Yahoo Finance Canadian shoe chain Aldo seeks creditor protection, citing pandemic pressure
Montreal-based shoe chain Aldo Group is seeking protection from its creditors in Canada, the United States and Europe because of disruptions caused by COVID-19.
Founded in Montreal in 1972 by Moroccan immigrant Aldo Bensadoun, the chain has grown to 3,000 locations in 100 countries. The company says it has sold 46 million pairs of shoes since its founding, and employs 8,000 people, including 2,900 at various stores in Canada and 1,200 people at the company's head office in Montreal.
In a press release Thursday, the company said it has been pummelled by the COVID-19 pandemic just like many other retailers.
"It is no secret that the retail industry has experienced rapid and significant change over the last several years," CEO David Bensadoun said. "We were making strong progress with the transformation of our business to tackle these challenges; however, the impact of the COVID-19 pandemic has put too much pressure on our business and our cash flows."
According to court filings, in the year up until the end of February, the company sold just over $1.2 billion worth of merchandise, but lost money — $74.8 million at Canadian stores, and $52.8 million at locations in the U.S.
None of the company's stores in the U.S. or Canada paid their rent in April or May. Unless something changes, the company will run out of cash by the first week of June, filings suggest.
The company is asking courts in Canada and the U.S. for protection from creditors while it restructures the business. In Canada, the company has filed under Companies' Creditors Arrangement Act, the law that covers businesses that have gone insolvent. It plans to pursue similar protections under Swiss and U.S. law.
"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," Bensadoun said.
The CCAA filing gives the company protection from its creditors for at least 10 days until it can come up with a plan and the company said it is aiming to eventually reopen.
"We will come out stronger and well-positioned to continue leading the way in fashion retail," Bensadoun said.
Store closures, job cuts coming
Court filings suggest the plan does involve closing an undisclosed number of stores, and laying people off.
"The work force will be curtailed substantially at the head office and in various stores," Aldo's restructuring firm, E&Y, said in a filing.
The company is asking the court for permission to honour customer gift cards during the restructuring process.
