Wave of Store Closures to Hit Canada in the Summer of 2020

Many stores will be closing in Canada over the summer as brands are hit hard in the wake of the COVID-19 pandemic. While it’s challenging to quantify the number of permanent closures at this time, it appears hundreds of individual store locations in Canada will be vacated before the fall.

The list of store closures include independent retailers as well as medium and larger chains which have either filed for bankruptcy protection or are simply shutting stores amid financial turmoil. Prior to COVID-19, many retail chains in Canada were struggling amid debt and the pandemic has in effect sped up the process by creating further financial challenges.

Some fashion retailers have been hit particularly hard given the purchase and delivery cycle. Spring collections saw significantly fewer sales as consumers stayed at home for much of the season, and now many retailers are considering their options as fall collections are coordinated for delivery. Some retailers have struggled with credit insurance coverage for deliveries which means that some retailers could be understocked for the fall if at all.

Some independent retailers are reconsidering their operations altogether, recognizing that demand for some retail categories are expected to be less in the fall of 2020. One retailer Retail Insider spoke with said that her family’s retirement plans were already in jeopardy and that it might make more sense to shut down stores rather than take the risk of restocking for the fall. Major costs including rent and staffing were part of the challenge, not to mention increased costs associated with sanitization and PPE. “Government support is simply not enough,” the retailer said.

Larger retailers are also looking to the future which for some will include fewer store locations. Many have been quietly restructuring operations which has included layoffs, and some retailers will seek creditor protection in an effort to close underperforming locations. One industry insider said that Canada may see one bankruptcy filing per week over the summer for medium and large-sized retailers. Other large retailers are making major staffing cuts. Seattle-based Nordstrom, which operates six full-line stores in Canada as well as six off-price Nordstrom Rack locations, for example, is undergoing a restructuring which has resulted in many management layoffs. Lisa Tant, formerly the Canadian Styling Sales Director at Nordstrom was let go recently according to a social media post, and others in Canada and the US are said to have been laid off as well.

International retailers with stores in Canada are also filing for bankruptcy protection and are looking to close stores in Canada. All of the store closures will have an impact on landlords who will have to find tenants to replace them, or reconsider the real estate portfolio altogether. The value of commercial properties in Canada will in many cases be reduced due to vacancies as well as unpaid rents, all of which will impact owners and shareholders.

Foodservice businesses such as restaurants will also add substantial vacancies to commercial properties in Canada. Given the thin margins that many restaurants operate with, closures and reduced capacity have impacted some that have already closed while others will struggle and eventually shutter over the summer or into the fall. When government support for rents and staffing costs is reduced or eliminated, the pace of closures will likely increase.

Independent Retailers Shuttering

Publications such as BlogTO seem to report almost daily on small businesses shutting in Toronto permanently, and it’s the same across the country. Some landlords have chosen not to participate in government rent relief funding and despite offers to defer rents, the debts incurred by small businesses are in some cases proving to be insurmountable. Adding to that are property taxes, insurance, and other expenses. One well-known broker in Toronto explained that many retailers are now seeking percentage rent lease deals, while some landlords are insisting on terms in executed leases which includes enumerated rents due. Many of these independent retailers are located on urban streets and vacancies could result in blight which will negatively affect vibrancy in some areas. If the trend continues, the future of some commercial areas could be in question, even popular areas such as Toronto’s Danforth and Beach areas for example.

National Chains Shutting Stores

Over the past several weeks numerous national retail chains have filed for bankruptcy protection and some have either already closed stores or are in the process of doing so.

Lole: Montreal-based athleisure brand Lole, considered to be a competitor with Lululemon, which filed for bankruptcy protection in May and shut its corporate stores in Canada and globally (franchised locations are still open according to a former store manager). Lole’s filings indicated that the company has about $47 million in debt. The company had high expectations given the success of competitors such as Lululemon.

Scholar’s Choice: London Ontario-based kid’s education retailer Scholar’s Choice announced a significant restructuring this week. A total of 13 of the retailer’s 16 stores will close permanently. That includes closing nine stores in Ontario, three in Alberta and one in Nova Scotia. The three remaining physical stores will act as regional sales and distribution centres to support the shift in the business with units remaining in London, Winnipeg and Moncton NB. The company’s restructuring will allow Scholar’s Choice to remain a going concern with a strong online sales focus.

