Laura files for creditor protection

The Canadian women's retailer is facing a challenging environment as other mid-market players also suffer.

Canadian women’s fashion retail chain Laura has filed for creditor protection, joining a string of other mid-market clothing stores that have been forced to scale back or even shut their doors entirely.

The Quebec-based Laura’s Shoppe Inc. was founded in 1930 and has over 150 stores in Canada under the Laura, Laura Petites, Laura Plus and Melanie Lyne banners. “The company experienced large losses in 2012 and 2013, attributable to merchandising changes that did not resonate with customers,” according to a press release from Laura. “Sales have since rebounded, but additional initiatives need to be put into place to complete the restructuring of the retailer’s operations.”

Kalman Fisher, president of Laura Canada, wrote in a letter to employees that “We fully expect to reorganize the business, emerge as a strong and well-financed retailer and continue to serve our customers for many years to come.”

Discounts of up to 80% are beginning in stores this week in anticipation of some closures, although it wasn’t specified how many locations may close.

“This sector in general has been extremely tough,” Farla Efros, president at consultancy HRC Advisory North America, told strategy. “With all the new U.S. entrants coming to Canada, it’s hard to stay afloat,” she adds. “I always felt that Laura had a ‘niche’ in the market, but with the dollar being where it’s at, and the overall economy and the uncertainty, I am not overall surprised – just saddened – as it’s been quite the iconic retailer that has been around for a long time.”

Women’s retail is not doing very well in the middle market as growth in high-end and low-end retail squeeze it out, she also notes.

“It’s certainly not because the market has somehow collapsed,” Ed Strapagiel, retail consultant, also said. Statistics Canada has reported that clothing store retail sales were up 7.7% year-to-date to May 2015 (the latest data available), he points out.

“Many of the fashion retailers that have fallen by the wayside however do have something in common,” he says. “Most of them are old-school, slow fashion operators which are being displaced by new business models such as fast fashion, cheap chic and off-price. Stores like H&M, Zara, and Marshalls are the fashion retailers that are expanding.”

Combined with online retail, mid-market stores are facing a challenge.

“It’s unlikely that Laura can come back in its current form,” Strapagiel adds. “They probably do have a core of locations that are profitable which can be packed up and sold, albeit at a bargain basement price. Much depends on the creditors, mostly suppliers and landlords. They may want to keep at least a part of Laura going in hopes of recouping more of their losses down the road. Alternatively, given the troubles in this retail sector, they may decide there is no hope, accept a minimal settlement, and be done with it.”