Le Château reports second quarter results

MONTREAL, Sept. 7, 2012 /CNW Telbec/ - Le Château Inc. (TSX: CTU.A) today reported that sales for the second quarter ended July 28, 2012 amounted to $72.5 million, a decrease of 14.5% from $84.8 million for the second quarter ended July 30, 2011. Comparable store sales decreased 14.4% for the second quarter versus the same period a year ago.

Net earnings for the second quarter amounted to $1.3 million or $0.05 per share (diluted) compared to net earnings of $3.5 million or $0.14 per share the previous year. Earnings before interest, income taxes, depreciation and amortization ("EBITDA") for the second quarter amounted to $8.5 million or 11.7% of sales, compared to $10.4 million or 12.3% of sales last year.

Six-month Results
Net loss for the six-month period ended July 28, 2012 amounted to $5.3 million or $(0.21) per share (diluted) compared to net earnings of $615,000 or $0.02 per share the previous year. EBITDA for the first six months amounted to $5.3 million or 4.1% of sales, compared to $11.5 million or 7.7% of sales last year.

Sales for the six months ended July 28, 2012 decreased 13.0% to $130.3 million from $149.8 million last year. Comparable store sales decreased 13.8% versus the same period a year ago.

During the first six months of the year, the Company opened one new store and closed eight stores. Total square footage for the Le Château network at the end of the second quarter ended July 28, 2012 amounted to 1,275,000 square feet.

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 236 retail locations, of which 235 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 10 stores under license in the Middle East. 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 52-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 EBITDA as a supplementary earnings measure. Depreciation and amortization includes the write-off and impairment of property and equipment. 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 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; customer preferences towards product offerings; seasonal weather patterns; fluctuations in foreign currency exchange rates; changes in the Company's relationship with its suppliers; interest rate fluctuations and other changes in borrowing costs; and changes in laws, rules and regulations applicable to the Company.

The Company's unaudited interim condensed financial statements and Management's Discussion and Analysis for the second quarter ended July 28, 2012 are available online at www.sedar.com

CONSOLIDATED BALANCE SHEETS  
(Unaudited)
(In thousands of Canadian dollars)
  As at
July 28, 2012
    As at
July 30, 2011
    As at
January 28, 2012
ASSETS                
Current assets                
Cash and cash equivalents $ 3,569   $ 7,305   $ 7,193
Short-term investments   -     18,580     -
Accounts receivable   1,665     3,299     2,358
Income taxes refundable   3,114     4,878     2,137
Derivative financial instruments   69     -     129
Inventories   127,651     103,194     119,325
Prepaid expenses   2,101     2,104     1,564
Total current assets   138,169     139,360     132,706
Property and equipment   91,888     96,436     95,744
Intangible assets   5,418     5,629     5,344
Deferred income taxes   -     169    
  $ 235,475   $ 241,594   $ 233,794
                 
LIABILITIES AND SHAREHOLDERS' EQUITY                
Current liabilities                
Bank indebtedness $ 18,808   $ -   $ -
Trade and other payables   19,367     28,563     21,820
Dividend payable   -     4,338     -
Deferred revenue   3,186     3,453     3,918
Current portion of provisions   160     842     300
Derivative financial instruments   -     579     -
Current portion of long-term debt    13,450     17,129     16,323
Total current liabilities   54,971     54,904     42,361
Long-term debt   23,353     20,452     29,145
Provisions   271     75     120
Deferred income taxes   2,936     2,883     2,954
Deferred lease credits   16,033     15,805     16,109
Total liabilities   97,564     94,119     90,689
                 
Shareholders' equity                
Share capital   37,729     37,729     37,729
Contributed surplus   2,426     2,216     2,328
Retained earnings   97,706     107,940     102,956
Accumulated other comprehensive income (loss)   50     (410)     92
Total shareholders' equity   137,911     147,475     143,105
  $ 235,475   $ 241,594   $ 233,794

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)     
(Unaudited)    For the three months ended   For the six months ended
(In thousands of Canadian dollars, except per share information)     July 28, 2012     July 30, 2011     July 28, 2012     July 30, 2011
Sales   $ 72,514   $ 84,810   $ 130,291   $ 149,769
Cost of sales and expenses                        
Cost of sales     22,503     29,203     40,521     48,515
Selling     38,381     40,819     76,864     80,309
General and administrative     8,716     9,473     18,376     19,276
      69,600     79,495     135,761     148,100
                         
Results from operating activities     2,914     5,315     (5,470)     1,669
Finance costs     879     502     1,568     987
Finance income     (7)     (91)     (8)     (183)
Earnings (loss) before income taxes     2,042     4,904     (7,030)     865
Income tax expense (recovery)     760     1,420     (1,780)     250
Net earnings (loss)   $ 1,282   $ 3,484   $ (5,250)   $ 615
                         
Net earnings (loss) per share                        
Basic   $ 0.05   $ 0.14   $ (0.21)   $ 0.02
Diluted     0.05     0.14     (0.21)     0.02
                         
Weighted average number of shares outstanding ('000)     24,789     24,789     24,789     24,789
                         
