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Canada: Housewares battle pushes Bowring, Bombay into bankruptcy protectionTuesday, August 12, 2014 > 09:25:41
(The Globe & Mail)
A trio of housewares chains owned by a prominent Canadian retailing family has gone into bankruptcy protection, adding to a growing array of domestic stores that are faltering in the face of pressures from foreign powerhouses and online players.
Bombay & Co. Inc., Bowring & Co. Inc. and Benix & Co. Inc., owned by a member of the Isaac Benitah family that also owns Fairweather, International Clothiers and other chains, received court protection from creditors last week, owing $86.6-million, according to court documents. Almost half of the debts – $39.5 million – is owed to companies tied to brothers Isaac and Fred Benitah as secured creditors, the filings say.
The Benitah family is grappling with U.S.-owned rivals that have invaded Canada, such as Bed Bath & Beyond, Home Sense, Williams Sonoma, Pottery Barn and Crate & Barrel. As well, giant discounters Wal-Mart Stores Inc., Costco Wholesale Corp. and more recently, Target Corp., operate sizable home goods sections in their outlets here.
“It’s getting harder and harder for independents to survive against the big-box stores,” said Jamie Salter, chief executive officer of Authentic Brands Group LLC in New York, which buys rights to brands in order to bolster and license them to other businesses – although it is not considering acquiring any of the Benitah’s failing brands.
The three insolvent chains, Bombay, Bowring and Benix, each face “a severe liquidity crisis” and are in default of various financial and other covenants, according to a court filing. The court gave them until Sept. 5 to “solicit offers for a sale or investment and/or develop a comprehensive restructuring plan to address underperforming stores, right size its overhead and address liquidity constraints.”
The chains’ collapse underlines the fragile nature of the retail landscape as larger, global players expand their operations here, often with e-commerce. As a result, mall landlords are racing to fill spaces with names that are picking up in popularity to replace the waning banners that fail to draw shoppers. Bombay and Bowring have more than 110 outlets combined.
Domestic retailers are feeling the heat of the shifts in the malls. Earlier this summer, discount chain XS Cargo, which also carries housewares, filed for bankruptcy protection for its 50 stores. A few months earlier, fashion retailer Boutique Jacob Inc. filed for bankruptcy, setting the stage for it to close its 92 stores.
Other chains, such as Reitmans (Canada) Ltd. and Le Château Inc., are struggling with declining financial results. U.S.-owned office-supplies purveyor Grand & Toy is closing its remaining 19 stores this year, although it continues to operate online; U.S. clothier Aéropostale Inc. is shutting stores here.
“Clearly, while a bankruptcy is always unfortunate in the short term, over the last few years there have been a number of retail bankruptcies,” said Huw Thomas, chief executive of Calloway Real Estate Income Trust, which has nine of the Bombay and Bowring stores in its power centres. “These have been, in the end, an opportunity to bring vibrant new tenants to our sites and improve the overall tenant mix.”
Mr. Thomas said virtually all the country’s major retail landlords, including RioCan Real Estate Income Trust and Ivanhoe Cambridge, will feel the pinch of the Bombay and Bowring filing. He knew of no single retailer that is looking to acquire the insolvent chains. But dollar stores and liquor stores are among retailers looking to expand.
“Retail in general doesn’t seem to be on a massive upswing at the moment,” Mr. Thomas said. “The Canadian consumer is relatively indebted.” In the home goods field, “the pie is getting shared among more people.” Even Toronto-based Indigo Books & Music Inc., which is closing some of its stores, is shoring up its higher-margin home wares and gift offerings to make up for falling book sales.
While Canadian non-anchor mall stores generated $638 sales per square foot in May, or about 19 per cent more than their U.S. counterparts because of a less crowded market here, those sales are advancing at a slower rate in Canada than in the U.S. – at 2.1 per cent compared with 3.6 per cent, according to the International Council of Shopping Centres.
Fred Benitah, chief executive officer of each of the three insolvent home goods chains, said in a filing “the housewares industry in Canada has become increasingly competitive, particularly with the recent entry of large-scale retail chains into the sector.
“This increased competitiveness had a significant impact on the profitability of the Benix store locations.”
Mr. Benitah said he converted Benix stores to Bombay or Bowring banners, but they continued to underperform. He also cited “poor 2013 Christmas sales due to an unusually harsh Canadian winter.”
Although the Benitah family is very private, Isaac was locked in a high-profile legal tussle with U.S. discounter Target a few years ago over ownership rights to the Target name in Canada. The fight surfaced more than a year before Target opened its first stores in this country in early 2013. Mr. Benitah came out the winner with a settlement that industry experts estimated to be in the millions. A lawyer for the Benitahs’ retailers declined to comment on Monday.