Frank And Oak seeks creditor protection while Ricki's and Cleo shutter stores in retail shakeup
Parent companies blame pandemic for profitability challenges in retail sector
Montreal-based retailer Frank And Oak has filed for creditor protection for the second time this decade, seeking relief from $71 million in debt, while the Ontario company behind Ricky's and Cleo says it will shutter their stores.
Frank And Oak, a sustainable-fashion brand, filed for creditor protection just before the Christmas holiday, according to Le Journal de Montréal, which first reported the news on Monday. It has been owned by New York-based fashion firm Unified Commerce Group (UCG) since 2020.
As Frank And Oak's creditors, UCG and Desjardins are owed $55.5 million, and the company owes an additional $14.6 million to unsecured creditors, including the Canada Border Services Agency, the Canada Revenue Agency and Shopify.
Accounting firm PricewaterhouseCoopers has been appointed its trustee during the proceedings.
The brand first sought creditor protection in June 2020 as the retail sector struggled with the closure of non-essential stores during the COVID-19 pandemic. The company said in court filings that it's still facing challenges from that time.
Damien Silès, director of the Retail Council of Quebec, told CBC News other contributing factors include slow retail spending by consumers, as well as aggressive competition from ultra-fast fashion brand Shein and online retailer Temu.
A company press release shared with CBC News says Frank And Oak is exploring options to restructure its business. It will continue to operate normally with "minimal" disruption to employees and customers.
"The primary goal is to preserve the business, safeguard jobs and explore potential solutions, including attracting an investor or identifying a buyer for the brand," the press release says.
Frank And Oak was launched as an online brand by co-founders Ethan Song and Hicham Ratnani in 2012. As of this year, it operates 15 brick-and-mortar locations across the country in Quebec, Nova Scotia, Ontario and B.C.
Ricki's, Cleo stores are set to close
Meanwhile, several other Canadian clothing brands have also announced store closures as they file for creditor protection.
Women's apparel company Comark Holdings says it will shutter all of the stores under its Ricki's and Cleo banners as it files for creditor protection.
Court documents show the Ontario-headquartered company operates 75 Ricki's stores, 54 Cleo stores, 20 joint locations and about 19 sites the brands split with Comark's other banner Bootlegger.
A note on Cleo's website says that, effective Jan. 17, its stores will no longer accept returns or gift cards, nor will it be able to redeem or receive loyalty points.
Retail analyst Doug Stephens told CBC News that most of the brand's 221 stores are mall-based, and "we've already been seeing a continual exodus of some really premium brands leaving malls."
Most malls seeing declines in foot traffic. Ricki's and Cleo are also challenged by the fact that they aren't quite discount brands, but don't qualify as luxury brands either, Stephens noted.
"So they are really stuck in that very, very difficult portion of the market that is trying to attract at that mid-tier consumer that increasingly doesn't exist anymore."
CBC News has reached out to the company's court-appointed monitor for more information about the store closures. It's currently unclear when the stores will close.
A court-appointed monitor says Comark's profitability has been negatively impacted by the pandemic, a November 2021 ransomware attack, more competition from ultra low-cost fashion retailers and supply chain and vendor issues.
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With files from CBC's Mélissa François and Meegan Read and The Canadian Press
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