Le Château reports first quarter results



    - Net earnings increased 33%
    - Quarterly dividend increased 20%
    - Special dividend of $0.25 per share declared
    - Normal course issuer bid announced

    MONTREAL, June 5 /CNW Telbec/ - Le Château Inc. (TSX: CTU.A) today
reported that net earnings for first quarter ended April 26, 2008 increased
33.3% to $5.6 million from $4.2 million for the first quarter ended April 28,
2007. Earnings per share (basic) for the first quarter increased to $0.23 per
share from $0.17 per share the previous year. Earnings before interest, income
taxes, depreciation and amortization (EBITDA) for the first quarter increased
21.6% to $12.4 million or 17.5% of sales, compared to $10.2 million or 14.4%
of sales last year, resulting primarily from continued improvements in gross
margins.
    Sales for the first quarter increased 0.3% to $70.6 million from
$70.4 million for the same period last year. Comparable store sales decreased
by 4.6% versus the same period a year ago.
    During the first quarter, the Company opened six new stores and expanded
six existing locations, resulting in the addition of 41,000 square feet or
4.2% to the Le Château network, bringing the total floor space at end of
period to 1,006,000 square feet.

    Dividend declarations
    ---------------------

    The Board of Directors has declared two dividends for the holders of
Class A subordinate voting shares and Class B voting shares. The Board of
Directors has increased the regular quarterly dividend by 20% from $0.125 to
$0.15 per share and has declared a special dividend of $0.25 per share. Both
dividends (constituting eligible dividends for income tax purposes) are
payable on August 19, 2008 to the shareholders of record at the close of
business on July 25, 2008.

    Normal course issuer bid
    ------------------------

    The Company announced today that it intends, subject to the approval of
the Toronto Stock Exchange, to proceed with a normal course issuer bid. Under
the bid, the Company may purchase up to 925,148 Class A subordinate voting
shares of the Company, representing 5% of the issued shares of such class as
at June 5, 2008. The bid will commence on June 19, 2008 and may continue to
June 18, 2009. The average daily trading volume for the 6-month period
preceding June 1, 2008 is 27,359 shares. In accordance with TSX requirements,
a maximum daily repurchase of 25% of this average may be made, representing
6,839 shares. The shares will be purchased on behalf of the Company by a
registered broker through the facilities of the Toronto Stock Exchange. The
price paid for the shares will be the market price at the time of acquisition,
and the number of shares purchased and the timing of any such purchases will
be determined by the Company. All shares purchased by the Company will be
cancelled. The Company currently has 18,502,964 Class A subordinate voting
shares outstanding. During the past 12 months, no shares were purchased by the
Company.
    The directors of the Company have concluded that purchases of up to
925,148 of the issued and outstanding Class A subordinate voting shares are an
appropriate and desirable use of the Company's available funds and, therefore,
would be in the best interests of the Company. As a result of such purchases,
the number of issued shares will be decreased and, consequently, the
proportionate share interest of all remaining shareholders will be increased
on a pro rata basis.

    Annual General Meeting
    ----------------------

    The Company's annual general meeting is scheduled for June 19, 2008 at
its head office located at 8300 Decarie Boulevard. The record date for this
meeting is May 15, 2008.

    New Accounting Standard Implemented in 2008:
    --------------------------------------------
    On January 27, 2008, the Company adopted the recommendations of the
following Section of the Canadian Institute of Chartered Accountants ("CICA")
Handbook:

    Section 3031, Inventory, was developed based on International Financial
Reporting Standards ("IFRS"). The standard was revised to provide more
extensive guidance than Section 3030, to facilitate the CICA's move towards
IFRS, and to reduce the number of alternatives for the measurement of
inventories. Section 3031 requires inventories to be measured at the lower of
cost and net realizable value. The Company previously valued its inventory at
the lower of average cost and net realizable value less a normal profit
margin, using the retail inventory method.
    The Company has adopted this new standard retrospectively, with
restatement of prior period amounts. The initial impact of measuring the
inventories under the new standard is an increase to the carrying amount of
opening inventories as at January 27, 2008 of $2.9 million ($4.4 million as at
January 28, 2007). Opening retained earnings as at January 27, 2008 has been
increased by $2.0 million, equal to the change in opening inventories net of
tax of $927,000. For the previous year, opening retained earnings as at
January 28, 2007 has been increased by $3.0 million, equal to the change in
opening inventories net of tax of $1.4 million.
    The adoption of the new standard resulted in a reduction of net earnings
for the first quarter ended April 26, 2008 of $442,000 or $0.01 per share. The
carrying amount of inventories as at April 26, 2008 increased by $2.2 million
to $49.9 million. As a result of the restatement, net earnings for the first
quarter ended April 28, 2007 decreased by $402,000 or $0.01 per share. The
carrying amount of inventories as at April 28, 2007 increased by $3.8 million
to $50.1 million.

