A woman in a face mask exits Le Chateau at Guildford Town Centre in Surrey, B.C., Friday, Dec. 4, 2020. The clothing store is going out of business amid the global COVID-19 pandemic. THE CANADIAN PRESS/Marissa Tiel

A woman in a face mask exits Le Chateau at Guildford Town Centre in Surrey, B.C., Friday, Dec. 4, 2020. The clothing store is going out of business amid the global COVID-19 pandemic. THE CANADIAN PRESS/Marissa Tiel

Pandemic shutdowns the last straw for some Canadian retailers, push others to brink

Some retail chains went into 2020 already saddled with massive debt and too many stores

For some, fashion retailer Le Chateau Inc. was the edgy store of their youth and 1990s clubwear. Others recall a place of prom dresses, business apparel and accessories.

“It was a trendsetting store,” says Toronto resident Tara Greene. “As a teen, it was a very cool and exciting place to shop.”

After six decades in operation, the Montreal-based clothing company joined the ranks of dozens of big-name retailers that have buckled under the weight of pandemic restrictions, filing for court protection in October and liquidating stores.

It’s been a year of unrelenting pain in retail, with widespread economic shutdowns toppling cornerstones of Canada’s retail industry just as easily as small operations.

And experts warn there are more casualties to come, as the second wave of cases forces further restrictions — decimating cash flow and exposing broader underlying problems.

Some retail chains went into 2020 already saddled with massive debt, too many stores and a track record of underperformance.

“The sector has been in a bit of turmoil even before the pandemic,” says Ramesh Venkat, director of the David Sobey Centre for Innovation in Retailing and Services at Saint Mary’s University in Halifax.

“Retailers that started the year in financially bad shape just couldn’t survive. They didn’t have the financial resources to make it through these hard times.”

Retail analysts say many also lacked a strong e-commerce presence and failed to keep up with shifting consumer behaviour.

“Some just aren’t appealing to the next generation of shoppers,” says John Archer, chief development officer with the Toronto retail consultancy firm Three Sixty Collective.

“The Gen Zeds are different than millennials and some stores like Forever 21 realized even before the pandemic they weren’t cutting it for the new generation.”

Then the pandemic hit, compelling many retailers to close or drastically curtail hours and customer capacity.

The shutdown sent overall retail sales into free fall, plummeting 30 per cent in April compared with a year earlier, Statistics Canada reported.

Clothing and shoe stores were hardest hit, down a staggering 87 per cent and 79 per cent, respectively, compared with April 2019.

The mounting toll of restrictions — on top of the existing problems hounding retail — was too much for some.

READ MORE: Clothing retailer Le Chateau plans to close its doors, files for CCAA protection

Household names like footwear empire Aldo Group, outdoor recreation outfit Mountain Equipment Co-operative and clothing retailer Reitmans (Canada) Ltd. have all filed for creditor protection since the start of the pandemic.

So have Comark Holdings with clothing brands Ricki’s, Cleo and Bootlegger, Groupe Dynamite with brands Garage and Dynamite, and Ann Canada Inc. with women’s clothing brands Ann Taylor and LOFT.

While some stores will disappear, experts say others are using creditor protection to step back from a risky retail environment and restructure after years of poor results.

Reitmans, for example, had seen its share price steadily decline for more than decade when the pandemic struck.

The Montreal-based company filed for creditor protection in May and began restructuring, liquidating its Addition Elle and Thyme Maternity stores to focus on its three remaining brands — Reitmans, Penningtons and RW & CO.

Indeed, some of companies filing for creditor protection could come back “leaner and meaner,” Archer says.

“If they were on the ropes already, they may have taken advantage of legal protection to take a breather and work with their suppliers and landlords and figure out how many stores they need.”

Still, Canada’s retail landscape is expected to lose thousands of stores as a result of restructuring and bankruptcies, putting many retail workers out of a job.

The first quarter of the year is a notoriously slow period for many retailers, and experts say without a robust holiday sales period it will be difficult for some to stay in business through the winter months.

“There are some companies that are obviously not thriving already, so with any sort of blip on the radar they are definitely going to have some issues,” says Anwar White, a lecturer with the Bensadoun School of Retail Management at McGill University.

But he says the insolvencies brought on by the pandemic are part of a normal economic cycle that has just been accelerated and compressed into a shorter time frame.

