Retailers are in trouble and there’s more to come: insolvency, restructuring experts

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The fall of Hudson’s Bay and Saks Fifth Avenue Canada may give the impression that one of the hottest trends this year is the distressed look, but retail and insolvency experts say the company’s demise is part of a now-annual pitter-patter they expect to continue.

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Since the COVID-19 pandemic, they’ve seen hundreds of retail businesses reach the brink every year. As a result, some restructured, others reduced their store count — and many closed for good.

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What they’ve observed mirrors federal government data showing insolvencies and bankruptcies in the retail sector have been rising over the past four years after a roughly 25-year decline.

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The latest data comes from April, when Canada recorded 56 insolvencies and 46 bankruptcies. A month earlier, the Bay filed for creditor protection, making it one of four retail companies that sought a reprieve in the first quarter of the year.

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“The Hudson’s Bay Company … was kind of like a big flag for everyone and I think is setting the expectation that retailers are in trouble and there’s more to come,” said Michael Basso, a partner in business restructuring and turnaround services for accounting firm BDO Canada.

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Experts, including Basso, say the trend is a reflection of many businesses that haven’t been able to catch a break between the slow rebound from the health crisis, see-sawing consumer demand and a global tariff war.

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“A lot of them have been just barely staying afloat since the pandemic … so when the tariffs happened, they probably just couldn’t withstand one more thing at that point,” said Dina Kovacevic, editor of Insolvency Insider, a Canadian newsletter detailing bankruptcy and creditor protection news.

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This year’s onslaught has not just toppled Canada’s oldest company, Hudson’s Bay, but also left shopping districts without Montreal apparel business Frank and Oak and farm goods store Peavey Mart.

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Ricki’s, Cleo and Bootlegger-owner Comark Holdings Inc., Vancouver clothing brand Oak + Fort and eyewear chain Hakim Optical got in on the action as well, filing for creditor protection and beginning restructurings.

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Several framed their troubles around the COVID crisis or pointed the finger at U.S. President Donald Trump’s penchant for tariffs, but Kovacevic said “the retail industry has been struggling for some time.”

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“Tariffs may have been the final nail in the coffin but to put all or even most of the blame on tariffs wouldn’t be fair,” she said. “It’s been a perfect storm of things beyond the retailers’ control.”

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For many, the problems started long ago. When some shoppers moved online, many retailers misjudged the moment. They either didn’t focus on e-commerce enough or leaned too far into it, cannibalizing their brick-and-mortar business.

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Others had a product mix that wasn’t enticing customers away from competitors or pushing them to spend as their expenses rose.

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When the pandemic arrived, it magnified these issues and caused some companies to rethink their entire business models, only for new tariffs to emerge and take aim at their supply chains and pricing.