Le Château reports second quarter results

MONTREAL, Sept. 9, 2011 /CNW Telbec/ - Le Château Inc. (TSX: CTU.A) today reported that sales for the second quarter ended July 30, 2011 decreased 2.0% to $84.8 million from $86.5 million for the second quarter ended July 31, 2010. Comparable store sales decreased by 5.0% versus the same period a year ago. The sales and earnings performance in the second quarter improved over the first quarter. The Company's gross margin percentage in the second quarter of 2011 decreased to 65.6% from 68.9% last year, due to increased promotional activity in a difficult retail environment.

Net earnings for the second quarter ended July 30, 2011 amounted to $3.5 million compared to $8.3 million for the second quarter ended July 31, 2010. Earnings per share (diluted) for the second quarter were $0.14 per share versus $0.34 per share the previous year. Earnings before interest, income taxes, depreciation and amortization ("EBITDA") for the second quarter amounted to $10.4 million or 12.3% of sales, compared to $16.6 million or 19.2% of sales last year.

Six-month Results
Net earnings for the six-month period were $615,000 or $0.02 per share (diluted) compared to $12.8 million or $0.52 per share the previous year. Earnings before interest, income taxes, depreciation and amortization (EBITDA) for the first six months amounted to $11.5 million or 7.7% of sales, compared to $27.5 million or 17.5% of sales last year.

Sales the six months ended July 30, 2011 decreased 4.9% to $149.8 million from $157.4 million last year. Comparable store sales decreased 8.1% versus the same period a year ago.

During the first six months of the year, the Company opened three stores and expanded 10 existing locations, resulting in the addition of 55,000 square feet or 4.5% to the Le Château network, bringing the total floor space at end of period to 1,277,000 square feet.

In July 2011, the Toronto Stock Exchange approved the Company's previously announced normal course issuer bid to purchase up to 1,011,443 Class A subordinate voting shares. Since July 18, 2011, no Class A subordinate voting shares have been purchased by the Company.

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

Dividend declaration
The Board of Directors has declared a quarterly dividend (constituting eligible dividends for income tax purposes) of $0.08 per Class A subordinate voting share and Class B voting share. This is the 72nd consecutive dividend declared by Le Château, and is payable on November 15, 2011 to the shareholders of record at the close of business on October 28, 2011.

Brand Repositioning
The Company is fully engaged in its previously announced brand repositioning. The strategies include investments in a completely upgraded merchandise collection, a multi-media advertisement campaign and a new store concept to be launched in October 2011 in Saint-Bruno, Quebec.

Appointment of new director
The Company also announced today the appointment of Norman Daitchman, FCA to the Board of Directors and Chair of the Company's Audit Committee. Mr. Daitchman will take the place of Mr. Herbert Siblin who has retired as a director of the Company effective today. Mr. Daitchman has over 40 years of experience in the accounting field, including as a partner in Ernst & Young's National Accounting & Auditing Services group. He has been a member of the Independent Advisory Committee to the Auditor General of Canada and a member of the Accounting Standards Board and the Emerging Issues Committee of the CICA.

"We look forward to working with Norman and benefiting from his expertise" said Jane Silverstone, Chief Executive Officer and Chairman of Le Château. "The Board would like to thank Mr. Siblin for his many years of dedication to the Company and wishes him the best of luck, enjoyment and fulfillment after a long and distinguished career."

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 243 retail locations, of which 241 are located in Canada and 2 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 7 stores under license in the Middle East.

The Company's 51-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 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 30, 2011 are available online at www.sedar.com

CONSOLIDATED BALANCE SHEETS
 
(Unaudited)
(In thousands of Canadian dollars)
As at
July 30, 2011
As at
July 31, 2010
As at
January 29, 2011
ASSETS      
Current assets      
Cash and cash equivalents $ 7,305 $ 15,967 $ 17,661
Short-term investments   18,580   38,620   30,300
Accounts receivable   3,299   3,363   2,439
Income taxes refundable   4,878   1,877   3,629
Derivative financial instruments   -   258   -
Inventories   103,194   77,775   91,773
Prepaid expenses   2,104   1,889   1,614
Total current assets   139,360   139,749   147,416
Property and equipment   96,436   91,977   93,490
Intangible assets   5,629   3,615   5,240
Deferred income taxes   169   -   35
  $ 241,594 $ 235,341 $ 246,181
 
