Wednesday » August 10 » 2005
Les Ailes stores get new owner
Fairweather Group pays $6.2 million. Sale does not include swimwear division; Margolis resigns as president and CEO
SHEILA MCGOVERN
The Gazette
Wednesday, August 10, 2005
The struggling Les Ailes de la Mode stores have been sold to the Fairweather Group in Toronto for $6.2 million, and retail analysts said it might be for the best.
The sale was not a surprise. Les Ailes de la Mode Inc. acknowledged more than a week ago that it was negotiating with the Toronto group, headed by Isaac Benitah.
The four stores - based in Montreal, Laval, Brossard and Ste. Foy - were to have been the pride of a retailing empire built by Paul Roberge in a rebirth of the luxurious department store. But they never took flight, and they dragged down the rest of his empire. In December 2003, the company had to seek protection from its creditors and sell a few of its banners, including the San Francisco chain on which it had been founded.
It emerged from bankruptcy protection with only Les Ailes and its swimwear division, which includes 50 Bikini Village and Ocean Bikini stores. At its annual meeting on July 21, the company said it still wasn't making money.
In announcing the sale, which does not involve the swimwear division, Les Ailes president David Margolis said that "on its own, the Les Ailes department stores would have required significant capital investments to remain viable in the long term."
By selling the stores to Fairweather, they "will benefit from the scale, purchasing power and relationships as well as the synergies that a large retailer can bring," he said. "Les Ailes' concept will continue under new leadership while recognizing its important impact on the Quebec retail market."
Benitah said he was excited about the purchase and that "with over $75 million in revenues and 630 employees, Les Ailes has a solid foundation from which we can build."
Fairweather will "continue to use the existing vendor base as well as adding new suppliers, which will broaden the appeal to customers and provide an enhanced platform for future success and growth," he said.
Benitah has been dubbed the "godfather of cheap chic," and there was speculation he would relaunch the chain as an off-price retailer like Winners.
However, three retail analysts contacted by The Gazette doubt that will happen.
"He absolutely should not do that," said Richard Talbot of Talbot Consultants International. Then he'd be competing with himself. A retailer can own a variety of stores "and maybe inside every low-end retailer there is also a high-end retailer."
Even though his stores would not carry the same merchandise, they would all benefit from combined supply, distribution, marketing and computer services, Talbot said.
And Quebec is the ideal market for a concept like Les Ailes, Talbot added. Though small department store chains are rare in the rest of Canada, Ste. Catherine St. has three - Les Ailes, Simons and Ogilvy - and the population remains fashion-conscious, he said.
David Howell of Associate Marketing International said low-end retailers are doing well, as are high-end retailers like Holt Renfrew and Harry Rosen. But the middle ground is not well served, he said, and Benitah has the expertise to capture that ground in Quebec and expand. "He understands the rest of Canada - Paul (Roberge) did not."
Ed Strapagiel of Kubas Consultants said many Canadian shoppers still want quality, and there probably is a stake to be claimed somewhere between The Bay and Holt Renfrew.
Benitah's empire has the reputation of being a tight operation, while Roberge "was probably not watching the nickels and dimes," Strapagiel said, and it also goes in for heavy marketing and promotion. "They are merchants who go out and hustle."
Roberge ran into trouble trying to expand too quickly, planning three stores in about a year, Strapagiel said. The Pointe Claire store never opened, the Ottawa stored closed, and the downtown Montreal store had to be chopped to a third of its size. When people run into financial difficulty, they cut back on advertising expenses, but you just can't do that in fashion. he said.
All agreed the tough nut to crack will be reviving the downtown Montreal store buried in the back of the old Eaton building. It has been a confusing store and tough to find, and it was the major contributor to Roberge's financial woes.
The Eaton building is owned by the Caisse de depot et placement du Quebec, the province's giant pension find manager. A spokesperson said yesterday the store was doing "business as usual" despite the sale.
Margolis, who founded the Winners chain, said he feels a sense of accomplishment at having stabilized Les Ailes, and is resigning as CEO and president. Leslie Glazerman, who has been Les Ailes' interim chief financial officer, will assume the title of interim chief executive officer.
The companies said the $6.2-million price tag is subject to certain adjustments, and $4.2 million was paid at the close yesterday, with the remaining $2 million to be paid in instalments in October, December and February.
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