Le Chateau to speed up home delivery by centralizing e-commerce distribution

MONTREAL -- Struggling fashion retailer Le Chateau is hoping to appeal to young consumers by speeding up delivery of online purchases with the opening of a larger, centralized distribution centre in the basement of its Montreal headquarters.

Starting this fall, the company said all purchases will be shipped within 24 hours from a fully-stocked location; right now, some items may take extra time to source from a smaller warehouse or stores. The announcement was made at its annual meeting Wednesday.

Le Chateau president Emilia Di Raddo said the company needed a more efficient operation to propel its online business and meet the expectations of the millennial shoppers it's targeting.

"This is the reality of retail today," she noted, when asked if such moves are part of the firm's salvation after 11 straight quarters of losses.

"I guess you could say salvation because if you don't do that you're not going to be around."

Di Raddo said the improved delivery service will also make it easier to expand its online wares. Le Chateau has spent up to $1.5 million in the last six months to build on efforts since 2010 to develop its e-commerce offerings, which is now operating at break-even.

Cost savings from the more efficient, larger operation is expected to reduce, if not eventually eliminate, shipping charges.

While customers can order online or in-store, the company is also hoping to introduce pickup at stores in mid-2017.

Le Chateau (TSX:CTU.A) won't say how much of its sales are e-commerce, but retail consultants Trendex estimates they were two per cent last year, behind Canadian rival Reitmans, Hudson's Bay and well back of U.S. specialty apparel retailers.

The company said online sales increased 53.9 per cent in the first quarter of the year, after growing about 35 per cent in 2015.

At the meeting, Le Chateau wouldn't confirm if it will meet its target of making a profit this year but said same-store sales are improving. They were down just 0.4 per cent in the first five weeks of the second quarter, compared to a 1.9 per cent decrease in the first quarter.

Le Chateau has been shrinking its Canadian retail network by closing some 30 underperforming stores, particularly in small "convenience store malls." It hopes to go from 211 to 171 locations in three years.

However, the ideal store count would be 150 if the company didn't have a number of long-term leases in too many locations that continue to be a drag on its results, Di Raddo noted.

Looking back, she said the company didn't grasp the speed of the digital revolution and consumer shift to top shopping malls.

In addition to streamlining its retail network, Le Chateau has been adjusting its product line by shifting from teen consumers to millennials.

Herschel Segal acknowledged the company he founded in 1959 didn't change fast enough to meet customer demands.

"We became the supplier to the rebellious, young person," he said, adding that for too long it targeted young men with unisex-style clothing.

"And now we have changed. I'm very confident that we have changed the right way."