Edinburgh Woollen Mill (EWM) is now set to lose its most important site in the capital to its main competitor, Gold Brothers, in a move which threatens up to 20 jobs. The company, which has upwards of 500 shops across the UK, was also criticised by Sheriff Ross for failing to protect its interests.
Both retailers have numerous outlets on the Royal Mile, often trading under different monikers. EWM's four sites include James Pringle Weavers and Hector Russell, while Gold has 19, using names such as Heritage of Scotland, I Love Scotland and Ballantrae Cashmere. They sell everything from boxes of Edinburgh Rock and clan geneology books to expensive tartan finery.
The EWM shop that trades under the company's own name at 453-455 Lawnmarket, in the final stretch leading up to Edinburgh Castle, is one of the most coveted of all, as it produces the highest turnover of any of the EWM sites in the city.
While the company has been operating there for 20 years, Gold Brothers became the landlord in 2007 when it bought the leasehold.
In January, Gold Brothers gave notice to EWM that it would not renew the lease when it expired at the end of this year, prompting EWM to initiate court proceedings for an extension under an old tenancy act from 1949.
But Sheriff Ross threw out the action, concluding that the law should only apply in limited circumstances.
He said: "The parties have both known, since the defenders acquired the landlord's interest approximately six years ago, that the lease would not be renewed consensually.
"That has left the pursuer plenty of time to anticipate and prepare for the trading realities that this would bring. The pursuer's business will be somewhat diminished by ceasing trade from the premises, but otherwise continues uninterrupted from its [other outlets].
"As a passing observation, one wonders, if the subjects or the immediate area were so important for the pursuer, and given its considerable financial resources, why it did not outbid the market in order to obtain the landlord's interest, or else acquire suitable neighbouring properties before."
The decision comes on the back of a BBC Panorama programme last month in which EWM was accused of having garments made at the Tazreen factory in Dhaka, Bangladesh, where more than 100 people were killed in a fire last December. The company strongly denies the allegations and claims it was set up.
A spokesman for EWM said: "I don't really understand why the court didn't agree to our action. We're still taking advice and if there's a chance to appeal, we will.
"It was a very important shop to us and we are disappointed we are losing it, but we will certainly be looking for another one and we will try to rehouse as many employees as possible."
Gold Brothers declined to comment.