    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 synonymous with ageless
fashion at accessible prices and is sold exclusively through the Company's 216
retail locations, of which 212 are located in Canada and 4 in the New York
City area. The Company's outlets are primarily found in major urban shopping
malls, complemented with high pedestrian-traffic, street-front locations. In
addition, the Company has 8 stores under license in the Middle East.
    The Company's 48-year tradition of vertical integration, a design and
manufacturing approach to retailing, makes it unique among Canadian fashion
merchants.

    Non-GAAP Measures
    -----------------

    In addition to discussing earnings measures in accordance with Canadian
generally accepted accounting principles ("GAAP"), this press release provides
earnings before interest, income taxes, depreciation and amortization
("EBITDA") as a supplementary earnings measure. Depreciation and amortization
include the write-off of fixed assets. 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 opened for at least one year.
    The above measures do not have a standardized meaning prescribed by GAAP
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.
    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.

    
    CONSOLIDATED BALANCE SHEETS
    ---------------------------
                                           As at         As at         As at
                                        April 26,     April 28,   January 26,
    (Unaudited)                             2008          2007          2008
    (In thousands of dollars)                        (restated)    (restated)
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents         $   16,929    $   11,720    $    3,846
    Short-term investments                53,080        32,516        66,354
    Accounts receivable and
     prepaid expenses                      6,800         4,410         6,307
    Income taxes refundable                    -           852             -
    Inventories                           49,868        50,136        45,903
    -------------------------------------------------------------------------
    Total current assets                 126,677        99,634       122,410
    Fixed assets                          92,214        86,394        84,466
    -------------------------------------------------------------------------
                                      $  218,891    $  186,028    $  206,876
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and
     accrued liabilities              $   29,815    $   31,948    $   30,377
    Dividend payable                       3,133         3,114         3,133
    Income taxes payable                     456             -         5,092
    Derivative financial instruments           -           829             -
    Current portion of capital
     lease obligations                     1,403         1,680         1,384
    Current portion of
     long-term debt                       10,049         7,414         7,113
    Future income taxes                        -         1,211           927
    -------------------------------------------------------------------------
    Total current liabilities             44,856        46,196        48,026
    Capital lease obligations                677         1,975         1,008
    Long-term debt                        25,335        17,703        12,689
    Future income taxes                    2,956         2,612         2,975
    Deferred lease inducements             8,704         5,508         8,573
    -------------------------------------------------------------------------
    Total liabilities                     82,528        73,994        73,271
    -------------------------------------------------------------------------

    Shareholders' Equity
    Capital stock                         31,794        30,367        31,794
    Contributed surplus                    2,034         1,358         1,761
    Retained earnings                    102,396        80,859        99,884
    Accumulated other
     comprehensive income                    139          (550)          166
    -------------------------------------------------------------------------
    Total shareholders' equity           136,363       112,034       133,605
    -------------------------------------------------------------------------
                                      $  218,891    $  186,028    $  206,876
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
    --------------------------------------------
                                                  For the three months ended
                                                      April 26,     April 28,
    (Unaudited)                                           2008          2007
    (In thousands of dollars)                                      (restated)
    -------------------------------------------------------------------------
    Balance, beginning of period -
     as previously reported                         $   97,914    $   76,814
    Adjustment to opening retained earnings
     resulting from adoption of new accounting
     standard for Inventories, net of
     income taxes of $927 (2007 - $1,400)                1,970         2,978
    Net earnings                                         5,645         4,181
    -------------------------------------------------------------------------
                                                       105,529        83,973
    Dividends declared                                   3,133         3,114
    -------------------------------------------------------------------------
    Balance, end of period                          $  102,396    $   80,859
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF EARNINGS
    -----------------------------------
                                                  For the three months ended
    (Unaudited)                                       April 26,     April 28,
    (In thousands of dollars,                             2008          2007
    except per share data)                                         (restated)
    -------------------------------------------------------------------------
    Sales                                           $   70,616    $   70,385
    -------------------------------------------------------------------------

