STRATEGY PRESENTED BY LE CHATEAU: POSITIONING FOR THE POST-BOOMER MARKET Disclaimer: This case was prepared by William D. Taylor, Professor of Business at the John Molson School of Business in November 2009. This case has been prepared for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. PRESENTED BY: Le Château: Positioning for the Post-Boomer Market When you think of the blur of all the brands that are out there, the ones you believe in and the ones you remember, like Chanel and Armani, are the ones that stand for something. Fashion is about establishing an image that consumers can adapt to their own individuality. And it's an image that can change, that can evolve. It doesn't reinvent itself every two years. 1 - Ralph Lauren ...you need to understand both sides of the business - the internal planning side and the external product side. But to thrive ... a retailer needs to create a sense of excitement, something that gets people to spend more of their money in your store than in your competitors'. 2 - Herschel Segal In December 2009 the executive team of Le Château, a leading Canadian specialty apparel retailer, was considering how it should be positioned in the post-boomer market. Addressing how Le Château’s brand should be positioned to increase market share was particularly important to the firm given the many challenges the apparel industry in Canada faced at the end of 2009. The Canadian economy had shown signs of recovery in recent months; however, most forecasters predicted a slow recovery and how consumer spending for apparel would change was uncertain. Significantly, industry analysts in many industries were starting to pay attention to what has been termed the post-boomer market as the large baby boom cohort (usually defined at those born in Canada between 1946 or 1947 and 1966) were starting to retire. Successful repositioning was nothing new to Le Château. Over the years founder Hershel Segal and subsequent CEO’s at Le Château had profitably moved the firm to take advantage of trendy sixties, Carnaby-style fashions, and later moved the firm from an under 21 Saturday night fashion focus to one with a broader assortment of day and evening wear for those over 25. Specifically, the Board of Le Château Inc. has asked the executive team to make recommendations about how the Le Château brand should be positioned to achieve the firm’s revenue and market share growth objectives. In making these recommendations the executive 2|Page PRESENTED BY: team was well aware of the need to consider the firms financing, and the operational challenges to the firm’s value chain that any repositioning would entail. THE CANADIAN RETAIL APPAREL MARKET Appendix 1 presents general statistics on the retail apparel industry 3. The Canadian apparel retail market is large. In 2007 total revenue generated in this market amounted to $ 20.6 billion dollars with over half of this amount being spent on women’s apparel. In Canada the top 10 retailers account for about 50% of all retail apparel sales and the top five retailers (Sears, WalMart, The Bay, Zellers and Mark’s Work Warehouse) account for about 41% of sales. On average about 50% of total Canadian retail apparel sales have been made in specialty apparel retail stores and this half of the retail apparel market is quite fragmented. With respect to drivers of demand, personal income levels (and thus demographics) and trends in fashion are both key 4. Segments within the industry include family clothing, women’s clothing, men’s clothing, children’s and infants clothing, accessories and footwear. Accessories include items such as hats, scarves, belts, handbags, ties, and even wigs. Within a segment, stores can sell a full range of products including clothing, outwear, and underwear. It is not unusual as well to find stores that sell footwear, accessories and even makeup or perfume. Clothing market segments can be defined by styles: casual, contemporary, professional, or formal. Alternatively, they can be defined by occasions: resort, special occasion, athletic. Importantly, markets can also be segmented by price tiers that target a special type of buyer: fashion leader, follower, socialite, or fashion neutral 5. THE IMPORTANCE OF POSITIONING It has been stated that strategic market positioning is probably the most important challenge of clothing retailers. 