Frank And Oak: Last month Montreal-based fashion retailer Frank And Oak filed for bankruptcy protection with about $19 million in debts. The company launched as an online menswear brand in 2012 and began opening stores after that, and in 2017 launched womenswear that included some standalone women’s stores. The company has 20 stores and is reportedly looking at closing 17 of them, leaving two stores in Quebec and one in Ontario. Frank And Oak has struggled for several years and came up with creative ways to stay in business, including a partnership with Postmedia for advertising in return for an equity stake as well as with landlord Cadillac Fairview. In March of this year, Frank And Oak co-founder Ethan Song left the company.

La Senza: While now owned by Beverly Hills-based Regent, Quebec-founded lingerie and underwear retailer La Senza will permanently close about 30 of its 100 Canadian storefronts. The future of the entire company is in question and it remains to be seen what happens with other locations in the coming months.

SAIL: We reported this month that Montreal-based sporting goods retailer SAIL had filed for bankruptcy protection and with that, all four of its Sportium banner stores will close as well as two SAIL stores in Ontario.

David’s Tea: Montreal-based David’s Tea filed for bankruptcy protection on Wednesday. A total of 124 of the company’s 210 North American stores will close for good, including 82 units in Canada and all 42 stores in the US. The company hadn’t paid landlords rent in months and will renegotiate remaining locations. The David’s Tea concept stores opened quickly over the past five years and the cost of real estate proved to be a challenge. The company will focus on e-commerce moving forward.

Aldo Shoes: We previously reported that Montreal-based footwear and accessory retailer Aldo had gone into creditor protection and we subsequently learned that more than 40% of its Canadian locations will either not reopen or will shutter over the next while. That will result in substantial vacancies for CRUs in the 1,000-2,000-square-foot range.

Reitmans: The Montreal-based fashion retailer is shuttering its 77-store women’s plus-sized Addition Elle banner as well as its 54-store Thyme Maternity banner. Reitmans has been quietly closing many of its stores over the past several years and in 2018 we reported that its chain of Hyba athleisure stores were shuttering.

Nygard: The Winnipeg-based Nygard retail chain of stores is liquidating, including its Alia and Tan Jay storefronts. It’s the end of an era for the fashion company with 169 stores and an expansive wholesale arm founded by designer Peter Nygard who’s empire has gone down amid allegations of sexual misconduct.

Toys Toys Toys: The Toronto-based toy retailer filed for bankruptcy this week and all product is being liquidated. The company’s stores include Vaughan Mills, Square One Shopping Centre, Erin Mills Town Centre, Scarborough Town Centre, and Oshawa Centre. A.D. Hennick & Associates and Danbury Global are handling the liquidation sale.

Comark Holdings: The parent company for Ricki’s, Cleo and Bootlegger filed for bankruptcy protection last month and with that, many stores are expected to close. While the majority of the 310 units will remain open according to filings, Comark is still expected to close at least 100 store locations in Canada in the coming weeks and months. We reported extensively on the filing last month.

Le Chateau: On Monday evening, Montreal-based Le Chateau issued a press release with its earning statement noting that the company may not survive another 12 months without outside investment. The company has 124 stores in Canada. Given the year-over-year losses and overall financial position, securing investment may be challenging and by early 2021, Le Chateau may become part of Canada’s retail history.

There are other examples not included above that we have reported on since March of this year. Several People’s Jewellers locations are said to have closed permanently and the future of the Moore’s menswear chain is in question as US parent company Tailored Brands struggles. Vancouver-based RYU Apparel has shut its mall-based stores in suburban Toronto and Vancouver as well as a unit near Robson Street, and we’re awaiting future details on the company.

International Retailers Closing Canadian Stores

The COVID-19 pandemic hastened plans for international companies to close stores in Canada and abroad. Given the number of international retailers operating in Canada, the loss of locations will have a profound effect on landlords and will result in substantial job losses.

Long Tall Sally: The women’s fashion and footwear retailer’s international business is winding down and with it, all Canadian stores have shuttered. It leaves a gap in terms of fashion for taller women and women with large feet, and some transgendered women have also commented online about the loss of the store. Long Tall Sally had stores in markets including in downtown Toronto, Vancouver, Ottawa, London, Edmonton, Calgary, and other markets in the past including Winnipeg and Saskatoon. The company acquired Canadian chain Tall Girl in 2009 which had nine stores at the time, and there is an opportunity for other retailers to bridge the gap in terms of stocking larger-sized clothing and footwear.

Microsoft: The Seattle-based technology company announced last month that all of its brick-and-mortar stores would close, including seven units in Canada. The seven Microsoft Canadian stores are all in high-profile malls including CF Chinook Centre in Calgary, West Edmonton Mall in Edmonton, Metropolis at Metrotown in suburban Vancouver, CF Pacific Centre in Vancouver, Square One in Mississauga, CF Toronto Eaton Centre in Toronto, and the Yorkdale Shopping Centre in Toronto. All store locations are considered to be exceptional and landlords are likely going to be able to find strong tenants to replace Microsoft in these malls. Microsoft will continue to focus its sales efforts online.

