TORONTO – Danier Leather Inc.’s recent insolvency filing is simply the latest reminder that Canada is a formidable market for its very own legacy retailers.
How an upswing of puffy parkas in Canada led to the undoing of Danier Leather Inc
A balmy winter gave Danier Leather Inc. its final push towards initiating insolvency proceedings last week, but the rising interest in down-filled parkas might have were built with a longer-term hand in the retailer’s downfall, based on court filings.
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Having spent the majority of his life in retail, Kalman Fisher is much more than aware of those challenges as president of Montreal-based Laura Canada, an 86-year-old family-run private womenswear company.
Founded by Fisher’s grandmother Laura Wolstein in 1930, Laura Canada emerged from restructuring in December after closing 22 stores and renegotiating agreements with various landlords.
Competition has had a high toll in recent years on some of the country’s oldest retailers, most of them based in Montreal. Reitmans and Le Chateau have struggled with weaker sales and closed down unprofitable stores; Comark, the operator of Bootlegger, Ricki’s and Cleo, was acquired last year after it emerged from bankruptcy protection and closed stores, as the veteran family-run retailer Jacob shuttered basically five of their 91 locations.
“Some regions of the market are more competitive than the others, specially the junior space, younger space,” Fisher said within an interview.
We are serving a distinct segment that people feel is underserved, and we are servicing them well
“In a very short time, H&M is becoming very dominant, as has Zara, and also to some degree Forever 21. Any retailers competing in that space have to find a method to really, really differentiate themselves from those world-class retailers. We’re inside a different space, and our setbacks are not a result of any new retailers taking our market share.”
Indeed, Danier’s woes were tied in part to trying to shift its designs to attract younger customers, a common stumbling block for retailers who realize that the demographic, though highly fickle, shops for garments more frequently than mature customers do.
Laura’s critical mistake occurred when it shifted away from the kinds of styles embraced by its regular customers, the majority of whom are women older than 45 seeking clothes in regular, petite and plus sizes.
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“In the fall (of 2012) and spring of 2013 we made changes in our fabric as well as in styling that actually, really alienated our core customer without attracting new clients. (Offering) simpler styles in solid colours as opposed to patterns, prints and textured fabrics. It didn’t flatter our customer,” he explained.
Despite turning the business around somewhat in 2014, the problems of 2012 and 2013 had done its damage to the company’s balance sheet. The organization declared creditor protection last August, citing near to $124 million in liabilities and $72.5 million of assets.
But Fisher remains optimistic about the future despite the less than stellar results of a so-called “Super El Nino” winter around the business, which operates 140 stores under the banners including Laura and Melanie Lyne, and the competitive environment.
“Business continues to be good,” Fisher said. “We feel we are perfectly placed competitively. We don’t feel that we’re competing against fast fashion. We’re serving a distinct segment that we feel is underserved, and we are servicing them well.”
Bruce Winder, partner in Toronto-based Retail Advisors Network, says the following year will be challenging for most Canadian-based fashion retailers as they grapple with a precarious economy, unrelenting global competition and a weak dollar.
“All of these middle-tier Canadian family based businesses are becoming crushed,” Winder said. “Most clothing retailers buy their products offshore (in U.S. dollars), so their landed price of product is going up. And competition has grown a lot, from global folks like H&M, Zara and online (companies). These global providers run really good shops and they have global buying power – they are a significant volume buyer in contrast to what a Canadian company can perform. They provide trendy fashion at a price others can’t compete with.”
Retailers who sell outerwear will be the hardest hit, he said, because of the unusually mild winter overall. “Up until this point, it has been nothing short of a disaster of these folks.”
Financial Post
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