Reitmans (Canada) Limited announces its results for the three and six months ended August 2, 2014

MONTREAL, Sept. 11, 2014 /CNW Telbec/ -

Three months ended August 2, 2014

Sales for the three months ended August 2, 2014 increased 1.9%, despite a net reduction of 55 stores, to $258.3 million as compared with $253.4 million for the three months ended August 3, 2013.  Same store sales1 increased 4.6%, excluding e-commerce which increased 48.3%.  Sales improved in the second quarter of fiscal 2015 in most banners, as consumers responded well to rebranding efforts and new product offerings.  The Smart Set banner is showing improved performance as it continues to eliminate underperforming locations and gains consumer acceptance through its repositioning and rebranding efforts.

The Company's gross margin for the three months ended August 2, 2014 decreased to 59.5% from 62.4% for the three months ended August 3, 2013. The weaker Canadian dollar against the U.S. dollar negatively impacted margins, with the average rate for a U.S. dollar ranging between $1.06 and $1.10 during the three months ended August 2, 2014 as compared to $1.00 and $1.06 in the three months ended August 3, 2013.

Net earnings for the three months ended August 2, 2014 were $9.6 million ($0.15 diluted earnings per share) as compared with net earnings of $10.2 million ($0.16 diluted earnings per share) for the three months ended August 3, 2013.  Adjusted EBITDA1 decreased by 22.9% to $23.6 million for the three months ended August 2, 2014 as compared with $30.6 million for the three months ended August 3, 2013.  The decrease in net earnings and reduction in adjusted EBITDA were primarily attributable to the significant decline in the Canadian dollar vis-à-vis the U.S. dollar resulting in increased costs of goods sold and a significant loss on the remeasurement to fair value of option contracts.

Six months ended August 2, 2014

Sales for the six months ended August 2, 2014 were $464.8 million as compared with $470.3 million for the six months ended August 3, 2013, a decrease of 1.2%, impacted by a net reduction of 55 stores.  Same store sales1 increased by 0.6%, excluding e-commerce which increased 36.9%. The Company's banners showed improvement in the second quarter of fiscal 2015 after experiencing weak sales in the first quarter.  The Company's e-commerce direct to consumer channel continues to show significant sales growth, although representing a small proportion of total Company sales.

The Company's gross margin for the six months ended August 2, 2014 decreased to 59.5% from 63.4% for the six months ended August 3, 2013. The weaker Canadian dollar against the U.S. dollar negatively impacted margins, with the average rate for a U.S. dollar ranging between $1.06 and $1.13 during the six months ended August 2, 2014 as compared to $1.00 and $1.06 in the six months ended August 3, 2013.

Net loss for the six months ended August 2, 2014 was $3.9 million ($0.06 diluted loss per share) as compared with net earnings of $7.6 million ($0.12 diluted earnings per share) for the six months ended August 3, 2013. For the six months ended August 2, 2014, adjusted EBITDA1 was $19.5 million as compared with $41.3 million for the six months ended August 3, 2013, a decrease of $21.8 million.  The net loss and reduction in adjusted EBITDA were primarily attributable to the significant decline in the Canadian dollar vis-à-vis the U.S. dollar resulting in increased costs of goods sold and a significant loss on the remeasurement to fair value of U.S. dollar option contracts.

A reduction in the number of employees in both head office and field operations, in conjunction with a reduction in the number of store locations has resulted in wages and benefit savings.  Additional savings have been achieved through improved cost management in non-wage areas.  These initiatives aimed at reducing costs across the organization have yielded savings in both the three and six months ended August 2, 2014.

Dividends

At the Board of Directors meeting held on September 11, 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 October 23, 2014 to shareholders of record on October 9, 2014.

Sales for the four weeks ended August 30, 2014

Sales for the month of August (the four weeks ended August 30, 2014) increased 1.8% with same store sales1 increasing 5.0%, excluding e-commerce which increased 62.7%.

