Le Château reports fourth quarter results

MONTREAL, April 11, 2014 /CNW Telbec/ - Le Château Inc. (TSX: CTU.A), a leading Canadian brand in specialty retailing, offering a broad array of contemporary fashion apparel, accessories and footwear for style-conscious women and men, today reported its results for the fourth quarter ended January 25, 2014.

Sales for the fourth quarter ended January 25, 2014 amounted to $76.9 million, a decrease of 4.8% from $80.8 million for the fourth quarter ended January 26, 2013. Sales were negatively impacted in the fourth quarter of 2013 by a reduction in store traffic due to adverse weather conditions and by increased promotional activity throughout the quarter. Comparable store sales decreased 4.3% for the fourth quarter versus the same period a year ago. Included in comparable store sales are online sales which increased 42% for the fourth quarter. While the contribution from online sales remains a relatively small percentage of overall sales, the e-commerce business continues to gain traction and is expanding customer reach.

Net loss for the fourth quarter amounted to $3.9 million or $(0.15) per share (diluted), compared to net earnings of $158,000 or $0.01 per share (diluted) the previous year. Adjusted EBITDA (see non-GAAP measures below) for the fourth quarter amounted to $385,000 or 0.5% of sales, compared to $7.1 million or 8.8% of sales last year. The decrease of $6.7 million in adjusted EBITDA for the fourth quarter was primarily attributable to the decrease of $6.1 million in gross margin dollars. The Company's gross margin for the fourth quarter of 2013 decreased to 57.1% from 62.0% in 2012, due to increased promotional activity primarily in the outlet stores where prior season discounted merchandise is being offered as part of the Company's inventory management plan. As for the regular stores, the gross margin remained relatively stable when compared with the same period last year. For the fourth quarter ended January 25, 2014, the Company recorded net write-downs of inventory totalling $4.5 million, compared to $3.0 million for the same period last year.

Year-end Results
Sales for the year ended January 25, 2014 amounted $274.8 million, the same as reported last year. Comparable store sales increased 0.6% versus the same period a year ago. Included in comparable store sales are online sales which increased 82% for the year ended January 25, 2014.

Net loss for the year ended January 25, 2014 amounted to $16.0 million or $(0.59) per share (diluted), compared to a net loss of $8.7 million or $(0.34) per share (diluted), the previous year. Adjusted EBITDA for the year amounted to $1.6 million or 0.6% of sales, compared to $12.7 million or 4.6% of sales last year.

During the year, the Company opened one new store and closed seven stores. Total square footage for the Le Château network as at January 25, 2014 amounted to 1,250,000 square feet, compared to 1,282,000 square feet at the end of the preceding year.

First Quarter of Fiscal 2014
For the first ten weeks ended April 5, 2014, total retail sales decreased 4.9% and comparable store sales decreased 3.8% compared to the same period last year. In the first quarter to date, the Company introduced 3 new concept stores, namely Carrefour Laval and Galeries d'Anjou in Quebec and White Oaks Mall in London, Ontario.

Profile
Le Château is a leading Canadian brand in specialty retailing, offering a broad array of contemporary fashion apparel, accessories and footwear for style-conscious women and men. The Le Château brand is sold exclusively through the Company's 228 retail locations, of which 227 are located in Canada. The Company's retail locations are primarily found in major urban shopping malls, as well as street-front locations with high pedestrian traffic. In addition, the Company has 6 stores under license in the Middle East and Asia. Le Château's web-based marketing is further broadening the Company's customer base among internet shoppers in both Canada and the United States. With its 54-year tradition of vertical integration, emphasizing a design and manufacturing approach to retailing, Le Château is unique among Canadian fashion merchants. 

Non-GAAP Measures
In addition to discussing earnings measures in accordance with IFRS, this press release provides adjusted EBITDA as a supplementary earnings measure, which is defined as earnings (loss) before interest, income taxes, depreciation, amortization, write-off and/or impairment of property and equipment and intangible assets. Adjusted EBITDA is provided to assist readers in determining the ability of the Company to generate cash from operations and to cover financial charges. It is also widely used for valuation purposes for public companies in our industry.

The Company also discloses comparable store sales which are defined as sales generated by stores that have been open for at least one year.

The above measures do not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies.

