Canadian apparel retailer Reitmans Canada Ltd. has obtained protection from its creditors as the company continues to struggle with long-term business challenges and the impact of the COVID-19 pandemic.
Reitmans announced on Tuesday that it had received an initial order under the Companies’ Creditors Arrangement Act (CCAA) allowing it to undergo restructuring. The company will be evaluating all aspects of the business, including its store footprint, which comprises 576 stores under the banners Reitmans, Penningtons, RW & Co., Addition Elle and Thyme Maternity.
“Consumer behaviours and purchasing patterns have changed. Who knows how it will evolve post-COVID-19,” chief executive Stephen Reitman said in an interview Tuesday. “We have to optimize our retail footprint, and in order to do that, we have to take a look at our stores. It’s too early to provide details of which direction we’re going to be going. ... We know that when we come out of this process, we want to be more agile. We want to be better-sized. That is what we’re working on right now.”
Earlier this month, Reitmans warned that its “ability to continue as a going concern” would depend partly on its ability to secure financing to meet its financial obligations. The company has been unable to do so.
“This is an environment where liquidity is very, very tight. It’s also an environment where retailers are not so much in favour with the banks,” chief financial officer Richard Wait said in an interview Tuesday. The company is now seeking interim financing as part of the restructuring process.
The retail industry and particularly the apparel sector were already facing enormous challenges as growth slowed significantly and competition from e-commerce giants has accelerated. The shock of the COVID-19 pandemic has been impossible to bear for some retailers that were already vulnerable. This month, J.Crew Group Inc., J.C. Penney Co. Inc. and Neiman Marcus Group Inc. have all filed for bankruptcy protection in the United States, and Canadian retailer Aldo Group has also obtained creditor protection to restructure its business.
Reitmans was struggling with lagging sales even before the pandemic forced the closing of its stores across Canada. In its previous fiscal year, ended Feb. 1, Reitmans reported a net loss of $87.4-million on sales of $869.5-million.
Reitmans had been cutting costs and attempting to address the weakness of its plus-size clothing stores, an effort that had not won back customers. This would have been “a terrific transition year” for that business, Mr. Wait said, had the pandemic not hit. The company has also invested heavily in its digital strategy.
“Over the last seven, eight years, the change is huge,” Mr. Reitman said. “Everyone is adapting.”
But while e-commerce sales have been strong during the shutdowns, they do not make up for losses from store traffic. Fewer than 150 of its stores have reopened as of Tuesday. Roughly 40 per cent of the company’s stores are located in shopping malls.
Reitmans will maintain operations during the restructuring and will continue to re-open stores as permitted, depending on provincial and regional guidelines.
At Feb. 1, Reitman’s said it owed its workers $26.7-million in pension benefits, and had $23.6-million in plan assets, for a shortfall of $3.1-million. The company also has a supplemental retirement plan for current and former executives, which owed them $21.1-million – and was completely unfunded at the end of the fiscal year.
“At the end of the restructuring, we come out with a viable, stronger, more flexible organization,” Mr. Reitman said. “We believe that we have a place in this retail world.”
-with files from David Milstead
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