Montreal-based footwear retailer Aldo announced that it is restructuring its operations after shutting its stores in March due to the COVID-19 pandemic. Similar announcements are expected in the coming weeks as retailers look to reduce store locations in an effort to rightsize businesses at a time when consumers are expected to increasingly shop online while avoiding physical retail spaces.
Aldo said that it had sought and obtained an initial order pursuant to the Companies’ Creditors Arrangement Act (the “CCAA”) from the Superior Court of Québec while at the same time voluntarily applying for similar protection in the United States. Switzerland will follow according to the company.
One of the goals of the restructuring is to “stabilize the business and build on its legacy in retail fashion” according to the release.
The Order made by the Superior Court of Québec provides for a stay of proceedings in favour of Aldo for an initial period of 10 days. That will be subject to an extension thereafter as the Court deems appropriate. Ernst & Young Inc. was appointed as Monitor in the Companies’ Arrangement Act proceedings.
According to filings, Aldo did not pay rent in April and May for its stores in both Canada and the United States. The company will run out of cash by the first week of June according to the filings. Aldo was already in trouble before the COVID-19 store closures — despite selling more than $1.2 billion worth of merchandise over the 12 months ending February 2020, the company lost $74.8 million in Canada and $52.8 million in the United States. The company’s debt stands at $287 million, excluding rents owed, and filings stated that some shuttered store locations will never reopen.
David Bensadoun, Aldo’s CEO, said: “ALDO is one of the world’s leading fashion footwear and accessory brands with a solid track record of growth and profitability for almost half a century. It is no secret that the retail industry has experienced rapid and significant change over the last several years. We were making strong progress with the transformation of our business to tackle these challenges”.
Mr. Bensadoun went on to say, “However, the impact of the COVID-19 pandemic has put too much pressure on our business and our cash flows. After conducting an exhaustive review of strategic alternatives, we determined that filing under CCAA and related proceedings is in ALDO’s best interest to preserve the Company for the long term and survive through this challenging period.”
He went on to say, “Throughout the process, ALDO expects to carry on business while it develops and implements a comprehensive restructuring plan across the organization. With our deep fashion footwear heritage, experienced leadership team, extensive omnichannel capabilities and loyal customer base, we firmly believe that we will emerge from the restructuring process and from the challenges posed by the COVID-19 pandemic. We will come out stronger and well-positioned to continue leading the way in fashion retail.”
The Aldo website as well as websites for its other retail brands, Call It Spring and GLOBO, will remain open. The Company’s corporate stores, which are temporarily closed due to COVID-19, will re-open based on the guidelines set by local governments and health authorities — many of those openings are expected to happen this month as restrictions are being lifted in many provinces.
Few details have been released by Aldo on store closings. Insider sources had informed us several weeks ago that Aldo had been considering filing for CCAA protection in an effort to reduce its store count. Aldo has more than 850 storers in North America and more than 3,000 points of sale in about 100 countries.
Sources are saying that more large retailers are looking to file for creditor protection in the coming weeks. One source said that they were ‘shocked’ when they learned of some of the names of the retailers that were looking to file for bankruptcy protection. Some retailers that have already announced that they are struggling include Montreal-based women’s fashion retailer Reitmans as well as camera retailer Henry’s. There are many more. This week, US-based retailers J. Crew and Neiman Marcus announced bankruptcy filings related to struggles with debt which have been compounded by COVID-19 store closures.