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Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.

 

Le Ch鈚eau adapting in competitive world, founder says

Wednesday, June 01, 2016 > 15:42:12
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(The Star)

Herschel Segal who founded the chain in 1959 believes today’s consumers are less interested in clothing.

The Canadian retail landscape is constantly changing, and Le Château’s founder says success depends on adapting to meet customers’ wants.

“There is a change in consumers’ habits especially in the new tech age, where people aren’t shopping in the mall. They are removed,” Herschel Segal said in an interview just before speaking to young entrepreneurs at Futurpreneur Canada’s conference on Tuesday.

“They’re not as interested in clothing as they were in 1960s and 1970s, or even the 1980s and 1990s,” he said. “They are spending on other things like travel and food.”

And the clothing business is crowded with so many competitors – including many that are also struggling or closing altogether in recent years such as Laura, Mexx, Danier Leather, Smart Set and Jacob.

Segal has put millions of his own money to keep Le Château afloat, including a $15-million loan last June, which was on top of a $10-million injection earlier, as the company closes underperforming stores and renovates others.

“It was necessary to get over the mistakes we made,” he said, “and the trend can get more exaggerated, so even though you are doing the right thing, it might not be fast enough.

“We have to keep watching that, which translates into less stores, and less staff,” he said.

Shares are now trading as a penny stock. As of Jan. 30, the company operated 211 stores including 65 fashion outlet stores, compared with 222 stores including 42 fashion outlet stores a year earlier.

In April, Le Château said it plans to close another 40 stores across Canada over the next three years as part of ongoing efforts to turn around its money-losing operations.

The chain lost $35.7 million or $1.19 per share for the 12 months ended Jan. 31. That compared with a loss of $38.7 million or $1.34 per share a year earlier.

Segal, who also co-founded specialty tea shop David’s Tea, noted there is little competition in the tea business. But in the clothing sector, there is too much.

He founded Le Château in 1959, quickly lost all his money, and then was forced to do something.

Segal credits a trip to Carnaby Street in London, England, with giving him inspiration.

Carnaby St., on the edge of Soho, was the centre for mod and hippie London, where local shops set fashion trends. British teens would flock to the area in hopes of catching a glimpse of the Beatles doing some clothes shopping.

By the end of the 1960s, Carnaby St. was a top tourist attraction, after Buckingham Palace.

“It was not a business plan. It was not encouraged by the bank,” he said.

Segal argued that the retail industry is divided between mass-produced lower-priced clothes like H&M and Zara, and high-end stores like Holt Renfrew, with little room in the middle.

“It used to be very crowded in the middle. Now there will be very few,” he said. “We are always looking to survive. We are never going to be the cheapest in the product, nor will we give the service of a Holt Renfrew.”

Le Château has been moving toward specializing on dresses for a night on the town, to formal events from proms to graduations.

“We make 50 per cent of our dresses in Canada, so you can more turns, and you can respond more quickly to the market,” he said.

Segal said the stores have added footwear, along with handbags and accessories.

“That might mean we don’t have gym clothing, and may mean men’s wear won’t belong in Château in the future. We’ll have to see.”



 


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