6 Constant monitoring of a retailer’s image and its distinctive market position is critical. Industry analysts have noted that in the specialty retail apparel market a business cannot be all things for all customers and must define its targeted market, or niche, 3|Page PRESENTED BY: very carefully. For example, the American chain Ann Taylor 7 historically targeted busy socially upscale women (offering products such as classic black dresses and women’s power suits). Abercrombie and Finch had apparel that was aimed at different groups: men and women between 18 to 22, girls between 10 and 14, high school boys and girls, and men and women age 22 to 25. Talbots Inc. targeted mostly women’s wear with classic sportswear, casual and dress wear. Nike’s global brand team defined Nike’s target female customer for women’s fitness (footwear, apparel and accessories) as “a 22-year-old, confident, slightly irreverent women who wanted to work out hard and look good.” Positioning is usually described as a mix of retail elements 8 including: Target Customers fashion leaders, followers, neutrals Merchandising range of items/styles and selection; quality and price tiers Reputation management of brand image and consumer perceptions (for example, limited distribution and premium prices, or wider distribution with accessible pricing) Marketing advertising in selected media (e.g. lifestyle publications), other types of promotion such as fashion shows or brochures etc. Store Locations and Layout store size; mall, city centre, or outlet locations; and in store atmosphere Sales Staff staff image, attitude of staff, helpfulness Product Development and Apparel Design internal development versus licensing in. 4|Page PRESENTED BY: TRENDS AND DRIVING FORCES IN APPAREL RETAILING Over the last few years, many factors have had an impact on apparel retailing in Canada 9, 10. These include: Trade liberalization which had opened up both the US and Canadian retail markets to textiles and apparel produced in other countries. The result has been that apparel manufacturing in relatively high wage countries such as Canada have declined in recent years. Between 2003 and 2006 the value of Canadian apparel manufacturing shipments went down from about 7.89 billion dollars to 4.78 billion dollars which represents a 39.4 % decline 11. Approximately 50 % of imported textiles and apparel now comes from China. Retail consolidation which has created fewer but larger retailers with more bargaining power. Often these large retailers have created their own private brands, or have featured global brands at the expense of Canadian apparel manufacturers. The increase in market share of highly- focused, specialized apparel retailers who have taken market share away from department stores and small independent apparel retailers. Strong pressures throughout the apparel fashion value chain for lower prices and higher quality. As well there is the growing need for innovative fashion products to meet the demands of specialized market segments. The increasing importance of discounters such as Wal-Mart which have put downward pressure on prices for apparel. Discounters such as Wal-Mart or Target in the US have started to focus on fashion as well as low prices. 5|Page PRESENTED BY: Increasing performance pressures due to “fast fashion’’ which has moved some retailers away from a two season cycle to often a monthly fashion, or even shorter, update cycle. The fast fashion business model based on designing trendy, inexpensive clothes brought to the retail market at very fast speeds has been developed by European apparel retailers Zara, H&M, and the British firm New Look. Growing social awareness on the part of apparel customers about eco-friendly materials such as organic cotton, and concerns about labour exploitation and other social issues in the apparel manufacturing value chain. Alternative sizing has grown; particularly in the United States were the number of overweight people in the population continues to increase. Also known as “vanity sizing” firms have adjusted their sizes to please customers (what use to be a women’s size 10 is now a women’s size 6). Plunkette Research, an American market research firm, states that the average adult woman in the United States is 5’4” tall, now weighs 155 pounds and wears a size 14 dress. 12 HISTORY OF THE LE CHÂTEAU CHAIN Founded in 1959 13 in Montreal by Herschel Segal, a McGill graduate in economics and political science, the Le Château chain started out as a men’s wear store which added a women’s collection in 1962. The name Le Château was selected to identify with the French nature of Quebec, an identification which became increasingly important after the start of the Quiet Revolution in the late 1950’s and early 1960’s. While the business enjoyed some initial success, it did not start to grow until Herschel Segal started to bring London’s street style into his stores. In the 1960’s, London’s Carnaby Street was the focal point of a new fashion wave which was epitomized by bell-bottom pants and a mod look. By 1972, his chain had grown to 10 stores which were in metropolitan area shopping stores. This ability to translate key trends into popular fashion apparel has been a cornerstone of the organization’s success over the years. 