"Canada's tuxedo store" is no more. After 85 years, Montreal-based Classy Formal Wear Inc. was declared formally bankrupt in Quebec Superior Court yesterday, written off as a bad investment by a technology tycoon who diversified into formal wear and football.
There was no sign that Canadians had lost their taste for fancy dress, but a Toronto wedding planner said Classy lagged behind its rivals in quality, style, selection and service.
Owner Robert Young, who made his fortune as co-founder of North Carolina software maker Red Hat Inc., said Classy succumbed to competition from suit retailers such as Moores Clothing For Men, with its own formal rental line, and Grafton-Fraser Inc.'s Tip Top Tailors, which offers rentals from Syd Silver Formals. Classy itself had outlets in Bay department stores.
"Golly, it's a very sad story," he said, "but what happened to it was a restructuring of their industry. ..... In effect the retailers are getting into the tuxedo rental business and the economics for stand-alone tuxedo rentals just don't work any more. Moores is probably the most aggressive player in the business right now but the Syd Silver and Tip Top Tailor combination is equally compelling. If I had to invest again, I'd invest in one of those two. They have much better economic models than the independents do."
The bankruptcy, which cost about 325 jobs across the country, left countless wedding parties and other clients looking elsewhere for outfits. Their reservations will not be honoured at Classy and money they left on deposit will not be refunded soon, if ever.
"They rank as unsecured creditors," said Montreal accountant Gilles Campeau, whose firm, KPMG Inc., was appointed trustee to arrange Classy's exit. "I don't know how many people; we're trying to put together the list. I know that there's roughly $120,000 of these deposits, but some people can be $10, some $30, some $100, so it's difficult to assess how many people are affected."
When businesses are liquidated in bankruptcy, unsecured creditors often get little or nothing. Mr. Campeau, who was Classy's interim receiver for two weeks, said the company had debts of about $2.5-million, including $1.8-million owed to Laurentian Bank of Canada, which petitioned it into bankruptcy. He had no estimate of recoverable assets.
He said Classy's employees were let go as of yesterday and clothing from about hundreds of outlets, including small-town agencies, company-owned stores and shops at Bay stores, was being returned to Montreal for eventual sale.
The company traced its beginnings to a Montreal tailor shop in 1919. Mr. Young, who was born near Hamilton and now owns the Hamilton Tiger-Cats football club, declined to say how much he invested in it.
Classy had seen lean times, including a dearth of formal events during last year's SARS scare, but people in the fashion and wedding trades said they saw no general slump in demand for rentals.
"Oh, no, definitely not," Toronto wedding planner Anne Anderson said. "It's definitely pretty healthy, and it's pretty competitive. I mean, there's quite a few [formal rental firms] out there."
As she saw it, Classy simply failed to make the grade. "My personal experience, with the couples I represent, is really the quality of the tuxedoes is first and foremost," she said, adding that a second requirement "is that they actually have the latest styles, and No. 3 is the service and selection." She said they lagged in all those areas. "There's a difference between the different tuxedo companies out there and the fabrics they select."
Karen Garscadden, a wedding consultant based in Thornhill, Ont., said she had no strong impressions of Classy. "I mean, it definitely was a household trade name. I just hope I don't have any grooms who [have tux reservations at Classy]."
But she, too, saw no shift away from rentals. "I think people look forward to dressing up, and with the cost of formal wear and how often they get to wear it, I would say that more people rent than buy." At the Classy outlet in Toronto's downtown Bay store, a sign said, "Selected retail merchandise now on sale while quantities last," but the racks and shelves were bare. A clerk, working out her last day, said there was nothing to sell.
© The Globe and Mail
Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.
Discover a wealth of investment information and and exclusive features.
