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On the same day last week that Boutiques San Francisco was pleading with creditors for its survival, top managers of Le Château Inc. were reaping accolades from a very happy group of shareholders.

This might have left investment-illiterate fashionistas scratching their coiffures.

After all, Le Château has made its name as a purveyor of "cheap chic." It peddles to tweens the kind of celebrity-inspired knock-offs that expose -- to Mom's dismay -- more epidermis than elegance. In comparison, San Francisco is the classy cousine whose Les Ailes de la Mode (The Wings of Fashion) banner is to Le Château what caviar is to chips n' dip.

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If snob appeal alone determined a stock's standing, San Francisco would be the star. But in the real world -- which includes places such as Chicoutimi and Charlottetown in addition to downtown Montreal -- it is Le Château that steals the show.

That became abundantly clear last week as the two Montreal-based fashion retailers found themselves in opposite circumstances. San Francisco met creditors in a do-or-die attempt to placate debenture holders and emerge from court protection. They are placated -- for now. But Les Ailes had better stock lots of rain gear this fall because there are still plenty of clouds on the horizon.

Le Château, meanwhile, met shareholders to tout record 2003 sales, a 45-per-cent rise in the stock price since January, a 50-per-cent dividend increase and an almost sixfold jump in first-quarter profit. It hailed the successful broadening of its appeal to Mom herself with the addition of more skin-covering styles in suitable sizing. It announced plans to add 10 outlets to the 166-store chain this year, including the first in Prince Edward Island. Even Anne of Green Gables, it seems, wants to dress like J Lo these days.

Now who's the class act?

That San Francisco is poised to exit creditor protection at all, rather than face liquidation, is a testimony to the savvy stick-handling of chief restructuring officer Gaétan Frigon and the enduring goodwill that exists within the ranks of Quebec's business elite toward chairman and founder Paul Delage Roberge.

Mr. Frigon and Mr. Roberge were able to persuade 27 investors to put up $17.2-million of their own money to recapitalize the company. The group includes cheese mogul Lino Saputo, Domtar chief executive Raymond Royer, erstwhile telecom wunderkind Charles Sirois, MAAX founder Placide Poulin and Normand Legault, the mastermind behind Montreal's Grand Prix Formula One racing event.

These 27 investors, who will own 74.9 per cent of the equity, obviously believe Boutiques San Francisco -- which will change its name, likely to Groupe Les Ailes de la Mode Inc., at the July 30 annual meeting -- has a future. Mr. Saputo, Mr. Royer, Mr. Poulin and even Mr. Sirois, have more often been right than wrong in the past. But their bet this time is speculative at best.

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After selling off most off its banners, including its namesake San Francisco women's clothing stores, the company is left with four Les Ailes outlets and 57 Bikini Village/San Francisco Maillots stores.

Gone, then, is the diversity of banners that once protected the company from seasonal shocks just as its vulnerability to such shocks becomes clearly evident, with sales sinking this year at the swim suit chains because of a hesitant summer.

Then there is the dubious wisdom in keeping the downtown Montreal Les Ailes store open. Its debt alone was the source of San Francisco's slide. Reducing its size to 75,000-square-feet from 225,000 cannot, in itself, bring customers back.

The outlet's logistical problems -- its main entrance is a long, daunting corridor away from the Sainte-Catherine Street strip -- remain intact. And the $2-million in renovations planned for the store can't correct them.

Still, the biggest hurdle Les Ailes faces is recapturing its lost cachet. The buzz is gone. It will have to flap its wings with all it's got in order to get consumers' attention again. With Spain's Inditex SA recently reopening an expanded Zara outlet a block down Sainte-Catherine, and the upcoming entry of Sweden's Hennes & Mauritz AB into the market, that won't be easy.

In fact, it's hard to think of Les Ailes without thinking of Eaton's. Barely two years after restructuring in 1997, it was bankrupt. Les Ailes, which occupies most of the old Montreal Eaton's store, could use a better omen.

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Le Château, meanwhile, keeps slinking along, defining 'cool' for a generation and now, its parents. Chairman and CEO Herschel Segal and president Emilia Di Raddo are definitely on to something. Heck, they've concluded, even Aunt Marilla wants to dress like J Lo now and then.

konrad@sympatico.ca

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