Stephen Reitman on Tuesday said he was quite possibly having the most difficult day of his long career. The fashion empire his grandparents started in Montreal 94 years ago appeared in a Quebec court seeking protection from creditors, shackled by months of unpaid bills that have piled up during the coronavirus shutdown.
“This pandemic has just knocked the heck out of us,” the chief executive of Reitmans Canada Ltd. said in a phone interview.
Quebec Superior Court on Tuesday granted an interim order, starting the process under the Companies’ Creditors Arrangement Act (CCAA) that will allow Reitmans to chart a new course for its foundering business in consultations with its creditors, mostly suppliers and landlords for each of the retailer’s 576 leased storefronts, none of which have been paid rent in two months, according to the company’s court filing.
The Reitmans board of directors unanimously decided that creditor protection was the safest way forward for the fashion chain, which has found itself at the edge of financial ruin after the economic shutdown forced it to shutter its stores.
Reitmans has temporarily laid off 90 per cent of its 5,600 store employees, and 30 per cent of its roughly 1,000 head office employees. The staff who remained took a salary cut, the company said in its court filing.
“I’ve realized that it’s the most difficult day possibly of my business career and the hardest decision we had to make as an organization for certain, in almost 100 years,” Reitman said.
Reitmans relies on in-store purchases for roughly 80 per cent of its revenue. Uncertain if shopping habits will ever return to normal, the company earlier this month warned it would be “unable to continue as a going concern” without new financing.
“We believe that (CCAA) is really the only course of action,” Reitman said.
In its application for creditor protection, Reitmans said its liabilities included $109 million in trade and other payables, $14 million in outstanding gift cards, $1 million related to its loyalty program and $24 million in pension obligations.
That roughly $150 million in liabilities was well below Reitmans’ $361 million in assets.
But chief financial officer Richard Wait said those liability numbers were from the fiscal 2020 yearend report, which covers up to Feb. 1, so it doesn’t include unpaid rent from April and May.
“We’re coming up on June rent,” Walt said. “We have this large liability hanging over our head.”
The restructuring plan will include permanent store closures across the network, Reitman said, but no decision has been made on whether any of the company’s store banners — Reitmans, Penningtons, RW & CO., Addition Elle and Thyme Maternity — will close for good.
We are trying to get in and out of this process and we want to make it as successful long term as possible
Did You See This CB Softwares?
37 SOFTWARE TOOLS... FOR $27!?Join Affiliate Bots Right Away
Stephen Reitman, CEO
“We have made no decisions. All this has to be done in the next short while and we are studying that as we speak,” Reitman said, adding he will not try to take the company private.
“We are trying to get in and out of this process and we want to make it as successful long term as possible,” he said.
Reitman had expected this year to be a good one. In early March, the company switched up the leadership of its flagging plus-size division, which has historically been a major revenue generator.
With the change, the 2021 fiscal year was starting to look like a “turnaround year” for the business that was started as a general store on St-Laurent Blvd. in Montreal by Romanian immigrants Sarah and Herman Reitman in 1926.
The Reitmans soon focused on women’s wear, gradually becoming a homegrown fashion empire and acquiring Penningtons and other banners during the past two decades or so.
By 2015, Reitmans had 823 stores across the network. But in its last fiscal year, which ended on Feb. 1, Reitmans lost $87.4 million compared to a net profit of $6.8 million the previous year.
Reitmans has closed 18 stores in 2020, continuing its protracted retreat from bricks-and-mortar retail that has shuttered more than 200 of its stores across multiple banners in five years.
On top of the financial issues, the company also lost its veteran chief executive Jeremy Reitman, who died in December.
“He’s not here and I have no one to argue with,” said Stephen Reitman, who took over as CEO from his late brother after working alongside him for about 50 years. “We made decisions together.”