6|Page PRESENTED BY: During the mid-1970’s Le Château grew rapidly. By 1980 it had more than 50 stores across Canada and its product line was more mainstream and more oriented to female clients. Profits were steady during these years until 1977 when Le Château suffered its first loss. The firm rebounded rapidly from this loss and by 1983 made an IPO which raised approximately $ 7.3 million to fund expansion, particularly to the United States. Growth continued across Canada during the 1980’s and by the early 1990’s the chain had about 160 store locations. Le Château’s first expansion into the United States in 1985 was not successful. Stores were opened in Boston, New York, Chicago, Baltimore, and several other cities. In total 26 stores were opened in the United States during this period. Similar to other Canadian retailers who have tried to expand to the American retail market, Le Château faced tough competition. Analysts attributed this lack of success to poor store locations and failure to adjust to American fashion tastes. Eventually all of these stores, except one in Manhattan, were closed. As things worked out, this Manhattan store (and 3 others in the New York/New Jersey area) continued to do well for the next 20 years. Le Château continued to grow in Canada and by the early 1990’s had about 160 stores. During this period the company vertically integrated both designing its apparel, but also manufacturing it at its own facilities. By manufacturing its own apparel Le Château reduced the cycle time to bring new designs to market faster and lowered its cost of goods sold. The recession of the early 1990’s was a difficult period for many Canadian firms, especially clothing retailers, resulting in the closure of some large chains. Noteworthy was the Eaton’s department store which after 130 years in business filed for bankruptcy in 1997. Le Château suffered from poor sales during the late 1990’s and had a larger quarterly loss in 1999. To correct its poor financial performance, Le Château made important strategic and management changes in early 2000’s. Jane Silverstone was made vice-chairman and Emilia Di Raddo, formerly Vice-president Finance, was made President. Changes were also made in quality 7|Page PRESENTED BY: control and inventory management during this period and Le Château enjoyed strong financial and stock market performance in 2002 and 2003. The repositioning of Le Château that took place after 2001 involved a number of elements. The chain moved a little upscale and upgraded quality. Increased sizes were introduced from 00 to 15/16 and clothes were adjusted to fit people who were a little larger. In an interview with the Toronto Star 14 in 2004, Emilia Di Raddo, company president, stated that she was convinced that more money could be made offering stylish clothes to adult women than trendy teenage girls. “We’re a fashion company, not a teenage company,” noted Di Raddo. “We’re a fashion company regardless of your age.” Di Raddo also noted that Le Château targets the middle market which had a large number of soccer moms and career-oriented women that are after the latest runway fashions, but in clothing that is wearable and of high-quality. In 2004 it was estimated that 50% of Le Château’s clientele was 25 or older and prior to the 2001 repositioning only 25 % was in this category. The chain strived to be unique and offer clothing that others did not have. Le Château went after the Canadian market in smaller centers which were neglected by other retailers. To reduce business risk by 2004 the chain had moved away from seasonal collections and rolled out new apparel on a monthly basis. As part of its repositioning, Le Château also renovated its stores to change the image from an emphasis on Saturday night “clubwear” to one of fashion for all ages. By the end of 2005 about one half of the chain’s stores had been done over. By 2004, 12% of revenues came from its men’s division, 8 % from junior girls and 7 % from footwear. The new strategies put into place by Le Château were very successful. The years from 2004 to 2008 were very good for the chain. In 2007, with its stock trading in the $ 64 range, Le Château split its Class A and Class B shares on a four-for-one basis. Appendix 2 presents the firm’s financial performance for the last five years. 8|Page PRESENTED BY: LE CHÂTEAU IN 2009 On its website, Le Château defines its mission as follows: Our mission is to translate at lightning speed, the latest runway fashion and global trends into must-have looks that clearly coordinate into a continuous flow of new collections, quickly delivered to an ageless customer by our dynamic sales team. 15 To accomplish this mission the Montreal-based firm designs, manufactures and retails women’s and men’s apparel, accessories and footwear. The chain operates 218 retail stores in Canada, 4 stores in the New York area of the United States and has licensed 9 stores to sell its goods in the Middle East. Appendix 3 describes where these stores are located and the square footage each offers. Le Château manufactures about 35% of the goods sold in its stores and produces about 1.5 million garments annually. In 2009 it employed about 3000 people in its organization. 