Bankruptcy: 1, Reitmans: 0

Is it the Amazon effect, COVID-19, or a mixture of the two?

Canadian retailer Reitmans (Reitmans Stock Quote, Chart, News TSX:RET.A) could be the latest bricks and mortar victim of the times.

The Montreal-based fashion chain is nearly a century old and had more than 500 locations. It employed nearly 7000 people though five brands; Reitmans, Penningtons, Addition Elle, RW & Co. and Thyme Maternity.

But the company’s footprint had been shrinking. In 2011, Reitmans had 968 locations with seven brands, including Cassis and Smart Set, which had since been shuttered.

“Filing for protection under the CCAA is truly the hardest decision we have had to make as an organization in our almost 100 years of history, but this pandemic has left us no choice,” CEO Stephen Reitman said of the development. “We believe that this is the only course of action to ensure we remain successful in the future.”

Reitmans may be forever associated with COVID-19, but a wider purview suggests the larger, call it post-Amazon environment is the actual culprit.

Shares of the company, which Friday closed at just $.075, have been falling since 2016 and the company’s financials, while not dire at first glance, revealed a firm that was slowly declining. Between the spring of 2018 and 2019, for instance, Reitmans closed 42 stores, which caused a 4.3 per cent drop in sales, from $964-million to $923-million in fiscal 2019.

Then, at the beginning of this month, the company’s annual report showed that annual sales had dipped again, this time to $869.5 million, a 5.8 per cent downtick.

But the real story was told in the company’s cash flow and it made the future untenable. Reitmans cash flow went from positive $6.77-million on February 2, 2019 to negative $87.4-million just a year later.

The developments at Reitmans are another window into how swiftly the retail environment has changed.

Just a decade ago, the company seemed to have nailed its place in the Canadian retail landscape, delivering high fashion looks at budget prices, as illustrated in a series of well received commercials that all ended with the catch phrase “Reitmans 1, Haute Couture: 0.

But retail has been brutal for money in the Amazon age, and Canada has not been spared. Even stalwarts such as Target, Staples, Sears and, most recently, Victoria’s Secret have folded in recent years.

Now, the impact of the coronavirus seems to have put the era on steroids and Reitmans will almost certainly be remembered as a small part of this larger trend.

“Covid is pulling forward several years of retailer fallout,” said retail analysts Green Street Advisors in an April 28 report.

As if to underline the point with a bright red marker, notable retail giants J. Crew, Neiman Marcus and JC Penney have all filed for bankruptcy in the short time since that report was produced,

“Many malls will now be faced with multiple anchor vacancies, a tough place to come back from, especially in an environment where demand for space is virtually non-existent,” Green Street’s Vince Tibone told CNBC recently. “This begs many questions. What will a mall redevelopment look like post-Covid? Backfilling with any retail could be tough and most non-retail development now likely doesn’t pencil.”

That could mean half as many malls as we have now, the expert said.

“The only certainty is that there will be far fewer department stores in the future and malls will need to adapt,” Tibone added.