Ransomware, disease and 'ultra low-cost retailers': Why 3 iconic Canadian clothing stores went broke

For three weeks in November and December 2021, iconic Canadian clothing chains Bootlegger, Cleo and Ricki's found themselves paralyzed — staring down the barrel of the "critical holiday season" but prevented by ransomware from moving inventory.

The attack occurred on Nov. 23, but the businesses weren't able to regain access to their internal systems until Dec. 13 — a lag time that forced the 221 affected stores to mount heavy promotions in order to offload the substantial portion of seasonal clothing caught up in the delay.

According to court documents filed as part of insolvency proceedings by Winnipeg-based Comark Holdings — the company which owns all three retailers — the "brick and mortar stores lost approximately $8.2 million in revenue due to the cyber incident alone."

Headwinds for clothing retailers

Chief executive officer Shamsh Kassam's affidavit provides a detailed window into the array of problems which forced Comark into creditor protection: the ransomware attack, the lingering impact of COVID, conflict in the Middle East and the rise of so-called "ultra-low-cost retailers."

An Ontario Superior Court judge has given the green light in recent weeks to deals that will see Ricki's and Cleo sold to Canadian retail billionaire Doug Putman — owner of Toys R' Us and Northern Reflections — and Bootlegger likely going to Warehouse One clothing.

But Canada's retail clothing and accessories industry — which generated $3.6 billion in 2024 — still faces the same headwinds that left Comark $61 million in debt.

"The competitive retail and, in particular, retail apparel industry in Canada has undergone significant changes in the past decade," writes Kassam, who is based in Vancouver.

"As a result of these changes, many Canadian retailers, including apparel retailers ... have filed for protection ... including Reitmans, Aldo, Aeropostale, American Apparel, Mexx, Forever XXI, Target Canada, Express, Sears Canada, Nordstrom Canada and Ted Baker Canada,"

Deep Canadian roots

The court documents spell out the history of all three stores, which have been part of the Canadian retail landscape for decades.

Ricki's was founded in 1939 in Brandon and sells mostly tops, sweaters, pants, dresses, blouses, blazers, outerwear, denim and accessories. Cleo's predecessor, Irene Hill, was founded in 1958.

"The Cleo brand provides work wear and casual clothing for women over the age of 48," Kassam writes. "Cleo is the largest retailer of women's petite merchandise in Canada."

Bootlegger was founded in B.C. in 1971 — "a retailer of denim, other casual apparel and accessories for men and women between the ages of 35 and 55."

Despite the deep Canadian roots, a report filed by Comark's court-appointed monitor says 82 per cent of private label merchandise made for the retailers "is sourced from foreign manufacturers, located primarily in China and Bangladesh."

Those supply chains would also come to play a role in Comark's fortunes.

"Unfortunately, international conflict in the Red Sea, protests at certain of the vendors' factories in Bangladesh, and rail and port strikes in 2024 all caused additional delays and resulted in further strained vendor relationships and lost sales," Kassam writes.

"This, in turn, placed increased financial pressure on the ... businesses."

'Consumer needs have changed'

The latest court proceedings are not Comark's first experience with insolvency. The company was forced into creditor protection in 2020 as a result of COVID lockdowns — re-emerging after a sale to an entity controlled by its principal shareholder "poised for success."

But Kassam writes that even after the sale, further lockdowns in 2020 meant Bootlegger, Cleo and Ricki's lost out on Black Friday and Christmas sales.

Delays in supply chains caused by the pandemic also factored into the sales schedule, delivering seasonal items "outside of their targeted time frame," which in turn led to product markdowns.

"Consumer needs have also changed as the COVID-19 pandemic led to increased remote work and a decreased need for workwear clothing, which previously made up a sizeable portion of the [companies'] businesses," Kassam writes.

The ransomware attack sent a shockwave through the business — shuttering retail stores and an e-commerce platform for two days and freezing inventory in the weeks that followed.

"The effects of the Cyber Incident extended far beyond this time period," Kassam writes.

"All of the companies' internal processes and systems, including [their] history and critical path, were lost or compromised through the Cyber Incident and, as these systems were not recovered, they had to be rebuilt."

The court documents say the very nature of the competition has also changed drastically in the past four years.

"Namely, a difficult economic environment combined with the introduction and consumer uptake of certain ultra-low-cost fashion retailers, including Shein and Temu, have placed significant financial pressure on traditional fashion retailers," Kassam's affidavit reads.

As of December 2024, Ricki's, Cleo and Bootlegger had approximately 2,056 hourly and salaried employees across Canada. The court proceedings do not say what the future holds for them.