Mass Bankruptcies and Store Closures Expected in Canada by Early 2021: Experts

Date:

Share post:

If you think it’s bad now for the retail sector in Canada, you ain’t seen nothing yet — just wait until early 2021.

THIS MAY BE THE LAST HOLIDAY SEASON FOR MANY RETAILERS

For many, the day of reckoning could come following the holiday season.

“For many retailers, sadly, this will be their last holiday season. For those that were caught with outdated business models, weak balance sheets, less than exciting brands, short-term investors or near-sighted landlords the holiday will be their swan song,” said Bruce Winder, author of RETAIL Before, During & After COVID-19 and President of Bruce Winder Retail.

“Some will have a hard time securing inventory for the all-important fourth quarter with cash in short supply and credit tapped out. Faced with stingy consumers, fading government subsidies and in some cases mounting deferred rent due, liabilities will exceed assets and they will enter CCAA (protection from creditors) and in many cases liquidate. And what a liquidation it will be. Clearance will be everywhere putting pressure on any remaining retailers as many wind down operations in the fall and use December to generate cash from inventory blow-outs.

“Some will live to fight again. Perhaps they will be bought by private equity and the truckloads of cash they are sitting on or scooped up by a landlord who wants to save them. Some could be acquired by one of the mega retailers looking to pick up a distressed brand. They will exist in a different form come the new year. Others will scrape by with e-commerce running full tilt and store traffic lower than last year but enough to pay the bills. They will regroup for holiday 2021 which will be a better time to be a retailer.”

Winder said Amazon will be Canada’s new holiday store and that it will give Canadian Tire, Walmart, and Costco a run for their money. There will be many late packages though, arriving after December 25 as delivery capacity will be no match for online demand, he added.

John Moss, Senior Vice President of Retail Leasing and Investment for CBRE Limited in Calgary, said there will be a reckoning.

“Retailers will feel more significant hardship by the end of the year. With government programs expiring, including the provincial eviction moratorium, tenants will realize how weak their financial positions are. Sales will continue to be weak,” he said.

“Come Christmas holiday season, it is unlikely corporations will have company functions because of COVID. This will be detrimental to most hospitality tenants. Come the new year, retailers will liquidate any retail inventory and shut their doors because they can’t hold on anymore.”

EXPERT SAYS ‘CATASTROPHIC’ TREND IS UNFOLDING WITH STORE CLOSURES DUE TO COVID-19

Craig Patterson, Editor-In-Chief and Founder of Retail Insider, described the trend in store closures as “catastrophic”. He did a tally in the early part of the year that indicated more than 1,000 store locations would be closing this year in Canada. COVID-19 has simply accelerated the financial challenges retailers were already facing.

“Now we’re seeing a fairly substantial number of bankruptcy filings. That doesn’t necessarily mean that the retailers will be going away, but some will. Others are restructuring. I was told that most retailers in this country have taken on a bit of a restructuring in some form. It doesn’t mean that they’ve necessarily filed but they’re certainly looking at their operations,” said Patterson.

“Overall, what I’m thinking, having talked to brokers, landlords, retailers, we are starting to see closures in the summer here. At the same time, there are government supports which have helped keep businesses afloat at least for now.

“But when those supports go away, I think we’re going to see more closures. Into the fall, I think we’re going to see more of this. We’re going to see more bankruptcy filings. Some will be household name retailers. From there we’re going to see the December holiday shopping season which some retailers will look to hopefully recoup some losses and maybe keep operational. But depending on things like a second wave, we don’t know where that’s going to go. I think January of 2021 is going to be a blood bath. I think we’re going to see a substantial amount of store closures in Canada — probably the most we’ve seen in our lifetimes in such a short period of time.”

EXPERT SAYS 10 YEARS OF CHANGE HAS OCCURRED IN THE PAST 7 MONTHS DUE TO COVID-19

Michael Kehoe, Broker/Owner of Fairfield Commercial Real Estate in Calgary and a veteran of the industry, said retail is always changing and evolving, and we have seen 10 years of change in the past seven months in this time of accelerated disruption.

“Although we are in the thick of the transformation of the consumer real estate and the retail industry, we are still in the birth canal of this process and will be well into 2021. Many retailers and building owners are struggling to cope with the changes and an unknown future that will be either terrifying or exciting as we strategize for ‘what could be’ for the retail future in Canada,” he said.

