Canada’s retail sector is facing a tough start to the year, as two major companies seek creditor protection and close stores while assessing their future.
Comark Holdings Inc., the owner of clothing brands Ricki’s, Cleo, and Bootlegger, and UCG Canada Holdings Inc., which operates Frank and Oak, have both filed court applications in recent weeks to seek relief from creditors and create space for restructuring their businesses.
Comark’s application under the Companies’ Creditors Arrangement Act (CCAA) comes alongside a decision to close all Ricki’s and Cleo locations. These brands, known for women’s apparel often designed for office environments, currently operate 75 Ricki’s stores, 54 Cleo stores, and 20 joint locations. Additionally, Comark has 19 locations shared with Bootlegger, which also has 53 standalone shops.
Court filings show that Comark employs 2,056 people in Canada. The company also indicated plans to seek a court order to liquidate some of its Bootlegger stores. Comark’s lawyers have yet to respond to requests for comment.
In court documents, Comark outlines the financial challenges it has faced, including the impact of the COVID-19 pandemic, a ransomware attack in November 2021, heightened competition from ultra-low-cost retailers like Shein and Temu, as well as ongoing supply chain and vendor issues.
“Despite our best efforts to reduce expenses, preserve capital, and improve profitability, our liquidity position continues to rapidly deteriorate, especially during the traditionally slower post-Christmas retail season,” said Comark’s CEO, Shamsh Kassam, in an affidavit. He estimated that by Christmas, the company owed $61 million to vendors, landlords, and other partners, amounts the company would be unable to pay.
According to Kassam, some vendors have stopped shipping new merchandise and are unwilling to produce summer and fall items. Other vendors have filed claims against the company in Ontario and Manitoba, seeking payment for outstanding amounts and damages.
Retail strategist Liza Amlani, co-founder of the Retail Strategy Group, was not surprised by Comark’s situation. “When you visit their stores, it feels like we have taken a step back in time,” she said via email. “Excess inventory sits on racks at the end of each season. They’re inundated with inventory and deep markdowns, which suggests they don’t know what their customers want.”
Amlani had similar impressions after visiting Frank and Oak’s stores. “The assortment was dull and boring,” she noted. “The sales associates didn’t have proper sales training and lacked customer service skills. I was greeted and told about the sale, but that was it.”
Frank and Oak, with 15 stores in Canada, has also sought creditor protection as it explores restructuring options. The Montreal-based company aims to preserve its business, safeguard jobs, and explore potential solutions, including attracting investors or finding a buyer for the brand. According to court filings, Frank and Oak owes approximately $71 million to creditors, including textile businesses, landlords, and utility companies.
Frank and Oak’s CEO, Dustin Jones, attributed the company’s debt to the losses incurred following the COVID-19 pandemic. “We are working diligently on our restructuring plan to ensure our success and to continue our business relationships,” he said in a note to creditors.
The court filings from Comark and Frank and Oak come shortly after Toys “R” Us Canada announced it would close five Ontario stores and reorganize its other locations to include play spaces and expand the HMV brand. The Body Shop Canada has also revealed plans to close stores as it moves toward a sale to an affiliate of Serruya Private Equity Inc., based in Markham, Ontario.
Despite the wave of closures and financial troubles, Amlani does not view this as an indication of a difficult year for the retail sector overall. “Consumers are simply being more cautious and intentional about what they buy,” she said. “With so many options both online and offline, the customer now has more choices than ever.”
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