Holt Renfrew’s Balancing Act: Broadening the Offering While Maintaining the Luxury Aura

When Sebastian Picardo became president and chief executive officer of Holt Renfrew in June 2020, he wasn’t on the sales floor or even in the C-suite at the Toronto-based retailer, but stuck on the other side of the world in Hong Kong.

He was coming off his previous job as CEO of Lane Crawford and unable to fly to Canada due to the pandemic. “Everyone was working remotely. It was tough for me to get a grasp of the culture of the business and an understanding of what was happening there on the ground.”

For his first few months as CEO, he worked nights given the 12-hour time difference between Hong Kong and Toronto, until he arrived at Holt Renfrew’s offices by flying to New York, taking a car to Newark Airport, flying to Buffalo, N.Y., and renting a car to get to Toronto. “With this and all these other things happening in the middle of the pandemic, it was very memorable and challenging time, and also very exciting.”

Additional challenges loomed — a slumping Canada economy marked by stalled income growth and inflation that peaked at 8.1 percent in 2022; rising prices on imports due to unfavorable exchange rates, changes in the communities Holt serves due to immigration, and most recently, the global luxury decline. Designers have also been opening their own stores.

But Picardo developed a comprehensive strategy and mission statement to attract more consumers and brand partners, while maintaining Holt’s luxury aura and reinforcing its social values.

“In the last few years we’ve been gradually expanding our offer to bring products that have different price points, but still remain exceptional in the sense that they’re very special products,” Picardo said. “We ask ourselves, is this product sustainable? Is this product new? Is this product diverse? Is this product Canadian? And can this product be available at Holt Renfrew only? We think of all these different things.”

Alexandra Weston, vice president of brand and creative strategy, added: “Our customer wants to shop high-low, but it’s not about price. It’s really about the uniqueness of product.”

Among the key changes:

Picardo spoke of efforts to give Holt a sharper, warmer and more welcoming personality, by expanding the mix and intensifying the use of Holt’s signature magenta color, conveying the 187-year-old retailer as modern and distinctly Canadian. Holt has also been bolstering its personal service and focusing more on waste reduction, energy efficiency and promoting sustainable brands.

“In terms of sustainability, every buyer has targets,” said Weston. “Over the last two years, the company has increased its percent of sustainable product from 1 percent to 12 percent. From a buying perspective, that’s a very short period of time.” Since 2013, the H Project program has been offering products with minimal impact on the environment and that support local communities or have a charitable component. The program is the brainchild of Weston, who believes retail could be a force for good. H Project, she said, “is an incubator for artisanal brands creating positive impact and a guiding star to self expression and to ignite positive change.”

With the closing of the men’s store in Toronto last December, menswear relocated to the newly renovated/reimagined 23,000-square-foot third level at Holt at 50 Bloor Street, called “On 3.” Asked if the freestanding men’s store lacked sufficient sales and shopper traffic, Picardo said: “It wasn’t so much that. What we wanted was to make sure that each store is a place for everyone to connect. By having a different format with men separate from the rest, we didn’t feel we could achieve that.”

“On 3” is an innovative, eclectic, dual-gender concept with a sense of discovery. It’s heavily merchandised with contemporary brands including Vince, Theory, Rag & Bone, Frame, Alexander Wang and Ganni. It also features a central “Denim Lab,” a men’s studio for made-to-measure looks, a tailored footwear area next to a casual footwear section, and a sneaker area curated with a range from designer labels such as Prada and Loewe to more affordable labels such as Adidas and Veja. And there’s a version of the Toronto-based Better Gift Shop selling inexpensive items not ordinarily found at Holt like logo T-shirts, collegiate sweatshirts, caps, keychains, incense, as well as some higher-end products.

Created by the Holt Renfrew design team along with Studio Paolo Ferrari and the Gensler architectural firm, On 3 is filled with splashes of vivid colors differentiating categories and installations, i.e. an orange-colored men’s grooming destination featuring Bleu De Chanel and Sauvage by Dior, among other brands. There are also natural wood fixtures, hanging plants, a skylight and rows of display racks suspended from the ceiling, setting up an innovative, updated experience that plays counterpoint to the tonier designer shops below.

