One of Canada's largest shoe sellers has filed for bankruptcy protection as the slumping dollar nips at the heels of Canadian retailers.
Sherson Group Inc., which owns 48 Nine West shoe stores, and holds the Canadian rights to brands such as Anne Klein, Bandolino, Easy Spirit and Enzo Angiolini, sought protection from creditors as it tries to restructure the business.
The company, a leading purveyor of pumps and peep-toes in the highly competitive women's shoe market, has been hurt by the tumbling loonie, which has raised supplier costs and eroded margins over the past two years.
In documents filed Tuesday with Ontario Superior Court, Sherson Group said it owes $32.2-million in unpaid bills and loans, including $19.1-million owed to Nine West Group Inc. of Bristol, Penn., which licences the brand to Sherson, and supplies its merchandise.
"The company has faced … rising foreign-exchange costs, and it's been dealing with some underperforming stores," said Gilles Benchaya, a partner at Richter Advisory Group, which is serving as the trustee in the restructuring.
"Some of it you can pass through to the customer, but in other instances it's more difficult because it's also a highly competitive retail environment, so some of that has to be absorbed by the companies."
Sherson's other largest creditors include Bank of Montreal, which is owed more than $4.7-million in loans, and BDC Capital, which is owed slightly more than $3-million.
Sherson chief executive officer Stephen Applebaum, who is also owner of the company, is listed as a creditor for $415,413, while a related company, Stephen Applebaum Inc., is owed $3.4-million. Mr. Benchaya said those figures represent Mr. Applebaum's equity in the company.
Mr. Applebaum began his career as a shoe salesman and worked his way up to vice-president of sales at Sherson before taking the reins after the death of its founder, Harry Sherman, in 1991. By the turn of the century, Sherson was the largest supplier of handbags and small leather goods to major Canadian department store chains, and embarked on a period of rapid expansion, opening more than 40 Nine West stores across the country by 2008.
The company was forced to start cutting costs in 2009 amid an economic slowdown, and began to close underperforming stores in an attempt to lower overhead. Mr. Applebaum could not be reached for comment on the filing. His office referred calls to the trustee.
The list of 69 creditors includes debts to various government agencies, including $29,000 to the B.C. ministry of finance, and $33,000 to the Quebec revenue ministry. The company also owes $506,000 to the federal government for duties and taxes.
Mr. Benchaya said it was too early to tell if the company would have to close stores. He said the filing, under the Bankruptcy and Insolvency Act, allows Sherson to continue operating while it formulates a proposal for creditors, which will ultimately be put to a vote.
"As part of the exercise, they're reviewing their store portfolio and looking at the underperforming stores and they will be entering into discussions with landlords. They'll make decisions if there's any stores that they want to ultimately disclaim. They can do so within the process," Mr. Benchaya said.
"Currently, it's business as usual – the stores are operating and the company is still operating its business. The filing has put a stay of proceedings in place to allow [Sherson] a chance to restructure."