MONTREAL -- DavidsTea has filed for creditor protection with the intention of becoming a predominantly-online retailer after a restructuring process takes place, the company announced on Wednesday. 

It cites an increasingly challenging retail market as the reason for the move, which it says has only worsened with the COVID-19 pandemic.

DavidsTea hinted at a possible restructure back in mid-June when it announced it hadn’t paid rent at any retail locations in three months. It was unclear back then when and how many stores would be able to reopen once government orders related to COVID-19 were lifted.

“As we indicated before, our challenge is to restructure our North American retail footprint in order to decrease the ongoing losses caused by unprofitable stores,” Herschel Segal, the brand’s founder, chairman and interim CEO said in a statement on Wednesday. “Through a restructuring, we intend to achieve that objective and complement our successful e-commerce and wholesale distribution channels.”

The brand will continue to supply its products in grocery stores and pharmacies across the country.

The company’s application is expected to be heard by the Quebec Superior Court on Wednesday and, if successful, a similar course will be pursued in the United States.

“The transformation of our business model is necessary to position the Company for a return to profitability,” Frank Zitella, CFO and COO of DavidsTea said, also in a statement. “DavidsTea has experienced a multi-year decline in brick & mortar sales and the post COVID-19 retail environment creates significant challenges for our unique in-store customer experience.”

The company has no plans to change its share structure during the restructuring process.