    Cost of sales and expenses
    Cost of sales and selling, general and
     administrative                                     58,262        60,188
    Depreciation and amortization                        4,039         3,846
    Write-off of fixed assets                              100             -
    Interest on long-term debt and capital
     lease obligations                                     434           347
    Interest income                                       (699)         (488)
    -------------------------------------------------------------------------
                                                        62,136        63,893
    -------------------------------------------------------------------------
    Earnings before income taxes                         8,480         6,492
    Provision for income taxes                           2,835         2,311
    -------------------------------------------------------------------------
    Net earnings                                    $    5,645    $    4,181
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings per share
      Basic                                         $     0.23    $     0.17
      Diluted                                             0.22          0.17

    Weighted average number of shares
     outstanding ('000)                                 25,063        24,883


    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    -----------------------------------------------
                                                  For the three months ended
                                                      April 26,     April 28,
    (Unaudited)                                           2008          2007
    (In thousands of dollars)                                      (restated)
    -------------------------------------------------------------------------
    Net earnings                                    $    5,645    $    4,181
    -------------------------------------------------------------------------
    Other comprehensive income
    Change in fair value of forward exchange
     contracts                                             209          (829)
    Realized forward exchange contracts
     reclassified to net earnings                         (255)         (320)
    Income tax recovery                                     19           387
    -------------------------------------------------------------------------
                                                           (27)         (762)
    -------------------------------------------------------------------------
    Comprehensive income                            $    5,618    $    3,419
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF CASH FLOWS
    -------------------------------------
                                                  For the three months ended
                                                      April 26,     April 28,
    (Unaudited)                                           2008          2007
    (In thousands of dollars)                                      (restated)
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net earnings                                    $    5,645    $    4,181
    Adjustments to determine net cash from
     operating activities
      Depreciation and amortization                      4,039         3,846
      Write-off of fixed assets                            100             -
      Amortization of deferred lease inducements          (338)         (205)
      Stock-based compensation                             273           219
      Future income taxes                                 (927)         (189)
    -------------------------------------------------------------------------
                                                         8,792         7,852
    Net change in non-cash working capital
    items related to operations                         (9,702)       (7,351)
    Deferred lease inducements                             469           429
    -------------------------------------------------------------------------
    Cash flows related to operating activities            (441)          930
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Repayment of capital lease obligations                (312)         (684)
    Proceeds of long-term debt                          18,000        16,344
    Repayment of long-term debt                         (2,418)       (1,553)
    Issue of capital stock                                   -           146
    Dividends paid                                      (3,133)      (20,992)
    -------------------------------------------------------------------------
    Cash flows related to financing activities          12,137        (6,739)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Decrease in short-term investments                  13,274        26,383
    Additions to fixed assets                          (11,887)      (11,597)
    -------------------------------------------------------------------------
    Cash flows related to investing activities           1,387        14,786
    -------------------------------------------------------------------------

    Increase in cash and cash equivalents               13,083         8,977
    Cash and cash equivalents, beginning of period       3,846         2,743
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period        $   16,929    $   11,720
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary information:
    Interest paid during the period                 $      434    $      347
    Income taxes paid during the period                  8,398         4,113
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    SEGMENTED INFORMATION
    ---------------------

                                                  For the three months ended
                                                      April 26,     April 28,
    (Unaudited)                                           2008          2007
    (In thousands of dollars)                                      (restated)
    -------------------------------------------------------------------------

    Sales by country
    Canada                                          $   69,206    $   68,304
    United States                                        1,410         2,081
    -------------------------------------------------------------------------
                                                    $   70,616    $   70,385
    -------------------------------------------------------------------------

    Sales by division
    Ladies' Clothing                                $   41,660    $   41,420
    Men's Clothing                                      10,865         9,754
    Footwear                                             7,471         8,335
    Accessories                                         10,620        10,876
    -------------------------------------------------------------------------
                                                    $   70,616    $   70,385
    -------------------------------------------------------------------------

    Net earnings (loss)
    Canada                                          $    5,730    $    4,390
    United States                                          (85)         (209)
    -------------------------------------------------------------------------
                                                    $    5,645    $    4,181
    -------------------------------------------------------------------------

    Identifiable assets
    Canada                                          $  216,460    $  181,382
    United States                                        2,431         4,646
    -------------------------------------------------------------------------
                                                    $  218,891    $  186,028
    -------------------------------------------------------------------------
    




For further information:

For further information: Emilia Di Raddo, CA, President, (514) 738-7000;
Johnny Del Ciancio, CA, Vice-President, Finance, (514) 738-7000; Maison
Brison: Rick Leckner, (514) 731-0000; Source: Le Château Inc.

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