Reitmans (Canada) Ltd. has received an initial order Tuesday after seeking court protection from its creditors under the Companies’ Creditors Arrangement Act (CCAA) to allow a restructuring of the women’s clothing retailer.
The retailer’s application was heard by the Quebec Superior Court earlier Tuesday. Ernst & Young Inc. was appointed as monitor for the CCAA process and will assist the retailer in creating a restructuring plan, the company said in a statement.
The plan will have to deal with the business fallout from COVID-19, which prompted retail outlets across Canada to shut their doors temporarily in an effort to help contain the pandemic from spreading, the company said in an earlier statement before the court proceedings.
READ MORE: Reitmans lays off 90% of retail staff as coronavirus shutters stores
Reitmans closed 587 stores on March 17, but its e-commerce websites have remained open.
At the time, the company also announced it would temporarily lay off 90 per cent of its Canadian retail staff, starting March 29, across its five banners: Reitmans, Penningtons, Addition Elle, RW & Co. and Thyme Maternity.
Thirty per cent of its Montreal head-office staff were also laid off starting March 30. Remaining employees, meanwhile, were asked to contribute to on-going cost-saving initiatives.
“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,” chief executive Stephen Reitman said.
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Reitman assumed the CEO role in early 2020 following the death of his brother Jeremy Reitman, who served as chief executive and chairman.
“We believe that this is the only course of action to ensure we remain successful in the future.”
The board reached the unanimous decision to file for court protection after having considered other alternatives and a number of factors, the company said.
In conjunction with its court filing, the company has undertaken a process to secure interim financing to allow its remaining 576 stores to continue normal operations once government regulations allow the reopening of retail locations.
The company, which employs about 6,800 people and was founded in 1926, now operates 259 Reitmans, 106 Penningtons, 80 RW & Co., 77 Addition Elle and 54 Thyme Maternity outlets.
“As the restructuring process gets underway, the company will look to optimize its retail footprint in Canada to emerge from this process in a stronger state,” the company said.
Reitmans is also in talks with lenders for permanent financing upon exit from the restructuring process, and is seeking an order from the Quebec Superior Court to postpone its annual general meeting of shareholders.
“The retail landscape has been in constant flux over the past several years, resulting in the evolution of consumer behaviour and purchasing patterns,” the company noted, adding it has implemented what it called “a successful digital-first strategy” and other initiatives to drive growth in the changing environment.
Reitmans boasted in January 2011 that it had 968 locations across seven banners, including 158 Smart Set and 22 Cassis stores.
In October 2011, the company announced it would close the Cassis stores and convert many to its other banners. The Cassis brand, which was aimed at women over 40 years old, accounted for less than two per cent of the company’s total annual sales, Reitmans said in a statement announcing the closures.
A little over three years later, in November 2014, Reitmans decided to close its Smart Set banner over the next 12 to 18 months. It planned to convert 76 locations to other banners and close 31 outlets. Smart Set sales accounted for about 10 per cent of the company’s annual sales.
Reitmans converted some of those Smart Set locations to a new brand, Hyba — the company’s activewear line. However, by March 2018, the company said it would close all 17 Hyba stores by Feb. 2, 2019. It planned to continue selling the line at Reitmans stores, as well as online. Hyba stores accounted for less than two per cent of the company’s annual sales, it said.
In announcing the CCAA filing, Reitmans noted the impact of the pandemic has changed the retail landscape even more.
“However, the COVID-19 pandemic forced the closure of all retail stores, and pushed the retail industry into a new and unknown era.”
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