Les Boutiques San Francisco, Inc

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Les Boutiques San Francisco, Inc.

50 de Lauzon Street
Boucherville, Quebec J4B 1E6
Canada
Telephone: (450) 449-1313
Fax: (450) 449-1317
Web site: http://www.bsf.ca

Public Company
Incorporated: 1978
Employees: 3000
Sales: $182.7 million (2003)
Stock Exchanges: Toronto
Ticker Symbol: SF.A
NAIC: 448120 Women's Clothing Stores; 452110 Department Stores

Les Boutiques San Francisco, Inc. is a leading Canadian chain of clothing stores, with approximately 140 stores in the provinces of Quebec and Ontario. Though little known outside Quebec, Les Boutiques San Francisco (BSF) is an innovative retailer that reinvigorated the department store concept in the late 1990s with luxurious megastores called Les Ailes de la Mode (The Wings of Fashion). These large department stores, which emphasize extraordinary customer service, were a bright spot in the slumping North American department store industry. The unique Les Ailes de la Mode chain, with four stores, make up one division of the Les Boutiques San Francisco company. The other division is composed of the company's various boutique chains. These are San Francisco, with 40 stores in Quebec, and the first in the BSF family; San Francisco Maillots, a chain of sports and activewear specialty shops; the swimwear vendor Bikini Village, with 46 units in Quebec and Ontario; and two chains of lingerie shops, Moments Intimes and Victoire Delage. The company restructured under bankruptcy protection in 2003 and sold off its chains of menswear and children's clothing specialty shops. The company aimed to hold onto Les Ailes de la Mode and its swimwear boutiques. The company was founded by Paul Delage Roberge in the late 1970s.

Building a Retail Network in the 1980s

The company that became Les Boutiques San Francisco, Inc. began as a women's clothing store founded in 1978 by Paul Delage Roberge and his wife Camille. Roberge was born to retail. He grew up near Quebec City, where his father was a clothing representative and his grandfather ran a general store. Roberge worked at his grandfather's establishment as a youth, and by the age of 15 he was working in a department store. In 1967, he earned a marketing degree at the University of Sherbrooke. After graduation, he worked as a buyer for a Montreal department store, Morgan, which was later acquired by the Hudson's Bay Co. chain.

After six years at Morgan, Roberge decided to go into business for himself. With a friend from college, Roberge opened a clothing store that catered to young women, called Boutique 20 Ans. Founded in 1973, by 1978 Boutique 20 Ans had grown to a chain of five stores. By 1978, Roberge had married Camille, a nurse by training and evidently a great influence on his sense of women's fashion (he referred to her as the "Queen Beauty of Quebec"). That year, Roberge sold his share of the Boutique 20 Ans chain, and with savings coming to about $40,000 the couple launched a new boutique in the Montreal suburb of St. Bruno. The new store was called San Francisco, a name that worked in both French and English for its evocation of the healthy lifestyle of the California city. San Francisco did so well that the Roberges opened two more stores within a year.

The new chain grew very quickly and soon had more than 20 locations. In 1985, the Roberges took their young company public on the Montreal Stock Exchange. Les Boutiques San Francisco consisted of 22 women's clothing boutiques. Quebec citizens were able to buy stock in the firm and receive a tax deduction as part of a government Quebec Stock Savings Plan that encouraged investment in Quebec companies. After the stock sale, BSF began to grow in a new way. Not only did it add more locations to its San Francisco chain, but the company launched other boutiques for different market segments. In 1986, BSF brought out San Francisco Maillots (also known as San Francisco Beach Club) stores, which specialized in swim gear and beach wear. By the early 1990s, San Francisco Maillots had close to 40 locations. Also in 1986, BSF began a chain of stores catering to fashions for businesswomen called L'Officiel. This grew to 20 stores by the early 1990s. In 1988, BSF debuted a chain of children's clothing stores, Frisco. The next year saw the firm enter the men's clothing market with a chain of stores called West Coast. Then, in 1991, BSF brought out Victoire Delage, a chain of lingerie shops.