“As the structures we have come to know and rely on seem to be crumbling before us, the future can either add to the fear or it can inspire the industry with new ideas and innovative possibilities. 2021 will see stores and restaurants continue to close and new ones will open. Building owners and their lenders will adapt and governments will need to get out of the way so as not to impede or delay the transformation of retail properties as they enter a new era to better serve the consumers in the markets where they are situated.

“Shopping centres and the concept of organized retail is the greatest entrepreneurial development in human history and both sides of the tenant, landlord equation will continue to be inspired by the challenges and the unknown trajectory of the future. The consumer real estate industry was built on relationships and the major adjustment in this intense time of change and unpredictability will be centred around the reorganization of relationships throughout the consumer real estate transactional chain.”

According to the most recent Canadian Federation of Independent Business survey, one in seven Canadian small businesses (158,000) are at risk of closing. The survey said 62 percent of small businesses are fully open; 37 percent are fully staffed; and only 26 percent are making normal sales.

6 COMMENTS

  1. I beg to differ….Amazon was horrific with delivery during the height of the pandemic and Costco, Canadian Tire and Walmart were there for consumers. I refuse to spend one dime with Amazon, even if they guarantee it in an hour!

  2. Private Equity will not bother with retail it is a hands off this sector. CCAA is limited to those with $5 Million or more in liabilities and the cost of a restructuring would be prohibitive to already cash strapped retailers. Small and mid sized retailers will disappear with silence, it will be the only thing that saves larger players. I believe what’s also important is the liquidity of real estate developers you can’t service debt without tenants.

  3. Thing is, internet is where its at now. Shopping online has greatly expanded. Even the retailers that were in malls before are seeing that they can sell online. Making a profit with little overhead costs.

  4. Like it or not online shopping is here to stay. The days of the mall are limited and covid has only expedited the eventuality of the “mall” culture. Future malls will have to be smaller and more specific to the local population. Covid will not be the last virus to affect us and the world has to learn to adapt to proper protocols. This is not a temporary situation it will continue now for years to come. How we learn to deal with it is the real test. Retailers and consumers alike will have to adapt one way or the other.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

More From Retail Insider

Iconic Flo’s Diner in Toronto’s Yorkville Forced to Close After 33 Years Amid Landlord Dispute 

Retail Insider interviewed Flo’s co-owner who discusses the “heart wrenching” situation where he is being forced to close his business that began on Bellair Street in 1991.

Anatomy of a Leader: Teresa Spinelli, Owner of Alberta-Based Italian Centre Shop Ltd.

Spinelli discusses her leadership of the popular retailer which has expanded over the years, describing how she struggled to run the company at first and grew to love it.

Upscale Canadian Fashion Brand SMYTHE Expands with New Standalone Calgary Store [Interview/Photos]

It's the second store location for the Toronto-based brand, which is seeing success with its exclusive womenswear collections.

Toronto’s CF Sherway Gardens Hits Sales Milestone with Exciting Retail Growth and Future Plans [Interview]

The shopping centre is adding new retailers as sales per square foot hit an all-time high, with plans to re-tenant Nordstorm as foot traffic grows following Eataly's opening in the mall a few months ago.

ECS Coffee Opens Canada’s Largest Coffee and Espresso Equipment Gear Showroom and Retail Space in Toronto [Interview]

The new Etobicoke location is unique to Canada if not North America, according to its founder, with coffee roasting, equipment showroom, over 500 varieties of coffee, Youtube studio and various in-store experiences. He has plans to expand the concept nationally.

New Loblaws City Market Opens in Vancouver’s ‘The Post’ Building, Adding Grocery Competition to the Downtown Core [Podcast]

Craig and Lee discuss the opening of a new Loblaws City Market in downtown Vancouver's renovated Post building, and they explore its potential impact on local grocery shopping.

Loblaw Announces $2 Billion Investment in Canada for 2024 with Dozens of New Stores and 7,500 New Jobs [Expert Comment]

The retail behemoth will be growing substantially this year, following backlash over profits as inflation continues to impact Canadians.