16 The chain regards itself as a fashion forward label meaning that it is focused on fashion trends and tries to anticipate new and upcoming trends rather than focusing on what might be described as classic apparel. It attempts to achieve competitive advantage by being faster than other firms in quickly identifying fashion trends and using its vertically integrated value chain to get trendy apparel into its stores. In 2008, Le Château’s Annual Report showed a profit of $38,621,000. Details on geographic and divisional earnings and revenues reveal the following: To Jan 31 2009 (53 weeks) Canadian Sales ($CAN) US Sales ($CAN) Total Amount To Jan 26, 2008 339,660 328,688 5,945 7,382 345,614 336,070 9|Page PRESENTED BY: To Jan 31 2009 (53 weeks) Canada Net Earnings US Loss Total Amount To Jan 26, 2008 39,259 34,705 (638) (2110) 38,621 32,596 With respect to sales revenue by division the results showed increased revenues in men’s clothing and accessories: To Jan 31 2009 (53 weeks) To Jan 26, 2008 Ladies Clothing 190,676 191,738 Men’s Clothing 57,847 52,053 Footwear 38,562 39,579 Accessories 58,529 52,700 345,614 336,070 Total On September 10, 2009 Le Château reported its unaudited earnings results for the first six months of 2009 17. Net earnings for the six-month period were $12.9 million or $0.53 per share (diluted) compared to $15.5 million or $0.61 per share the previous year. Earnings before interest, income taxes, depreciation and amortization (EBITDA) for the first six months amounted to $28.3 million or 18.5% of sales, compared to $31.0 million or 19.5% of sales last year. Sales decreased 3.8% to $153.2 million for the six months ended August 1, 2009, compared to $159.3 million last year. Comparable store sales decreased 7.1% versus the same period a year ago. During the first six months of the year, the Company opened 5 stores, closed 1 and expanded 3 existing locations, resulting in the addition of 37,000 square feet or 3.5% to the Le Château network, bringing the total floor space at end of period to 1,085,000 square feet. 10 | P a g e PRESENTED BY: POSITIONING FOR THE FUTURE In analyzing its current position in the Canadian retail apparel market and potential changes to that position the Executive team was aware that it needed answers to two questions: 1. How would changing Canadian demographics affect retail apparel sales? While one must be very cautious about generalizing about various generations, categorizations of the buying habits of various age cohorts are common. The baby boom generation (roughly defined as those born between 1946 or 1947 and 1965 or 1966) was now entering retirement years (Appendix 4). This large age cohort had dominated marketing attention in North America for 50 years and with boomers having more limited disposable income in retirement there was great uncertainty as to how their spending habits would change in the next few years. The boomer generation was often described as the “I want all there is” generation. Many retailers had noted that once the baby boomers reached 30 years of age they defied typical life cycle purchase patterns, and their purchasing behaviours were sometimes very hard to predict. It was known that they would spend on products that made them look and feel younger. They also like better quality and would search out better quality products if that quality could be demonstrated. Accumulating assets and financial resources has been important to many baby boomers as a sign that they were successful. Born after the baby boom (roughly 1966 to the late 1970’s) Generation X came of age during much more difficult times than the boomers. Generation X members are more likely to be raised by single parents. They are more research oriented in their shopping behaviours and are often very sceptical in assessing advertising and other retailer claims. They are just now coming into affluence and are starting to become more materialistic and more prone to personal luxuries (luxury homes and luxury apparel) at the same time that baby boomers are downscaling their 11 | P a g e PRESENTED BY: lifestyles. Generation X has moved more quickly to mass merchandisers than other age cohorts. Interestingly they like denim (jeans) more than either baby boomers or Generation Y. Generation Y (roughly defined as those born between the late 1970’s and late 1990’s) also has unique buying habits. They are very comfortable with technology and they usually live at a very fast pace, although they can get distracted at times. Individuals from Generation Y love to shop whether it is at the mall (the term “mallrats” had been used by some to describe them), or online. They also have spending power with some studies showing that they spent a lot more than their parents at the same age. Importantly, for them retail establishments have become social locations as illustrated by the success of Apple Inc. stores and some trendy retailers. They like it when products are made available so that they can touch and sample. Unlike baby boomers, Generation Y use shopping to a greater degree to define their personal identity. An article in a cotton textile trade publication reported the results (Appendix 5) of surveys which looked at how