Forward-Looking Statements
This news release may contain forward-looking statements relating to the Company and/or the environment in which it operates that are based on the Company's expectations, estimates and forecasts. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict and/or are beyond the Company's control. A number of factors may cause actual outcomes and results to differ materially from those expressed. These factors also include those set forth in other public filings of the Company. Therefore, readers should not place undue reliance on these forward-looking statements. In addition, these forward-looking statements speak only as of the date made and the Company disavows any intention or obligation to update or revise any such statements as a result of any event, circumstance or otherwise except to the extent required under applicable securities law.

Factors which could cause actual results or events to differ materially from current expectations include, among other things: the ability of the Company to successfully implement its business initiatives and whether such business initiatives will yield the expected benefits; competitive conditions in the businesses in which the Company participates; changes in consumer spending; general economic conditions and normal business uncertainty; seasonality and weather patterns; changes in the Company's relationship with its suppliers; lease renewals; information technology security and loss of customer data; fluctuations in foreign currency exchange rates; interest rate fluctuations; liquidity risk and changes in laws, rules and regulations applicable to the Company. The foregoing list of risk factors is not exhaustive and other factors could also adversely affect our results.

The Company's consolidated financial statements and Management's Discussion and Analysis for the year ended January 25, 2014 will be available online at www.sedar.com

CONSOLIDATED BALANCE SHEETS    
(Unaudited)
(In thousands of Canadian dollars)
As at
January 25, 2014
As at
January 26, 2013
ASSETS               
Current assets      
Cash $ 1,446 $ 1,783
Accounts receivable   1,476   1,906
Income taxes refundable   6,663   3,211
Derivative financial instruments   418   215
Inventories   124,878   123,218
Prepaid expenses   2,292   1,890
Total current assets   137,173   132,223
Property and equipment   69,870   83,315
Intangible assets     3,815   4,672
  $ 210,858 $ 220,210
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current liabilities        
Bank indebtedness $ 30,767 $ 13,034
Trade and other payables   19,553   20,718
Deferred revenue   3,712   3,558
Current portion of provisions   265   228
Current portion of long-term debt    7,987   9,844
Total current liabilities   62,284   47,382
Long-term debt   7,843   14,290
Provisions   391   530
Deferred income taxes   1,829   2,298
Deferred lease credits   13,412   15,912
Total liabilities   85,759   80,412
         
Shareholders' equity        
Share capital   42,960   42,740
Contributed surplus   3,581   2,664
Retained earnings   78,253   94,239
Accumulated other comprehensive income   305   155
Total shareholders' equity   125,099   139,798
  $ 210,858 $ 220,210


CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
   
(Unaudited) For the three months ended For the year ended
(In thousands of Canadian dollars, except per share information) January 25, 2014 January 26, 2013 January 25, 2014 January 26, 2013
Sales 76,918 $  80,800 $  274,840 $  274,827
Cost of sales and expenses                
Cost of sales   32,986   30,733   101,770   92,565
Selling   39,148   40,540   155,859   155,561
General and administrative   9,135    8,457   36,218   35,847
    81,269   79,730   293,847   283,973
                 
Results from operating activities   (4,351)   1,070   (19,007)   (9,146)
Finance costs   664    672   2,714     3,063
Finance income   (3)    (11)   (13)   (23)
Earnings (loss) before income taxes   (5,012)     409   (21,708)    (12,186)
Income tax expense (recovery)   (1,152)   251     (5,722)   (3,469)
Net earnings (loss) (3,860) $ 158 $  (15,986) $ (8,717)
               
Net earnings (loss) per share            
Basic (0.15) $  0.01 $  (0.59) $ (0.34)
Diluted   (0.15)   0.01   (0.59)   (0.34)
                 
Weighted average number of shares outstanding ('000)   27,334   27,243   27,289   25,659
               


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
   
(Unaudited)  For the three months ended  For the year ended
(In thousands of Canadian dollars) January 25, 2014 January 26, 2013 January 25, 2014 January 26, 2013
Net earnings (loss) $ (3,860) 158 $  (15,986) $  (8,717)
                 
Other comprehensive income to be reclassified to profit or loss in subsequent periods                 
Change in fair value of forward exchange contracts   357   133   497   223
Income tax expense   (96)   (37)   (134)   (62)
    261   96   363   161
Realized forward exchange contracts reclassified to net earnings (loss)   (75)   (106)   (294)   (137)
Income tax recovery   20   30   81   39
    (55)   (76)   (213)   (98)
Total other comprehensive income   206   20   150   63
Comprehensive income (loss)  (3,654) $  178 $  (15,836) $ (8,654)
                 