“It’s more of a one-stop-shop concept,” said Allan Tse, vice president of experience design. “We worked on fixtures and visual merchandising to keep as much density as we could, but we significantly reduced the space that goes to women’s on the third floor and increased the density on the second floor in women’s.” That one-stop-shopping notion extends to all Holt stores now. “All of them have all of the categories across different price points,” Tse said.

Over a recent lunch at Holts Café at the Bloor Street flagship, Picardo spelled out the challenges, accomplishments and opportunities for Holt Renfrew, which is owned by the Weston family and is considered Canada’s leading luxury retailer. In developing the agenda for Holt: “We felt that there was a large group of people who were not necessarily thinking there were things for them at Holt, and that was partly because of our luxury positioning.”

But shifts in the buying approach have recently brought in such brands as the Kardashian-founded Skims brand. “It’s been very well received with our customer, and we have that brand exclusively in the Canadian market,” Picardo said. Mejuri, the Canadian fine jewelry label, as well as Carhartt, Adidas, and Commes des Garçons Play are also among the “accessible” labels that are relatively new to the assortment, as well as Fear of God, a brand that blends luxury and streetwear.

“We still have a luxury positioning, but we know our customers come here because they want to have a multibrand experience. They also like high and low prices, as long as it’s a special product, a special brand,” Picardo said. Currently, approximately 30 percent of what Holt buys and sells is in the more accessible price range. “We’ve been working on this for the last two or three years,” he said.

With the changes at Holt, “We are seeing a lot of traction, but we have to constantly remind ourselves that it has to be fashion, it has to be on trend, and it has to be a brand or product that is special,” Picardo said.

The Holt Marketplace

Two years ago, Holt formed a marketplace format online, listing products bought by Holt as well as goods being sold by such brands as Brunello Cucinelli, Burberry and David Yurman. “We are on a journey to building the business. The focus is on adding products within categories already offered, as opposed to introducing categories that have yet to be offered,” Picardo said. The home category would seem an opportunity for growth, at least online, though Picardo said, “We have a very small selection and very small curation, and for the time being, that will probably continue to be the case.”

Asked if the merchandise-related augmentation blurs the luxury aura, Picardo replied, “It’s not necessarily a challenge but this is where our efforts on curation are extremely important. We’ve been very successful in this.”

Category-wise, Picardo said there’s been “a lot of traction and momentum in beauty. We are very strong in skin care, and we’re also very strong in fragrance, particularly niche fragrance businesses. We’re also seeing a lot of momentum in men’s and women’s contemporary fashion, and in women’s leather goods.”

A Personal Touch

Holt’s top consumers, “in most cases, have a relationship with someone from our team,” Picardo said. “It could be a personal shopper, a sales consultant or someone who works on the floor. We are investing heavily in giving our teams tools to be able to provide this ‘brand pillar’ we talk about, which is personal service at scale.” The clienteling tools provide associates with richer client and product information, and make it more “seamless” for customers to set up appointments with personal sellers and stylists. Holt employs about 1,000 sales associates.

The selling floors remain heavily populated by luxury concession shops including Prada, Brunello Cucinelli, Louis Vuitton, Loewe, Dior, Chanel, Hermès, Gucci, Loro Piana, Bulgari and Celine. And at the two-level, 130,000-square-foot Yorkdale store — among Holt’s top two biggest-volume stores along with the Vancouver location — there’s been an influx of luxury concession shops since 2018 to the extent that 75 percent of the selling space is occupied by the format.

They’re mostly manned by personnel from the designer brands, though according to Weston, at certain of the concessions, such as Dior, Holt associates are responsible for about 40 percent of the sales. Weston also said that it’s common practice for Holt associates to bring customers to the brands’ stand-alone shops, such as Tiffany and Cucinelli, which operate their own stores at the Yorkdale center, just across from Holt Renfrew. “We will have an arrangement where we have our customers shop in their environments. We also partner with our brands to take our customers to their events,” said Weston.

The Holt Business

Industry sources place Holt Renfrew’s annual volume at around 700 million Canadian dollars. The company operates six stores: three in Toronto at 50 Bloor Street West, in the Yorkdale and Square One shopping centers; the Holt Renfrew Ogilvy store in Montreal; and in downtown Calgary and downtown Vancouver. Five locations were closed beginning in 2015 as market conditions became more difficult.

