How the rise of puffy parkas in Canada led to the downfall of Danier Leather Inc

TORONTO ? A balmy winter gave Danier Leather Inc. its final push towards initiating insolvency proceedings last week, but the rising popularity of down-filled parkas might have were built with a longer-term submit the retailer’s downfall, according to court filings.

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Founded in 1972 with 84 stores across Canada, the leather goods retailer unsuccessfully tried to reposition itself in 2013 by consolidating areas of the company, growing sales of higher-margin accessories and improving merchandising and planning.

But that “effected change too rapidly, and resulted in the unintended lack of institutional knowledge because of new management hires throughout the period,” said an affidavit from Danier’s chief financial officer Brent Houlden, who joined the leather goods company last July to aid in the company’s restructuring efforts.

“The personnel changes resulted in a lack of understanding of the business’s subscriber base and trends in outerwear,” said the affidavit filed by having an Ontario Superior Court motion record on Monday.

“There seemed to be too great a focus placed on serving a younger demographic, which resulted in a loss of revenue of sales towards the company’s historic subscriber base.”

That led to a downturn in fiscal 2014 and 2015, where the organization also found itself under-prepared for 2 unseasonably cold winters, running low on the heavily lined winter coats consumers were grabbing while its stock of lighter coats ended up unsold and later marked down. More recently, earlier this November and December were tough for Danier and lots of other retailers because of an unseasonably warm winter.

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But underpinning all of Danier’s woes in recent years was an upswing from the now-ubiquitous puffy parka, turned into a Canadian fashion staple by Canada Goose a lot more than 5 years ago as well as on an upswing ever since as other brands bulked up their stock of down or polyester-blend-filled winter parkas.

“In the marketplace generally, there is a dramatic shift towards purchases of down-filled outerwear and fewer demand for leather jackets (lined or unlined),” Houlden said in his court affidavit.

Danier’s predicament is not entirely surprising because of the cyclicality of fashion, which can hit niche players hard when major trends shift.

“Danier was already weak, so when you set the fashion element into it, it’s difficult if you’re not in line with the trend so when you are linked primarily to one type of product,” said Maureen Atkinson, a retail analyst at Toronto-based J.C. Williams Group. “Who knows what will happen to Canada Goose later on, and when that trend is sustainable over time.”

Danier company began insolvency proceedings last week underneath the Bankruptcy and Insolvency Act and will begin liquidating its stores if it can’t find a purchaser. In the meantime, it is not bankrupt and has enough cash to keep its stores open and pay staff.

Danier was already weak, and when you add the fashion element in it, it’s difficult if you are not in line with the trend so when you are linked primarily to one type of product.

The news comes after a hard few years set for Canadian retailers, with Le Chateau, Reitmans and Laura closing down some unproductive stores, Jacob closed all but five of its 91 stores and Mexx Canada closed down entirely.

In fiscal 2015 Danier posted an internet lack of $19.9 million after a $7.7-million loss in 2014. Revenue fell to $126 million in in 2015 from $155 million in 2013.

And for the 6 months ended Dec. 26, sales slid 6.6 percent to $70.9 million from $75.9 million within the same period last year, based on court filings. Danier recorded a practical lack of about $1.4 million for the reason that period and also the company anticipates an internet loss in its current fiscal year.

As of Dec. 26 the organization had assets of $54.5 million and liabilities of $118.4-million.

Between March and July of this past year Danier talked to some interested potential customers, but it didn’t get any formal purports to purchase the organization.

Many potential customers “expressed concerns the company’s risk profile was too great considering its declining revenues and the operational changes which were underway.”

hshaw@nationalpost.com

Twitter.com/HollieKShaw