Reitmans (Canada) Limited Announces Year-End Results

MONTREAL, April 2, 2014 /CNW Telbec/ - Sales for the fiscal year ended February 1, 2014 ("fiscal 2014") were $960,397,000 as compared with $1,000,513,000 for the year ended February 2, 2013 ("fiscal 2013") (which includes an extra week due to the Company's floating year-end), a decrease of 4.0% (a decrease of 2.7% after adjusting for the extra week). Same store sales decreased by 2.8%.  Competitive pressures continued to necessitate increased promotional pricing impacting sales. The Company has made significant changes in branding among its banners. The branding strategies executed in Reitmans, Addition Elle and Penningtons banners have shown positive customer acceptance. A reduction in the number of stores contributed to lower sales as the Company rationalizes underperforming locations, with a net reduction of 33 stores in fiscal 2014. The Company's gross margin for fiscal 2014 decreased to 60.7% from 62.8% for fiscal 2013.  Net earnings for fiscal 2014 decreased 59.1% to $10,788,000 ($0.17 diluted earnings per share) as compared with $26,356,000 ($0.40 diluted earnings per share) for fiscal 2013.  For fiscal 2014, adjusted EBITDA1 decreased by $20,140,000 or 22.2% to $70,453,000 as compared with $90,593,000 for fiscal 2013.

Sales for the fourth quarter of fiscal 2014 were $240,677,000 as compared with $267,659,000 for the fourth quarter of fiscal 2013 (which includes an extra week due to the Company's floating year-end), a decrease of 10.1% (a decrease of 3.5% after adjusting for the extra week).  Same store sales decreased by 2.3%.  Performance in the fourth quarter of fiscal 2014 was impacted by the same issues noted above.  The fourth quarter sales of fiscal 2014 were impacted by a difficult retail environment.  The Company's gross margin for the fourth quarter of fiscal 2014 decreased to 54.8% from 59.2% for the fourth quarter of fiscal 2013.  The Company recorded a net loss for the fourth quarter of fiscal 2014 of $2,571,000 ($0.04 diluted loss per share) as compared with net loss of $1,145,000 ($0.02 diluted loss per share) for the fourth quarter of fiscal 2013.  Adjusted EBITDA1 decreased by $4,914,000 or 37.7% to $8,136,000 as compared with $13,050,000 for the fourth quarter of fiscal 2013.

As previously reported, the Company has embarked on an initiative aimed at reducing costs across the organization which included a review of head office activities and processes targeted at improving efficiencies.  To date this initiative has resulted in a reduction in the number of employees in both head office and field operations resulting in severance costs of approximately $1,700,000 included in fiscal 2014 results.  The employee reductions are projected to result in annualized wage and benefit savings, for the year ending January 31, 2015, in excess of $6,000,000.  Additional savings have been achieved through improved cost management in non-wage areas.  The Company is continuing a review aimed at process improvements and anticipates additional savings and further efficiencies as the Company moves forward with this project.

The Smart Set banner performance was particularly disappointing, despite its efforts to regain acceptance by consumers through ongoing repositioning and rebranding.

The Thyme Maternity shop-in-shop boutiques in the U.S. market have underperformed, not achieving anticipated results. The Company has decided to close its Thyme Maternity shop-in-shop locations in the U.S.  The closures are anticipated to take place through to June 2014. The Thyme Maternity U.S. operation for fiscal 2014 has incurred losses of approximately $7,900,000, including impairment charges of $2,000,000.  As the Company closes these locations over the next few months, further operating losses are not anticipated to be significant.

During the year, the Company opened 25 new stores and closed 58. Accordingly, at February 1, 2014, there were 878 stores in operation, consisting of 349 Reitmans, 129 Smart Set, 77 RW & CO., 70 Thyme Maternity, 152 Penningtons, and 101 Addition Elle, as compared with a total of 911 stores as at February 2, 2013. In addition, there were 23 Thyme Maternity boutiques ("shop-in-shop") in select Babies"R"Us locations in Canada and 169 boutiques in Babies"R"Us stores in the United States.

At the Board of Directors meeting held on April 2, 2014, 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 April 24, 2014 to shareholders of record on April 10, 2014.