Approximately 7 to 8 percent of Holt’s total business is generated by holtrenfrew.com. “We saw digital sales grow almost 10 times in the span of three to four years. Then the growth slowed down and it’s starting to resume again,” Picardo said. “We’re seeing growth, and it’s profitable growth.” He said digital could eventually represent a double-digit percentage of the total volume “at some point…Our plan is to gradually add brands that have products in a distribution center in Canada and potentially outside of Canada.” Currently, online orders are only shipped from stores.

The potential for Holt to gain market share increased with the departure of Nordstrom stores from Canada in 2022 and 2023, and weak selling trends at Hudson’s Bay and Saks Fifth Avenue. “There is an opportunity for us to operate in an environment with less competition when it comes to multibrand retailers,” Picardo said.

Some brands not currently carried have expressed interest in selling at Holt, the CEO said. “It’s mainly in the kind of aspirational contemporary space where we see a lot of demand. We don’t know if it’s related to lower competition in the market, or also an evolution of what’s happening in the market.”

The Luxury Slowdown

Approximately 18 months ago, Holt started seeing less momentum in its designer business, following a post-pandemic surge in demand that led to higher prices. “The price increases were quite significant,” Picardo said. “Then interest rates started to go up. People started traveling more and going out for meals more often. Customers had less share of wallet for discretionary spend. Whatever happens in China, in terms of business sentiment or the economy, obviously has an impact,” given Canada’s large Asian community, which currently represents about 20 percent of the population. “In Canada, prices have increased even faster because of the foreign exchange rate.”

The luxury sector, Picardo said, “is going to take some time to normalize. In the short term, there are challenges. But the fundamentals of the luxury industry remain strong for the long term.”

Regarding how luxury is performing at Holt, “We see polarization in the space. Some designer brands are having momentum,” Picardo said, singling out Miu Miu, Hermès, Brunello Cucinelli and The Row.

Asked how the company is performing overall, Picardo replied, “A very large part of our offer is luxury. Therefore, if there is less demand in the luxury space, we obviously notice it. The last 18 months have been softer than we had expected. Having said that we are seeing momentum in other areas outside of luxury and even in some luxury brands,” he said. “But overall, I would say that as a company, we’re doing well. It’s just not as strong as we were. We don’t see the same level of strength in demand as we saw. But the company is profitable and we continue to invest in it.

“When I joined Holt Renfrew, NPS [net promoter score] was hovering [at] approximately 30, and this year it’s close to 70, and we had weeks where we were at 80.

“We still have an amazing very supportive shareholder who is very focused on making sure that the company is strong in the long term,” Picardo said. The Weston family, which has owned Holt Renfrew since 1986, are also owners of Wittington Investments, which also has two big names in food in its portfolio, Loblaws and Associated British Foods. From late 2016 to 2020, Weston invested 400 million Canadian dollars to renovate and expand key Holt Renfrew stores, adding dozens of designer shops and upgrading the IT, while also closing weaker locations.

“That investment period was very important,” Picardo said. “Then I came in, and not only did I have to craft the plan and the strategy for the next few years, with our teams, with our brand partners, with our customers, but I started discovering that the customer in Canada was changing.”

A Changing Customer

“Canada has a very strong and very successful immigration program,” Picardo said. “The communities where we operate have evolved and changed with very diverse groups of people with different experiences and expectations. So we needed to make sure we could do a good job in each community. With the six stores we have, we have a very good footprint to cover all the key markets, and then with online being able to cover the other markets.

“We also saw that not only our customer and also our teams were increasingly concerned about climate change and some of the social issues of the time, such as the Black Lives Matter movement. We started asking ourselves, ‘Why do we really exist, and what is it we’re trying to do?’ We did a big outreach to stakeholders towards the end of 2020. What came out of it was a very clear mission statement — to empower self expression and ignite positive change.

“Self expression is not just for our customers, but it’s for everyone who interacts with us — our employees, our customers, our brand partners,” Picardo said. “Igniting positive change really is about taking a leadership role when it comes to the environment or social aspects our communities care about…We’ve been around for 187 years, and we thought for us to be culturally relevant over time, it would be really great to see ourselves as a brand, not just as a house of brands. If we operate as a brand and come across with a personality, people will connect with us through shared values. And if we can achieve that, people will want to shop or do business with us, or be employed here, not just because we have certain categories or certain brands or certain locations, but because of who we are and what we stand for.”