As more than 80% of Canadian Retail Businesses Reported a Decrease in Revenue, Major Retailers are Closing Canadian Stores

eResearch | Last week, Canada started rolling out Phase 3 of the re-opening guidelines for businesses with indoor retail operations to start offering more services. However, several months of prolonged lockdowns already forced small retailers to close and larger corporations to pull operations out of Canada.

According to Statistics Canada, more than 80% of Canadian retail businesses reported a decrease in revenue in Q1/2020 compared with the prior year, and more than 27% of those businesses reported revenue decreases of 50% or more.

Smaller businesses who run operations month-to-month or rely on credit to buy inventory are struggling to keep their businesses afloat, while global brands and corporations are pulling retail storefronts out of Canada to consolidate operations and reduce costs.

Retail Brands Shutting Stores in Canada

Ascena Retail Group

Last week, Ascena Retail Group Inc. (NASDAQ: ASNA), a female focused clothing retailer in the U.S. with 2,800 apparel stores internationally, announced plans to close all 50 stores in Canada, including brands Ann Taylor, Loft, and Justice.

The store closing came after Ascena’s recent Chapter 11 bankruptcy proceedings and restructurings due to COVID-19 impacts. Ascena also expects to close all stores in Puerto Rico and Mexico, and a significant number of stores in the U.S. where it has most of its stores.

Reitmans Canada Limited

In May, Reitmans Canada Limited, a leading ladies apparel retailer in Canada, filed for creditor protection (“CCAA”) as its Liabilities in FQ1/2020 rose to C$207 million with only C$42.7 million in Assets, while its Net loss surged to C$74.7 million.

Last week, Reitman delisted from the TSX with expectations to transition to the TSX Venture Exchange later, in August.

In June, Reitmans, as part of the CCAA, announced plans to close all 54 Thyme Maternity stores and all 77 Addition Elle stores. Reitmans is expected to continue running the rest of its brands in Canada, which include 259 Reitmans stores, 106 Penningtons stores, and 80 RW&CO stores.

Starbucks

Last month, Starbucks Corp. (NASDAQ: SBUX), the world’s largest coffee chain, announced plans to close up to 200 stores in Canada over the next two years as sales drastically dropped due to lockdowns.

This week, Starbucks reported FQ3/2020 earnings and estimated a loss of approximately US$3.1 billion in sales due to COVID-19 impacts.

Business Strategies and Changes

Canadian retail businesses are altering and implementing new strategies to adapt to changes in consumer behaviours amid the pandemic.

Below is a list of specific changes retail businesses made due to COVID-19, according to data from Statistics Canada.

• 61% added new ways to interact with or sell to customers
• 38% increased virtual connections externally or by e-commerce
• 47% altered offered products or services
• 38% discontinued a product or service

Most retail businesses are struggling to adapt to new changes such as online sales, as many companies did not prepare the infrastructure, marketing, and logistics for online operations ahead of time.

Canada COVID-19 Update

Canada currently has 116,000 confirmed cases with 8,935 reported deaths due to COVID-19. However, Canadians have made a strong effort in flattening the curve with new cases lowered to approximately 100 a day.

This week, in an effort to track new cases of COVID-19, the federal government launched the “COVID Alert” app, which uses Bluetooth technology for contact tracking, signalling the user if a newly infected person, who had the app downloaded, was nearby the user’s phone in the past 14 days.

As Canada transitions into Phase 3, only time will tell if the country will be hit by another wave of new COVID-19 cases, which could lead to more retailers shutting doors for good in Canada.

CHART 1: Retail Businesses Closing Stores in Canada 2020

 Source: eResearch; CTV News; Global News; CBC News; Retail Insider