Le Château is one of Canada’s leading specialty retailers, offering trendy clothing for men and women at a low price. According to the Quarterly Report for the three months ended April 30 2005, sales have increased 19.6% to $60,601,000. In addition, comparable store sales have increased by 16.9%. These figures clearly indicate a strong demand for the company’s products and prove that even the recently opened stores are quite successful.

     Le Château is a company that prides itself in quick identification of trends and an even quicker response. Collections are updated nearly every four weeks, allowing customers to remain up to date with the hottest styles right off the runway. Le Château clothing is inspired by styles seen in New York, London, Milan, Tokyo and Paris.

     In addition to selling men’s and women’s apparel, Le Château also offers a junior girls’ line (for 8 – 14 year olds) as well as a wide variety of footwear and accessories. Le Château is a brand name that is trusted by its large following of devoted customers, young men and women who want to look trendy without having to pay a lot of money.

Company History

     Le Château was founded over forty-five years ago by Herschel Segal, McGill BA 1955. The first store opened in 1959 on the trendy Ste-Catherine Street in downtown Montreal. The clothing found at Le Château was unique, making the store stand out and gain a quick reputation. The fashion was daring and young, made for someone with attitude. To top it off, it was offered at a very low price.

     After noticing a large demand for the store’s products, Segal made the wise decision to expand his operations. Today Le Château is a publicly-owned international company, with one hundred and seventy-four retail locations and over two thousand employees. All stores are located in Canada, primarily in Ontario and Quebec, except for four locations in New York City. A complete listing of Le Château stores arranged by province can be found at the end of this report. All manufacturing of the company’s apparel occur in their own production facilities located in Canada, which produces more than two and a half million garments per year.

Current Product Line

     This season’s line is similar to those of previous years in the sense that it is primarily “club couture.” The tops, skirts and dresses are made of silky/sheer material and are for the most part too revealing for the office or for daily activities. What sets this season’s line apart from those of the past are the designs. In accordance with today’s fashion, the prints found on most pieces are subtle and less flashy. Also, the shirts are longer throughout the torso and cut unevenly across the bottom.

     The men’s line has also become a lot more casual in its style, veering away from the flamboyant perception many people have. The style of the pants and shirts are clean cut and simple, with the exception of a few wild patterns.

     The junior girls’ line has been the subject of much controversy since its inception several years ago. The designs this season remain too adult for the target audience, featuring low cut tops and sexy styles. It seems unclear where the girls would wear this clothing, since it is far too fancy for school and the customers are much too young to enjoy the nightlife. It is believed by some that the majority of purchases from this line are made by adult women with small figures. Even so, according to the 2004 Annual Report, sales for the junior girls’ line have gone down approximately twenty percent.

     Although not a company known for its promotions, Le Château does offer two-for-one top and accessory deals on a seasonal basis. The company also discounts its products regularly, which helps to clear space for the new items that arrive every month.

Competitors

     Le Château offers a wide variety of clothing and accessories that are comparable to many successful retailers, including Bebe and Guess. However, these stores cannot be considered as Le Château’s main competition because of the vast price point difference. Apparel at Bebe and Guess sells from $60 – $100+, whereas Le Château’s products are more within the $15 - $50 range.

     Le Château’s primary competitors are Suzy Shier, Urban Behavior and Forever 21 (in the United States). These retailers offer similar style clothing at comparable prices. Suzy Shier and Forever 21 have a trashier image than Le Château, in terms of the style and quality of their garments. Clothing found at these stores is made of weak material that cannot withstand more than one or two washes. The styles are also less tasteful than Le Château’s pieces; some people even go so far as to refer to the clothing as “hooker wear.”

     Urban Behavior apparel has a slightly more toned down look, although the clothing is still flashy and fairly cheap. The products found at this store are similar in quality to those found at Le Château and targeted toward the same target market.

     The major difference between Le Château and its competitors is the variety of apparel offered. Although Le Château mainly sells clubbing wear, they also offer a small collection of business-appropriate pieces. Clothing under this collection, referred to as Bella Donna, is slightly more expensive than the regular line, but is still extremely reasonable. In addition, Le Château has a footwear and accessories division that in 2004 accounted for twenty-three percent of total sales.

     There will always be retailers that sell the same style clothing as Le Château. To date, there is no store that has been able to match Le Château’s unique combination of medium-quality trendy clothing at low prices. Le Château has established itself as a reliable brand name, growing at a rapid pace since 1959. Currently there are no foreseeable competitors in the future that will pose a significant threat to the company.

Personal Experience

     Le Château is not a store where I would sop. This is mainly because the styles do not suit me, and the low quality of the clothing is unacceptable. I do not like the idea of buying an item and having it fall apart after a few washes, even if it was offered at a low price. Having said that, I do recognize the appeal of Le Château for people who want to look and feel sexy while working with a budget.

     I recently entered a Le Château store (in Yorkdale) for the first time in probably five years. It was exactly how I remembered it – loud, busy and dark, just like a club. The salespeople were surprisingly polite and not too aggressive. After I was asked if I needed help, they left me alone to shop at my own pace. The clothing that I found in the store matched what I saw on the website, which was a nice change from what usually happens. The store was also very well stocked; each item I looked at was available in extra small, small, medium and large. In general, I was impressed with the layout, selection and service of Le Château, even though I did not buy anything.

Growth

     Le Château has not made any public announcements regarding mergers or acquisitions in the past few years. The company continues to stand by its products and hopes to revitalize some of its divisions to become more profitable. Most notably, these divisions include the junior girls’ line and the ladies’ line, which grew only a little over two percent last quarter.

     Le Château plans to continue expansion in North America, although no figures have been released. The company has been growing at approximately five percent annually, opening an average of just over eight new stores per year.

Concerns

     A major concern for Le Château is the quality of their clothing. Recently, customers have been complaining that the apparel is poorly made. Segal agreed, telling Canadian Business that the company may have been getting sloppy. The challenge facing the company now is improving the quality of the clothing without drastically raising the prices.

     A second cause of concern for the company is the lack of success of the junior girls’ line, as discussed previously. The sales have been declining steadily since 2001. Since the style of the clothing does not appear to be changing, the future does not look bright. It is imperative that Le Château redesign their junior line to become more appropriate for the target audience, or they may have to shut down the division entirely.

     Finally, there is one aspect of Le Château’s operations that could be costing the company a lot – the fact that they are not selling products online. Since Le Château is an international company with hopes of continued expansion, it seems unwise to neglect the online market.

Conclusion

     Le Château founder Herschel Segal has created a strong Canadian brand with a lot of promise. In fact, he was recently recognized for his creative vision at the 2005 Ryerson School of Fashion graduation ceremonies, where he accepted an honorary doctorate.

     Le Château sales have been consistently increasing in recent years, demonstrating a strong demand for the company’s product. If Le Château can find a way to improve the quality of its clothing and revitalize the junior girls’ line, there is no telling where the company could go.

Listing of Retail Stores