Swimco in creditor protection as it tries to survive pandemic's economic strain
Calgary-based swimwear retailer works on restructuring plan, reducing its store count
Swimco chief executive Lori Bacon had a date in mind.
The first day of summer sounded like the perfect time for the head of a Canadian swimsuit retailer to set off on retirement.
But the arrival of COVID-19 changed a lot of plans, including hers.
Instead of retirement, Bacon is working on restructuring the family-run business in a bid to weather its recent insolvency and see better days.
"We're still here, we're fighting the good fight," said Bacon, who sees it as another evolution for the 45-year-old company.
"We've been through evolutions in malls. We've been through evolutions in our product offering. And this is a very dramatic time frame, but it's one more evolution."
Company owes more than $1 million to landlords
For Swimco, like so many other retailers, the impact of the pandemic was swift.
In an affidavit filed with the Court of Queen's Bench in Calgary, Bacon said that up until mid-March, the company had been operating its retail applications in the "ordinary course."
But with the pandemic's arrival and the related emergency health measures, Swimco was forced to close all of its retail locations and temporarily lay off the vast majority of its staff.
From mid-March to late-May, Swimco's only source of revenue was from its online sales, according to the affidavit. That revenue, however, was insufficient to pay ongoing lease obligations or to service Swimco Group's long-term debt.
During this period, the company's landlords were willing to defer lease payments and, eventually, its stores reopened as various governments allowed.
But sales revenues didn't return to their normal levels and the Swimco Group became unable to meet its payment obligations to various creditors.
When one of its landlords demanded payment by a certain date, the company elected to seek creditor protection to allow it to "reorganize its affairs to better fit with the new retail reality."
The company estimates approximately $6.5 million in unsecured claims for the Swimco Group, including $1.6 million in landlord rent, according to a court filing in June.
The Calgary-based company notified creditors last month that Swimco Aquatic Supplies Ltd. and Swimco Partnership had each filed a notice of intention to make a proposal, known as an NOI, a procedure under the Bankruptcy and Insolvency Act.
An NOI provides companies that are struggling financially with protection from creditors for up to six months, giving them the opportunity to restructure their financial affairs and avoid bankruptcy.
In Swimco's case, the company aims to streamline operations, focus on its most successful locations and, ultimately, return to profitability.
It reopened most of the stores it was operating prior to the pandemic, but shut a handful of outlets and cut staff, proceeding with its reorganization plans.
The permanent store closures include three in Ontario — London, Hamilton and Newmarket. Swimco also did not renew its lease on a store in downtown Vancouver.
"We're looking to restructure our business and come up with a stronger, smaller ... company," Bacon told CBC News. "We see a bright future where our world of travel does resume, even if it is two years away."
Pandemic hit retailers hard
Many North American retailers are trying to find their footing in a retail environment upended by the economic wallop of COVID-19.
In recent weeks, numerous companies have closed shops. On Thursday, the U.S. parent company of Ann Taylor, Loft and Justice announced it will close all of its clothing stores in Canada.
Indeed, many retailers have been hit hard by COVID-19.
Authorities shuttered stores and malls due to the pandemic.Many shoppers have moved online. Even after re-opening, retailers face the added costs of cleaning to meet health guidelines. The future for the sector — like many others during the pandemic — seems uncertain.
"It's quite a tough time for retailers, as you can imagine," said Farla Efros, president of HRC Retail Advisory. "It's not a fun time to be a retailer, unless you're in groceries."
Efros said the retailers that are most likely to survive the current shake-up will be those with strong balance sheets and an e-commerce presence that allows them to "flip the switch" quickly to push more into that area. Being nimble to adjust to consumer needs will also be key, she said.
Swimco has long history in Canada
Swimco will be known to many Canadian shoppers.
It started out in 1975 as a home-based, mail-order swimwear business, catering to the needs of swim teams, lifeguards and synchronized swimmers.
In 1980, it began selling fashion swimwear, eventually opening three retail locations in Calgary. Over the years, Swimco added locations in all four western provinces and Ontario.
Up until mid-March, the company operated 25 different retail locations, which employed some 205 full and part-time employees. It is now operating 20 stores, employing more than a hundred people.
The company has also made cuts at its Calgary headquarters and warehouse, reducing its staff of about 45 people by roughly half, said company director Dave Bacon.
Lori Bacon's hope is Swimco's relatively small size will allow it to pivot much faster than larger companies, like a "seadoo that can turn quickly."
Going forward, the plan is to operate with roughly 20 stores, grow its e-commerce business and evolve its product offerings, adding items its customers would want to buy regardless of travel. Integral to the plan, Bacon said, is renegotiating rent with landlords.
In the short term, Dave Bacon said maximizing the swimsuit retailer's sales over the next six weeks of summer will also be important, adding "this is our Christmas."
"Everyone in our industry trying to figure this out," Lori Bacon said of the pandemic's fallout.
"It's an emotional and tough time, but we see the light and think, 'OK, let's give it a go.'"