Mastermind Toys says it has obtained an initial order for creditor protection from the Ontario Superior Court of Justice as it faces financial challenges and a slowing economy.
The Toronto-based specialty toy and children’s book retailer characterized the decision to file for the protection as “difficult but necessary” and said the move was the product of increasing competition, disruptions from the COVID-19 pandemic and, more recently, a deteriorating macroeconomic environment.
“Despite implementing a series of operational improvements and cost reductions, and undertaking an extensive strategic review and conducting a robust sale process, the challenges facing the company’s business have become too significant to overcome,” Mastermind said in a news release.
The company declined an interview with CBC News, saying that it was prioritizing communication to its employees and other stakeholders on Friday.
News of the company’s creditor protection filing came on Black Friday, a sales period that is typically a boon for retailers, especially those selling toys, which people often purchase in advance of the holiday season.
Creditor protection allows companies facing financial difficulties to restructure their operations in hopes of helping the business overcome its challenges and rebound.
As part of its creditor protection proceedings, Mastermind said all 66 of its stores across Canada will remain open for business, and all ongoing sales and holiday promotions, including its Black Friday sale, will continue.
However, it will immediately liquidate and close some “underperforming” stores while exploring alternatives for the business with an unnamed buyer, who has been in “accelerated negotiations” to buy the company, management consulting firm Alvarez & Marsal Canada Inc. said in court filings made on behalf of Mastermind.
“If a transaction with such purchaser materializes, it is the Mastermind Entities’ intention to conduct a holiday sale for continuing stores in the normal course,” court documents say.
“If the proposed transaction is not finalized imminently, the Mastermind Entities will have no choice but to commence a full liquidation of all 66 of their retail locations.”
Specialty retailers feeling the pressure
“I’m surprised because they have some really good quality stuff in there,” said Sophia Espinoza, a Toronto shopper who was exiting a Mastermind store in Toronto’s Summerhill neighbourhood on Friday.
“I’ve bought the odd item once in a while but not [on] a frequent basis, such as other stores like Toys ‘R’ Us or Indigo,” she said, adding that should the store close, it would leave her with one less option for Christmas shopping.
Sam Care, the owner of Toronto independent toy store Playful Minds, says it’s a challenging time for all small businesses.
“A lot of people are looking for better deals, and it’s just a hard time for small independent toy stores or any store,” she said. Care added that her business is well supported by the neighbourhood but that the store still has to compete with Amazon.
“Probably about 38 per cent of our business comes from this holiday season … we need it now,” she said.
Sam Care, the owner of Toronto independent toy store Playful Minds, says that it’s a challenging time for most small businesses. (Tess Ha/CBC)
Mastermind’s circumstances are “indicative, really, of the pressure that many, many retailers are finding right now,” said Doug Stephens, the founder of consulting firm Retail Prophet.
Stephens said that a few patterns in the retail sector are impacting companies like Mastermind, including the decline of specialty retail: “We live in a world where just about everything is available just about everywhere.”
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Another is the pressure that online marketplaces like Amazon have put on traditional brick-and-mortar retailers.
“When you have that kind of competitive pressure and a potentially weak economy ahead of us with job insecurity and financial insecurity, it makes for a tough environment,” Stephens said.
These factors, combined with a changing consumer market — with children increasingly turning to online or digital games instead of analog toys — put Mastermind in a tough spot, he said.
Company has been trying to sell since April
Mastermind began trying to sell the business in April, after experiencing material net losses and financial strain.
A bidder was found, but the deal was subject to “a lengthy review process with the Competition Bureau, which involved both Mastermind LP and the proposed purchaser responding to extensive information requests and making numerous submissions,” court documents say.
A Black Friday promotional sign is shown at a Mastermind toy store in Toronto’s Summerhill neighbourhood on Friday. (Tess Ha/CBC)
Because of the “material cost and length of time that would have been required to respond” while the company faced “challenging circumstances” and the upcoming holiday season, it filed for creditor protection instead.
It plans to seek further authorization from the Ontario Superior Court of Justice to close an unspecified number of stores during the proceedings under the Companies’ Creditors Arrangement Act. It also expects to seek additional relief at a court hearing next Thursday.
Mastermind owes $22.2 million to merchandise vendors and $2.6 million to logistics and other vendors. It also has about $5.6 million in outstanding gift card liabilities.
These amounts are owed to unsecured creditors, who typically have no collateral and are thus often unlikely to recoup outstanding amounts.
Its secured creditors include Canadian Imperial Bank of Commerce, which is owed $25.7 million.
The debts come as Mastermind said its same stores sales have declined materially, trending about 22 per cent below prior year results.
Mastermind’s history dates back to 1984, when brothers Andy and Jon Levy opened an educational software store in Toronto. Its popularity convinced the brothers to turn the store into a chain and to broaden its merchandise assortment.
By the 2000s, they had rebranded the company to focus on educational toys rather than software and renamed the chain Mastermind Toys.
The company also has an e-commerce platform, which it said accounts for about 10 per cent of sales and employs roughly 800 non-unionized workers.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
