Struggling retailer Le Chateau will close 40 locations over the next three years and focus more on growing online sales.
The chain tweaked its fashion line last year, in an aim to sell clothing to what it called a “more mature” customer, including professionals in their 20s and 30s.
But losses have continued to mount.
In its earnings report released Friday, Le Chateau reported a net loss of $35.7 million for the 12 months ending Jan. 30. That made it the fifth year straight of losses. It lost $38.7 million in the year ending Jan. 20, 2015.
After closing 11 stores last year, there are 211 Le Chateau locations in Canada and four in the Middle East. It plans to close 14 locations in 2016.
By early 2019, Le Chateau expects to shrink its retail network to 171 stores, the smallest since 2007 and a 30 per cent reduction since it began closing stores in 2012.
The chain said most of the additional closures will be in fashion big box and discount outlet stores.
“Over the past few years, the retail landscape has evolved and consumer shopping habits have changed significantly with e-commerce. In light of this evolution, the high concentration of stores in large urban markets, a successful model in the pre-digital world, is no longer required,” the company said in its earnings report.
Le Chateau said it will continue to close underperforming stores and concentrate on a repositioning and rebranding project. The chain also renovated five locations in Toronto, Ottawa, Vancouver and Pointe-Clair, Que. last year.
Herschel Segal, who founded Le Chateau in the 1960s, loaned the company $15 million last year. The chain has repeatedly gone to Segal for loans, arguing it costs less in interest than going to a bank.
The bright light for the Montreal-based chain has been its online sales, which increased about 35 per cent in the past fiscal year, however online sales only account for roughly 10 per cent of Le Chateau's revenue.
Le Chateau is among a growing list of struggling Canadian clothing stores, including Hudson’s Bay, Lulelemon, and Reitmans.
Brands that have failed in the past two years include Danier Leather, Bovet, Smart Set, Mexx Canada, Jacob, and Parasuco Retail.
But at the same time, several high-end brands are making moves into Canada, with Nordstrom and Saks opening stores in Canada in 2016 and 2017, while Holt Renfrew and Harry Rosen are planning expansions.
One retail analysts say Le Chateau’s strategy is tantamount to pruning a bad branch so a tree can grow.
“Any brand, any business, has to reinvent themselves once in a while because it’s the only way to survive,” said Bianca Barbucci, a Montreal-based retail analyst.
“The competitive landscape is changing. Players from the outside are coming in. The market trends are changing. The consumers are shopping in different ways. To think that people are shopping like they used to do 10 years ago is utopic because it’s not the way that business is done now.”
But another retail analyst says Le Chateau has been slow to evolve its business away from bricks and mortar.
"They're struggling," said Jean Rickli of J.C. Williams Group.
"I think they are starting to get it now but we find it's late."
-With files from The Canadian Press