Generation X and Baby Boomers, as well as the generation that preceded the boomers, got their clothing ideas in 1995 and later in 2004. What were the sources of ideas for the purchase of apparel? The only area that remained at the same level of importance between 1995 and 2004 was the category - getting your ideas as to what you wanted to buy from what you already owned. Noteworthy is the decline in store displays, people you see regularly, salespeople, catalogues, and commercials and ads for baby boomers. For Generation X similar declines took place although store display did not decline as much as with the Baby Boomers while people you see regularly declined even more as a source of fashion ideas. The impact of demographics has not gone unnoticed by fashion retailers who have noted the large buying power of Generation X women who often had gone ignored. Appendix 6 presents an article written in 2005 about the strategies of some fashion retailers to respond to this segment. 12 | P a g e PRESENTED BY: 2. Which firms would represent the greatest competitive threats if Le Château either stayed in its current retail position, or altered that position? Le Château faced many large and small competitors in its markets. To be able to understand the impact of any potential repositioning it is necessary to analyze the competitive positions of many businesses. Appendix 7 gives a list of many firms which to varying degrees either compete with Le Château or potentially could compete with the chain. The Executive Team realized that it must analyze the competition in making any decision about its market positioning. REPORTING TO THE BOARD The task given to the executive team by the Board was clear. The Board was not interested in plans that called for international expansion or specific product line introductions. The team knew that it must make a clear recommendation about how Le Château Inc. should be positioned in the post-baby boom market. The team also understood that it needed to be cautious not to alienate its current Baby Boomer clients or the rest of its current market. In addition, it would need to make recommendations about operational strategies and financing that would be necessary to ensure the success of whatever position it would put forward. 13 | P a g e PRESENTED BY: APPENDIX 1 – Canadian Apparel Retail Market Estimated Revenues Canadian Apparel Retail Market (billions $) Source: Trendex North America (http://www.trendexna.com/annual_retail_sales_information.htm) 2000 2001 2002 2003 2004 2005 2006 2007 18,443 18,627 18,757 18,700 19,216 19,742 20,393 20,660 Estimated 2007 Total Canadian Apparel Retail Market by Category (billions $) Source: Trendex North America (http://www.trendexna.com/annual_retail_sales_information.htm) Women Men Girls Boys Infants TOTAL 10,954 6,646 1,318 1,170 578 20,660 53% 32% 6% 6% 3% 100% Estimated 2003-2007 Canadian Apparel Market By Retail Channel (%) Source: Trendex North America (http://www.trendexna.com/annual_retail_sales_information.htm) 2003 2004 2005 2006 2007 Department Stores 22.2 21.3 20.7 19.8 19.7 Apparel Specialty Stores 49.1 49.5 50.3 50.8 48.0 Discount Stores 19.8 19.7 20.0 20.1 23.0 Sporting Goods Stores 4.0 4.4 3.8 3.9 3.8 All Other Stores 4.9 5.1 5.2 5.4 5.5 100.0 100.0 100.0 100.0 100.0 14 | P a g e PRESENTED BY: APPENDIX 2 – Selected Financial Highlights Le Château Inc. Annual Report 2008 In thousands of $ except for share data and ratios Fiscal year ended Results Jan 31, 2009 (53 weeks) Sales Earnings before income tax Net earnings - per share basic Dividends per share -ordinary -special Average shares outstanding 2 Jan 28, 2006 Jan 29, 2005 336,070 50,523 303,879 38,406 279,064 35,963 241,131 24,336 38,621 1.56 32,596 1.30 24,751 1.02 23,513 .99 15,886 .74 .625 .25 24,796 .50 24,978 .28 .75 24,181 .20 23,812 .16 21,448 85,620 142,414 216,431 74,384 133,605 206,876 45,928 108,174 185,709 60,491 105,245 166,236 47,781 85,244 128,198 3.03 1.75 0.20:1 2.55 1.59 0.17:1 1.75 1.08 0.14:1 2.52 1.63 0.20:1 2.61 1.62 0.16:1 54,691 50,125 40,374 36,311 25,291 21,467 24,091 27,701 27,655 16,491 221 209 195 185 174 1,047,529 385 965,077 408 853,767 407 762,093 416 686,830 394 Financial Ratios Current Quick Long Term Debt to Equity 1 1 Jan 27, 2007 345,614 57,706 Financial Position Working capital Shareholder’s equity Total assets Other Statistics Cash Flow from Operations (in `000) Capital Expenditures (in `000) Number of Stores at Year End Square Footage Sales per Square Foot 2 Jan 26, 2008 Including capital leases and current portion of debt. Excluding deferred lease inducements. Excluding Le Château Outlet stores. 