Simons acquires outside investment to help fund distribution centre

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La Maison Simons is bringing in outside investors for the first time in its storied history, striking deals with two public-sector allies that will help fund a new distribution centre key to its growth strategy as it confronts an unforgiving retail environment.

The Quebec City-based clothing store chain, believed to be the oldest privately owned family business in the country at 178 years, is opening its share capital to the Caisse de dépôt et placement du Québec and Investissement Québec after weeks of talks with potential partners. Simons announced details of the agreements on Tuesday.

“This isn’t a rescue; this is an investment,” company chief executive officer Peter Simons said in explaining his choice of partners. “It’s an investment in a business that right now is firing on all four cylinders. We’re excited about what we’ve built.”

Simons opens its doors to outside investors for bigger push into e-commerce

Simons was looking for smart and patient capital, partners who could contribute and provide an opinion on operations and strategy, Mr. Simons said in an interview. He said he believes he could have closed with a number of different investors and won a lower cost of financing, but that the Caisse and the Quebec government’s investment arm best understood the company’s values and needs.

“We have a thriving business in the U.S. that we really haven’t focused on because we just didn’t have the capacity,” Mr. Simons said. “This really allows us to look at other vectors of growth for the company that I think look really promising while properly servicing our existing customers and our existing business in Canada.”

The Caisse will make a $27-million investment in Simons while Investissement Québec will put in $17-million, Simons said in a background document. An exit clause gives the retailer the opportunity to buy out its partners in seven years.

The Quebec government will also lend the company $81-million on undisclosed terms, most of it for the purchase of equipment for the new distribution facility. Labour fund Fonds de solidarité FTQ is contributing $20-million through a real estate partnership with Simons for land purchase and construction. New agreements from Simons’s existing banks round out the financing.

Located in Quebec City, the new distribution centre building will stretch over about 575,000 square feet. The heavily automated facility will give Simons the power to process roughly 15,000 orders an hour and ship more than 40 million units a year, doubling its current handling capacity, the company says. It is expected to open in 2020 at a total project cost of $215-million.

Simons, which sells private-label and designer clothing in addition to home fashions, has managed to hold its own in a retail environment that has laid to waste other companies in recent years. Sears Canada closed its final stores in January after months-long liquidation, the latest casualty in an industry grappling to balance the need for a traditional bricks-and-mortar presence with internet sales channels.

Moves by Quebec, Ontario and Alberta to hike the minimum wage are cranking up the pressure on the sector. And international e-commerce giant Amazon.com Inc. and others continue to take market share from smaller players. Mr. Simons has been among the loudest voices calling for the federal and provincial governments to subject foreign-based online retailers to the same tax regulations as local businesses.

“I think these investors saw the value in backing a home-grown retailer,” said JoAnne Labrecque, a retailing specialist at Montreal’s HEC business school. “It’s a business that’s always been well managed, that’s been a visionary in many ways and that has a strong commercial differentiation and industry positioning.”

Simons now has 15 stores Canada-wide. It had planned to have 17 locations by 2019, but may fall slightly short of that target as it tries to strike the right balance between a store presence and e-commerce offering. The retailer’s annual sales currently top $500-million and internet volumes should make up about one-fifth of the total this year, Mr. Simons said in March.