The company, founded in 1837, says the stores will close at the end of January 2015. The Ottawa store has 72 employees and the one in Quebec City has 85.
The company said it had explored a number of options in the Ottawa and Quebec City markets and that the stores had performed well.
"It was ultimately concluded that Holt Renfrew's enhanced speciality luxury business model requires a significantly larger store footprint in any target market and a deep assortment across a wide array of its core brand partners," the company said in a statement.
Company president Mark Derbyshire described employees at the two stores as having been "devoted through many successful years," adding "we are dedicated to supporting them through this transition."
Meanwhile, the company also announced it is planning $300-million in expansion projects in key markets in Vancouver, Calgary, Edmonton, Toronto and Montreal.
Craig Patterson, an analyst who runs the online news magazine Retail Insider, said the company is consolidating stores in anticipation of losing market share to U.S. luxury retailers.
The first Nordstrom in Canada is set to open next month in Calgary, while Saks Fifth Avenue, which was acquired by Hudson's Bay Co. (TSX:HBC) last July, will open a new location in Toronto's Eaton Centre.
Patterson says Holt Renfrew's planned expansion is likely a direct response to the impending arrival of Saks Fifth Avenue, which carries similar merchandise.
"Saks really plans to up its game in Canada. When it builds its Canadian . . . (stores) it says its going to be more luxurious than their current American locations," Patterson noted.
Among the scheduled projects, Holt Renfrew said it would add a new 120,000-square-foot store at Square One in Mississauga, west of Toronto, to open in 2016. It will expand and renovate its Bloor Street store in Toronto, including the addition of a new facade. The flagship stores in Vancouver and Calgary will also be updated.
A new 220,000 square-foot concept store in Montreal will be complete by 2017.
Despite the increased competition, Patterson says the company has a good chance of survival. The chain has been successful in attracting high-end vendors — recent examples include Dior and Miu Miu — and its lucrative personal shopping service has been a boon to the chain.
"I think that Holt Renfrew has two things going for it. It's got a strong brand awareness among many wealthy Canadians and brand loyalty. And it does have some vendors that (others don't) have and probably wouldn't be able to keep," he said.