15 | P a g e PRESENTED BY: APPENDIX 3 - Le Château Profile Stores and Square Footage Le Château Inc. Annual Report 2008 January 31, 2009 Stores Square Footage January 31, 2008 Stores Square Footage 69 330,986 62 296,280 24 109,308 24 102,055 7 34,254 7 26,428 5 12,292 4 16,200 2 9,203 1 3,480 Ontario Quebec BC Alberta Manitoba Nova Scotia New Brunswick Saskatchewan Newfoundland PEI 73 65 27 26 7 7 5 4 2 1 352,214 319,762 128,768 117,321 35,575 28,083 19,323 16,200 9,203 3,480 Total Canada Total US 217 4 1,029,938 17,591 205 4 947,486 17,591 Total - Le Château 221 1,047,529 209 965,077 16 | P a g e PRESENTED BY: APPENDIX 4 Projected population by age group and sex according to a medium growth scenario for 2006, 2011 2006 (thousands) 2011 (thousands) Both sexes Male Female Both sexes Male Female 32,547.2 16,115.9 16,431.3 33,909.7 16,786.7 17,123.0 0 to 4 1,697.5 868.2 829.3 1,724.7 884.1 840.6 5 to 9 1,842.6 943.1 899.5 1,780.8 910.7 870.1 10 to 14 2,084.6 1,068.1 1,016.5 1,916.4 982.1 934.2 15 to 19 2,164.8 1,109.4 1,055.5 2,170.4 1,112.5 1,057.9 20 to 24 2,252.9 1,152.8 1,100.2 2,295.3 1,171.1 1,124.1 25 to 29 2,226.1 1,124.9 1,101.2 2,330.2 1,178.3 1,151.9 30 to 34 2,222.6 1,121.5 1,101.1 2,354.8 1,183.2 1,171.6 35 to 39 2,351.1 1,182.7 1,168.4 2,327.1 1,172.3 1,154.8 40 to 44 2,698.3 1,356.6 1,341.7 2,409.3 1,209.8 1,199.4 45 to 49 2,671.5 1,334.7 1,336.9 2,711.2 1,361.6 1,349.5 50 to 54 2,363.9 1,170.1 1,193.8 2,651.5 1,321.1 1,330.4 55 to 59 2,082.5 1,028.5 1,054.0 2,327.4 1,144.4 1,183.0 60 to 64 1,583.3 777.8 805.5 2,027.9 991.2 1,036.7 65 to 69 1,227.3 590.5 636.8 1,513.1 731.6 781.5 70 to 74 1,044.2 489.9 554.3 1,130.8 530.7 600.1 75 to 79 878.0 387.2 490.8 907.6 409.2 498.4 80 to 84 638.3 249.1 389.2 692.2 286.1 406.1 85 to 89 342.8 115.0 227.9 422.2 148.4 273.9 90 to 94 137.3 37.8 99.4 169.2 48.2 121.0 95 to 99 33.1 7.2 25.9 42.4 9.2 33.2 5.4 0.9 4.5 All ages1 100 and over 4.7 0.9 3.8 Source: Statistics Canada Cansim Table, 052-2004 - Appendix 5 17 | P a g e PRESENTED BY: APPENDIX 5 APPENDIX 6 Source: Lorrayne Anthony, Sudbury Star, Life Section, Retailers clue in to fashion needs of gen-X women, published on July 23, 2005, B9. (…) Women aged 35-44 have considerable buying power. Was a generation overlooked by the fashion industry? Clothing manufacturers catered to boomers and helped their kids replicate the sexy Britney look. But what about gen Xers? Not completely comfortable wearing the midriffbaring fashions of teens, they weren't prepared to embrace the mature look of their moms either. They spent their dollars trying to bridge the gap. Suddenly, confronted with statistics, retailers are realizing the purchasing power of gen-X women -- now aged about 35 to 44. "The women's denim market is an estimated $579.7 million-dollar annual business, 52 per cent of which is driven by women over 35," said Kaileen Millard, director of fashion for NPD Canada, a division of the NPD Group. And it's not just jeans. NPD figures show women aged 35-44 spent almost $2 billion on apparel in Canada in the 12 months ending this past May. That's an increase of more than $300 million from a decade earlier. The biggest spenders are women aged 45 to 54, with those 35 to 44 coming in a close second. Canadians under 25, often thought to be the focus of much of today's marketing, are the least active shoppers, reported the study by NPD Canada, which tracks consumer behaviour. 18 | P a g e PRESENTED BY: There is a higher percentage of 35-to-44-year-old women working than ever before, and they need to spend money on clothes, said Len Kubas of Kubas Consultants, a Toronto firm that specializes in retail and marketing. Finally, the industry's radar is picking up on the fashion needs of the almost 2.5 million women in that age group, with companies such as Liz Claiborne Canada, Gap, Boutique Jacob, Mango and Le Chateau targeting them. "It's finally time for us," said Jamie Lee Goulakos, fashion director at Yzza. With teenage kids, Goulakos said she no longer wants to shop at stores that cater to the 20-something crowd. More than 60 Yzza (pronounced ease-ah) stores are expected across Canada over the next five years. The new chain, the creation of Montreal-based Mexx Canada which is owned by Liz Claiborne, will cater to the 35-plus woman. The Montreal-based Boutique Jacob will open five stores this fall targeting women over 35. Department stores such as the Bay have catered to the diverse figures of women over 35 by carrying designs in sizes 4-16 in petites, regular and above average. But the new numbers are not lost on them. In August, the Canadian retailer will be introducing a new line of denim, Code Bleu, for the over-35 crowd. While the 35-45 demographic may be the flavour of the month for national chains, independent clothing stores have been serving these women for years. "We have always geared our product to the 35-year-old market," said Deb Shortill, owner of Hannah's, a not-so-small clothing store in Erin, Ont. "It seems to me that the younger gals look forward to the maturity and confidence of the 35-yearold. Those 35 to 45 are already confident and comfortable with who they are," said Shortill, who has been in business more than 15 years. APPENDIX 7 - Some Firms in the Canadian Retail Apparel Market Source: http://cobrands.hoovers.com/global/cobrands/proquest/factsheet and other assorted other sources Aldo Aldo Group knows the value of cheap chic; heck, its founder practically tripped over the concept. Aldo Group runs some 1,500 shoe stores, including about 1,180 under the Aldo banner and another 335 shops under the Spring, Little Burgundy, First, and Globo names, among others. The company has stores in Canada, the US, the UK, and some 40 other countries worldwide. Aldo Group entered the US market in 1993 and has grown to more than 200 stores here. Globetrotting Aldo's international sales now outpace its business in Canada. Plans call for more expansion in Europe, the Middle East, Africa, Asia, and the US. The company was born with the 1972 opening of four stores by Moroccan founder Aldo Bensadoun. 