Davidstea seeks creditor protection
Davidstea Inc. on Wednesday announced it will seek creditor protection as the struggling Canadian chain of tea boutiques retreats from brick and mortar retail and tries to refocus on e-commerce and grocery wholesale.
The Montreal-based retailer with roughly 220 tea shops in Canada and the United States said it was to appear in Quebec Superior Court on Wednesday to seek an initial order under the Companies’ Creditors Arrangement Act, which would allow it to proceed with a formal restructuring plan in coordination with its creditors.
That restructuring plan will include a “significant reduction” in Davidstea’s store network, chairman and interim chief executive Herschel Segal said in a news release.
“I sincerely regret the impact the restructuring of our business will have on some of our exceptional and passionate employees,” he said. “This has been an incredibly difficult decision to take, but a necessary one to ensure the long-term viability of our company.”
Davidstea was already in trouble before the pandemic, posting net losses totalling $93.2-million in the past three years. In a quarterly update last month, the company said it had not paid rent for April, May or June and had received default notices from 37 landlords representing 53 of its stores.
The retail sector in much of Canada is reopening, but Davidstea has yet to reopen a
single store since shuttering them all at the start of the pandemic in midMarch.
The company is trying to renegotiate better lease terms with its landlords, but “ultimately may terminate a significant number of our 222 leases as we seek to right-size our retail footprint,” Davidstea’s chief financial officer Frank Zitella said in the same news release.
“We have to accelerate the transition of our business away from brick and mortar and focus on becoming the leading online purveyor of loose-leaf tea and accessories in North America, complemented by our growing wholesale business,” he said.