Reitmans (Canada) Limited announces its results for the nine months ended October 29, 2011

MONTREAL, Nov. 30, 2011 /CNW Telbec/ - Sales for the nine months ended October 29, 2011 decreased 3.9% to $759,443,000 as compared with $790,286,000 for the nine months ended October 30, 2010. Same store sales1 decreased 5.2%.  Sales for the nine months ended October 29, 2011 as compared to the nine months ended October 30, 2010 were impacted by weaker customer traffic as consumers were faced with higher personal debt levels, high commodity costs and concern over economic conditions.  The Company's gross margin decreased from 67.7% to 65.7% for the nine months ended October 29, 2011.  While the strength of the Canadian dollar in the nine months ended October 29, 2011 was favourable to the gross margin, this improvement was offset by a more promotional environment which negatively impacted gross margin.  The average rate for a US dollar in the first nine months of fiscal 2012 was $0.98 Canadian as compared to $1.03 Canadian in the first nine months of fiscal 2011.  EBITDA1 for the nine months ended October 29, 2011 decreased 29.7% to $104,767,000 as compared with $148,975,000 last year.  Net earnings decreased 43.0% to $42,865,000 or $0.65 diluted earnings per share as compared with $75,168,000 or $1.11 diluted earnings per share last year.

Sales for the third quarter ended October 29, 2011 decreased 3.2% to $254,072,000 as compared with $262,515,000 for the third quarter ended October 30, 2010. Same store sales decreased by 5.8%. The Company's gross margin decreased from 66.2% to 65.8% for the third quarter ended October 29, 2011. While the strength of the Canadian dollar in the third quarter ended October 29, 2011 was favourable to the gross margin, this improvement was offset by a more promotional environment which negatively impacted gross margin.  The average rate for a US dollar in the third quarter ended October 29, 2011 was $1.00 Canadian as compared to $1.03 Canadian in the third quarter ended October 30, 2010. EBITDA for the third quarter ended October 29, 2011 decreased by $11,566,000 or 26.6% to $31,845,000 as compared with $43,411,000 last year.  Net earnings decreased 49.0% to $10,561,000 or $0.16 diluted earnings per share as compared to $20,692,000 or $0.31 diluted earnings per share for the same period last year.

On October 19, 2011 the Company announced its plan to close its 25 Cassis stores, primarily through conversion to other Company banners.  In the third quarter ended October 29, 2011 the Company has recorded costs associated with store conversions and closures, primarily related to fixed asset impairment losses and employee severance costs, of $5,100,000 ($3,700,000 after tax).

During the third quarter, the Company opened 14 new stores, comprised of 5 Reitmans, 1 Smart Set, 1 RW & CO., 3 Thyme Maternity, 1 Cassis, 1 Penningtons and 2 Addition Elle.  Four stores were closed, comprised of 2 Reitmans and 2 Penningtons.  At October 29, 2011, there were 975 stores in operation, consisting of 366 Reitmans, 158 Smart Set, 68 RW & CO., 77 Thyme Maternity, 25 Cassis, 158 Penningtons and 123 Addition Elle, as compared with a total of 979 stores as at October 30, 2010.

Sales for the month of November (the four weeks ended November 26, 2011) decreased 2.2% with same store sales decreasing 2.3%.

At the Board of Directors meeting held on November 30, 2011, a quarterly cash dividend (constituting eligible dividends) of $0.20 per share on all outstanding Class A non-voting and Common shares of the Company was declared, payable January 26, 2012 to shareholders of record on January 6, 2012.

As reported in the November 24, 2011 press release, the Company received approval from the Toronto Stock Exchange to proceed with a normal course issuer bid, under which the Company may purchase up to 2,579,895 Class A non-voting shares, representing 5% of the issued and outstanding Class A non-voting shares as at November 14, 2011. The bid commenced on November 28, 2011 and may continue to November 27, 2012.

Effective for the first quarter ended April 30, 2011, Reitmans began reporting its financial results in accordance with International Financial Reporting Standards ("IFRS"), including comparative information.  Previously reported financial results prepared in accordance with Canadian generally accepted accounting principles have been presented to conform to the new standards adopted.

1Non-GAAP Financial Measures

In addition to discussing earnings in accordance with IFRS, this press release provides EBITDA as a supplementary earnings measure, which is defined as earnings before income taxes, dividend income, interest income, impairment losses on available-for-sale financial assets, interest expense and depreciation, amortization and 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.  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.

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 interim condensed financial statements including notes and Management's Discussion and Analysis for the third quarter ended October 29, 2011 are available online at www.sedar.com.