1Non-GAAP Financial Measures
In addition to discussing earnings in accordance with IFRS, this press announcement provides adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA") as a non-GAAP financial measure.  Adjusted EBITDA is defined as earnings before income tax expense, other income, dividend income, interest income, realized gains or losses on disposal of available-for-sale financial assets, interest expense, depreciation and amortization and impairment charges.  A table reconciling the most comparable GAAP measure, net earnings (loss), to adjusted EBITDA is provided below.  Management believes that adjusted EBITDA is an important indicator of the Company's ability to generate liquidity through operating cash flow to fund future working capital needs and fund future capital expenditures and uses the metric for this purpose.  The exclusion of other income and dividend and interest income eliminates the impact of revenue derived from non-operational activities.  The exclusion of depreciation, amortization and impairment charges eliminates the non-cash impact.  The intent of adjusted EBITDA is to provide additional useful information to investors and analysts and the measure does not have any standardized meaning under IFRS.  Adjusted EBITDA should therefore not be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS.  Other companies may calculate adjusted EBITDA differently. From time to time, the Company may exclude additional items if it believes doing so would result in a more effective analysis of underlying operating performance. The exclusion of certain items does not imply that they are non-recurring.

The Company uses a key performance indicator ("KPI"), same store sales, to assess store performance (including each banner's e-commerce store) and sales growth.  Same store sales is defined as sales generated by stores that have been continuously open during both of the periods being compared and includes e-commerce sales.  The same store sales metric compares the same calendar days for each period.  Although this KPI is expressed as a ratio, it is a non-GAAP financial measure that does not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures used by other companies.  Management uses same store sales in evaluating the performance of stores and considers it useful in helping to determine what portion of new sales has come from sales growth and what portion can be attributed to the opening of new stores.  Same store sales is a measure widely used amongst retailers and is considered useful information for both investors and analysts.  Same store sales should therefore not be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS.

The Company's fiscal year ends on the Saturday closest to the end of January. The fiscal year ended February 2, 2013 included 53 weeks instead of 52 weeks. The inclusion of an extra week occurs every fifth or sixth fiscal year due to the Company's floating year-end.

The following table reconciles net earnings (loss) to adjusted EBITDA for the fiscal year and three months ended February 1, 2014 and February 2, 2013:

         
(unaudited) For the years ended For the three months ended
  February 1, 2014
(52 weeks)
February 2, 20131
(53 weeks)
February 1, 2014
(13 weeks)
February 2, 20131
(14 weeks)
Net earnings (loss) $ 10,788,000 $ 26,356,000 $ (2,571,000) $ (1,145,000)
Depreciation, amortization and net impairment losses 63,724,000 59,655,000 17,312,000 15,514,000
Other income2 (6,054,000) - (6,054,000) -
Dividend income (3,481,000) (3,526,000) (873,000) (911,000)
Interest income (621,000) (1,062,000) (184,000) (203,000)
Realized loss on available-for-sale financial assets 248,000 - 248,000 -
Impairment losses on available-for-sale financial assets 2,699,000 156,000 2,007,000 50,000
Interest expense 496,000 592,000 114,000 139,000
Income taxes 2,654,000 8,422,000 (1,863,000) (394,000)
ADJUSTED EBITDA $ 70,453,000 $ 90,593,000 $ 8,136,000 $ 13,050,000
1 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 February 1, 2014 audited consolidated financial statements
2 Other income comprises a gain on sale of intellectual property rights and proceeds from the settlement of a trademark dispute


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, including those described in the Operating Risk Management and Financial Risk Management sections of the Company's Management Discussion and Analysis.  Consequently, actual future results may differ materially from the anticipated results expressed in forward-looking statements, which reflect the Company's expectations only as of the date of this press announcement.  Forward-looking statements are based upon the Company's current estimates, beliefs and assumptions, which are based on management's perception of historical trends, current conditions and currently expected future developments, as well as other factors it believes are appropriate in the circumstances.  Specific forward-looking statements in this press announcement include, but are not limited to, statements with respect to the Company's anticipated future results and the ability of the Company to successfully implement its strategic initiatives and cost reduction and productivity improvement initiatives as well as the impact of such initiatives.  The reader should not place undue reliance on any 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 complete financial statements including notes and Management's Discussion and Analysis for the year ended February 1, 2014 are available online at www.sedar.com.

Montreal, April 2, 2014

Jeremy H. Reitman
Chairman and Chief Executive Officer

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

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

         
  For the years ended For the three months ended
  February 1, 2014 February 2, 2013 February 1, 2014 February 2, 2013
         
Sales $ 960,397 $ 1,000,513 $ 240,677 $ 267,659
Cost of goods sold 377,913 372,135 108,794 109,332
Gross profit 582,484 628,378 131,883 158,327
Selling and distribution expenses 544,679 550,165 139,444 147,396
Administrative expenses 47,154 47,729 13,317 13,642
Results from operating activities (9,349) 30,484 (20,878) (2,711)
         