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities      
Trade and other payables $ 28,563 $ 24,501 $ 25,338
Dividend payable   4,338   4,313   4,338
Deferred revenue   3,453   3,547   4,261
Current portion of provisions   842   1,093   1,060
Derivative financial instruments   579   -   118
Current portion of long-term debt   17,129   12,103   15,920
Total current liabilities   54,904    45,557   51,035
Long-term debt   20,452   14,920   20,260
Provisions   75   969   414
Deferred income taxes   2,883   2,196   2,883
Deferred lease credits   15,805   15,828   15,936
Total liabilities   94,119   79,470   90,528
         
Shareholders' equity      
Share capital   37,729   35,666   37,729
Contributed surplus   2,216   2,121   2,006
Retained earnings   107,940   117,903   116,001
Accumulated other comprehensive (loss) income   (410)   181   (83)
Total shareholders' equity   147,475   155,871   155,653
  $ 241,594 $ 235,341 $ 246,181

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY    
(Unaudited) For the three months ended For the six months ended
(In thousands of Canadian dollars) July 30, 2011 July 31, 2010 July 30, 2011 July 31, 2010
SHARE CAPITAL        
Balance, beginning of period $ 37,729 $ 35,329 $ 37,729 $ 34,335
Issuance of subordinate voting shares upon exercise of options   -   280   -   1,070
Reclassification from contributed surplus due to exercise of share options   -   57   -   261
Balance, end of period $ 37,729 $ 35,666 $ 37,729 $ 35,666
 
CONTRIBUTED SURPLUS        
Balance, beginning of period $ 2,129 $ 2,087 $ 2,006 $ 2,159
Stock-based compensation expense   87   91   210   223
Exercise of share options   -   (57)   -   (261)
Balance, end of period $ 2,216 $ 2,121 $ 2,216 $ 2,121
 
RETAINED EARNINGS        
Balance, beginning of period $ 108,794 $ 113,935 $ 116,001 $ 113,743
Net earnings   3,484   8,281   615   12,783
Dividends declared   (4,338)   (4,313)   (8,676)   (8,623)
Balance, end of period $ 107,940 $ 117,903 $ 107,940 $ 117,903
 
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME            
Balance, beginning of period $ (1,047) $ 111 $ (83) $ 40
Other comprehensive (loss) income for the period   637   70   (327)   141
Balance, end of period $ (410) $ 181 $ (410) $ 181
 
Total shareholders' equity $ 147,475 $ 155,871 $ 147,475 $ 155,871

CONSOLIDATED STATEMENTS OF EARNINGS    
(Unaudited) For the three months ended For the six months ended
(In thousands of Canadian dollars, except per share information) July 30, 2011 July 31, 2010 July 30, 2011 July 31, 2010
Sales $ 84,810 $ 86,536 $ 149,769 $ 157,432
Cost of sales and expenses         
Cost of sales   29,203   26,912   48,515   45,878
Selling   40,819   38,293   80,309   74,508
General and administrative   9,473   9,227   19,276   18,254
    79,495   74,432   148,100   138,640
 
Results from operating activities   5,315   12,104   1,669   18,792
Finance costs   502   400   987   846
Finance income   (91)   (147)   (183)   (310)
Earnings before income taxes   4,904   11,851   865   18,256
Income tax expense   1,420   3,570   250   5,473
Net earnings $ 3,484 $ 8,281 $ 615 $ 12,783
 
Net earnings per share        
  Basic $ 0.14 $ 0.34 $ 0.02 $ 0.52
  Diluted   0.14   0.34   0.02   0.52
 
Weighted average number of shares outstanding ('000)   24,789   24,632   24,789   24,592

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME    
(Unaudited) For the three months ended For the six months ended
(In thousands of Canadian dollars) July 30, 2011 July 31, 2010 July 30, 2011 July 31, 2010
Net earnings $ 3,484 $ 8,281 $ 615 $ 12,783
Other comprehensive (loss) income        
Change in fair value of forward exchange contracts   29   137   (1,459)   295
Income tax recovery (expense)   (8)   (40)   423   (87)
    21   97   (1,036)   208
Realized forward exchange contracts reclassified to net earnings   867   (37)   998   (96)
Income tax (expense) recovery   (251)   10   (289)   29
    616   (27)   709   (67)
Total other comprehensive (loss) income   637   70   (327)   141
Comprehensive income $ 4,121 $ 8,351 $ 288 $ 12,924