Montreal, November 30, 2011
 
Jeremy H. Reitman
Chairman and Chief Executive Officer
 
Telephone:  
Corporate Website:
(514) 385-2630
www.reitmans.ca


REITMANS (CANADA) LIMITED
CONDENSED STATEMENTS OF EARNINGS (Unaudited)
(in thousands of Canadian dollars except per share amounts)
   
  For the nine months ended For the three months ended
  October 29, 2011 October 30, 2010 October 29, 2011 October 30, 2010
               
Sales $ 759,443 $ 790,286 $ 254,072 $ 262,515
Cost of goods sold   260,374   255,458   86,982   88,715
Gross profit   499,069   534,828   167,090   173,800
Selling and distribution expenses   408,947   391,039    144,125   132,723
Administrative expenses   33,527   39,533   12,356   13,258
Results from operating activities   56,595   104,256   10,609   27,819
                 
Finance income   3,546   3,511   4,088   1,996
Finance costs   969   583    241   189
Earnings before income taxes1   59,172   107,184    14,456   29,626
                 
Income taxes   16,307   32,016   3,895   8,934
                 
Net earnings $ 42,865 $ 75,168 $ 10,561 $ 20,692
                 
Earnings per share:                
  Basic $ 0.65 $ 1.12 $ 0.16 $ 0.31
  Diluted   0.65   1.11   0.16   0.31
 
1 A reconciliation of earnings before income taxes to earnings before income taxes, dividend income, interest income, impairment loss on available-for-sale financial assets, interest expense and depreciation, amortization and impairment losses ("EBITDA") is as follows:
 
Earnings before income taxes $ 59,172 $ 107,184 $ 14,456 $ 29,626
Dividend income   2,598   1,941   850   655
Interest income   948   733   336   375
Impairment loss on available-for-sale financial assets   73   -   73   -
Interest expense   520   583   168   189
Depreciation, amortization and impairment losses   48,548   43,882   18,334   14,626
   
EBITDA $ 104,767 $ 148,975 $ 31,845 $ 43,411



REITMANS (CANADA) LIMITED
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(in thousands of Canadian dollars)
   
  For the nine months ended   For the three months ended
  October 29, 2011 October 30, 2010   October 29, 2011 October 30, 2010
                   
Net earnings $ 42,865 $ 75,168   $ 10,561 $ 20,692
Other comprehensive income:                  
  Net unrealized (loss) gain on available-for-sale financial assets arising during the period (net of tax of $121 for the nine months and $246 for the three months ended October 29, 2011; $394 for the nine months and $250 for the three months ended October 30, 2010)   (808)   2,643     (1,647)   1,674
  Reclassification of impairment loss on available-for-sale financial assets to net earnings (net of tax of $9)    64   -     64   -
                   
Total comprehensive income $ 42,121 $ 77,811   $ 8,978 $ 22,366


REITMANS (CANADA) LIMITED
CONDENSED BALANCE SHEETS (Unaudited)
(in thousands of Canadian dollars)
 
   
  October 29, 2011   October 30, 2010   January 29, 2011
ASSETS  
CURRENT ASSETS  
  Cash and cash equivalents $ 159,309   $ 218,944   $ 230,034
  Marketable securities   69,799     51,345     70,413
  Trade and other receivables    3,516     3,622     2,866
  Income taxes recoverable   7,396     -     -
  Inventories   107,591     94,078     73,201
  Prepaid expenses    13,964     13,095     12,491
    Total Current Assets    361,575     381,084     389,005
                 
NON-CURRENT ASSETS                
  Property and equipment   184,666     202,379     193,064
  Intangibles    15,962     11,740     13,841
  Goodwill   42,426     42,426     42,426
  Deferred income taxes    22,492     20,937     21,021
    Total Non-Current Assets   265,546     277,482     270,352
   
TOTAL ASSETS $ 627,121   $ 658,566   $ 659,357
   
LIABILITIES AND SHAREHOLDERS' EQUITY  
CURRENT LIABILITIES  
  Trade and other payables $ 65,830   $ 68,617   $ 64,093
  Deferred revenue    9,279     14,768     19,834
  Income taxes payable   -     7,711     5,998
  Current portion of long-term debt    1,451     1,363     1,384
    Total Current Liabilities   76,560     92,459     91,309
   
NON-CURRENT LIABILITIES  
  Other payables   11,022     9,929     10,180
  Deferred revenue   2,323     2,677     2,384
  Deferred lease credits   18,513     19,591     19,011
  Long-term debt   8,951     10,402     10,047
  Pension liability   13,948     12,414     13,626
    Total Non-Current Liabilities   54,757     55,013     55,248
   
SHAREHOLDERS' EQUITY  
  Share capital   31,512     27,985     29,614
  Contributed surplus   6,462     6,134     6,266
  Retained earnings   451,208     468,977     469,554
  Accumulated other comprehensive income   6,622     7,998     7,366
    Total Shareholders' Equity   495,804     511,094     512,800
   
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 627,121   $ 658,566   $ 659,357


