For 3 weeks in November and December 2021, iconic Canadian clothes chains Bootlegger, Cleo and Ricki’s discovered themselves paralyzed — staring down the barrel of the “important vacation season” however prevented by ransomware from shifting stock.
The assault occurred on Nov. 23, however the companies weren’t capable of regain entry to their inner methods till Dec. 13 — a lag time that compelled the 221 affected shops to mount heavy promotions with the intention to offload the substantial portion of seasonal clothes caught up within the delay.
In line with court documents filed as a part of insolvency proceedings by Winnipeg-based Comark Holdings — the corporate which owns all three retailers — the “brick and mortar shops misplaced roughly $8.2 million in income as a result of cyber incident alone.”
Headwinds for clothes retailers
Chief govt officer Shamsh Kassam’s affidavit supplies an in depth window into the array of issues which compelled Comark into creditor safety: the ransomware assault, the lingering impression of COVID, battle within the Center East and the rise of so-called “ultra-low-cost retailers.”
An Ontario Superior Courtroom decide has given the inexperienced mild in current weeks to offers that may see Ricki’s and Cleo offered to Canadian retail billionaire Doug Putman — proprietor of Toys R’ Us and Northern Reflections — and Bootlegger doubtless going to Warehouse One clothes.
However Canada’s retail clothes and accessories business — which generated $3.6 billion in 2024 — nonetheless faces the identical headwinds that left Comark $61 million in debt.
“The aggressive retail and, particularly, retail attire business in Canada has undergone important adjustments previously decade,” writes Kassam, who relies in Vancouver.
“On account of these adjustments, many Canadian retailers, together with attire retailers … have filed for cover … together with Reitmans, Aldo, Aeropostale, American Attire, Mexx, Without end XXI, Goal Canada, Specific, Sears Canada, Nordstrom Canada and Ted Baker Canada,”
Deep Canadian roots
The court docket paperwork spell out the historical past of all three shops, which have been a part of the Canadian retail panorama for many years.
Ricki’s was based in 1939 in Brandon and sells principally tops, sweaters, pants, clothes, blouses, blazers, outerwear, denim and equipment. Cleo’s predecessor, Irene Hill, was based in 1958.
“The Cleo model supplies work put on and informal clothes for ladies over the age of 48,” Kassam writes. “Cleo is the biggest retailer of ladies’s petite merchandise in Canada.”
Bootlegger was based in B.C. in 1971 — “a retailer of denim, different informal attire and equipment for women and men between the ages of 35 and 55.”
Regardless of the deep Canadian roots, a report filed by Comark’s court-appointed monitor says 82 per cent of personal label merchandise made for the retailers “is sourced from overseas producers, situated primarily in China and Bangladesh.”
These provide chains would additionally come to play a task in Comark’s fortunes.
“Sadly, worldwide battle within the Pink Sea, protests at sure of the distributors’ factories in Bangladesh, and rail and port strikes in 2024 all induced extra delays and resulted in additional strained vendor relationships and misplaced gross sales,” Kassam writes.
“This, in flip, positioned elevated monetary strain on the … companies.”
‘Client wants have modified’
The most recent court docket proceedings aren’t Comark’s first expertise with insolvency. The corporate was compelled into creditor safety in 2020 on account of COVID lockdowns — re-emerging after a sale to an entity managed by its principal shareholder “poised for achievement.”
However Kassam writes that even after the sale, additional lockdowns in 2020 meant Bootlegger, Cleo and Ricki’s misplaced out on Black Friday and Christmas gross sales.
Delays in provide chains brought on by the pandemic additionally factored into the gross sales schedule, delivering seasonal gadgets “outdoors of their focused timeframe,” which in flip led to product markdowns.
“Client wants have additionally modified because the COVID-19 pandemic led to elevated distant work and a decreased want for workwear clothes, which beforehand made up a sizeable portion of the [companies’] companies,” Kassam writes.
The ransomware assault despatched a shockwave by the enterprise — shuttering retail shops and an e-commerce platform for 2 days and freezing stock within the weeks that adopted.
“The results of the Cyber Incident prolonged far past this time interval,” Kassam writes.
“All the corporations’ inner processes and methods, together with [their] historical past and demanding path, have been misplaced or compromised by the Cyber Incident and, as these methods weren’t recovered, they needed to be rebuilt.”
The court docket paperwork say the very nature of the competitors has additionally modified drastically previously 4 years.
“Particularly, a tough financial surroundings mixed with the introduction and client uptake of sure ultra-low-cost trend retailers, together with Shein and Temu, have positioned important monetary strain on conventional trend retailers,” Kassam’s affidavit reads.
As of December 2024, Ricki’s, Cleo and Bootlegger had roughly 2,056 hourly and salaried staff throughout Canada. The court docket proceedings don’t say what the longer term holds for them.
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