Known for their floral-forward prints, crisply tailored suits, and eyebrow-raising price tags, Ted Baker is one of those brands that sells a lifestyle as much as it sells clothing. But the luxury retailer’s days may very well be numbered in Canada.
On Wednesday, the Ontario courts granted an order pursuant to the Companies’ Creditors Arrangement Act (CCAA) appointing Alvarez & Marsal Canada Inc. as monitor over the business and financial affairs of Ted Baker Canada. The Canadian arm of the UK retailer currently comprises of 25 stores across the country, including nine operating under the Ted Baker banner, seven under the Lucky Brand banner, and nine under the Brooks Brothers banner. As of April 19, 2024, Ted Baker Canada employs 58 full-time and 72 part-time staffers across those 25 locations.
Ted Baker Canada also sells to customers in a selection of Hudson Bay Company stores.
Wednesday’s order stems from an application made by OSL Fashion Canada Inc. and OSL Fashion Services Inc.: Ted Baker Canada’s current ownership group. OSL filed for creditor protection on behalf of the retailer last week, explaining that the company’s “financial and operational performance has struggled” since early 2023.
An April 24, 2024 factum of the applicants goes into greater detail, noting that OSL acquired the equity interests of Ted Baker Canada and Ted Baker Limited in March 2023. Prior to that point, equity interests of Ted Baker Canada and Ted Baker Limited were owned by No Ordinary Design Label (NODL), which is a subsidiary of Authentic Brands Group (ABG). OSL still has licensing agreements with both NODL and ABG. In August 2023, under OSL's ownership, Ted Baker Canada acquired licensing assets related to both Lucky Brand and Brooks Brothers.
Over the past year and change, OSL's financial situation has “deteriorated to the point of no longer being sustainable,” the factum says. “Applicants have failed to deliver free cash flow since June 2023, and over the last year Ted Baker [North America] has underperformed relative to budget, and revenues have significantly declined.”
The court documents cite the failure of certain ABG operating partners to make payments in respect of the global Ted Baker supply chain, resulting in “substantial” supply chain disruptions, as well as the fact that NODL is facing insolvency in the UK, which prompted suppliers to accelerate their payment terms for Ted Baker North America.
OSL is also claiming that the transitioning of the Ted Baker website URL to tedbaker.us has “significantly impeded sales” and “disrupted relationships” with the the company’s online customer base.
And then, as touched on earlier, Ted Baker stores across North America reportedly had a net loss over $11.3M USD for the 11 months ending December 31, 2023. “During January through April YTD 2024, Ted Baker NA has generated negative cash flow in excess of $5M,” the court documents state.
In addition to being in an “over-advance position on the borrowing base” under their credit agreement, Ted Baker Canada is now in “significant arrears with a number of critical vendors,” with over $14M currently owed. Adding to the debt load is approximately $2M owed to ABG as part of a licensing agreement, $2.4M owing to global logistics company, Future Forwarding, $1M owed in property taxes related to Ted Baker’s 5th Avenue location, and an undisclosed amount owed to the Canada Revenue Agency. The situation is apparently so far along that the senior lender — CIBC — recently informed OSL that it would not permit further draws under the existing credit facility outside of a CCAA proceeding.
What’s unfolding with Ted Baker Canada is a lesson in how tricky the foray into Canadian retail can be — even for established brands. Earlier this year, The Body Shop was wrapped up in a similar predicament, filing for creditor protection and announcing the closure of 33 stores in late February. About a year before that, both Nordstrom and Bed Bath & Beyond shuttered their Canadian locations after failing to achieve the profitability they needed to sustain those stores.