19 | P a g e PRESENTED BY: Fairweathers Initially part of Dylex one of Canada’s largest apparel clothing chains, Fairweathers’ targeted the career and casual clothing sector. With the breakup of Dylex in 2006 it was acquired by a private Canadian investment consortium. As a specialty retailer it offers offering contemporary fashion apparel and accessories to style-conscious women. The brand’s success is built on quick identification of and response to fashion trends through the use of design and product development teams. Fairweather sells brand name merchandise, and exclusive brands Beechers Brook, and Majora. The Gap The ubiquitous clothing retailer Gap has been filling closets with jeans and khakis, T-shirts, and poplin since the Woodstock era. The firm, which operates about 3,150 stores worldwide, built its iconic casual brand on basics for men, women, and children, but over the years has expanded through the urban chic chain Banana Republic and ailing budgeteer Old Navy, launched in 1994. Old Navy entered Canada in 2001 and since then has grown to over 60 stores. Other brand extensions include GapBody, GapKids, and babyGap; each also has its own online incarnation. All Gap clothing is private-label merchandise made exclusively for the company. From the design board to store displays, Gap controls all aspects of its trademark casual look. Gap was founded by Doris and the late Don Fisher in 1969. Hart Stores Hart Stores started at the coast and is advancing like a retailing army, determined to conquer the heart of Eastern Canada. The fast-growing retailer operates about 90 mid-sized department stores (26,000 square feet on average) in smaller markets under the Hart, Bargain Giant, and Géant des Aubaines banners; the stores are found mostly in Québec, but also in Ontario, New Brunswick, Newfoundland, and Nova Scotia. Hart Stores sells national brands and its own brand of apparel, footwear, gifts, home furnishings, linens, small appliances, toys, and more. The company is run by the Hart family, which controls about 58% of its shares. H&M H&M Hennes & Mauritz targets the Hip & Modish. The firm designs cheap but chic clothing, mainly for men and women 18 to 45, children's apparel, and its own brands of cosmetics. Fast-growing H&M operates about 1,800 stores in about 35 countries and has direct sales operations in selected areas. Germany is H&M's #1 market, accounting for about 25% of sales. About 60% of its clothing is made in Asia; the rest is manufactured primarily in Europe. H&M opened its first women's clothing store in 1947 as Hennes (Swedish for "hers"); it later bought the hunting and men's clothing store Mauritz Widforss. H&M is controlled by the family of chairman Stefan Persson (the billionaire son of founder Erling Persson). The Bay Here's a company that's traveled a fur piece from its 17th-century roots. Hudson's Bay Company (HBC) is Canada's largest department store chain. Founded in 1670 as a fur trading enterprise, HBC is also Canada's oldest corporation. Its Zellers chain is the country's #2 discount department store (behind Wal-Mart 20 | P a g e PRESENTED BY: Canada, with some 290 stores. HBC also runs about 100 the Bay department stores, some 120 Fields general merchandise and apparel stores in Western Canada, more than 60 Home Outfitters superstores. La Senza As their name suggests, the company targets women age 18 to 35 with its underwear, loungewear, and sleepwear, which are sold through La Senza and Silk & Satin stores. The manufacturer and retailer caters to the 'tween market with its La Senza Girl stores and Web site. Overall, La Senza owns and operates more than 300 stores in Canada, and licensees run another 500 stores in 45 other countries. Loblaw (Joe Fresh) Like other sellers of "fast fashion," Joe Fresh draws from the latest runway and red carpet designs. The clothing is made in Asia, which keeps the prices down, with new designs arriving in stores every four weeks. The concept is similar to that used by Fairweather, Reitman's and Le Château. But where Joe Fresh differs is its milieu -- a grocery store. Sales were estimated to be $ 400 million dollars in 2007 and in 2007 Loblaw predicted that it would have $ 1 billion in revenues. Northern Reflections Northern Reflections wants its customers to light up and inspire, like the Northern Lights. The company is a