 

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)             For the three months ended               For the year ended
(In thousands of Canadian dollars) January 25, 2014 January 26, 2013 January 25, 2014 January 26, 2013
                 
SHARE CAPITAL                 
Balance, beginning of period $ 42,939 $  42,740 $  42,740 $ 37,729
Issuance of subordinate voting shares upon conversion of long-term debt   -   -   -   5,011
Issuance of subordinate voting shares upon exercise of options   15   -   159   -
Reclassification from contributed surplus due to exercise of share options   6   -   61   -
Balance, end of period $ 42,960 $  42,740 $ 42,960 $ 42,740
                 
CONTRIBUTED SURPLUS                
Balance, beginning of period $ 3,302 $ 2,544 $ 2,664 $  2,328
Stock-based compensation expense   285   120   978   336
Exercise of share options   (6)   -   (61)   -
Balance, end of period $  3,581 $  2,664 $  3,581 $  2,664
                 
RETAINED EARNINGS                
Balance, beginning of period $  82,113 94,081 $ 94,239 $  102,956
Net earnings (loss)   (3,860)   158   (15,986)   (8,717)
Balance, end of period  $ 78,253 $  94,239 $ 78,253 $ 94,239
                 
ACCUMULATED OTHER COMPREHENSIVE INCOME                
Balance, beginning of period $ 99 $  135 $  155 $  92
Other comprehensive income for the period   206     20   150   63
Balance, end of period $  305 $ 155 $  305 $ 155
Total shareholders' equity $  125,099 $  139,798 $ 125,099 $  139,798


CONSOLIDATED STATEMENTS OF CASH FLOWS
     
(Unaudited)           For the three months ended            For the year ended
(In thousands of Canadian dollars) January 25, 2014 January 26, 2013 January 25, 2014 January 26, 2013
OPERATING ACTIVITIES            
Net earnings (loss) $  (3,860) $  158 $ (15,986) (8,717)
Adjustments to determine net cash from operating activities                
  Depreciation and amortization   4,529   4,806   18,723   19,574
  Write-off and net impairment of property and equipment and intangible assets   207   1,157   1,897   2,142
  Loss on disposal of property and equipment   -   108   -   108
  Amortization of deferred lease credits   (656)   (371)   (2,539)   (1,285)
  Deferred lease credits   -     106   39   1,088
  Stock-based compensation   285   120   978   336
  Provisions   (7)   271   (102)   338
  Finance costs    664   672   2,714   3,063
  Finance income   (3)   (11)   (13)   (23)
  Interest paid   (610)   (610)   (2,436)   (2,863)
  Interest received         2   11   13   28
  Income tax expense (recovery)   (1,152)   251   (5,722)   (3,469)
    (601)   6,668   (2,434)   10,320
Net change in non-cash working capital items related to operations    11,987   12,109   (3,030)   (6,340)
    11,386   18,777   (5,464)   3,980
Income taxes refunded   -   438   2,108   2,056
Cash flows related to operating activities   11,386     19,215     (3,356)   6,036
                 
FINANCING ACTIVITIES                
Increase (decrease) in bank indebtedness   (9,057)   (16,843)   17,482   13,600
Repayment of long-term debt   (2,025)   (3,400)   (8,304)   (16,323)
Issue of capital stock upon exercise of options   15   -   159   -
Cash flows related to financing activities   (11,067)    (20,243)   9,337   (2,723)
                 
INVESTING ACTIVITIES                
Additions to property and equipment and intangible assets   (652)   (972)   (6,318)   (9,237)
Proceeds from disposal of property and equipment          -   514   -   514
Cash flows related to investing activities   (652)   (458)   (6,318)   (8,723)
                   
Decrease in cash   (333)   (1,486)   (337)   (5,410)
Cash, beginning of period   1,779   3,269   1,783   7,193
Cash, end of period $ 1,446 1,783 $ 1,446 $   1,783

SOURCE LE CHATEAU INC.

For further information:

Emilia Di Raddo, CPA, CA, President (514) 738-7000
Johnny Del Ciancio, CPA, CA, Vice-President, Finance, (514) 738-7000
MaisonBrison:  Pierre Boucher, (514) 731-0000