Reitmans (Canada) Limited announces its results for the nine and three months ended November 2, 2013

MONTREAL, Dec. 3, 2013 /CNW Telbec/ - Sales for the nine months ended November 2, 2013 were $719,720,000 as compared with $732,854,000 for the nine months ended October 27, 2012, a decrease of 1.8%.  Same store sales1 decreased 3.0%.  Sales were negatively impacted due to a reduction in the number of stores as the Company rationalizes underperforming locations combined with competitive pressures necessitating more promotional pricing.  Sales were also impacted by significantly slower than anticipated acceptance by consumers of the Company's repositioning and rebranding efforts in its Smart Set banner.  The retail environment remains challenging with increased competitive pressure for apparel retailers.  The Company's gross margin for the nine months ended November 2, 2013 decreased to 62.6% from 64.1% for the nine months ended October 27, 2012.  Increased markdowns in the Smart Set banner significantly contributed to the reduction in gross margin.  Net earnings for the nine months ended November 2, 2013 were $13,359,000 ($0.21 diluted earnings per share) as compared with $27,501,000 ($0.42 diluted earnings per share) for the nine months ended October 27, 2012.  In the nine months ended November 2, 2013, adjusted EBITDA1 was $62,317,000 as compared with $77,543,000 for the nine months ended October 27, 2012, a decrease of 19.6%.

Sales for the three months ended November 2, 2013 increased 5.6% to $249,414,000 as compared with $236,247,000 for the three months ended October 27, 2012.  Same store sales1 increased 1.6%, however Smart Set sales declined significantly for the third quarter of fiscal 2014 as compared to the third quarter of fiscal 2013.The Company's gross margin for the three months ended November 2, 2013 decreased to 61.0% from 63.0% for the three months ended October 27, 2012.  A highly promotional environment combined with increased markdowns in the Smart Set banner significantly contributed to the gross margin decline.  Net earnings for the three months ended November 2, 2013 were $5,763,000 ($0.09 diluted earnings per share) as compared with a loss of $29,000 ($0.00 diluted earnings per share) for the three months ended October 27, 2012.  Adjusted EBITDA1 increased by 50.1% to $21,011,000 for the three months ended November 2, 2013 as compared with $14,001,000 for the three months ended October 27, 2012.

During the three months ended November 2, 2013, the Company opened 8 new stores, comprised of 2 Reitmans, 4 RW & CO. , 1 Penningtons and 1 Addition Elle.  Thirteen stores were closed, comprised of 4 Reitmans, 3 Smart Set, 1 RW & CO., 1 Thyme Maternity, 3 Penningtons and 1 Addition Elle.  At November 2, 2013, there were 895 stores in operation, consisting of 355 Reitmans, 138 Smart Set, 77 RW & CO., 71 Thyme Maternity, 151 Penningtons and 103 Addition Elle, as compared with a total of 923 stores as at October 27, 2012.  In addition, there were 22 Thyme Maternity boutiques in select Babies"R"Us locations in Canada and 166 boutiques in Babies"R"Us stores in the United States.  During the three months ended November 2, 2013, the Company began offering consumers Penningtons plus-size apparel, under a wholesale agreement, in five Sears stores in Canada, as well as online at sears.ca.

Sales for the month of November (the four weeks ended November 30, 2013) increased 1.4% with same store sales1 increasing 1.1% compared to the comparable 4 weeks ended November 24, 2012.

As a result of the disappointing earnings for the nine months ended November 2, 2013, the Board of Directors has decided to reduce the quarterly cash dividend from $0.20 per share to $0.05 per share.  Accordingly, at the Board of Directors meeting held on December 3, 2013, a quarterly cash dividend (constituting eligible dividends) of $0.05 per share on all outstanding Class A non-voting and Common shares of the Company was declared, payable January 30, 2014 to shareholders of record on January 20, 2014.

1Non-GAAP Financial Measures
In addition to discussing earnings in accordance with IFRS, this press release provides adjusted EBITDA as a supplementary earnings measure, which is defined as earnings (loss) before income taxes, dividend income, interest income, realized gains or losses on disposal of available-for-sale financial assets, impairment losses on available-for-sale financial assets, interest expense, depreciation, amortization and net impairment losses related to property and equipment. The Company also discloses same store sales, which are defined as sales generated by stores that have been open for at least one year and includes e-commerce sales for banners that have been operational for at least one year.  The Company believes these measures provide meaningful information on the Company's performance and operating results. However, readers should know that these non-GAAP financial measures have no standardized meaning as prescribed by IFRS and may not be comparable to similar measures presented by other companies.  Accordingly, they should not be considered in isolation.

