Le Chateau Shutting Operations After CCAA Filing

Another Canadian retailer will be shutting down this year following the COVID-19 pandemic store closures in the spring. Montreal-based Le Chateau will shut its operations which includes 123 storefronts in Canada as well as an e-commerce site. 

The 60 year old retailer says that it spent much of the pandemic trying to refinance or sell the business which was ultimately unsuccessful. “Its already evident impact on consumer demand for Le Chateau’s holiday party and occasion wear, which represents the core of our offering, has diminished Le Chateau’s ability to pursue its activities,” the company said.

“Regrettably, these circumstances leave the company with no option other than to commence the liquidation process.” 

Le Chateau’s application for protection from its creditors under the Companies’ Creditors Arrangement Act (CCAA) was being heard by a Quebec court on Friday.

The retailer said in a statement that the pandemic has had an “evident impact on consumer demand for Le Château’s holiday party and occasion wear, which represents the core of our offering [and] has diminished Le Château’s ability to pursue its activities.”

While Le Chateau liquidates its 123 stores, the company will remain fully operational. The eventual closure will result in the loss of about 1400 jobs with 900 of those in the stores and an additional 500 positions at Le Chateau’s head office. 

“We regret the impact this will have on our people and can assure you that we explored all options available to us prior to taking this difficult decision,” the company said.

Le Chateau was scheduled to have its annual general meeting on Thursday and it was cancelled two days prior without explanation beyond saying that the company “will provide further updates in due course”. Industry insiders this week immediately speculated that a filing would follow.

Over the three-month period up until July 25, Le Château only sold $14.7 million in its stores and online — down almost $50 million from the same time last year. As of July 2020, Le Chateau says it had about $118 million in assets and $201 million worth of liabilities.

Gordon Brothers and Merchant Retail Solutions are to be appointed as consultants to implement the liquidation. PricewaterhouseCooper Inc. will become its monitor in the CCAA proceedings. If the application is granted, Le Chateau will obtain interim financing from Wells Fargo Canada to maintain operations for the short-term during liquidation.

Le Chateau’s exit from malls will create further headaches for landlords who are already grappling with vacancies following other store closures. A research document provided to Retail Insider shows that Le Chateau had more than 700,000 square feet of retail space in Canada. The largest Le Chateau location is at the CrossIron Mills shopping centre near Calgary, spanning 8,842 square feet. The top selling unit was said to have been at West Edmonton Mall prior to the pandemic, with sales surpassing $1,000 per square foot for the 5,680 square foot space in the mall’s ‘Phase 3’.

This week we also reported that Calgary-based swimwear brand Swimco had shut its 25 Canadian stores after an attempted restructuring in the summer. About 30 other retail chains in Canada, as well as countless independent retailers have also filed for creditor protection and in some cases have shut down entirely. Experts expect more retailers to file for bankruptcy protection in the coming weeks and months as retail spending in some segments slow amid a second wave of the COVID-19 pandemic. In early 2021 it is expected that more stores and other businesses in Canada will close than at any time in history, including some household names looking to rightsize operations.

Le Chateau was founded in 1959 in Montreal by Herschel Segal as a menswear store. In 1962 womenswear was added including European fashions from places such as Carnaby Street in London. It was the first to introduce bell bottoms to Canada and in its early years was considered to be a trendsetter. The company’s IPO on the Toronto Stock Exchange was in 1983. The company had closed about half of its stores since 2015. Last quarter saw the company turn its first profit in about 13 years. Last year we reported that Le Chateau had planned to expand into the United States through a new e-commerce site. 

Herschel Segal’s cousin David Segal founded David’s Tea which this year filed for creditor protection and closed all but 18 stores. Herschel’s daughter Sarah Segal is the founder of Squish Candy which has also restructured with only a handful of locations remaining.