                         
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)    
(Unaudited)   For the three months ended   For the six months ended
(In thousands of Canadian dollars)     July 28, 2012     July 30, 2011     July 28, 2012     July 30, 2011
Net earnings (loss)   $ 1,282   $ 3,484   $ (5,250)   $ 615
Other comprehensive income (loss)                        
Change in fair value of forward exchange contracts     295     29     (98)     (1,459)
Income tax (expense) recovery     (82)     (8)     28     423
      213     21     (70)     (1,036)
Realized forward exchange contracts reclassified to net earnings (loss)     167     867     38     998
Income tax expense     (47)     (251)     (10)     (289)
      120     616     28     709
Total other comprehensive income (loss)     333     637     (42)     (327)
Comprehensive income (loss)   $ 1,615   $ 4,121   $ (5,292)   $ 288
 
 
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY  
(Unaudited)   For the three months ended   For the six months ended
(In thousands of Canadian dollars)     July 28, 2012     July 30, 2011     July 28, 2012     July 30, 2011
                         
SHARE CAPITAL   $ 37,729   $ 37,729   $ 37,729   $ 37,729
                         
CONTRIBUTED SURPLUS                        
Balance, beginning of period   $ 2,374   $ 2,129   $ 2,328   $ 2,006
Stock-based compensation expense     52     87     98     210
Balance, end of period   $ 2,426   $ 2,216   $ 2,426   $ 2,216
                         
RETAINED EARNINGS                        
Balance, beginning of period   $ 96,424   $ 108,794   $ 102,956   $ 116,001
Net earnings (loss)     1,282     3,484     (5,250)     615
Dividends declared     -     (4,338)     -     (8,676)
Balance, end of period   $ 97,706   $ 107,940   $ 97,706   $ 107,940
                         
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)                        
Balance, beginning of period   $ (283)   $ (1,047)   $ 92   $ (83)
Other comprehensive income (loss) for the period     333     637     (42)     (327)
Balance, end of period   $ 50   $ (410)   $ 50   $ (410)
                         
Total shareholders' equity   $ 137,911   $ 147,475   $ 137,911   $ 147,475
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS   
(Unaudited)   For the three months ended   For the six months ended
(In thousands of Canadian dollars)     July 28, 2012     July 30, 2011     July 28, 2012     July 30, 2011
OPERATING ACTIVITIES                        
Net earnings (loss)   $ 1,282   $ 3,484   $ (5,250)   $ 615
Adjustments to determine net cash from operating activities                        
  Depreciation and amortization     4,969     4,867     9,919     9,571
  Write-off and impairment of property and equipment     607     255     836     255
  Amortization of deferred lease credits     (310)     (239)     (576)     (479)
  Deferred lease credits     481     240     500     348
  Stock-based compensation     52     87     98     210
  Provisions     214     (251)     11     (557)
  Finance costs     879     502     1,568     987
  Finance income     (7)     (91)     (8)     (183)
  Interest paid     (744)     (508)     (1,433)     (999)
  Interest received     5     31     12     379
  Income tax expense (recovery)     760     1,420     (1,780)     250
      8,188     9,797     3,897     10,397
Net change in non-cash working capital items related to operations     (1,236)     (1,172)     (11,684)     (10,538)
      6,952     8,625     (7,787)     (141)
Income taxes refunded (paid)     489     (1,423)     993     (1,499)
Cash flows related to operating activities     7,441     7,202     (6,794)     (1,640)
                         
FINANCING ACTIVITIES                        
Proceeds of long-term debt     -     -     -     10,024
Repayment of long-term debt     (4,205)     (4,530)     (8,665)     (8,623)
Dividends paid     -     (4,338)     -     (8,676)
Cash flows related to financing activities     (4,205)     (8,868)     (8,665)     (7,275)
                         
INVESTING ACTIVITIES                        
Decrease in short-term investments     -     -     -     11,720
Additions to property and equipment and intangible assets     (3,594)     (6,335)     (6,973)     (13,161)
Cash flows related to investing activities     (3,594)     (6,335)     (6,973)     (1,441)
                         
Decrease in cash and cash equivalents, net of bank indebtedness     (358)     (8,001)     (22,432)     (10,356)
Cash and cash equivalents, net of bank indebtedness, beginning of period     (14,881)     15,306     7,193     17,661
Cash and cash equivalents, net of bank indebtedness, end of period   $ (15,239)   $ 7,305   $ (15,239)   $ 7,305
 
 
TOTAL SALES BY DIVISION   
(Unaudited)   For the three months ended   For the six months ended
(In thousands of Canadian dollars)     July 28, 2012     July 30, 2011     July 28, 2012     July 30, 2011
                         
Ladies' Clothing   $ 40,915   $ 48,562   $ 75,317   $ 87,881
Men's Clothing     13,925     15,166     23,417     25,340
Footwear     7,453     8,751     13,815     15,426
Accessories     10,221     12,331     17,742     21,122
    $ 72,514   $ 84,810   $ 130,291   $ 149,769

 

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
Source:  Le Château Inc.

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LE CHATEAU INC.

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