manufacturer and retailer of specialty apparel for women. Its garments include jackets, slacks, tops, and warm-up outfits in a variety of patterns and fabrics, under the Northern Reflections brand. The company operates more than 160 mall-based Northern Reflections stores throughout Canada, 10 shops in four US states (New York, Massachusetts, Pennsylvania, and Vermont), and an online store. Northern Reflections is owned by the Canadian affiliate of York Management Services, a New Jersey-based investment and management advisory services company. Sears Canada Sears Canada Inc. more commonly referred to as "Sears") is a retailer, headquartered in Toronto, Ontario, that operates in all provinces and territories across Canada with a network of 188 corporate stores, 180 dealer stores, 67 home improvement showrooms, 112 Sears Travel offices and a nationwide home maintenance, repair, and installation network. The firm has its own transportation and logistics services and which comprises 620 trucks, 3,700 trailers, and 900 associates with terminals located throughout Canada. Sears also has a general merchandise catalogue with over 2,200 catalogue merchandise pickup locations. There is a Sears location within a 10-minute drive of 93% of Canadians. About 50,000 associates are employed throughout the company. Wal-Mart Retail giant Wal-Mart Stores made its blanket coverage of North America complete with the 1994 acquisition of the 122-store Woolco division of Woolworth Canada. Like Wal-Mart de México, its sistercompany south of the US-Mexico border, Wal-Mart Canada has since grown into a major retail force in its home country with more than 310 stores, including about 60 and supercenters (which sell groceries and general merchandise under one huge roof), nationwide. Wal-Mart Canada's discount stores offer up to 21 | P a g e PRESENTED BY: 80,000 products, including apparel, household goods, hardware, toys, sporting goods, health and beauty aids, food and other merchandise. In-stores services include vision centers as well as tire and auto centers. Zara Trendy Zara is the flagship brand for Europe's fastest-growing apparel retailer Industria de Diseño Textil (commonly known as Inditex). Zara, the cheap-chic subsidiary of the Spanish fashion giant, runs about 1,520 stores, including some 230 Zara Kids shops, in more than 70 countries worldwide, including China where is has about two dozen locations. Zara has about 40 shops in the US and 60 in Mexico. The chain sells women's, men's, and children's apparel and also offers plus-size and maternity lines to clothe its larger customers. Zara Home, which sells home fashions, has about 250 stores, in about 25 countries. Zara is Inditex's principal chain and accounts for about two-thirds of its parent company's sales. Winners Winners is a chain of off-price Canadian department stores owned by TJX Companies. It offers brand name clothing, footwear, bedding, furniture, fine jewellery, beauty products, and house wares. All merchandise is 20–60% below regular department and specialty store prices. The company operates over 200 stores across the country. Winners’ is modeled after its American sister store Marshalls. ENDNOTES 1 http://www.evancarmichael.com/Famous-Entrepreneurs/1895/Ralph-Lauren-Quotes.html Dana Flavelle. 2005. Excitement a half step at a time. Toronto Star. April 20, A19. 3 This section was adapted from http://www.trendexna.com/annual_retail_sales_information.htm. 4 http://www.hoovers.com/clothing-stores/--ID__182--/free-ind-fr-profile-basic.xhtml 5 Jane Lin. A new look: retail clothing in Canada, http://www. statcan.gc.ca/pub/11-621-m/11-621m2003006-eng.htm 6 Michael K Mills, Strategic retail fashion market positioning: a comparative analysis. Journal of the Academy of Marketing Sciences, Summer 1985, vol. 13. 7 Will the Real Ann Taylor Please Dress Up? Case Study, in Dess, Lumpkin and Eisner, Strategic Management. Fourth Edition. 2008, McGraw Hill Irwin, C98. 8 Christopher Moore; Grete Birtwistle. The Burberry business model: creating an international luxury fashion brand International Journal of Retail & Distribution Management; 2004; 32, 8/9; 9 Plunkett Research Divulges 10 prominent Trends in the Apparel and textile Industry. June 10, 2009. http://www.plunkettresearch.com/AboutUs/News/tabid/408/Default.aspx 10 Canadian Retail Trade Industry. The Structure of the Retail Trade in Canada of www.ic.gc.ca/eic/site/retracomde.nsf/eng/h_qn00171.html 11 Industry Canada. Overview of the Canadian Apparel Industry. http://www.ic.gc.ca/eic/site/apparelvetements.nsf/eng/ap03295.html 12 Plunkett Research.Ibid. 13 This section has been adapted from http://lechateau.com/ir/corporate/history.html and http://www.fundinguniverse.com/company –histories/Le-Chateau-Inc 14 Carrie Tait. At 45 le Chateau is aging gracefully. Toronto Star. July4 2004,C04 15 http://lechateau.com/ir/corporate/mission_statement.html 16 http://lechateau.com/ir/fact_sheet/LeChateau_FS_April09_EN_v5.pdf 17 http://lechateau.com/ir/index.html 2 22 | P a g e