Other income 6,054 - 6,054 -
Finance income 20,180 5,624 12,759 1,361
Finance costs 3,443 1,330 2,369 189
Earnings (loss) before income taxes 13,442 34,778 (4,434) (1,539)
         
Income tax expense (recovery) 2,654 8,422 (1,863) (394)
         
Net earnings (loss) $ 10,788 $ 26,356 $ (2,571) $ (1,145)
         
Earnings per share:        
  Basic $ 0.17 $ 0.40 $ (0.04) $ (0.02)
  Diluted 0.17 0.40 (0.04) (0.02)


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

         
  For the years ended For the three months ended
  February 1,
2014
February 2,
2013
February 1,
2014
February 2,
2013
         
Net earnings (loss) $ 10,788 $ 26,356 $ (2,571) $ (1,145)
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 $358 for the year ended February 1, 2014 and $265 for the three months ended February 1, 2014; $21 for the year ended February 2, 2013 and $7 for the three months ended February 2, 2013) 2,341 135 1,742 43
  Net change in fair value of available-for-sale financial assets (net of tax of $561 for the year ended February 1, 2014 and $139 for the three months ended February 1, 2014; $25 for the year ended February 2, 2013 and $75 for the three months ended February 2, 2013) (3,679) (207) (909) 497
  Foreign currency translation differences 29 - (194) -
  (1,309) (72) 639 540
Items that will not be reclassified to net earnings:        
  Actuarial gain (loss) on defined benefit plans (net of tax of $124 for the year and three months ended February 1, 2014; $293 for the year and three months ended February 2, 2013) 373 (736) 373 (736)
Total other comprehensive (loss) income (936) (808) 1,012 (196)
         
Total comprehensive income (loss) $ 9,852 $ 25,548 $ (1,559) $ (1,341)


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

       
  As at February 1, 2014   As at February 2, 2013
ASSETS      
CURRENT ASSETS      
  Cash and cash equivalents $ 122,355   $ 97,626
  Marketable securities 55,062   71,630
  Trade and other receivables 6,422   3,969
  Derivative financial asset 11,775   548
  Income taxes recoverable 5,656   8,709
  Inventories 109,601   93,317
  Prepaid expenses 12,512   25,944
    Total Current Assets 323,383   301,743
       
NON-CURRENT ASSETS      
  Property and equipment 178,341   205,131
  Intangible assets 17,211   19,224
  Goodwill 42,426   42,426
  Deferred income taxes 28,578   26,444
    Total Non-Current Assets 266,556   293,225
       
TOTAL ASSETS $ 589,939   $ 594,968
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
CURRENT LIABILITIES      
  Trade and other payables $ 90,734   $ 69,150
  Derivative financial liability 3,065   266
  Deferred revenue 19,998   16,297
  Current portion of long-term debt 1,672   1,570
    Total Current Liabilities 115,469   87,283
       
NON-CURRENT LIABILITIES      
  Other payables 11,842   11,425
  Deferred lease credits 15,607   16,805
  Long-term debt 5,331   7,003
  Pension liability 18,259   17,559
    Total Non-Current Liabilities 51,039   52,792
       
SHAREHOLDERS' EQUITY      
  Share capital 39,227   39,227
  Contributed surplus 7,188   6,521
  Retained earnings 369,660   400,480
  Accumulated other comprehensive income 7,356   8,665
    Total Shareholders' Equity 423,431   454,893
       
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 589,939   $ 594,968


REITMANS (CANADA) LIMITED
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 year          
  Net earnings     10,788   10,788
  Total other comprehensive income (loss)     373 (1,309) (936)
Total comprehensive income for the year -             - 11,161 (1,309) 9,852
           
Contributions by (distributions to) owners of the Company          
  Share-based compensation costs   667     667
  Dividends     (41,981)   (41,981)
Total contributions by (distributions to) owners of the Company - 667 (41,981) - (41,314)
           
Balance as at February 1, 2014 $ 39,227 $ 7,188 $ 369,660 $ 7,356 $ 423,431
           
           
Balance as at November 3, 2013 $ 39,227 $ 7,126 $ 375,088  $ 6,717 $ 428,158
           
Total comprehensive loss for the period          
  Net loss     (2,571)   (2,571)
  Total other comprehensive income     373 639 1,012
Total comprehensive loss for the period - - (2,198) 639 (1,559)
           
Contributions by (distributions to) owners of the Company          
  Share-based compensation costs   62     62
  Dividends     (3,230)   (3,230)
Total contributions by (distributions to) owners of the Company - 62 (3,230) - (3,168)
           
Balance as at February 1, 2014 $ 39,227 $ 7,188 $ 369,660 $ 7,356 $ 423,431
           
           
  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 year          
  Net earnings     26,356   26,356
  Total other comprehensive loss     (736) (72) (808)
Total comprehensive income for the year - - 25,620 (72) 25,548
           
