Insolvent Danier Leather Inc. generated interest from 33 companies last year about possibly acquiring the retailer or providing it with much-needed capital, but no formal offer emerged.
At the same time, the financial performance of the 84-store chain continued to decline and its internal financial forecasts were repeatedly revised downward, Brent Houlden, chief financial officer of Danier, said in a court document as part of the company's insolvency proceedings.
Toronto-based Danier, which received court protection from its creditors under the Bankruptcy and Insolvency Act last week, is now trying again to find a buyer. If it's unsuccessful, it will have to liquidate its inventory and close its stores, distribution centre and corporate offices, letting go almost 1,300 employees.
Danier joins a growing list of apparel retailers that is increasingly being squeezed by rising e-commerce powerhouses and large cheap-chic players, such as Swedish-based Hennes & Mauritz. Other fashion chains that have closed or dramatically shrunk in the past year or so include Mexx, Smart Set and Jacob. U.S. discounter Target Corp. closed all 133 of its stores in Canada last April.
"It's hard to see that things are getting any better for Danier Leather," Randy Harris, president of apparel-market researcher Trendex North America, said in a newsletter last week just days before the chain filed for protection.
Mr. Harris predicted that four more Canadian-based apparel retailers would either go out of business or be acquired this year.
In its 2015 fiscal year, Danier lost almost $20-million from a year earlier as sales fell 11 per cent to $126-million. For the six months ended Dec. 26, 2015 (the first half of fiscal 2016), sales declined by 6.6 per cent to $70.9-million "and the company anticipates a net loss," court documents say.
Mr. Houlden said Danier's 2015 effort to find a buyer was unsuccessful for a number of reasons. He said it focused on soliciting a share-acquisition transaction, "which ultimately became unappealing to prospective purchasers in light of the company's deteriorating financial condition and the significant liabilities that would be assumed and incurred if a prospective purchaser attempted to restructure the company's affairs by taking such measures as closing unprofitable store locations or terminating employees."
He said Danier's move to operate under court protection and seek a buyer or investor addresses such concerns because the current process is flexible and allows interested companies to invest in Danier, acquire the retailer, or buy all or some of its assets.
In the latest process, Danier has an agreement with GA Retail Canada to take over its stores and liquidate its inventory and its retail furniture and equipment if it doesn't find another buyer.
Danier's financial adviser, Consensus Advisory Services LLC, has had "meaningful" talks with companies that have "varied interests" in the retailer, Mr. Houlden said. They include liquidators, competitors and companies that are interested in the business as a going concern, he said.
He said he's optimistic the court-supervised sale process "will likely have the desired effect of generating additional offers for the company and its assets."
Last year, Danier's financial adviser contacted almost 190 companies about potentially buying the retailer, Mr. Houlden said. Of those, 33 signed confidentiality agreements and received information about Danier, he said.