For the most part, the new boutiques did well, though the company made a few avowed mistakes. In the late 1980s, BSF began manufacturing and franchising jeans, a venture that failed. This led the company to post a loss in 1988. BSF also had trouble moving into English-speaking markets. After some expensive and apparently ill-planned store openings in Ontario and Michigan, BSF pulled back to Quebec. The company's president, Guy Charron, told Canadian Business (June 26, 1998) that Boutiques San Francisco, to its disadvantage, had been "talking to Ontario in French." The company put together a team to craft a strategy for moving beyond Quebec in the future. Meanwhile, Camille Roberge began publishing a fashion magazine in Quebec that eventually became the best-selling fashion journal in the province.

By 1993, Boutiques San Francisco was running 60 of its namesake stores, and under its other five banners ran more than a hundred stores. The Quebec company had been remarkably successful at a time when other Canadian retailers were struggling. The company took advantage of strategic mall locations, where it often had several of its banner stores side by side. This encouraged customers to move from one to the other. Because the company had stores in several market segments, it was able to do well as a whole even when one area, children's clothing, for example, had an off year. The stores also did well selling BSF's own private label goods alongside designer labels. As well as clothing, the boutiques stocked private label skin care products and shampoo, and the beachwear stores sold suntan lotions. Sales grew nicely, hitting just over $93 million for 1993, and then growing to $109 million the next year.

Reinventing the Department Store in the Mid-1990s

The early 1990s were poor times for the retail sector in North America. The industry underwent a wave of consolidations as old-line department stores made way for newer vendors with discounted lines. While BSF's rivals aimed to cut costs, the boutique chains did well and remained profitable throughout the early 1990s recession. Paul Roberge, however, thought about quitting retail altogether. He was bored. He and his wife had hoped to do well with their boutiques but had apparently not imagined the business growing to this size. The strategic operations of the company's financial empire were overseen by president Guy Charron, whereas Roberge was more of a hands-on salesman who liked to walk the store floor. Instead of abandoning the company he had built up so far, Roberge began an ambitious new plan. BSF's stores had up to this point been small, specialized boutiques. Now Roberge imagined building huge new department stores, bigger and more luxurious than anything else in North American retailing. This was Les Ailes de la Mode.

The first Les Ailes de la Mode opened in Brossard, Quebec, in 1994. The inspiration for Les Ailes was the Seattle, Washington-based chain Nordstrom's. Roberge had studied Nordstrom's history, and he was sure a similarly upscale chain would do well in Canada. The Canadian market had several mid-market department chains, including Hudson's Bay and Eaton's. At the upper end, there was Holt Renfrew. The market seemed to lack an upper-middle niche, and that was what Les Ailes aimed to fill. At the same time, Les Ailes was also a remarkable break with current trends in department store retailing. Where other stores had cut costs and trimmed back, Les Ailes was awash in customer service and extraordinary amenities. The Brossard store was originally supposed to be 45,000 square feet but then went to 65,000 square feet. It cost $12.6 million to build, having gone over its original budget by 50 percent and taken six months longer than expected before it was ready to open. The store was dotted with leather-upholstered piano lounges, gourmet concession areas, notable original artwork, and private lounges where mothers could nurse their babies. In a palatial environment, the store's employees went to extremes to satisfy customers. Les Ailes de la Mode aimed to be a shopping destination where customers took pleasure in plonking down money rather than in scouring racks for bargains. Though this seemed to be the antithesis of trends in retail, Les Ailes de la Mode was a success from the start. In its first year of business, the Brossard store did just shy of $25 million in sales, very close to what Roberge had predicted. Though the cost of running the store was high, Les Ailes was very profitable. It brought in about $450 per square foot in sales, which was more than twice the average of its nearest rival, and three times that of the mid-level Eaton's and Hudson's Bay stores. Les Ailes also did well by selling a high proportion of private label goods. Its profit margin was well above that of any comparable store.