The following table reconciles adjusted EBITDA to earnings before income taxes for the nine and three months ended November 2, 2013 and October 27, 2012:

   
(unaudited) For the nine months ended For the three months ended
  November 2, 2013 October 27, 20122 November 2, 2013 October 27, 20122
Earnings (loss) before income taxes $ 17,876,000 $ 36,317,000 $ 7,792,000 $ (193,000)
Dividend income   (2,608,000)   (2,615,000)   (872,000)   (874,000)
Interest income   (437,000)   (859,000)   (133,000)   (198,000)
Impairment losses on available-for-sale financial assets   692,000   106,000   190,000   -
Interest expense   382,000   453,000   121,000   145,000
Depreciation, amortization and net impairment losses   46,412,000   44,141,000   13,913,000   15,121,000
ADJUSTED EBITDA $ 62,317,000 $ 77,543,000 $ 21,011,000 $ 14,001,000
2  Adjusted to reflect the impact from the implementation of the amendments to IAS 19, Employee Benefits, which can be found in Note 3 of the November 2, 2013 unaudited condensed consolidated interim financial statements

Forward-Looking Statements

All of the statements contained herein, other than statements of fact that are independently verifiable at the date hereof, are forward-looking statements. Such statements, based as they are on the current expectations of management, inherently involve numerous risks and uncertainties, known and unknown, many of which are beyond the Company's control. Such risks include but are not limited to: the impact of general economic conditions, general conditions in the retail industry, seasonality, weather and other risks included in public filings of the Company. Consequently, actual future results may differ materially from the anticipated results expressed in forward-looking statements. The reader should not place undue reliance on the forward-looking statements included herein. These statements speak only as of the date made and the Company is under no obligation and disavows any intention to update or revise such statements as a result of any event, circumstances or otherwise, except to the extent required under applicable securities law.

The Company's unaudited condensed consolidated interim financial statements including notes and Management's Discussion and Analysis for the nine and three months ended November 2, 2013 are available online at www.sedar.com.

Montreal, December 3, 2013

Jeremy H. Reitman
Chairman and Chief Executive Officer

Telephone:  (514) 385-2630
Corporate Website: www.reitmans.ca


REITMANS (CANADA) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands of Canadian dollars except per share amounts)

                 
  For the nine months ended For the three months ended
  November 2, 2013 October 27, 2012 November 2, 2013 October 27, 2012
    (note 3a)   (note 3a)
Sales $ 719,720 $ 732,854 $ 249,414 $ 236,247
Cost of goods sold   269,119   262,803    97,190   87,417
Gross profit   450,601   470,051   152,224   148,830
Selling and distribution expenses   405,235   402,769   135,956   138,276
Administrative expenses   33,837   34,087   10,946   11,537
Results from operating activities   11,529   33,195   5,322   (983)
                 
Finance income   7,421   4,332   2,781   1,464
Finance costs   1,074   1,210   311   674
Earnings (loss) before income taxes   17,876   36,317   7,792   (193)
                 
Income tax expense (recovery)   4,517   8,816   2,029   (164)
                 
Net earnings (loss) $ 13,359 $ 27,501 $ 5,763 $ (29)
                 
Earnings per share:                
  Basic $ 0.21 $ 0.42 $ 0.09 $ 0.00
  Diluted   0.21   0.42   0.09   0.00


REITMANS (CANADA) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in thousands of Canadian dollars)

     
  For the nine months ended For the three months ended
  November 2, 2013 October 27, 2012 November 2, 2013 October 27, 2012
                 
Net earnings (loss) $ 13,359 $ 27,501 5,763 $ (29)
Other comprehensive (loss) income                
Items that are or may be reclassified subsequently to net earnings:                
  Reclassification of impairment loss on available-for-sale financial assets to net earnings (net of tax of $93 for nine months and $25 for three months ended November 2, 2013; $14 for nine months ended October 27, 2012)   599   92   165   -
  Net change in fair value of available-for-sale financial assets (net of tax of $422 for nine months and $237 for the three months ended November 2, 2013; $100 for nine months and $29 for the three months ended October 27, 2012)   (2,770)   (704)   (1,547)   184
  Cumulative translation reserve   223   -   223   -
                 
Total other comprehensive (loss) income   (1,948)    (612)   (1,159)   184
                 
Total comprehensive income $ 11,411 $ 26,889 $ 4,604 $ 155


REITMANS (CANADA) LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands of Canadian dollars)