Contributions by (distributions to) owners of the Company          
  Cancellation of shares pursuant to share repurchase program (663)       (663)
  Share-based compensation costs   1,363     1,363
  Dividends     (52,068)   (52,068)
  Premium on repurchases of Class A non-voting shares     (11,952)   (11,952)
Total contributions by (distributions to) owners of the Company (663) 1,363 (64,020) - (63,320)
           
Balance as at February 2, 2013 $ 39,227 $ 6,521 $ 400,480 $ 8,665 $ 454,893
           
           
Balance as at October 28, 2012 $ 39,227 $ 5,979 $ 415,278 $ 8,125 $ 468,609
           
Total comprehensive loss for the period          
  Net loss     (1,145)   (1,145)
  Total other comprehensive (loss) income     (736) 540 (196)
Total comprehensive loss for the period - - (1,881) 540 (1,341)
           
Contributions by (distributions to) owners of the Company          
  Share-based compensation costs   542     542
  Dividends     (12,917)   (12,917)
Total contributions by (distributions to) owners of the Company - 542 (12,917) - (12,375)
           
Balance as at February 2, 2013 $ 39,227 $ 6,521 $ 400,480 $ 8,665 $ 454,893


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

         
  For the years ended For the three months ended
  February 1, 2014 February 2, 2013 February 1, 2014 February 2, 2013
CASH FLOWS FROM OPERATING ACTIVITIES        
  Net earnings (loss) $ 10,788 $ 26,356 $ (2,571) $ (1,145)
  Adjustments for:        
    Depreciation, amortization and net impairment losses 63,724 59,655 17,312 15,514
    Share-based compensation costs 667 1,363  62 542
    Amortization of deferred lease credits (4,517)  (4,485) (1,110) (1,104)
    Deferred lease credits 3,319 3,973 104 190
    Pension contribution (960) (303) (298) (32)
    Pension expense 2,157 1,701 807 443
    Other income (6,054)  -  (6,054)  -
    Realized loss on sale of marketable securities 248 -  248 -
    Impairment loss on available-for-sale financial assets  2,699 156 2,007 50
    Net change in fair value of derivatives  (8,428) (1,036) (7,388) (178)
    Foreign exchange gain on cash and cash equivalents (1,604) (4) (1,334) (207)
    Interest and dividend income, net (3,358) (3,996) (695) (975)
    Interest paid (496) (592) (114) (139)
    Interest received 594 1,184 149 207
    Dividends received 3,355 3,871 752 1,261
    Income tax expense 2,654 8,422 (1,863) (394)
  64,788  96,265 14 14,033
  Changes in:        
    Trade and other receivables  (533) (906) 630 62
    Inventories  (15,945) (129) 18,327 24,478
    Prepaid expenses 13,432 (14,042) 14,921 (14,155)
    Trade and other payables 20,929 (8,107) 13,493 (11,987)
    Deferred revenue 3,701  (5,981) 13,574 8,144
  Cash from operating activities  86,372 67,100  60,959 20,575
  Income taxes received 650 4,497 - -
  Income taxes paid (2,306) (19,800)  - -
  Net cash flows from operating activities  84,716  51,797 60,959 20,575
         
CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES        
  Purchases of marketable securities  (420) (420)  (105) (105)
  Proceeds on sale of marketable securities 12,500 - 12,500 -
  Proceeds on sale of trademarks 4,329 - 4,329  -
  Additions to property and equipment and intangible assets (34,524) (84,433)  (5,485) (18,691)
  Cash flows (used in) from investing activities (18,115) (84,853) 11,239 (18,796)
         
CASH FLOWS USED IN FINANCING ACTIVITIES        
  Dividends paid  (41,981) (52,068)  (3,230) (12,917)
  Purchase of Class A non-voting shares for cancellation - (12,615) -  -
  Repayment of long-term debt  (1,570) (1,474)  (403) (378)
  Cash flows used in financing activities  (43,551) (66,157)  (3,633) (13,295)
         
FOREIGN EXCHANGE GAIN ON CASH HELD IN FOREIGN CURRENCY 1,679 4 1,409  207
         
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  24,729 (99,209)  69,974  (11,309)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 97,626 196,835  52,381 108,935
         
CASH AND CASH EQUIVALENTS, END OF THE PERIOD $ 122,355 $ 97,626 $ 122,355 $ 97,626

 

 

SOURCE Reitmans (Canada) Limited

For further information:

Jeremy H. Reitman
Chairman and Chief Executive Officer

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