Company Perspectives:

Our company's mission is to create a passionate environment where each business unit, partner, supplier, and employee contributes in his or her own way to reinventing the retail concept to better meet our customer's individual needs. This approach has helped us build relationships of trust and mutual understanding with our clients. To achieve this mission, the Company is focused on two key business areas: its store network and its specialty department stores.

By 1998, there were three Les Ailes de la Mode stores in Quebec, all built along the same extravagant lines. The company advertised primarily in its fashion magazine, then added a weekly television show that featured shopping advice and celebrity interviews. The stores' customers could take advantage of a Les Ailes credit card, which racked up bonus points redeemable at the store. This was the first so-called chip-based or "smart" credit card in Canada. It gave BSF an abundance of data about its shoppers and brought them into the store at least once a month to redeem points. BSF also brought shoppers to Les Ailes by chartering special buses and trains. Les Ailes de la Mode wowed shoppers and industry analysts alike. Roberge talked about having reinvented the department store—not just in Quebec, not just in Canada, but in North America. For a very limited number of stores in the distant north of the continent, his claims may have seemed hyperbolic. Yet Les Ailes truly stood out as a shopping experience and seemed to have the financial results to prove Roberge's point.

However, the greatest challenge of BSF's new shopping experience was moving it beyond French-speaking Quebec. The first three Les Ailes stores were all in suburban locations, and intense planning was necessary to move its next store into the very different big-city environment of Montreal. The company hoped to open stores in Toronto and then Vancouver following the Montreal opening. In 1999, the venerable T. Eaton Co., Ltd., a once-leading chain of 64 department stores, filed for bankruptcy. BSF beat out other competitors for space in what had been Eaton's flagship store in downtown Montreal, and in 2002 the company opened what was its fifth Les Ailes de la Mode. (The fourth Les Ailes opened in 2001 in Bayshore, Ottawa.) Les Ailes took up 258,000 square feet of the cavernous building, and the company spent some $40 million on renovations that included building a spectacular floating staircase. The Montreal Les Ailes de la Mode also featured a karaoke lounge, sushi bar, French café, and a Berlitz language school.

The opening of the Montreal store did not go as well as planned, as sales over the summer fell short of expectations. In the meantime, the boutique side of the business was not performing as well as it once had. In 2001, BSF split into two divisions, with the boutiques comprising one side of the business and Les Ailes de la Mode making up its own separate division. BSF posted a loss in the second quarter of 2001, but things seemed better for the same period the next year, when the company increased sales and posted a moderate profit. For the next quarter, however, the company was in the red again. At that point, president Guy Charron resigned. He had been praised as the steady man at the helm, while Roberge was the more visionary leader. Now Roberge temporarily took on Charron's duties.

The company attempted to cut costs in 2003, but this move was unsuccessful. BSF sold off its menswear chain, West Coast, as well as its children's wear stores and its L'Officiel chain of women's businesswear. The Les Ailes de la Mode store in Ottawa did not last long and closed in 2003. In December of that year, the company filed for bankruptcy, asking for court protection from creditors while it restructured. Its stores remained open. Meanwhile, BSF decided to cut down the square footage of its Montreal store, and revamping this flagship location led the company to take a third quarter writedown of close to $40 million.

The company blamed intense competition for its poor showing. With the court's approval, BSF decided to concentrate its business on its four Les Ailes de la Mode stores and on its swimwear boutiques. These were San Francisco Maillot, with 21 stores, and its 39-store chain called Bikini Village. The company trimmed jobs and shut down boutiques. In 2004, it sold 33 of its 36 San Francisco stores, its original boutique chain, for about $2.4 million to Groupe Marie Claire. Marie Claire ran several chains of fashion stores, and it planned to keep the San Francisco name on its new acquisition. Even with all this seemingly bad news for BSF, the company maintained that its Les Ailes de la Mode stores remained among the most successful in Canada. The company hoped to return to its growth in the near future.