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The Montreal-based DavidsTea is seeking protection at Quebec Superior Court from creditors so that it can operate selective stores while it restructures. It plans to close most of its stores across the country.
As per company’s statement on Wednesday, it is seeking an order to allow it to restructure under the Companies’ Creditors Arrangement Act in Canada and under Chapter 15 of the U.S. Bankruptcy Code for its U.S. subsidiary.
The company said that it plans to continue operating online through davidstea.com during the restructuring process. Its wholesale distribution channel, which supplies grocery stores and pharmacies will also keep on running for the time being.
The chain’s stores have been closed since March 17 due to the COVID-19 pandemic.
“The transformation of our business model is necessary to position the company for a return to profitability,” Chief Financial Officer Frank Zitella said in a statement.
DavidsTea had been experiencing year-to-year decline in store sales for last few years and the company fears that post COVID-19, retail environment creates significant challenges for the sales to pickup.
The company hadn’t paid rent on any of its stores for April, May and June.
Zitella said Wednesday it would seek more favourable lease conditions from landlords and ultimately may terminate “a significant number” of its 222 leases.
DavidsTea’s Founder and interim Chief Executive, Herschel Segal, said “I regret the impact that the restructuring will have on our employees.” “This has been an incredibly difficult decision to take, but a necessary one to ensure the long-term viability of our company,” Segal added.