Miniso: Chineses variety retailer Miniso, which positions itself as a Japanese brand, has been closing some stores across Canada. The company entered Canada in 2017 and had plans to open about 500 stores as part of an ambitious expansion. Trouble ensued as we reported last year amid claims of fraud, and the problems have continued since then. Many franchised Miniso locations were said to be losing money and many have closed. Some locations that are currently open, including a Miniso store on Robson Street in Vancouver, are for sublease.

GNC: The struggling health supplement chain will close 29 Canadian stores as part of a major downsizing after a US bankruptcy filing last month. The future of GNC is uncertain and more units could close in the coming months.

Lucky Brand: After a bankruptcy filing this month, denim fashion brand Lucky Brand has filed for bankruptcy and some stores will be closing. It remains to be seen how many units in Canada will ultimately close or what the future of the brand will be. On Tuesday, news reports noted that Authentic Brands Group and landlord Simon Property Group were looking to buy Lucky Brand.

Ben Sherman: The UK-based men’s clothing brand Ben Sherman is closing two of its stores in the Toronto area, including a unit on Queen Street as well as at Vaughan Mills. It’s unclear what will happen to the store at Square One in Mississauga which opened in the summer of 2016 in an upscale wing anchored by Holt Renfrew.

The Gap: San Francisco-based fashion retailer The Gap has been quietly closing stores in Canada for the past several years. The company wasn’t paying rent on its stores for months during the COVID-19 shutdowns and sources are saying that several more Canadian units will be shuttering under the Gap, Banana Republic, and Old Navy banners. A Canadian landlord chained the doors of one Old Navy location according to a broker source.

Bestseller: The Danish retailer shut its Bestseller-branded stores in Canada in the spring (including converting a Winnipeg unit to a Jack & Jones banner) and last month, announced in a bankruptcy filing that it would be closing more stores under its Jack & Jones and Vero Moda banners in Canada. A source familiar with the proceedings told Retail Insider that all 10 Vero Moda stores will close in Canada as well as 13 of the 51 Jack & Jones locations.

Victoria’s Secret: We previously reported that lingerie and underwear retailer Victoria’s Secret had been closing some of its Canadian stores even before COVID-19, and it remains to be seen if others shutter over the summer following what is expected to be reduced retail sales in such stores. Victoria’s Secret operates massive flagship stores in downtown Vancouver and Montreal as well as stores in malls across the country.

Starbucks: Last month Seattle-based coffee retailer Starbucks announced that it was closing approximately 200 locations across Canada as the company restructures its operations and looks to the future. Some of the shuttered locations will be replaced or kiosks will be located nearby — last year Starbucks piloted a take-out concept in Toronto’s Financial District and more are expected to come.

Many other international retailers are struggling and are in the process of restructuring or filing for bankruptcy protection, which will result in even more store closures in Canada in the months to come. We’ll provide periodic updates when information becomes available with a focus on the Canadian market.

Other Struggles

Retailers that are still operating are also experiencing challenges at this time. Quebec City-based La Maison Simons, which lost Canada Goose as a vendor last year, has removed designer apparel from its stores for the time being. Credit insurance on deliveries is said to be an issue and all stock from brands such as Balmain have been moved online for the time being. The company says that in the fall designer brands will be moved back into Simons’ stores.

Landlords are also making changes at this time. Montreal-based Ivanhoé Cambridge laid off 60 employees last month including COO Roman Drohomirecki. In February the president of retail Claude Sirois was let go. The landlord is said to have been looking to reduce its exposure to retail in its vast portfolio for the past couple of years and that it was looking to sell off some of its retail properties. A French language report in La Presse indicated that ‘if the price is right’, Ivanhoé Cambridge could still divest some properties including its recently overhauled Montreal Eaton Centre.

Retail Insider will continue to follow what’s happening in the Canadian retail industry as businesses reopen following closures due to COVID-19. And at the same time, there is good news from some retailers worth mentioning. Besides grocery and pharmacy retailers which have seen sales spikes while being permitted to stay open during the pandemic, some strong brands are also seeing strong sales. That includes luxury brands in the Toronto and Vancouver markets, which are said to be seeing record-breaking sales numbers in some instances. Some of these brands are connecting directly with customers through apps such as WeChat and are selling out of some product categories that are being coveted by loyal brand fans.