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Holt Renfrew resizes strategy to focus on core markets, brands
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By MARINA STRAUSS
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Monday, June 18, 2018 – Print Edition, Page B1


TORONTO -- When Mario Grauso took the top job at Holt Renfrew & Co. in 2016, one of the first things he did was meet with dozens of its customers, one by one, to get their feedback. He got an earful.

They wanted more clothing sizes - especially bigger and smaller ones - more half-sizes in shoes, more denim wear and more guidance on keeping up with trends. They told him they were overwhelmed with the choices on the store racks, and frustrated that Holts, the country's dominant luxury fashion retailer, sold so little of its marquee merchandise online.

Almost two years later, he has overhauled the retailer and is retooling for a digital age. Holt Renfrew will bet big on fewer brands - Chanel, Gucci and Prada, for instance - ditching marginal lines in a bid to focus on hard-to-find items. It will also complete some posh renovations and unveil a more vigorous e-commerce presence, starting in the fall with footwear and rolling more out gradually over two years.

A seasoned luxury goods executive, Mr. Grauso arrived at Holts at a time when the retailer was feeling the pressure of a more crowded premium fashion market. Upscale U.S. department stores Nordstrom and Saks Fifth Avenue had started to open stores here while other luxury players - some of them Holts's most important suppliers - were expanding with their own standalone stores and e-commerce sites. Big foreign retailers were bolstering their online selling while Holts struggled in that sphere.

Mr. Grauso acted quickly. He replaced almost all of Holts' top executives and other corporate staff with fresh talent and dropped almost 40 per cent of the brands the retailer carried, including cosmetics specialist Clinique and fashion label Michael Kors. He cut back parka purveyor Canada Goose, phasing out the men's coats, because they were popping up in too many other chains.

He also slashed about 80 per cent of Holts' e-commerce merchandise categories, leaving just beauty items, as he prepared for an online return with upgraded technology and inventory that better reflected goods in its stores.

For the first year or so under his leadership, Holts grappled with softer sales growth as the chain underwent the makeover. But today it is beginning to see the fruits of his team's work, he said in an interview.

"We certainly had to up our game here in the corporate office," said Mr. Grauso, clad in casual-chic of a grey Brunello Cucinelli jacket over a sweater and shirttails stylishly hanging out over dark Acne jeans, rolled up at the bottom, and Prada loafers. ("I'm good friends with Brunello," he says.)

"Have we lost customers? Perhaps. Are the customers we retained buying more? Perhaps. One way or another, we've got double-digit growth and two competitors entered the market."

In its push to emerge a winner in Canada's luxury wars, Holts is pouring $400-million into remodelling and expanding four of its nine stores in Montreal, Toronto and Vancouver along with new technology over a four-year period to 2020, he said.

Owned by the private company of the wealthy Weston family, which also controls the country's premier grocer, Loblaw Cos. Ltd., and the No. 1 drugstore chain, Shoppers Drug Mart, Holts is returning to a simpler business model. It has shed ancillary businesses such as its discount chain and done away with underperforming stores, private labels and fur salons.

"It shows the commitment that the group has in this brand to the market in the face of competition," said Mr. Grauso, who previously headed Loblaw's Joe Fresh apparel line and before that was an executive at luxury goods suppliers.

The luxury fashion market is growing in Canada, bolstered by more players, a stronger economy and favourable currency shifts, said Randy Harris, president of researcher Trendex North America. The industry has also been helped by millennials making their first luxury purchases; more e-commerce; and a pickup in the chi-chi casual and streetwear segment, he said.

While total Canadian retail apparel sales dropped 2.1 per cent to $30.6-billion last year, sales of luxury clothing rose 4.2 per cent to $2.3-billion in 2017 and will climb 3.7 per cent this year, according to Trendex estimates.

"If there were any losers in the luxury apparel market last year, it had to be both Holt Renfrew and the Bay," Mr. Harris said, adding that Holts did benefit from beefing up its beauty business. While Holts has begun to update its stores, "it should have started much earlier," he said. And delaying by a few years the launch of its combined new Holt Renfrew/Ogilvy store in Montreal to replace two separate ones "will only ensure the retailer could be in danger of being lapped in the Canadian luxury apparel market," he said.

Mr. Grauso countered that Holts has capitalized on more customers shopping in Canada rather than in other countries.

"I've heard a lot of customers say to me they have less reason to shop elsewhere, meaning outside of Canada. You want to keep your core customer shopping in your town."

He said annual sales at privately held Holts have increased to more than $1-billion from an estimated $800-million in 2013, enjoying a double-digit lift at existing stores so far this year (and single-digit gains last year after a year of no growth in 2016). That's despite having closed three stores in Ottawa, Quebec City and Winnipeg as well as its two HR2 discount outlets and most of its e-commerce over the past few years, he added. But heavy investments in the business are eating into profits.

Today the retailer is investing in markets and categories in which it thinks it can profit most, including Montreal, where neither Nordstrom nor Saks operates, and Vancouver, where Saks doesn't have a store.

Within the next two years, Holts will close its sole men'sonly store in Toronto - which opened in 2014 and, Mr. Grauso said, was too small and never meant to be permanent - while introducing a men's section with double the space in its nearby flagship store.

He's also bulking up on fast-growing categories of casual and athletic wear to cater to well-off millennial shoppers, as well as footwear, beauty, handbags, outerwear and overall edgier designs. Departments of more formal wear such as suits and ties have been scaled back. Holts has dropped private labels (which are made specifically for a retailer and are usually less expensive) as it focuses more on big brands.

To bond more with customers, Holts has increased by 30 per cent the number of "personal shoppers" since Mr. Grauso arrived. The retailer now employs more than 40 of those advisers.

"There's still more to do," he said. "I certainly don't want anyone to feel that we're done."


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