Canada’s retailers are in trouble and there’s more to come: experts

A shopper walks past an empty sales area at the flagship downtown Hudson's Bay store in Vancouver, on Monday, March 24, 2025. THE CANADIAN PRESS/Darryl Dyck

The fall of Hudson’s Bay and Saks Fifth Avenue Canada may give the impression that one of the hottest trends this year is the distressed look, but retail and insolvency experts say the company’s demise is part of a now-annual pitter-patter they expect to continue.

Since the COVID-19 pandemic, they’ve seen hundreds of retail businesses reach the brink every year. As a result, some restructured, others reduced their store count — and many closed for good.

What they’ve observed mirrors federal government data showing insolvencies and bankruptcies in the retail sector have been rising over the past four years after a roughly 25-year decline.

The latest data comes from April, when Canada recorded 56 insolvencies and 46 bankruptcies. A month earlier, the Bay filed for creditor protection, making it one of four retail companies that sought a reprieve in the first quarter of the year.

“The Hudson’s Bay Company ... was kind of like a big flag for everyone and I think is setting the expectation that retailers are in trouble and there’s more to come,” said Michael Basso, a partner in business restructuring and turnaround services for accounting firm BDO Canada.

Experts, including Basso, say the trend is a reflection of many businesses that haven’t been able to catch a break between the slow rebound from the health crisis, see-sawing consumer demand and a global tariff war.

“A lot of them have been just barely staying afloat since the pandemic ... so when the tariffs happened, they probably just couldn’t withstand one more thing at that point,” said Dina Kovacevic, editor of Insolvency Insider, a Canadian newsletter detailing bankruptcy and creditor protection news.

This year’s onslaught has not just toppled Canada’s oldest company, Hudson’s Bay, but also left shopping districts without Montreal apparel business Frank and Oak and farm goods store Peavey Mart.

Ricki’s, Cleo and Bootlegger-owner Comark Holdings Inc., Vancouver clothing brand Oak + Fort and eyewear chain Hakim Optical got in on the action as well, filing for creditor protection and beginning restructurings.

Several framed their troubles around the COVID crisis or pointed the finger at U.S. President Donald Trump’s penchant for tariffs, but Kovacevic said “the retail industry has been struggling for some time.”

“Tariffs may have been the final nail in the coffin but to put all or even most of the blame on tariffs wouldn’t be fair,” she said. “It’s been a perfect storm of things beyond the retailers’ control.”

For many, the problems started long ago. When some shoppers moved online, many retailers misjudged the moment. They either didn’t focus on e-commerce enough or leaned too far into it, cannibalizing their brick-and-mortar business.

Others had a product mix that wasn’t enticing customers away from competitors or pushing them to spend as their expenses rose.

When the pandemic arrived, it magnified these issues and caused some companies to rethink their entire business models, only for new tariffs to emerge and take aim at their supply chains and pricing.

The succession of troubles left companies taking on more and more debt to cover bills like rent, which in some cases, had become insurmountable.

“We in the insolvency community call it a reckoning of zombie companies,” said Kovacevic.

Zombie companies are businesses so unable to generate enough revenue to operate the business, they rely on debt to stay alive.

The number of Canadian zombie firms has been rising over the past few decades, with recent studies showing that the country’s share could potentially be the highest in the world, researchers from Statistics Canada and the federal Department of Finance concluded in 2023.

Basso attributes some of the increase to the loans and other financial support the federal government offered during the pandemic to companies that might not have been able to borrow that money.

“They had issues before the pandemic and would otherwise have gone down or been forced to restructure during the pandemic,” he said. “The loans I think helped them have a chance to continue but are now saddling the balance sheets with debt ... they have no ability to pay off.”

Such situations have driven many companies to their death.

Others have looked for a way forward through the court system or businesses like Gordon Brothers, which are involved with appraisals, liquidation, fundraising and restructuring.

At the start of the month, Gordon Brothers helped Canadian home goods and accessories retailer Linen Chest secure $35 million in credit to increase its “liquidity and support future growth.” In December, it gave $120 million in financing to Toys “R” Us Canada Ltd., which has been closing stores and building play centres at others.

What all the companies Gordon Brothers has dealt with lately have in common is that the dynamics of their business — from supply chains to consumer demand — are “changing much more quickly” than before the pandemic, said chief transaction officer Kyle Shonak.

“There’s a lot of variables out there and unfortunately, there’s no silver bullet for any of it,” he said.

Some, like furniture businesses, have a glut of inventory from the pandemic, when people were feverishly revamping homes. As demand dropped, they didn’t curtail production.

Now, they need Gordon Brothers to help them offload pieces they have, ideally for the most money possible while setting up the business to avoid falling into the same trap again.

At the same time, these companies and others are looking to Gordon Brothers to help them evaluate whether they have to raise prices or move production, storage or distribution of their products to cope with current tariffs or other crises that could be on their way.

Gordon Brothers can help clients identify which of their products are less tariff prone or drum up financing to help those needing to switch manufacturers, but Shonak said, customers ultimately pay the price.

“The consumer at the end of the day is the one that pays for a lot of this stuff as it passes its way through the chain, but it affects everyone,” he said.

This report by The Canadian Press was first published June 18, 2025.

Tara Deschamps, The Canadian Press