Reitmans granted creditor protections
Women’s apparel retailer optimistic it will rebound from restructuring more resilient
Reitmans (Canada) Ltd. says the COVID -19 pandemic forced it to seek protection from creditors, but the women’s apparel retailer believes it can emerge from restructuring stronger and more resilient in a sector hard hit by virus-related lockdowns.
The Montreal-based company’s application under the Companies’ Creditors Arrangement Act was heard by the Quebec Superior Court Tuesday, which approved an order that appointed restructuring monitor Ernst & Young and stayed creditor action for an interim period.
Reitmans said it is in the process of securing interim financing in conjunction with its court filing to let its stores continue normal operations throughout the CCAA process.
The company says it remains open for business on all of its e-commerce websites and in stores as they reopen according to government guidelines, with 130 to 140 bricks-and-mortar outlets reopening Tuesday, mostly in Quebec. The company’s brands have 80 stores in the GTA.
“Filing for protection under the CCAA is truly the hardest decision we have had to make as an organization in our almost one hundred years of history, but this pandemic has left us no choice,” president and CEO Stephen Reitman said.
He told The Star that the company was in the process of implementing a successful digitalfirst strategy to drive growth, until the pandemic forced the closure of all retail stores in mid-March and pushed the retail industry into “a new and unknown era.”
He said the company has strong national brands, a robust digital-retail strategy and a loyal customer base that values affordable fashions and has been “shopping on our websites at a record pace since the start of the pandemic.” Reitman said he is confident the company can emerge successfully from restructuring, though likely with fewer bricks-and-mortar outlets.
The mandated closures of Reitman stores along with other fashion retail outlets, as a sector not deemed essential by health authorities, followed a net loss for the company of $87.4 million for the year up to February due to the disappointing sales from its plus-size brands. Although corrective measures were implemented, changes occurred late in its fiscal year, the company said in a year-end filing.
The company’s stores accounted for 80 per cent of overall revenue going into the crisis.
In addition, temporary factory closings in China disrupted the supply chain, delaying delivery of merchandise and increasing freight costs, the company said in the filing, adding that said some credit lines had become unavailable.
Store cloings to promote physical distancing led to the temporary layoff of 90 per cent of its store employees and 30 per cent of head-office staff. The publicly traded company also suspended its dividend.
The company said it had liabilities as of Feb. 1 of $189.7 million versus $89.4 million of cash and cash equivalents. Some of those liabilities are to various landlords, but Reitmans expects to terminate a number of leases across Canada.
It envisions a liquidation sale of inventory at some stores and intends to honour its commitments under loyalty programs.
Craig Patterson, a retail analyst and consultant at the Retail Council of Canada, said the company had been investing to refurbish stores and rejuvenate its fashion lines until the pandemic, which has led to filings for creditor relief by a number of brands including footwear retailer the Aldo Group Inc., also based in Montreal, “hit it from left field.”
“They were looking to turn things around but needed to pivot fairly quickly.”
Reitmans says it employs approximately 6,800 people and operates 576 stores including 259 Reitmans, 106 Penningtons, 80 RW & CO., 77 Addition Elle and 54 Thyme Maternity.