Dubai-Based Asian Street Food Concept ‘Wok Boyz’ Expands into Canada with Plans for Multiple Locations [Interview]

The company's founder says the popular concept, with personalized meals, has an opportunity to grow substantially with its high-quality ingredients and theatrical flare, complete with fiery customer-facing woks.

Calgary Surge Basketball Team Launches Innovative Pop-Up at CF Chinook Centre to Boost Community Engagement [Interview]

The retail activation, which opened this month, is resulting in heavier foot traffic in a quieter part of the mall.

Upscale Pusateri’s Fine Foods to Close Yorkville Grocery Store in Toronto After 20 Years

The 5,500 square foot store opened to much fanfare in 2003, with valet parking, private chefs and pricey goods. 

Loblaw and Walmart Could be Forced to Adhere to Grocery Code of Conduct with Legislation [Op-Ed]

Sylvain Charlebois says that it's rare for all of Canada's political parties to agree, signalling a shift that could force grocers to comply amid record inflation.

Factory Direct to Shut All 14 Stores Amid Bankruptcy, Liquidation to Begin Saturday

The company, founded in 1995, is one of Canada’s largest privately owned discount retailers which struggled with declining sales and increasing costs following the pandemic.

What to Expect for the Canadian Retail and Hospitality Sectors in 2024 [Video Interview]

Michael Kehoe provides an expansive overview of what's expected for Canada's retail industry in 2024, and how the commercial real estate industry is becoming more dynamic than ever.

Anatomy of a Leader: David Lui, CEO of Kit and Ace and Co-Founder of Unity Brands

Lui has an extensive background in retail with over 30 years of experience and is known for his award-winning brand transformations, e-commerce and digital knowledge along with his passion for scaling businesses.

Robotic Retail Gaining Traction in Canada, But Some Consumers are Being Left Behind [Op-Ed]

Automated retailers without in-store staff are opening across Canada, such as Aisle 24, RC Coffee and PizzaForno -- but consumers without smart phones, credit cards, or with vision issues may not be able to access these retailers says a researcher.

Oakridge Park Announces 1st Luxury Retailers, Attracting Top Brands to Vancouver [Podcast]

Craig and Lee discuss the latest Oakridge Park announcement, highlighting the addition of luxury and upper contemporary brands to Vancouver's retail landscape and how it will impact downtown.

Interview on What it Takes: Lee Valley Tools Named Top Retailer in Ontario for Customer Service

The company's COO Jason Tasse discusses the retailer's secret sauce for having an engaged workforce, while also discussing plans to expand with more stores and retail concepts.

Survey Data Shows Canadians will Prioritize Romance Over Budget Cuts This Valentine’s Day [Interviews]

David Litwin of Moneris notes that Valentine's is an interesting bellwether for what businesses might expect from consumers for the rest of the year.

Anine Bing to Open 2nd Canadian Storefront at the Four Seasons Hotel in Toronto 

The US-based women’s fashion brand recently opened its first Canadian store at Yorkdale, and will open its second location in a downtown luxury hotel. 

Retail Burnout Crisis in Canada: The Call for Empathetic Leadership and Proactive Solutions Amid Operational Strains [Feature]

It's never been more difficult to work in retail, with store managers burning out amid lower staffing numbers, increased task and store robberies. Two industry experts discuss the situation.

RECENT RETAIL INSIDER VIDEOS

Advertisment

Subscribe to the Newsletter

Subscribe

* indicates required

RECENT articles

Iconic Flo’s Diner in Toronto’s Yorkville Forced to Close After 33 Years Amid Landlord Dispute 

Retail Insider interviewed Flo’s co-owner who discusses the “heart wrenching” situation where he is being forced to close his business that began on Bellair Street in 1991.

Anatomy of a Leader: Teresa Spinelli, Owner of Alberta-Based Italian Centre Shop Ltd.

Spinelli discusses her leadership of the popular retailer which has expanded over the years, describing how she struggled to run the company at first and grew to love it.

Upscale Canadian Fashion Brand SMYTHE Expands with New Standalone Calgary Store [Interview/Photos]

It's the second store location for the Toronto-based brand, which is seeing success with its exclusive womenswear collections.

Toronto’s CF Sherway Gardens Hits Sales Milestone with Exciting Retail Growth and Future Plans [Interview]

The shopping centre is adding new retailers as sales per square foot hit an all-time high, with plans to re-tenant Nordstorm as foot traffic grows following Eataly's opening in the mall a few months ago.

