David Bensadoun, CEO of Aldo Group, at an Aldo store in Toronto on May 12.Ammar Bowaihl/The Globe and Mail
Canada’s shoe giant is back from the brink.
Three years ago, Aldo Group chief executive officer David Bensadoun was facing a fight to ward off the demise of the business his father founded. Now, for the first time since before COVID-19 shocked Canada’s retail industry and pushed Aldo to seek creditor protection, the company is in expansion mode.
Nearly a year since completing its restructuring, the Montreal-based footwear retailer’s plans for its future mean rebalancing where much of its business comes from.
“We want the other parts of the business to grow,” Mr. Bensadoun says, standing in a brightly lit Aldo store in Toronto. The 441 corporate-owned stores like this one across North America currently account for 52 per cent of the company’s revenue. While Aldo has no plans to close more stores – which sell shoes under the banners Aldo, Call It Spring and Globo – the plan is for them to account for a much smaller proportion of sales, as the company focuses on expanding through franchise locations around the world, wholesale deals and e-commerce. Its eventual goal is for each of those components to account for one-quarter of revenues.
While Aldo is a Canadian retailer, the bulk of its store presence exists elsewhere. The company already has roughly 1,100 franchise stores in 110 countries, with plans to open another 70 this year. Those include new markets such as South Korea, as well as expansion in existing markets such as India. And there are three major markets – China, Brazil and Japan – where Aldo currently has no presence, and is considering how to change that.
“If we can get into those markets with the right partners, it gives us massive potential,” Mr. Bensadoun says. “Franchise is a big part of how we’re going to grow.”
Aldo making plans for growth represents a big shift in focus, after senior management spent the better part of two years in restructuring. While the pandemic was a blow to the entire retail industry, some parts of the sector were hit particularly hard. Total footwear sales in Canada declined from $7.5-billion in 2019 to $5.9-billion in 2020, according to Statistics Canada. Store closings wiped out 90 per cent of Aldo’s sales almost overnight, and as a retailer primarily of fashion footwear, even the online business was slow.
It’s the end of the Bay as we know it – and Richard Baker feels fine
But even before the crisis, the company was losing money – recording a $74.8-million loss in its Canadian business and a US$52.8-million loss for Aldo U.S. in the year ended Feb. 1, 2020. The company had been lining up financing to execute an already-planned transformation strategy, when the pandemic arrived and that dried up. Instead, that transformation happened under creditor protection.
Aldo closed 267 stores and laid off more than 200 people – a process Mr. Bensadoun calls the worst time of his career. In addition to jettisoning those store leases, the company took millions of dollars in costs out of the business by relocating its head office and spending less on IT. Its distribution centre costs have also been cut in half by moving to a facility with less automation, a reversal of the wider industry trend away from manual warehouse tasks.
“What we did was very deliberately simplify and lighten the business,” Mr. Bensadoun says. “We’re now in a position where as we grow, the costs will grow – but we’re not struggling to pay for big structural fixed costs that were already present.”
Aldo Group’s annual sales now total just over $1-billion, less than the US$1.28-billion it recorded in the year before entering creditor protection (according to documents filed at the time, which were stated in USD). But the company is now profitable, he says. The goal is to grow those revenues to $1.5-billion as soon as possible.
Its ability to do so relies on keeping up with consumer tastes, which shifted amid a pandemic dress code of sneakers, flip flops and UGG boots. While people are dressing up again, they are more reluctant to suffer for a high heel.
“This is the first time in my career where I’ve seen 20- to 25-year-olds arrive into the fashion footwear world and not be willing to buy uncomfortable shoes,” Mr. Bensadoun says.
He is hoping to change their minds. The company has added new layers of padding to many of its designs, which have made its stilettos “way more comfortable,” he insists with the unwavering confidence of a man currently walking around in flats.
Other changes are also afoot: Aldo is expanding its wholesale business, recently signing long-term licensing deals with both Ted Baker and Brooks Brothers. Licensing gives Aldo the right to design, produce and sell those brands’ footwear through other retailers, as well as supplying the shoe collections to Ted Baker and Brooks Brothers’ own boutiques. Together, those deals are worth roughly $50-million in additional revenue per year, Mr. Bensadoun says, and the company is working on a third deal that would add another $50-million to its books if it goes through.
The company also sells its own Aldo- and Call It Spring-branded shoes wholesale, via other retailers such as Amazon, Macy’s and The Shoe Company. The only part of its wholesale business where Aldo is scaling back, is in private-label production – manufacturing shoes for other labels, such as Joe Fresh, which the company has produced for in the past – which comes with lower margins.
All of this would seem to suggest that its own stores are a lower priority for Aldo, but Mr. Bensadoun says they serve a larger purpose than just displaying shoes for sale.
“The stores are a massive data-collection service,” he says, asking the store manager at this location to demonstrate how staff scan and record every pair a shopper tries on. The design teams track that information, to see which fits are not working. The company also uses the data to tell wholesale customers which styles work best in various locales around North America.
The stores are also deeply tied to Aldo’s e-commerce operations, since it ships all of its online orders from their stockrooms rather than from a distribution centre. As e-commerce grows, Aldo’s leaders believe this will help them keep up with faster fulfilment, and lower shipping costs since they are sending out orders from locations as close to customers as possible.
“The business that I started running before COVID was really a legacy retail-oriented business,” says Mr. Bensadoun, who took over as CEO in 2017. “When COVID hit, it was really a moment for us to recognize that the old structure was not going to be sustainable.
“We just went through some pretty radical change.”