TORONTO - National craft supply retailer Lewiscraft Corp. could close 10 of its 90 stores this month, after filing for bankruptcy protection from its creditors this week.
The Brampton, Ont.-based craft supply retailer currently has 90 stores across the country, in each province except Quebec and Prince Edward Island, and employs more than 200 full-time employees and about 400 part-time employees.
In court documents, president and sole director John Wilcox said he has reached the conclusion that Lewiscraft must undergo a significant restructuring to survive.
"I believe that any restructuring will include store closures and employee terminations, and potentially, lease renegotiations," he said. "The objective of management at this time will be to keep Lewiscraft operating and to close only those locations which are clearly not viable."
Court documents say that "as few as 10 store locations will be closed, with these closures happening by the end of January 2006."
Wilcox also revealed that "Lewiscraft has been discreetly seeking a buyer since approximately July 2005," due to mounting losses and the "unsuccessful attempts of current management to make Lewiscraft profitable on a consistent basis."
While the sale efforts continue, Wilcox said he believes the chances of finding a buyer are better with the company in bankruptcy protection, which is governed by the Companies Creditors Arrangement Act.
CCAA allows a company to freeze its debts while it works out a restructuring plan with its creditors under court supervision. RSM Richter has been appointed monitor.
Lewiscraft has posted a loss in six of the last eight years, and Wilcox said he believes it will report another loss for the current fiscal year, ending on April 30.
The retailer's origins date back to 1913, when Lewiscraft Inc. was founded in Toronto to sell supplies needed to make leather accessories. An expansion in the 1970s pushed the retailer into craft goods.
In 1996, Lewiscraft Inc. was bought out of receivership by Lewiscraft Corp., a company created for that transaction by the retailer's current sole shareholder, Lance Cove Investments Inc., which took on debt and invested $2.5 million at the time.
Because of the losses in most of the years since, Lance Cove has been routinely funding the business since then, as 30 new stores were opened, many in Class A shopping malls. The advances from Lance Cove amounted to $11.69 million by June 2005.
As of last week, Lewiscraft owed Lance Cove $8.2 million.
The retailer lost $1.3 million in the seven months ended November 2005.
"Various attempts by current management to improve the financial performance of Lewiscraft have proven unsuccessful," Wilcox said in court documents.
"In my view, this does not mean that Lewiscraft is not a viable business, or that it cannot become profitable...I have recognized, however, that a manager with extensive retail experience is likely required."
One of Lewiscraft's suppliers, Spinrite Income Fund, has already disclosed that it is holding receivables of about $600,000 for the retailer, and will be taking a provision for the whole amount because it doesn't know if it will recover any of the funds.
Lewiscraft represents about 1.4 per cent of Spinrite's revenues.
"Lewiscraft has been a loyal customer to Spinrite for many years, and as one of their largest suppliers, we are committed to helping them through this difficult time," chief executive Dario Margve said in a release Monday.