MONTREAL -- Shoppers will be losing another Canadian retail option after Reitmans announced Tuesday it is closing all of its Smart Set clothing stores.
The Montreal-based retailer said it will shut down 107 Smart Set stores over the next 12 to 18 months, including 31 by year end or early next year. About 76 locations will be converted to other Reitmans' banners.
Reitmans (TSX:RET.A) had tried to refocus the Smart Set banner over the last two years to appeal to younger women, but decided to abandon its efforts in the face of intense competition that has driven down prices.
"It's a very, very difficult market and I guess we never had the appropriate focus for that particular customer," president and CEO Jeremy Reitman said in an interview.
He said the decision will help the company "refocus its sales and merchandising efforts" and improve its overall results.
Smart Set represents about 10 per cent of the Montreal-based company's annual sales, which were approximately $96 million for the year ended Feb. 1.
The banner joins a series of Canadian names that have closed or face threat of bankruptcy. Among them was women's retailer, Jacob, which abandoned efforts to restructure the chain and announced in October the closure of its 92 stores across the country.
There has also been an influx of American fashion retailers that have gradually built their Canadian presence in recent years.
While Target and Marshalls are two of the more notable newcomers, other big foreign brands like H&M and Banana Republic have increased their market share by driving down prices. Mid-priced retailers such as Ann Taylor, Loft and J. Crew have also moved into the country after building reputations with cross-border shoppers. While high-end department stores Nordstrom and Saks are also opening stores to compete against Holt Renfrew.
Jeremy Reitman denied that Smart Set's problems were the result of an influx of U.S. retailers.
"There's a lot of people in the space that have closed down or are closing down which led them to reduce prices dramatically and that put a pressure on our pricing structure," he said.
"It's a very, very busy space and we are not in a position of dominance and we didn't think we could grow to a position of dominance."
Analyst Mark Petrie of CIBC World Markets said the decision to close Smart Set is not surprising, with the net reduction of stores "in line with our expectations."
Reitmans said it will incur non-cash asset write-offs of $2.2 million after tax associated with the closures, which will be recorded in its third quarter results to be released Dec. 4.
The company's adjusted profits are expected to increase 42 per cent to $8.2 million or 11 cents per share on $254.6 million of revenues, according to analysts polled by Thomson Reuters.
"I think Reitmans is very secure. We have a very strong balance sheet," Reitman added.
It wasn't immediately clear how many people will lose their jobs as a result of the closures. About 40 employees working with the Smart Set banner at the head office will be transferred to the company's other banners. Reitmans employs about 10,000 full-time and part-time employees across Canada at all its stores.
The first Reitmans stores opened in Montreal in 1926. The Smart Set hosiery brand was created in 1945 with the first Smart Set store opening in Ontario in 1970, according to the company's website.
In addition to Smart Set, Reitmans also operates the clothing banners Penningtons, Addition Elle, RW & CO., and Thyme Maternity.
On the Toronto Stock Exchange, Reitmans shares lost a penny at $6.14 in Tuesday morning trading.
