Canada’s mid-size retailers continue to struggle

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Danier Leather and Le Chateau have been fixtures in the Canadian marketplace for decades. However, the two retailers are beginning to struggle as cheaper, faster fashion brands expand and online retailers take over market share.

With 86 stores across Canada, Danier has hired Consensus Advisory Services, a boutique investment banking and financial advisory firm, to help it explore strategic alternatives after posting yet another steep decline in sales in the last quarter.

“Danier is working on its business and operational strategy with a view to improving its results,” says chief executive officer Jeffrey Wortsman. “As publicly disclosed, Danier regularly monitors its stores and under-performing stores may be closed or relocated as leases expire or otherwise as well as look for opportunities for new stores. One of Danier’s strategies is to optimize its real estate.”

Meanwhile, Le Chateau has recently relied on founder, director and majority shareholder Herschel Segal’s firm for loans. In June, the company secured $15 million through this channel, the bulk of which is being used to renovate stores. The problem, says retail expert Randy Harris of Trendex North America, is that Le Château isn’t renovating stores quickly enough.

“As of the end of August, 2015, the company will have renovated 20 of its stores since the fall of 2011,” remarks Harris. “Note that that is less than 10 per cent of Le Château’s total locations . . . This fact translates to a disconnect between Le Château’s more upscale/expensive merchandise and the environment of its stores.”

Many of these retailers’ issues, notes Ed Strapagiel, an independent retail consultant, stem from the growth of other mid-end apparel retailers. “The middle fashion market is starting very much to get squeezed,” he says. “The Zaras and H&Ms of the world have expanded more. It wasn’t a big deal when they only had two stores, but they’ve grown now.” CJ

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