CONSOLIDATED STATEMENTS OF CASH FLOWS      
(Unaudited) For the three months ended For the six months ended
(In thousands of Canadian dollars) July 30, 2011 July 31, 2010 July 30, 2011 July 31, 2010
OPERATING ACTIVITIES        
Net earnings $ 3,484 $ 8,281 $ 615 $ 12,783
Adjustments to determine net cash from operating activities        
  Depreciation and amortization   4,867   4,316   9,571   8,501
  Write-off and impairment of property and equipment   255   215   255   215
  Amortization of deferred lease credits    (239)   (194)   (479)   (268)
  Deferred lease credits   240   439   348   675
  Stock-based compensation   87   91   210   223
  Provisions   (251)   (294)   (557)   (588)
  Deferred income taxes   -   (57)   -   (128)
  Finance costs   502   400   987   846
  Finance income   (91)   (147)   (183)   (310)
  Interest paid   (508)   (400)   (999)   (916)
  Interest received   31   141   379   369
  Income tax expense   1,420   3,570   250   5,473
    9,797   16,361   10,397   26,875
Net change in non-cash working capital items related to operations   (1,172)   (493)   (10,538)   (17,123)
    8,625   15,868   (141)   9,752
Income taxes paid   (1,423)   (2,942)   (1,499)   (5,748)
Cash flows related to operating activities   7,202   12,926   (1,640)   4,004
 
FINANCING ACTIVITIES        
Proceeds of long-term debt   -   -   10,024   -
Repayment of long-term debt   (4,530)   (2,924)   (8,623)   (6,193)
Issue of capital stock upon exercise of options   -   280   -   1,070
Dividends paid   (4,338)   (4,310)   (8,676)   (8,603)
Cash flows related to financing activities   (8,868)    (6,954)   (7,275)   (13,726)
 
INVESTING ACTIVITIES        
Decrease in short-term investments   -   7,380   11,720   6,380
Decrease in long-term investments   -   -   -   10,000
Additions to property and equipment and intangible assets   (6,335)   (5,548)   (13,161)   (14,102)
Cash flows related to investing activities      (6,335)   1,832   (1,441)   2,278
     
Increase (decrease) in cash and cash equivalents   (8,001)   7,804   (10,356)   (7,444)
Cash and cash equivalents, beginning of period   15,306   8,163   17,661   23,411
Cash and cash equivalents, end of period $ 7,305 $ 15,967 $ 7,305 $ 15,967

SEGMENTED INFORMATION      
(Unaudited) For the three months ended For the six months ended
(In thousands of Canadian dollars) July 30, 2011 July 31, 2010 July 30, 2011 July 31, 2010
Sales to external customers        
Canada $ 84,296 $ 85,681   $ 148,785 $ 155,635
United States   514   855   984   1,797
  $ 84,810 $ 86,536 $ 149,769 $ 157,432
 
Sales by division        
Ladies' Clothing $ 48,562 $ 49,721 $ 87,881 $ 93,056
Men's Clothing   15,166   14,890   25,340   25,197
Footwear   8,751   8,888       15,426   16,198
Accessories   12,331   13,037   21,122   22,981
  $ 84,810 $ 86,536 $ 149,769 $ 157,432
 
Net (loss) earnings        
Canada $ 3,650 $ 8,389 $ 852 $ 13,052
United States   (166)   (108)   (237)   (269)
  $ 3,484 $ 8,281 $ 615 $ 12,783
 
Property and equipment and intangibles assets        
Canada $ 102,054 $ 95,358 $ 102,054 $ 95,358
United States   11    234   11   234
  $ 102,065 $ 95,592 $ 102,065 $ 95,592

 

 

 

 

 

 

SOURCE LE CHATEAU INC.

For further information:

Emilia Di Raddo, CA, President (514) 738-7000
Johnny Del Ciancio, 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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