“I’m not thinking about this as a doom and gloom situation,” White says. “This experience has forced retailers to really digitally evolve in lightspeed ways and do things completely differently than they’ve done before.”

Yet unlike usual economic cycles, the current uncertainty plaguing the retail industry hinges in part on the length and scale of store closures.

Retail analyst Bruce Winder says he expects the new year, and a potentially worsening second wave of the pandemic, will usher in more bankruptcies.

But he says the number of insolvencies could be offset by federal aid, including the wage and rent subsidies.

“You’re going to see a number of companies propped up by government subsidies that probably without them would have been in (creditor protection) a long time ago,” Winder says.

“These sort of zombie companies are operating with maybe 10 or 20 per cent of their normal revenues but they’re still in business because the government is propping them up.”

Brett Bundale, The Canadian Press


Like us on Facebook and follow us on Twitter.

Want to support local journalism during the pandemic? Make a donation here.

CoronaviruseconomyRetail

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Smaller egg farmers find themselves in a David and Goliath situation when it comes to major producers and chain-grocery store shelf space. (Citizen file)
Name on the egg carton not what it seems, cautions Cowichan producer

“Island” eggs may come from Manitoba, Woike says

The Kerry Park Islanders and Peninsula Panthers battle during a Vancouver Island Junior Hockey League game in November 2020. (Kevin Rothbauer/Citizen)
Vancouver Island Junior Hockey League hasn’t given up on season

Games can’t resume until at least February, but league brass still hopeful

Parents Robin Ringer and Wyatt Gilmore with the No. 1 baby of 2021 in the Cowichan Valley. They have yet to decide on a name for her. (Photo by Don Bodger)
Chemainus couple excited about having the New Year’s baby for the Cowichan Valley

Recent arrivals from Fort Nelson celebrate their girl coming into the world on Jan. 7

A COVID-19 outbreak is over at the Ts’i’ts’uwatul’ Lelum assisted-living facility in Duncan. (File photo)
COVID-19 outbreak over at Duncan assisted living facility

One staff member tested positive at Ts’i’tsuwatul’ Lelum

A woman wears a face mask and shield to curb the spread of COVID-19 while walking in North Vancouver, B.C., on Wednesday, January 6, 2020. THE CANADIAN PRESS/Darryl Dyck
536 COVID cases, 7 deaths reported as B.C. find its first case of South African variant

Henry said 69,746 people have received their first dose of the COVID vaccine.

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Alan Davidson was sentenced to almost six years for abusing seven boys in the late 1970s and early 1990s. (Canadian Press file)
Full parole granted to former Mountie, sports coach convicted of sex abuse of boys

Alan Davidson convicted of abusing boys in B.C. and Saskatchewan in late ’70s, early ’90s

The first COVID-19 vaccine arrives in B.C. in temperature-controlled containers, Dec. 13, 2020. (B.C. government)
More vaccine arrives as B.C. struggles with remote COVID-19 cases

Long-term care homes remain focus for public health

The Transportation Safety Board of Canada said a lack of experienced crew members and the inability to detect navigational errors is what led to a Sooke search and rescue boat running aground in February 2019. (Twitter / @VicJRCC_CCCOS)
TSB: Sooke search and rescue boat crash caused by ‘misinterpretation of navigational information’

Crew members were lacking experience and unable to detect navigational errors

The first Pfizer-BioNTech COVID-19 vaccine dose in Canada is prepared at The Michener Institute in Toronto on Monday, Dec. 14, 2020. THE CANADIAN PRESS/Frank Gunn
Doses of COVID-19 vaccine expected in 60 B.C. First Nations by next week

B.C. has allocated 25,000 doses of COVID-19 vaccine to First Nations for distribution by the end of February

Kamloops-South Thompson MLA Todd Stone questions the NDP government in the B.C. legislature, Feb. 25, 2020. (Hansard TV)
Todd Stone says he’s not running for B.C. Liberal leadership

Kamloops MLA was widely viewed as a front-runner

Wireless voice and data services are out for those on Telus as of Thursday (Jan. 14) afternoon across Western Canada, Telus Support said in a recent Tweet. (Black Press file photo)
UPDATE: Telus services restored across Western Canada

Telus said they are monitoring the situation to ensure connections remain stable

Most Read