ECS Coffee Opens Canada’s Largest Coffee and Espresso Equipment Gear Showroom and Retail Space in Toronto [Interview]

The new Etobicoke location is unique to Canada if not North America, according to its founder, with coffee roasting, equipment showroom, over 500 varieties of coffee, Youtube studio and various in-store experiences. He has plans to expand the concept nationally.

New Loblaws City Market Opens in Vancouver’s ‘The Post’ Building, Adding Grocery Competition to the Downtown Core [Podcast]

Craig and Lee discuss the opening of a new Loblaws City Market in downtown Vancouver's renovated Post building, and they explore its potential impact on local grocery shopping.

Loblaw Announces $2 Billion Investment in Canada for 2024 with Dozens of New Stores and 7,500 New Jobs [Expert Comment]

The retail behemoth will be growing substantially this year, following backlash over profits as inflation continues to impact Canadians.

Dubai-Based Asian Street Food Concept ‘Wok Boyz’ Expands into Canada with Plans for Multiple Locations [Interview]

The company's founder says the popular concept, with personalized meals, has an opportunity to grow substantially with its high-quality ingredients and theatrical flare, complete with fiery customer-facing woks.

Calgary Surge Basketball Team Launches Innovative Pop-Up at CF Chinook Centre to Boost Community Engagement [Interview]

The retail activation, which opened this month, is resulting in heavier foot traffic in a quieter part of the mall.

Upscale Pusateri’s Fine Foods to Close Yorkville Grocery Store in Toronto After 20 Years

The 5,500 square foot store opened to much fanfare in 2003, with valet parking, private chefs and pricey goods. 

Loblaw and Walmart Could be Forced to Adhere to Grocery Code of Conduct with Legislation [Op-Ed]

Sylvain Charlebois says that it's rare for all of Canada's political parties to agree, signalling a shift that could force grocers to comply amid record inflation.

Factory Direct to Shut All 14 Stores Amid Bankruptcy, Liquidation to Begin Saturday

The company, founded in 1995, is one of Canada’s largest privately owned discount retailers which struggled with declining sales and increasing costs following the pandemic.

What to Expect for the Canadian Retail and Hospitality Sectors in 2024 [Video Interview]

Michael Kehoe provides an expansive overview of what's expected for Canada's retail industry in 2024, and how the commercial real estate industry is becoming more dynamic than ever.

Anatomy of a Leader: David Lui, CEO of Kit and Ace and Co-Founder of Unity Brands

Lui has an extensive background in retail with over 30 years of experience and is known for his award-winning brand transformations, e-commerce and digital knowledge along with his passion for scaling businesses.

Robotic Retail Gaining Traction in Canada, But Some Consumers are Being Left Behind [Op-Ed]

Automated retailers without in-store staff are opening across Canada, such as Aisle 24, RC Coffee and PizzaForno -- but consumers without smart phones, credit cards, or with vision issues may not be able to access these retailers says a researcher.

Oakridge Park Announces 1st Luxury Retailers, Attracting Top Brands to Vancouver [Podcast]

Craig and Lee discuss the latest Oakridge Park announcement, highlighting the addition of luxury and upper contemporary brands to Vancouver's retail landscape and how it will impact downtown.

Interview on What it Takes: Lee Valley Tools Named Top Retailer in Ontario for Customer Service

The company's COO Jason Tasse discusses the retailer's secret sauce for having an engaged workforce, while also discussing plans to expand with more stores and retail concepts.

Survey Data Shows Canadians will Prioritize Romance Over Budget Cuts This Valentine’s Day [Interviews]

David Litwin of Moneris notes that Valentine's is an interesting bellwether for what businesses might expect from consumers for the rest of the year.

Anine Bing to Open 2nd Canadian Storefront at the Four Seasons Hotel in Toronto 

The US-based women’s fashion brand recently opened its first Canadian store at Yorkdale, and will open its second location in a downtown luxury hotel. 

Retail Burnout Crisis in Canada: The Call for Empathetic Leadership and Proactive Solutions Amid Operational Strains [Feature]

It's never been more difficult to work in retail, with store managers burning out amid lower staffing numbers, increased task and store robberies. Two industry experts discuss the situation.