The uncertainty caused by COVID-19 has pushed retailer Reitmans Canada Ltd. to the brink, with the company warning on Friday that unless it is able to secure financing to meet its financial obligations, the business could fail.
“The company’s ability to continue as a going concern is dependent on its ability to resume normal operations, generate future revenues and profitable operations, and obtain financing,” Reitmans said in a statement on Friday evening, adding it is “also exploring various alternatives.”
Reitmans is “actively seeking additional financing” and may be unable to continue if it “is unable to obtain such financing in the limited time period required,” the statement said.
The Montreal-based company owns store banners including Reitmans, RW&Co., Penningtons and Addition Elle. Like many apparel retailers during the COVID-19 pandemic, Reitmans is considered a non-essential business. It was required to close all of its 582 stores across Canada in mid-March.
Even before the outbreak of the coronavirus that causes COVID-19, the company had been cutting costs and its financial performance had been lagging expectations, largely because of declines at its plus-size banners, it said in the release.
Reitmans had been attempting to refresh those brands over the past year and had stepped up promotions, but did not win back customers. The company had already suspended its quarterly dividend to shareholders, and at a meeting on Friday the Reitmans board of directors decided to continue to do so in order to conserve cash, the statement said.
For nearly seven weeks, Reitmans has relied on e-commerce sales for all of its revenue, but economic uncertainty owing to wide-scale shutdowns of many industries could affect shopping behaviours, the company said, and it is still unclear when it will be able to reopen stores.
“Based on the company’s liquidity position as of the date of this press announcement, including the termination and reduction in availabilities under the company’s credit facilities … and in light of the uncertainty surrounding the outbreak, [Reitmans] estimates that it will need financing to meet its current and future financial obligations,” Friday’s statement said.
Reitmans reported results for its fiscal year ended Feb. 1 on Friday. The retailer reported sales of $869.5-million for the year, a 5.8-per-cent decline compared with the prior year. Comparable sales – an important metric that excludes the impact of store openings or closings – declined 1.3 per cent, including e-commerce sales. While Reitmans’ e-commerce sales are growing, store traffic was down 2.2 per cent last year.
The company said the decline was due mostly to disappointing sales at its plus-size stores, the closing of 18 stores and unseasonable weather in early 2019. Reitmans reported a net loss of $87.4-million or $1.56 a share, down from net earnings of nearly $6.8-million or 11 cents a share the year before. The decline includes an $11.8-million impairment charge.
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