   
  November 2, 2013 October 27, 2012 February 2, 2013
ASSETS       (note 3a)   (note 3a)
CURRENT ASSETS            
  Cash and cash equivalents $  52,381 $  108,935 $ 97,626
  Marketable securities   68,753   70,954   71,630
  Trade and other receivables   5,163   4,382   3,969
  Derivative financial asset   2,794   527   548
  Income taxes recoverable   2,951   8,283   8,709
  Inventories   127,749   117,795   93,317
  Prepaid expenses   27,433   11,789   25,944
    Total Current Assets   287,224   322,665   301,743
             
NON-CURRENT ASSETS            
  Property and equipment   189,851   203,401   205,131
  Intangible assets   17,089   18,652   19,224
  Goodwill   42,426   42,426   42,426
  Deferred income taxes   29,680   26,265   26,444
    Total Non-Current Assets   279,046   290,744   293,225
             
TOTAL ASSETS $ 566,270 $ 613,409 594,968
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
CURRENT LIABILITIES            
  Trade and other payables $ 76,040 $ 81,896 $ 69,150
  Derivative financial liability   1,472   423   266
  Deferred revenue   6,424   8,153   16,297
  Current portion of long-term debt   1,646   1,545   1,570
    Total Current Liabilities   85,582   92,017   87,283
             
NON-CURRENT LIABILITIES            
  Other payables   11,910   11,541   11,425
  Deferred lease credits   16,613   17,719   16,805
  Long-term debt   5,760   7,406   7,003
  Pension liability   18,247   16,117   17,559
    Total Non-Current Liabilities   52,530   52,783   52,792
             
SHAREHOLDERS' EQUITY            
  Share capital   39,227   39,227   39,227
  Contributed surplus   7,126   5,979   6,521
  Retained earnings   375,088   415,278   400,480
  Accumulated other comprehensive income   6,717   8,125   8,665
    Total Shareholders' Equity   428,158   468,609   454,893
             
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 566,270 $ 613,409 594,968
             


REITMANS (CANADA) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(in thousands of Canadian dollars)

    Share Capital Contributed
Surplus
Retained
Earnings
Accumulated Other
Comprehensive
Income
Total
Shareholders'
Equity
Balance as at February 3, 2013   $  39,227 $ 6,521 $ 400,480 $ 8,665 $ 454,893
                       
Total comprehensive income for the period                      
  Net earnings             13,359       13,359
  Total other comprehensive loss                 (1,948)   (1,948)
Total comprehensive income for the period     -   -   13,359   (1,948)   11,411
                       
Contributions by (distributions to) owners of the Company                      
  Share-based compensation costs         605           605
  Dividends               (38,751)       (38,751)
Total contributions by (distributions to) owners of the Company         -   605    (38,751)   -   (38,146)
                       
Balance as at November 2, 2013   $ 39,227 $ 7,126 $ 375,088 $ 6,717 $ 428,158
                       
                       
Balance as at August 4, 2013   $ 39,227 $ 6,997 $ 382,242 $ 7,876 $ 436,342
                       
Total comprehensive income for the period                      
  Net earnings               5,763       5,763
  Total other comprehensive loss                 (1,159)   (1,159)
Total comprehensive income for the period     -   -     5,763   (1,159)   4,604
                       
Contributions by (distributions to) owners of the Company                      
  Share-based compensation costs         129           129
  Dividends             (12,917)       (12,917)
Total contributions by (distributions to) owners of the Company     -   129   (12,917)   -   (12,788)
                       
Balance as at November 2, 2013   $ 39,227 $ 7,126 $ 375,088 $ 6,717 $ 428,158
                       
      Share Capital Contributed
Surplus
Retained
Earnings
Accumulated Other
Comprehensive
Income
Total
Shareholders'
Equity
Balance as at January 29, 2012   $ 39,890 $ 5,158 $ 438,880 $ 8,737 $ 492,665
                       
Total comprehensive income for the period                      
  Net earnings             27,501       27,501
  Total other comprehensive loss                 (612)   (612)
Total comprehensive income for the period     -   -   27,501   (612)   26,889
                       
Contributions by (distributions to) owners of the Company                      
  Cancellation of shares pursuant to share repurchase program     (663)               (663)
  Share-based compensation costs         821           821
  Dividends             (39,151)       (39,151)
  Premium on repurchases of Class A non-voting shares                 (11,952)       (11,952)
Total contributions by (distributions to) owners of the Company         (663)   821   (51,103)   -   (50,945)
                       
