Why did Factory Direct announce Bankruptcy?

Factory Direct, a Vaughan, Ontario-based discount retailer, is shutting down all 14 of its stores. Liquidation sales kick off this weekend following the approval of court to begin the chain’s liquidation.

The company, struggling with declining sales and increased costs post-pandemic, filed for bankruptcy under the Bankruptcy and Insolvency Act on February 7th. Court approval on Thursday paved the way for the chain’s liquidation.

What liabilities did Factory Direct cite in its bankruptcy filing?

In court documents, Factory Direct cited liabilities of approximately $3.5 million, including $1.6 million in termination and severance pay owed to its employees. The company faced mounting overhead costs due to economic inflation and higher minimum wage requirements, resulting in continuous losses.

A significant portion of Factory Direct’s inventory, such as televisions and mobile phones, falls into the ‘non-essential’ category. Decreased demand for these items, coupled with economic slowdowns and reduced consumer spending, further exacerbated the company’s struggles.

Increased competition from online marketplaces and wholesalers entering the direct-to-consumer business also contributed to Factory Direct’s downfall.

How many employees are affected by Factory Direct’s closure?

All 14 of Factory Direct’s stores, primarily located in southern Ontario, operate on month-to-month leases. These large-format stores, some as large as 14,000 square feet, are spread across the Greater Toronto Area, Ottawa, Barrie, Brantford, Hamilton, Kitchener, London, Niagara Falls, and Windsor.

Despite having once boasted 24 stores in Ontario and employing hundreds of workers, the company’s bankruptcy proposal includes compensation for its remaining 200 employees under the Wage Earner Protection Program.

A consulting agreement for Factory Direct’s liquidation was approved on February 15th, with A.D. Hennick & Associates Inc. and Danbury Global Ltd. tasked with handling the process. Liquidation sales commence on Saturday, February 17th, offering a wide range of products from major brand names, including Apple, Samsung, LG, Dell, Panasonic, Cuisinart, and Danby.

Alex Hennick of A.D. Hennick & Associates expressed his regret over Factory Direct’s demise, attributing it to various financial challenges. He anticipates a rise in retailer bankruptcy filings this year, reflecting a troubling trend in the industry.

How Can Experienced Employment Lawyers Help?

If you find yourself in the difficult situation of dealing with a bankrupt employer, it’s crucial to seek guidance from a skilled employment lawyer. At Whitten & Lublin, our experienced team is dedicated to offering personalized insight and advice to suit your unique circumstances. If you’re grappling with the complexities of employer bankruptcy and need legal assistance, reach out to Whitten & Lublin online or call us at (647)-951-7038.