Hit by a weak Canadian dollar and the soft economy in Western Canada, insolvent chain Ben Moss Jewellers was granted court protection from its creditors on Wednesday as it prepares to close 11 of its 66 stores.
Winnipeg-based Ben Moss Jewellers Western Canada Ltd. is already holding liquidation sales at its underperforming stores. It will look at an array of restructuring options, including selling all or part of its business, chief restructuring officer Naveed Manzoor said.
"Ben Moss is facing immediate and serious challenges to its continued operations," Mr. Manzoor said in a court filing.
The retailer "can be a viable business with significant future potential," he added.
But it needs to secure credit that is only available in an insolvency situation. And it needs to assess restructuring options along with "a potential sale of all or a portion of its business," he said.
The retailer, which sells mid- to high-priced jewellery, is facing growing competitive pressure from online players and low-cost rivals. Still, the jewellery and watch industry, whose global sales came to about $290-billion in 2014, is expected to continue to grow at 7 per cent annually over the next five years, helped by higher per capita incomes and gold prices, the court filing said.
The corporate restructuring comes as an array of retailers have filed for court protection or bankruptcy in the past 18 months or so, including the Canadian division of U.S. retail giant Target Corp., which closed all of its 133 stores last year. Other chains that have shut down or shrunk include clothiers Mexx and Smart Set, and electronics specialist Future Shop, which was owned by Best Buy Co.
Ben Moss, whose fiscal 2016 sales of $78.8-million dropped by 7.8 per cent over the previous year, felt the effects of tumbling oil prices and a declining loonie, which prevented it from stocking some products in advance of the key holiday season and bruised its sales, Mr. Manzoor said in his affidavit.
The retailer posted a loss of about $4.2-million in its 2016 fiscal year, which ended March 26, court documents say.
Ontario Superior Court granted Ben Moss protection for 30 days under the Companies' Creditors Arrangement Act. The company can ask for an extension.
Alvarez & Marsal Canada Inc. was appointed as monitor in the case. It is also acting as monitor in the Target Canada proceedings, which are still continuing.
Ben Moss was acquired by wholesaler JSN Group in 2013 to provide it with an additional sales outlet. But since the takeover, "there has been a significant decrease in Ben Moss's net sales and profitability," Mr. Manzoor said. He also pointed to the high cost of some "economically unviable leases" and fixed overhead expenses "that are out of line with the level of total sales."
Salus Capital is the key lender of Ben Moss. It has six secured creditors in addition to senior secured lenders.
At the end of fiscal 2016, Ben Moss had total liabilities of $62.2-million and total assets of $72.2-million, the court document says. But it also owed $68.1-million under its the credit facilities as of May 16, it says.
Parent JSN Inc., a privately held company owned by Joseph Shilon, has a jewellery manufacturing and distribution plant in Toronto. The company does high-margin repairs and special orders while fulfilling corporate orders for customers, including Ben Moss. The retailer's chief place of business is Ontario, which generates the biggest chunk of revenue at the chain, the filing says. Under the restructuring, the largest number of stores expected to be closed are located in Ontario, it says.
While in the past, key decisions at Ben Moss were made at its head office in Winnipeg, today some decision making has been transferred to parent JSN in Toronto, it says. JSN also owns a number of jewellery manufacturers and brokers in various parts of the world, including Thailand and Israel.
Mr. Manzoor is managing director of FAAN Advisors Group Inc., which was retained by Ben Moss on April 18 to act as interim chief financial officer. On May 13, the retailer hired FAAN and other related companies to act as chief restructuring officer for the current proceedings, the document says.