Canadian fashion retailer Le Château experienced a net loss of $12.1 million during the first three quarters of 2013. The loss represents a 36.6% increase over the net loss experienced during the first three quarters of 2012.
Le Château’s third quarter report attributed the loss to increases in general expenses and expenses related to promotional activity, selling, and administration. The report noted that the loss was also due to the increased use of stock as compensation for employees.
The company, which specializes in clothing, accessories, and footwear for women and men, has seen its net earnings decline steadily since 2009. Johnny Del Ciancio, Le Château’s vice-president of finance, acknowledged the downward trend.
“The loss is obviously concerning. Our goal is to reduce it. At the end of the day, you somewhat have to weather the storm,” Del Ciancio said.
Michael McIntyre, a professor of finance with Carleton University’s Sprott School of Business, also said the loss trend is worrisome.
“It’s not a good thing, they’re definitely struggling,” McIntyre said. “They’re not going to disappear soon, but they’re under threat.”
Despite the continuing net loss, the company experienced a 2% year-to-date sales increase during the third quarter of 2013 compared to the previous year. Le Château attributed this increase to improvements in product assortment, regional strengths, and the performance of its new-concept and top-performing stores.
McIntyre said the company will have to carve out a space for itself within today’s competitive retail market.
“They probably have to have a really good, hard look at reinventing themselves and figuring out: what is it they do well? What market niche do they really appeal to?” he said. “And if they find out that niche is shrinking or getting stolen then they have to reinvent themselves.”
The company experienced its largest third quarter sales increase in the footwear division. Third quarter year-to-date footwear sales rose 13.5% between 2012 and 2013.
“You search for where you’re winning and try to exploit that,” McIntyre said.
Del Ciancio said the company is continuing to move forward.
“Obviously we want to get back to profitability and that is our target. We’ve made a lot of strategic changes in terms of product and our store concepts,” he said.
Del Ciancio said the changes began five years ago. The company broadened its target market from customers between the ages of 18 and 25 to customers between the ages of 25 and 45. It began to focus on value and quality rather than price-point and improved its footwear line to include leather products. The company also began selling its products online.
“I think a lot of the changes that we had to make are sort of behind us now, it’s now focusing on efficiency,” Del Ciancio said. “Increasing productivity in the stores, that’s our challenge right now.”
While the third quarter report stated that sales are generally higher in the fourth quarter due to the holiday season, it noted that total retail sales had decreased by 2.2% during the first five weeks of the 2013 fourth quarter compared to the previous year.
The company’s fourth quarter wraps up at the end of January, but results won’t be released until later in the year.
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