HOLT’S HITS GROWTH THROTTLE
Byline: Paul French
TORONTO — With Canada’s retail sector still digesting the news of T. Eaton Co.’s bankruptcy-protection filing last month, at least one high-end player has been galvanized into action.
Moving swiftly to fill a widening gap in the market, Holt Renfrew Co. is plotting an aggressive expansion course that will boost the specialty chain’s selling space 25 percent over the next 18 months. The planned growth follows five profitable years in what Holt’s called “a weak fashion economy” that nonetheless saw the firm’s same-store sales double.
“Our primary goal is to bring all the Holt’s locations up to a world-class standard,” president Joel E. Rath told WWD from Paris, where he was shopping the collections. “The investment is not breaking ground in any new markets.”
Instead, the 12-store retailer of apparel, accessories, cosmetics and fragrance is solidifying its position in its eight Canadian cities: Quebec City, Montreal, Ottawa, Winnipeg, Calgary, Edmondton, Vancouver and its home base of Toronto.
“Our most focused interest right now is taking the organization to the next level in Canada, where we believe there is substantial growth available,” Rath noted. “There are other markets that are attractive to us, but our primary goal is to bring existing locations up to the size that business demands.”
Speculation that Holt’s might enter the U.S. and make a play for Barneys New York was dismissed by Rath.
“We have been observers, like many people,” he said. “In our next phase, we might consider other markets.”
If Holt’s continues to grow robustly, it would look to opportunities elsewhere, Rath added.
“I guess that could include the U.S. but it wouldn’t necessarily only include the U.S.,” he said.
In the meantime, Holt’s is trying to maintain its market-share momentum in Canada, according to retail analyst Len Kubas of Kubas Consultants.
“The expansion program reflects the momentum they have,” he said.
The chain’s eight markets account for 50 percent of Canada’s retail sales and 70 percent of the high-end fashion sold in the country, Kubas noted. The additional selling space is expected to reinforce Holt’s preeminence as a leading fashion retailer. Rath said the company’s sales hit $220 million ($300 million Canadian) in 1996.
Over the next 18 months, the privately held firm will invest $18 million ($25 million Canadian) to redesign its Toronto flagship, dramatically expand its store at the Yorkdale Shopping Centre in suburban Toronto and remodel units in Quebec City and Calgary.
The company will also add a second store in Vancouver and is scouting for a second site in Calgary. In 1995, Holt’s completed a major overhaul of its Montreal flagship.
In August, the Holt Renfrew store at the Yorkdale Shopping Centre will be moved from a 15,000-square-foot space in the mall’s northeast corner to a 55,000-square-foot location in the south end. At the new site, Holt’s will offer underground valet parking and elevator access directly into the store. They are services the company plans to feature at other metropolitan stores, along with strategically placed “comfort zones” where shoppers can relax, use phones and read magazines.
“I’m not sure we believe in the concept of the suburban store any longer,” Rath said. “You just don’t cookie-cutter these stores. We believe in fuller assortments that also adapt goods to the specific needs of a marketplace. For instance, women wear more scarves in Quebec than they do in Toronto.”
Expansion of the Toronto flagship will add 5,000 square feet for designer accessory shops, including Prada, Gucci, Ferragamo and Fendi. Cosmetics and fragrance galleries are slated to be enlarged as well.
Holt’s private label lines are steadily gaining consumer acceptance and now account for 28 percent of the chain’s sales of women’s and men’s apparel, accessories, cosmetics and fragrances. Rath sees a bigger place for the store brands in Holt’s future, saying the chain is “not comfortable” with the amount of business the house labels are producing.
Kubas said the company is on the right track in building an in-house label.
“Holt Renfrew has a solid brand name attached to it now, the cachet of some of the better-known designer labels,” he said.
Retail-watchers say the timing of Holt’s expansion in the wake of the troubles experienced by Eaton’s will help strengthen Holt’s position in the upscale arena. With the demise of the Lipton’s chain two years ago and Eaton’s future uncertain, that portion of the market has no big competition.
“Eaton’s shifted down-market as it searched for a way out of its problems,” said Richard Talbot, managing director of Thomas Consultants International Inc. “That left the top end open, and Holt’s is filling the gap left by the department stores.”
Still, Talbot cautioned that Holt’s must not expand so aggressively as to water down the image of its brand, adding, “We’ve seen that before with the likes of Birks, the jewelry store chain.”
Asked who his competition is, Holt’s Rath eyed the big picture: “I’m not being flippant but I really believe it’s the world. Canadians travel a great deal and not only south of the border.”
Eaton’s has hired investment bankers Goldman Sachs & Co. and Toronto-based RBC Dominion Securities Inc. to sell as many as 31 of its 86 department stores by July. With that much retail space coming on the market, Rath said he will be watching closely.
“One always has to be aware of a world of opportunities and when to take advantage of them,” he acknowledged.
Despite the often-rumored prospect that a U.S. department store firm may be getting ready to set up shop in Canada, thus providing new competition for Holt’s, Rath remains sanguine.
“A vibrant retail community makes for good sales and keeps your customer in your market,” he contended.