to drive sustainable growth in this evolving retail environment. However, the COVID-19 pandemic forced the closure of all retail stores, and pushed the retail industry into a new and unknown era.
“In conjunction with its filing under the CCAA, the Company has undertaken a process to secure an interim financing (DIP) that shall provide the required liquidity to meet all of the anticipated needs of Reitmans and its brands to continue normal operations following the opening of its retail locations and throughout the CCAA process. Reitmans is also in discussion with lenders with respect to a permanent financing upon exit from the restructuring process.”
In its fiscal year 2020 which ended February 1, Reitmans reported sales decreased by $53.5 million or 5.8 percent, to $869.5 million from fiscal year 2019. Net loss for fiscal 2020 was $87.4 million ($1.56 basic and diluted loss per share) as compared with $6.8 million net earnings ($0.11 basic and diluted earnings per share) for fiscal 2019.
“The firm has been a pillar within the retailing fabric of the country for a generation and the problems they face are common in these challenging economic times. The firm had faced challenges in the recent past related to unproductive locations, high rents, changing shopping patterns and shifting demographics,” said Kehoe, a veteran of more than 40 years in the industry and broker/owner of Fairfield Commercial Real Estate in Calgary.
“The face of shopping centres in Canada will be forever changed as fashion mainstays like Reitmans with their numerous retail banners will emerge from restructuring with a significantly reduced footprint. Retailing is always changing and evolving and Reitmans will carry on in an era of the omnichannel environment.”