About Reitmans (Canada) Limited

The Company is a leading ladieswear specialty apparel retailer with retail outlets throughout Canada.  The Company operates 845 stores consisting of 343 Reitmans, 143 Penningtons, 102 Addition Elle, 76 RW & CO., 68 Thyme Maternity and 113 Smart Set. The Company also operates 21 Thyme Maternity shop-in-shop boutiques in select Babies"R"Us locations in Canada.

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 net 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, amortization and impairment charges.  The following table reconciles the most comparable GAAP measure, net earnings (loss), to adjusted EBITDA.  Management believes that adjusted EBITDA is an important indicator of the Company's ability to generate liquidity through operating cash flow to fund working capital needs and fund capital expenditures and uses the metric for this purpose.  The exclusion of 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 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.  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 following table reconciles net earnings (loss) to adjusted EBITDA for the three and six months ended August 2, 2014 and August 3, 2013:

   
(unaudited)
(in thousands of Canadian dollars)
For the three months ended For the six months ended
  August 2, 2014 August 3, 2013 August 2, 2014 August 3, 2013
Net earnings (loss) $ 9,557 $ 10,182 $ (3,858) $ 7,596
Depreciation, amortization and net impairment losses   12,364   17,503   25,831   32,499
Dividend income   (630)   (868)   (1,297)   (1,736)
Interest income   (181)   (170)   (344)   (304)
Realized loss on disposal of available-for-sale financial assets   37   -   61   -
Impairment losses on available-for-sale financial assets   -   452   10   502
Interest expense   103   127   211   261
Income tax expense (recovery)   2,346   3,397   (1,079)   2,488
ADJUSTED EBITDA $ 23,596 $ 30,623 19,535 $ 41,306

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 six months ended August 2, 2014 are available online at www.sedar.com.

Montreal, September 11, 2014

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 six months ended For the three months ended
  August 2, 2014 August 3, 2013 August 2, 2014 August 3, 2013
                 
Sales $ 464,804 $ 470,306 $ 258,326 $ 253,445
Cost of goods sold   188,278   171,929   104,545   95,242
Gross profit   276,526   298,377   153,781   158,203
Selling and distribution expenses   252,681   268,066   127,151   136,095
Administrative expenses   25,305   24,104   14,436   11,828
Results from operating activities   (1,460)   6,207   12,194   10,280
                 
Finance income   6,229   4,640   2,244   3,878
Finance costs   9,706   763   2,535   579
(Loss) earnings before income taxes   (4,937)   10,084   11,903   13,579
                 
Income tax recovery (expense)   1,079   (2,488)   (2,346)   (3,397)
                 
Net (loss) earnings $ (3,858) $ 7,596 $ 9,557 $ 10,182
                 
(Loss) earnings per share:                
  Basic $ (0.06) $ 0.12 $ 0.15 $ 0.16
  Diluted   (0.06)   0.12   0.15   0.16

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


   
  For the six months ended For the three months ended
  August 2, 2014 August 3, 2013 August 2, 2014 August 3, 2013
                 
Net (loss) earnings $ (3,858) $ 7,596 $ 9,557 $ 10,182
Other comprehensive income (loss)                
  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 $1 for the six months ended August 2, 2014; $68 for the six months and $60 for the three months ended August 3, 2013)   9   434   -   392
    Net change in fair value of available-for-sale financial assets (net of tax of $361 for the six months and $49 for the three months ended August 2, 2014; $185 for the six months and $286 for the three months ended August 3, 2013)   2,358   (1,223)   317   (1,886)
    Foreign currency translation differences   (151)   -   22   -
                 
Total other comprehensive income (loss)   2,216   (789)   339   (1,494)
                 
