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Fashion chains eye store closings as retailers feel pinch

Holt Renfrew is one of a number of fashion chains planning to close stores after a disappointing holiday selling season and growing pressure from new and expanding rivals.

Fernando Morales/The Globe and Mail

A number of fashion chains plan to close dozens of stores following a disappointing holiday selling season and growing pressure from new and expanding rivals.

Holt Renfrew & Co. Ltd. will close its off-price discount chain called hr2 in mid-2017, the company said. It has two of those stores, which industry observers said were designed to take on Saks Off 5th, the discount arm of luxury chain Saks Fifth Avenue, as well as upscale Nordstrom Inc.'s Rack – the first of which are to launch in Canada next year – and Winners, owned by TJX Cos.

Other chains that are looking at closing stores include the high-end BCBG Max Azria Group LLC, whose tight-fitting chi-chi dresses have been a celebrity favourite.

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It has about 70 stores in Canada, although it's unclear how many of them will remain, industry sources said.

A BCBG spokesman said on Monday that the U.S.-based company, which has about 175 outlets in the United States, plans to shutter about 120 stores.

As well, the licensee of Bench, Scotch and Soda, Esprit and Thread + Copper plans to close some of its 58 stores, said Eric Barbieri, a partner at Richter Advisory Group, which is trustee in the matter.

The outlets, including 39 under the Bench banner, are run by Freemark Apparel Brands Inc., which on Feb. 17 filed for bankruptcy protection from its creditors with an intention to present them with a restructuring proposal, according to court documents.

Merchants often wait until after the busy holiday season to shut stores, counting on the Christmas rush to recover at least some of their losses from previously in the year.

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The shutdowns have come swiftly since January as apparel merchants struggle in a market that is pinched by cheap-chic fashion powerhouses, such as H&M of Sweden and Zara of Spain, as well as online-shopping heavyweights, especially U.S.-based Amazon.com Inc.

Fewer people are heading to brick-and-mortar stores, making it tougher for retailers to shore up their sales.

"Mall traffic is down," Mr. Barbieri said. "You've got some international competition that's come in. … Sales have been down."

Susan McGibbon, co-founder of retail consultancy Three Sixty Collective, said the life of a fashion retailer is becoming increasingly compressed and some "are lucky to get three to five years."

Shoppers' tastes are changing much faster than before, she said. "Consumers want the latest and greatest and whichever new retail concept offers it gets their attention and their money."

Last month, Grafton-Fraser Inc., the parent company of menswear retailer Tip Top Tailors, got court protection from its creditors after having racked up debts of more than $100-million, according to court documents.

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It was planning on closing some of its 158 stores, liquidating inventory and finding a buyer, the filings say.

It's the second time in about eight months that Grafton-Fraser found itself in court seeking protection. Last summer, the Toronto-based retailer, whose other banners are George Richards Big & Tall, Mr. Big & Tall and Kingsport Big and Tall Clothier, got court protection from its creditors after its Jones New York womenswear stores, which it had just acquired in 2015, faltered.

It has now closed its 37 Jones New York stores, but debts and lawsuits piled up as a result of that insolvency, contributing to the retailer's current woes, according to court documents.

Two weeks earlier, the Jean Machine chain filed for bankruptcy protection, saying it was looking at closing stores or finding a buyer. Other apparel retailers have followed a similar path, or closed altogether, over the past couple of years, including Mexx, Danier Leather, Jacob, Aéropostale, Smart Set and American Apparel.

Mr. Barbieri said the same troubles that have plagued other fashion retailers hit the four chains run by Freemark.

Richter's consulting division had been working on a restructuring plan for the retailers but their debts kept mounting, hitting about $32-million when Freemark filed for bankruptcy protection, Mr. Barbieri said.

"It's not a liquidation or closure of all of its stores, by any means," he added. He noted that Esprit, with only two stores, had previously shut all its stores in Canada a few years ago but had since re-emerged.

Thread + Copper had just launched last year carrying brands from Freemark's other chains but failed to catch on with consumers, he said, adding all 12 of its stores will close.

BCBG, which is also stocked in departments stores such as Saks Fifth Avenue, also owns Hervé Leger, which makes form-fitting dresses, and the lower-cost BCBGeneration line.

The BCBG spokesman would not comment on Canadian store closings.

Mario Grauso, president of Holt Renfrew, said the decision to close hr2 was made "so that we can focus fully on our enhanced luxury business" at its namesake stores. "This decision was a strategic one designed to benefit the business as a whole."

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About the Author
Retailing Reporter

Marina Strauss covers retailing for The Globe and Mail's Report on Business. She follows a wide range of topics in the sector, from the fallout of foreign retailers invading Canada to how a merchant such as the Swedish Ikea gets its mojo. She has probed the rise and fall (and revival efforts) of Loblaw Cos., Hudson's Bay and others. More

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