Le Château rocked by brutal competition: Dianne Buckner

Whether or not you’re in the market for a trendy chiffon skirt or a Tropic Thunder men’s print shirt, it’s not good news that the retail chain Le Château is under intense competitive pressure.

With 226 stores in Canada, 2,600 employees and close to 35 per cent of its production done here at home, there’s a lot at stake.

Is this 55-year-old company — whose founder once boasted he introduced bell bottoms to Canada in the '70s, and who clad John and Yoko in velour pantsuits for their famous Montreal Bed-in — finally on the ropes?

The company’s stock price plunged after second quarter results were released, amid news both sales and net revenue are down.

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With the Jacob chain’s bankruptcy announcement in May, the continuing struggles of Sears and Target, and now Le Château’s troubles, no further evidence is needed to prove that Canada’s retail marketplace is a brutal place to do business.

But the company’s vice-president of sales and operations, Franco Rocchi, tells CBC News there’s no fear the company will fold. "We’re not concerned with that at all," he says defiantly. "We’re not in that space."

Currently rebranding

Rocchi does admit however, that Le Château has been in a "rebranding stage that started a few years ago." The store built its name with inexpensive (some would say cheap) stylish apparel aimed at young people. Now the target market is older, more sophisticated customers, 25- to 45-year-olds.

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"That’s the challenge we’re having right now, is getting that message across," says Rocchi, lamenting the fragmented nature of communication these days, with consumers getting information not just from a handful of magazines and TV networks, but from "thousands" of sources, including social media and blogs.

The company’s market share tells the story of that challenge.

"They’ve been underperforming the market growth of the apparel industry at least since 2012," says Sasha Poljsak, a director with Fusion Retail Analytics. While the overall industry grew by three per cent over the past year, Poljsak’s data shows "Le Chateau’s year-over-year sales performance has basically been negative over that entire time." Its market share decreased by 0.1 per cent.

Retailers that grew during that period include Hudson’s Bay Company, Winners and Mark’s Work Wearhouse.

Ups and downs of fashion

But this isn’t the first time Le Château has been down on its luck. Herschel Segal, the grandson of an immigrant tailor, started the company in 1959 and expanded to four stores, but then had to shrink back to just one on Ste-Catherine Street in Montreal, minus the inheritance he’d invested.  

He carried on and eventually grew again, but the ups and down kept coming. In a 2008 report on CBC, he admitted that his 25-store expansion into the U.S. was a disaster and that Le Château almost went bankrupt in 1991.  

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There was yet another comeback though, and by 2010 the stock hit a high of $15 per share. You can guess what came next: another ride down the roller-coaster. The stock went down to almost a dollar per share by the summer of 2012.   

Newly retired, Segal made a $10-million loan to his company. (That wasn’t a financial problem for him, apparently. Segal co-founded Davids Tea in 2008 after his retirement, which with 117 Canadian locations and a mention from Oprah on her show, has done quite well). 

"We’ve been masters of reinvention," says Le Château’s Rocchi. "You can’t measure a rebranding effort in increments of three months the way public companies are required to do. You need a longer arc."

Formidable competition

Despite the formidable growth in competitors — H&M, Zara, Forever 21 — Rocchi claims the real challenge has been the spending habits of Canadian consumers.

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"We’re post-recession right now, but I think the consumer is still carrying some of the scars from that," says Rocchi. "We’re still seeing cautionary discretionary spending out there, which is why we need to evolve and move."

While Rocchi points to the economy, industry watchers point to a lack of focus at Le Château. Analysts talk about the company losing touch with its customer base.

Still, Rocchi remains hopeful, pointing to a new clothing line that Le Château will launch later this week, curated by Canadian actress Lauren Holly (former partner of Jim Carrey). And the company provided wardrobe for After the Ball, a romantic comedy starring Chris Noth that was shot in Montreal. It will be released early next year.  

Will those types of tactics help? With all those jobs at stake, and Le Château’s long history in Canada, many hope so.  But fashion is an inherently tricky business, as financial analyst Neil Linsdell of Industrial Alliance Securities points out.

"Le Château bet on fashion forward, and fashion forward is very fickle, it’s high risk in the industry," says Linsdell.  

"You know, you just have to get the coloured scarf wrong and you’re screwed."