Total comprehensive (loss) income $ (1,642) $ 6,807 $  9,896 8,688

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


   
  August 2, 2014 August 3, 2013 February 1, 2014
ASSETS            
CURRENT ASSETS            
  Cash and cash equivalents $ 113,380 $ 76,559 $ 122,355
  Marketable securities   52,905   70,432   55,062
  Trade and other receivables   5,160    3,585   6,422
  Derivative financial asset   3,343   2,475   11,775
  Income taxes recoverable   2,123   5,436   5,656
  Inventories   112,455   116,595   109,601
  Prepaid expenses   27,134   27,869   12,512
    Total Current Assets   316,500   302,951   323,383
             
NON-CURRENT ASSETS            
  Property and equipment   164,375   193,556   178,341
  Intangible assets   18,287   17,291   17,211
  Goodwill   42,426   42,426   42,426
  Deferred income taxes   30,729   29,003   28,578
    Total Non-Current Assets   255,817   282,276   266,556
             
TOTAL ASSETS $ 572,317 $ 585,227 $ 589,939
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
CURRENT LIABILITIES            
  Trade and other payables $ 87,550 $ 81,891 $ 90,734
  Derivative financial liability   4,057   1,256   3,065
  Deferred revenue   15,359   10,962   19,998
  Current portion of long-term debt    1,725   1,620   1,672
    Total Current Liabilities   108,691   95,729   115,469
             
NON-CURRENT LIABILITIES            
  Other payables   10,855   11,265   11,842
  Deferred lease credits   13,921   17,374   15,607
  Long-term debt   4,456   6,181   5,331
  Pension liability   18,749   18,336   18,259
    Total Non-Current Liabilities   47,981   53,156   51,039
             
SHAREHOLDERS' EQUITY            
  Share capital   39,227    39,227   39,227
  Contributed surplus   7,503   6,997   7,188
  Retained earnings   359,343   382,242   369,660
  Accumulated other comprehensive income   9,572   7,876    7,356
    Total Shareholders' Equity   415,645   436,342   423,431
             
TOTAL LIABILITIES AND
      SHAREHOLDERS' EQUITY
$ 572,317 $ 585,227 $ 589,939
             

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 2, 2014 $ 39,227 $ 7,188 $ 369,660 $ 7,356 $ 423,431
                     
Total comprehensive loss for the period                    
  Net loss           (3,858)       (3,858)
  Total other comprehensive income               2,216   2,216
Total comprehensive loss for the period   -   -   (3,858)   2,216   (1,642)
                     
Contributions by and distributions to owners of the Company                    
  Share-based compensation costs       315           315
  Dividends           (6,459)       (6,459)
Total contributions by and distributions to owners of the Company   -   315   (6,459)   -   (6,144)
                     
Balance as at August 2, 2014 $ 39,227 $ 7,503 $ 359,343 $ 9,572 $ 415,645
                     
                     
Balance as at May 4, 2014 $ 39,227 $ 7,261 $ 353,016 $ 9,233 $ 408,737
                     
Total comprehensive income for the period                    
  Net earnings           9,557       9,557
  Total other comprehensive income               339   339
Total comprehensive income for the period   -   -   9,557   339   9,896
                     
Contributions by and distributions to owners of the Company                    
  Share-based compensation costs       242           242
  Dividends           (3,230)       (3,230)
Total contributions by and distributions to owners of the Company   -   242   (3,230)   -   (2,988)
                     
Balance as at August 2, 2014 $ 39,227 $ 7,503 $ 359,343 $ 9,572 $ 415,645
                     
Balance as at February 3, 2013 $ 39,227 $ 6,521 $ 400,480 $ 8,665 $ 454,893
                     
Total comprehensive income for the period                    
  Net earnings           7,596       7,596
  Total other comprehensive loss               (789)   (789)
Total comprehensive income for the period   -   -   7,596   (789)   6,807
                       
Contributions by and distributions to owners of the Company                    
  Share-based compensation costs       476           476
  Dividends           (25,834)       (25,834)
Total contributions by and distributions to owners of the Company   -   476   (25,834)   -   (25,358)
                     
