Is COVID-19 a Knock-Out Blow for the Retail Industry?

The COVID-19 pandemic has resulted in several large retail operations seeking insolvency protection both under the Companies Creditors Arrangement Act (CCAA) in Canada and under its US equivalent, Chapter 11. In Canada, this list includes retail giants Aldo Group and Reitmans Group. In the United States, since the beginning of May, Hertz US, J.C. Penney, Neiman Marcus and Pier 1 Imports have all filed for protection.

The Costs of Insolvency

As previously mentioned, insolvency and/or financial difficulties rarely happen unexpectedly. Several signs warn business leaders that such a situation is on its way. Unfortunately, these signs are frequently ignored. Often, management allows the situation to deteriorate without making financial diagnostics. The line of credit is being used at full capacity, payments to vendors are stretched…