REITMANS (CANADA) LIMITED
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
(in thousands of Canadian dollars)
   
    For the nine months ended
    October 29, 2011   October 30, 2010
           
SHARE CAPITAL          
Balance, beginning of the period $ 29,614   $ 25,888
  Cash consideration on exercise of share options   2,133     2,273
  Ascribed value credited to share capital from exercise of share options   545     555
  Cancellation of shares pursuant to share repurchase program   (780)     (731)
Balance, end of the period   31,512     27,985
           
CONTRIBUTED SURPLUS          
Balance, beginning of the period   6,266     5,164
  Share-based compensation costs   741     1,525
  Ascribed value credited to share capital from exercise of share options   (545)     (555)
Balance, end of the period   6,462     6,134
           
RETAINED EARNINGS          
Balance, beginning of the period   469,554     461,845
  Net earnings   42,865     75,168
  Dividends   (39,581)     (38,655)
  Premium on repurchase of Class A non-voting shares   (21,630)     (29,381)
Balance, end of the period   451,208     468,977
           
ACCUMULATED OTHER COMPREHENSIVE INCOME          
Balance, beginning of the period   7,366     5,355
  Net unrealized (loss) gain on available-for-sale financial assets arising during the period (net of tax of $121; $394 for the nine months ended October 30, 2010)   (808)     2,643
  Reclassification of impairment loss on available-for-sale financial assets to net earnings (net of tax of $9)   64     -
Balance, end of the period   6,622     7,998
           
Total Shareholders' Equity $ 495,804   $ 511,094


REITMANS (CANADA) LIMITED
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands of Canadian dollars)
   
  For the nine months ended For the three months ended
  October 29, 2011 October 30, 2010 October 29, 2011 October 30, 2010
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES                
  Net earnings $ 42,865 $ 75,168 $ 10,561 $ 20,692
  Adjustments for:                
    Depreciation, amortization and impairment losses   48,548   43,882    18,334   14,626
    Share-based compensation costs   741   1,525    (153)   522
    Amortization of deferred lease credits    (3,468)   (3,731)    (1,148)   (1,236)
    Deferred lease credits   2,970   2,713    2,146   1,549
    Pension contribution   (816)   (465)    (459)   (155)
    Pension expense   1,138   1,014    380   338
    Impairment loss on available-for-sale financial assets    73    -    73   -
    Foreign exchange loss   2,793   358   342   198
    Interest and dividend income, net    (3,024)   (2,091)   (1,016)   (841)
    Interest paid   (522)   (583)    (170)   (189)
    Interest received    969   770   336   344
    Dividends received   2,592   1,817   866   651
    Income taxes    16,307   32,016   3,895   8,934
       111,166   152,393    33,987   45,433
  Changes in:                  
    Trade and other receivables    (665)   (609)   (809)   (1,005)
    Inventories    (34,390)   (30,951)    (26,114)   (25,649)
    Prepaid expenses       (1,473)   (2,085)    300   1,121
    Trade and other payables   3,531   13,367   7,265   15,271
    Deferred revenue    (10,616)   (1,191)   (5,066)   2,446
  Cash generated from operating activities    67,553   130,924   9,563   37,617
  Income taxes received    -   5,870    -   5,856
  Income taxes paid   (31,060)   (37,870)    (3,546)   (8,529)
  Net cash flows from operating activities   36,493   98,924   6,017   34,944
                 
CASH FLOWS USED IN INVESTING ACTIVITIES                
  Purchases of marketable securities   (315)   (282)   (105)   (105)
  Additions to property and equipment and intangibles    (43,223)   (40,457)   (18,604)   (16,514)
  Cash flows used in investing activities    (43,538)   (40,739)   (18,709)   (16,619)
                 
CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES                
  Dividends paid   (39,581)   (38,655)    (13,007)   (13,241)
  Purchase of Class A non-voting shares for cancellation    (22,410)   (30,112)    (22,410)   -
  Repayment of long-term debt    (1,029)   (966)    (349)   (327)
  Proceeds from exercise of share options    2,133   2,273   617   849
  Cash flows used in financing activities   (60,887)    (67,460)    (35,149)   (12,719)
                 
FOREIGN EXCHANGE LOSS ON CASH HELD IN FOREIGN CURRENCY   (2,793)   (358)   (342)   (198)
                 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS    (70,725)   (9,633)   (48,183)   5,408
                 
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD   230,034   228,577   207,492   213,536
                 
CASH AND CASH EQUIVALENTS, END OF THE PERIOD $ 159,309 $ 218,944       $  159,309       $ 218,944

SOURCE REITMANS (CANADA) LIMITED

For further information:

Jeremy H. Reitman
Chairman and Chief Executive Officer
 
Telephone:   (514) 385-2630
Corporate Website: www.reitmans.ca

 

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REITMANS (CANADA) LIMITED

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