Balance as at August 3, 2013 $ 39,227 $ 6,997 $ 382,242 $ 7,876 $ 436,342
                     
                     
Balance as at May 5, 2013 $ 39,227 $ 6,795 $ 384,977 $ 9,370 $ 440,369
                     
Total comprehensive income for the period                    
  Net earnings           10,182       10,182
  Total other comprehensive loss               (1,494)   (1,494)
Total comprehensive income for the period   -   -   10,182   (1,494)   8,688
                     
Contributions by and distributions to owners of the Company                    
  Share-based compensation costs       202           202
  Dividends           (12,917)       (12,917)
Total contributions by and distributions to owners of the Company   -   202   (12,917)   -   (12,715)
                     
Balance as at August 3, 2013 $ 39,227 $ 6,997 $ 382,242 $ 7,876 $ 436,342

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


   
  For the six months ended For the three months ended
  August 2, 2014 August 3, 2013 August 2, 2014 August 3, 2013
CASH FLOWS FROM OPERATING ACTIVITIES                
  Net (loss) earnings $ (3,858) $ 7,596 $ 9,557 $ 10,182
  Adjustments for:                
    Depreciation, amortization and net impairment losses   25,831   32,499   12,364   17,503
    Share-based compensation costs   315   476   242   202
    Amortization of deferred lease credits   (1,955)   (2,258)   (926)   (1,082)
    Deferred lease credits   269   2,827   73   1,659
    Pension contribution   (494)   (123)   (207)   (91)
    Pension expense   984   900   492   450
    Realized loss on sale of marketable securities   61   -   37   -
    Impairment loss on available-for-sale financial assets   10   502   -   452
    Net change in fair value of derivatives   9,424   (937)   2,395   (2,536)
    Foreign exchange gain on cash and cash equivalents   (1,086)   (155)    (406)   (196)
    Interest and dividend income, net   (1,369)   (1,779)   (671)   (911)
    Interest paid   (211)   (261)   (103)   (127)
    Interest received   381    310   183   172
    Dividends received   1,439   1,734   629   867
    Income tax (recovery) expense   (1,079)   2,488   2,346   3,397
    28,662   43,819   26,005   29,941
Changes in:                
    Trade and other receivables   1,028   379   1,944   1,977
    Inventories   (2,854)   (23,278)   8,287   (4,342)
    Prepaid expenses   (14,622)   (1,925)   (1,372)   (2,078)
    Trade and other payables   (4,333)   12,490   13,795   6,503
    Deferred revenue   (4,639)   (5,335)   (168)   (164)
  Cash from operating activities   3,242   26,150   48,491   31,837
  Income taxes received   5,133   650   5,133   3
  Income taxes paid   (3,033)   (2,306)   (838)   -
  Net cash flows from operating activities   5,342   24,494   52,786   31,840
                 
CASH FLOWS USED IN INVESTING ACTIVITIES                
  Purchases of marketable securities   (185)   (210)   (80)   (105)
  Proceeds on sale of marketable securities   5,000   -    2,500   -
  Proceeds on sales of trademarks   55   -   26   -
  Additions to property and equipment and intangible assets   (12,779)   (18,900)   (6,444)   (8,794)
  Cash flows used in investing activities   (7,909)   (19,110)   (3,998)   (8,899)
                 
CASH FLOWS USED IN FINANCING ACTIVITIES                
  Dividends paid   (6,459)   (25,834)   (3,230)   (12,917)
  Repayment of long-term debt   (822)   (772)   (415)   (390)
  Cash flows used in financing activities   (7,281)   (26,606)   (3,645)   (13,307)
                 
FOREIGN EXCHANGE GAIN ON CASH HELD IN FOREIGN CURRENCY   873   155   389   196
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS   (8,975)   (21,067)   45,532   9,830
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD   122,355   97,626   67,848   66,729
                 
CASH AND CASH EQUIVALENTS, END OF THE PERIOD $ 113,380 $ 76,559 $ 113,380 $ 76,559

 

 

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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