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American expansion

In 1985, two years after the IPO, Le Château opened their first store in the United States. Le Château opened 26 stores in the U.S. over the next couple years including Boston, New York, Chicago, and Baltimore. However, the stores fared poorly, something Segal attributes today to bad locations, poor fashion choices for U.S. tastes, and "entrepreneurial arrogance."[4] Within a few years, all the American locations except for one location in New York would close.[4] In 1997, Le Château began opening several new stores in Manhattan and New Jersey and by 2003 had 5 stores, a number that remains today (Last checked in July 2007). In November 2000, Le Château said it planned to open as many as 300 stores in the United States, concentrating in the Northeast at first; however, seven years later after making that remark, they still have only 4 American stores, all concentrated in the New York metropolitan area.[5]

Description

Le Château Inc. is a fashion company founded in 1959 in Montreal, Quebec, Canada that designs, imports and retails a wide range of women's and men's apparel, accessories and footwear.[2] In 2006, the company generated sales of nearly $303.88 million CAD.[1] The company sells directly to customers with over 205 retail stores in Canada, 4 in the New York metropolitan area, as well as 8 throughout the United Arab Emirates and Saudi Arabia.[3] As of 2007, Le Château employed more than 2,800 people worldwide. Le Château manufactures about 40% of the merchandise themselves in Canadian factories with the remainder being imported.[3][2]

Early years: 1959-1982

Founded by Herschel Segal in 1959, as "Le Chateau Men's Wear", it began as a menswear store in downtown Montreal's Victoria Square, on St. Catherine's Street, a bustling shopping district at the time.[2] Segal gave his store a French name because of the budding francophone feelings occurring in Quebec. At first, Le Château was not a "fashion-forward" store, as it would later become, as Segal sold overstock from his father's old store. In 2003, Segal described his early customers as "old ... blue-haired ladies."[4] Le Château did well at first, and three more stores were opened. However, by the early 1960s the company was close to bankruptcy, and all but the original store were closed. In 1962, Le Château added women's clothing, shorted the name to "Le Château," and switched to selling the latest imported European fashions. The store imported from Carnaby Street in London, a fashion centre at the time, as well as other imports such as French suits and Italian turtlenecks.[4] This worked well, and within a few years, Le Château completely phased out the original traditional clothing style to concentrate on selling fashionable imports to youths. Segal claims that Le Château was the first to introduce bell bottoms to Canada, and had the latest European fashion before it even arrived in New York. By 1972, the chain grew to 10 stores, and by the end of the decade Le Château had over 50 stores across Canada.[4] By this time, Le Château had shifted to selling mainstream fashion instead of the latest imports from Europe.

IPO and expansion: 1983-2003

In December 1983, Le Château had its initial public offering on the Toronto Stock Exchange (TSX), where it has since remained. It raised $7.3 million. By the early 1990s, Le Château had 160 stores and had switched to doing most of its design and manufacturing itself. In the early 1990s, there was a prolonged recession in Canada which hurt most business in the clothing industry. In the mid 90s Le Château experimented briefly with Goth styled clothing and in 1997, they launched a short lived adolescent girls brand "Jr. Girls." In the 1990s, Le Château had become criticized for cheap clothing and achieved a nickname "Le Crapeau."[4] By 1999, the company's stock fell to an eight-year low and the company took a large quarterly loss of $1.3 million in the three months ended July 29, 2000, compared with a profit of $1.1 million a year earlier.[4] This led to a management shakeup, store redesign, changes to the merchandise, and according to Le Château, a concerted effort to improve their quality and image. Executives at Le Château said their designers went too avant-garde and the chain's younger market "recoiled."[4] In 2003, Segal acknowledged the "disposable fashion" stereotype, and said the company "forgot about" the product. "We might have been sloppy," he said. "But now we're putting in more money and time. We have an inspection system and a young lady who's a grad of a textile school. We never had that before."[4] Since then, Le Château has been trying to build up their brand image, and shed the image that their clothes are "only for wearing to nightclubs," a view that still persists. That year, they released a collection designed based on the 1960s-set Renée Zellweger movie, Down with Love and were the exclusive supplier of clothing to Canadian Idol contestants.[4]

References

* Evans, Mark, "Clothing Sector in Tatters," Financial Post, August 15, 1992, p. 6. * Giese, Rachel, "Consuming Passion," This Magazine, November-December 2002, p. 23. * Kletter, Melanie, "Le Chateau's American Dream," WWD, November 2, 2000, p. 8B. * "More 34th Street Changes," WWD, March 13, 1997, p. 30. * Olijnyk, Zena, "Retail Sector Shudders in Eaton's Shock Wave," Financial Post, March 1, 1997, p. 4. * Vogl, Cara, "Quitting the Club," Marketing Magazine, September 29, 2003, p. 16.

Today: 2003-2007

Today, the company is quite profitable and they are often described as selling trendy fashions selling inexpensive clothes to a young market.[4] Known for their tailored and form-fitting clothes, they sell formal wear, casual wear, evening wear, and footwear. With 190 stores nationwide and none are franchised. In 2006, they produced over 2.5 million garments in its own production facilities in Canada, representing 40% of their merchandise.[2] While Le Château is publicly traded, the company is tightly held with 67% of shares owned by Segal, the company's board, executives and two institutional investors. In addition, the shares have less than 2% of voting rights. The current CEO is Segal's wife, Jane Segal.