Balance as at October 27, 2012   $ 39,227 $ 5,979 $ 415,278 $ 8,125 $ 468,609
                       
                       
Balance as at July 29, 2012   $ 39,890 $ 5,694 $ 440,176 $ 7,941 $ 493,701
                       
Total comprehensive income for the period                      
Net loss             (29)       (29)
Total other comprehensive income                 184   184
Total comprehensive income for the period     -   -   (29)   184   155
                       
Contributions by (distributions to) owners of the Company                      
  Cancellation of shares pursuant to share repurchase program     (663)               (663)
  Share-based compensation costs         285           285
  Dividends             (12,917)       (12,917)
  Premium on repurchases of Class A non-voting shares             (11,952)       (11,952)
Total contributions by (distributions to) owners of the Company     (663)   285   (24,869)   -   (25,247)
                       
Balance as at October 27, 2012   39,227 $ 5,979 $ 415,278 $ 8,125 $ 468,609

REITMANS (CANADA) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of Canadian dollars)

   
  For the nine months ended For the three months ended
  November 2, 2013 October 27, 2012 November 2, 2013 October 27, 2012
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES            
  Net earnings (loss) $ 13,359 $ 27,501 $ 5,763 $ (29)
  Adjustments for:                
    Depreciation, amortization and net impairment losses   46,412   44,141   13,913   15,121
    Share-based compensation costs   605   821   129   285
    Amortization of deferred lease credits   (3,407)   (3,381)   (1,149)   (1,123)
    Deferred lease credits   3,215   3,783   388   2,243
    Pension contribution   (662)   (271)   (539)   (32)
    Pension expense   1,350   1,258   450   420
    Impairment loss on available-for-sale financial assets   692   106   190   -
    Net change in fair value of derivatives   (1,040)   (858)   (103)   (392)
    Foreign exchange (gain) loss on cash and cash equivalents   (270)   203   (115)   (651)
    Interest and dividend income, net   (2,663)   (3,021)   (884)   (927)
    Interest paid   (382)   (453)   (121)   (145)
    Interest received   445   977   135   250
    Dividends received   2,603   2,610   869   872
    Income tax expense   4,517   8,816   2,029   (164)
    64,774   82,232   20,955   15,728
  Changes in:                
    Trade and other receivables   (1,163)   (968)   (1,542)   (994)
    Inventories   (34,272)   (24,607)   (10,994)   (15,860)
    Prepaid expenses   (1,489)   113   436   3,483
    Trade and other payables   7,436   3,880   (5,054)   184
    Deferred revenue   (9,873)   (14,125)   (4,538)   (1,806)
  Cash generated from (used in) operating activities   25,413   46,525   (737)   735
  Income taxes received   650   4,497   -   22
  Income taxes paid   (2,306)   (19,800)   -   (2,354)
  Net cash flows from (used in) operating activities   23,757   31,222   (737)   (1,597)
                 
CASH FLOWS USED IN INVESTING ACTIVITIES                
  Purchases of marketable securities   (315)   (315)   (105)   (105)
  Additions to property and equipment and intangible assets   (29,039)   (65,742)   (10,139)   (24,243)
  Cash flows used in investing activities   (29,354)   (66,057)   (10,244)   (24,348)
                 
CASH FLOWS USED IN FINANCING ACTIVITIES                
  Dividends paid   (38,751)   (39,151)   (12,917)   (12,917)
  Purchase of Class A non-voting shares for cancellation   -   (12,615)   -   (12,615)
  Repayment of long-term debt   (1,167)   (1,096)   (395)   (371)
  Cash flows used in financing activities   (39,918)   (52,862)   (13,312)   (25,903)
                 
FOREIGN EXCHANGE GAIN (LOSS) ON CASH HELD IN FOREIGN CURRENCY   270    (203)   115   651
                 
NET DECREASE IN CASH AND CASH EQUIVALENTS   (45,245)   (87,900)   (24,178)   (51,197)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD   97,626   196,835   76,559   160,132
                 
CASH AND CASH EQUIVALENTS, END OF THE PERIOD $ 52,381 $ 108,935 $ 52,381 $ 108,935

 

 

SOURCE Reitmans (Canada) Limited

For further information:

Jeremy H. Reitman
Chairman and Chief Executive Officer

Telephone:  (514) 385-2630
Corporate Website: www.reitmans.ca