Womenswear retailer Jacob files for bankruptcy

The Canadian Press ~ OBJ
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Women's clothing retailer Jacob Inc. has filed for bankruptcy and will be liquidating inventory at all 92 of its stores across Canada in the coming weeks.

(File photo)

The Montreal-based company, which has eight locations in Ottawa and Gatineau, has been under creditor protection since November 2010 and underwent operational restructuring. But the company says it was unable to make the business profitable or to find new financiers.

Jacob’s decision to shutter its Ottawa-area stores won’t have a major impact on the city’s retail scene, according to local retail analyst Barry Nabatian.

Eight locations “really is not that much,” said Mr. Nabatian, director of the market research division at Shore Tanner & Associates.

Mr. Nabatian said Jacob wasn’t able to compete against new American and European brands arriving in Canada, such as H&M and Forever 21. Both have opened locations in Ottawa and other large Canadian cities in recent years.

He said there’s another factor that’s affecting the clothing industry across North America: a growing number of discount clothing retailers and higher-end and trendy stores that are “basically squeezing out the middle,” he said.

“H&M is not higher-end but it is very popular,” Mr. Nabatian said. “It’s new.”

Jacob, on the other hand, wasn’t updating its look or its styles, he said, and was positioned squarely in the middle of the market in terms of price, quality and company size, making it “particularly vulnerable.”

Even discount retailers are strengthening their offerings in the face of growing competition, he added. Winners “is always bringing in new stuff,” Mr. Nabatian said, while WalMart has introduced its own in-house brand, George, and Loblaws has Joe Fresh.

It’s not just increased competition that is impacting retailers, he said.

“Wages have gone up in China,” said Mr. Nabatian. The price of cotton has also increased, forcing retailers to raise prices or take smaller margins.

All that means other stores that are “mid-everything” could be following Jacob into bankruptcy, he said.

In a release issued on Tuesday, Jacob cited the challenging economy plus the influx of new international retailers to the Canadian marketplace among the factors leading to the company's inability to overcome its financial challenges.

"Although we did not achieve the desired result, I am proud of the passion and dedication that the Jacob team showcased over these past few years while trying to bring the company back to financial health," president and founder Joey Basmaji said in a statement.

"I would like to sincerely thank each employee and business partner that contributed to our success during these 35 wonderful years. I hope that the remaining Canadian retailers will get through these difficult economic times."

-- With files from Jacob Serebrin

Geographic location: Ottawa, Gatineau

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