Factory Direct to Shut All 14 Stores Amid Bankruptcy, Liquidation to Begin Saturday

Vaughan, Ontario-based discount retailer Factory Direct’s 14 stores are closing with liquidation sales beginning this weekend. Factory Direct filed an NOI under the Bankruptcy and Insolvency Act on February 7th and court approval on Thursday gave the green light to liquidate the chain.

Factory Direct said in filed court documents that it had struggled with declining sales and increased costs following the pandemic. The retailer listed liabilities of about $3.5 million as part of its filing, including approximately $1.6 million in termination and severance pay owed to its employees. High economic inflation and increased minimum wage requirements resulted in significantly increased overhead costs for the company, which failed to see sales increase enough to make the business profitable. The company lost about $1.7 million for the 11 month period ending November 30, 2023, according to court documents.

Much of Factory Direct’s merchandise also falls under the ‘non-essential’ category, including such things as televisions and mobile phones. Demand for these goods has decreased recently with an economic slowdown in Canada, including reduced consumer spending on non-essentials. Increasing inflation and housing costs are squeezing many Canadian households, which have shifted spending as a result.

Online marketplaces and related increased competition were also to blame for Factory Direct’s demise, according to filed bankruptcy documents, including wholesalers entering the direct-to-consumer business.

Factory Direct’s 14 stores are all in southern Ontario, and many are month-to-month leases according to court documents. The large-format stores span as large as 14,000 square feet each. Stores are located in the Greater Toronto Area as well as Ottawa, Barrie, Brantford, Hamilton, Kitchener, London, Niagara Falls, and Windsor. At one time, the chain had 24 stores in Ontario and hundreds of employees. Part of the bankruptcy proposal includes compensation for employees under the Wage Earner Protection Program, as funds likely won’t cover what’s owed to the 200 remaining employees of the company following the bankruptcy.

On Thursday, February 15, an Ontario judge approved a consulting agreement for the liquidation of Factory Direct, which will be handled by A.D. Hennick & Associates Inc. and Danbury Global Ltd. Liquidation sales at stores begin the morning of Saturday, February 17. A wide range of products are available from major brand names with cell phones, computers, appliances, TV and home theatre, furniture, speakers, kitchen and other items. Brand names include Apple, Samsung, LG, Dell, Panasonic, Cuisinart, Danby and others.

Alex Hennick of A.D. Hennick & Associates said in an interview that Factory Direct was a terrific retailer, and that the business had struggled financially due to a variety of factors and as a result, is no longer viable. It’s an unfortunate situation that he said will become more commonplace with more retailer bankruptcy filings expected this year. Hennick said that he’s receiving considerably more calls this year than last from retailers struggling and looking to potentially file/liquidate, which indicates a concerning trend that we’ll be reporting on further in Retail Insider.