Le Château reports second quarter results



    - Net earnings increased 56%
    - Quarterly dividend increased to $0.175 per share

    MONTREAL, Sept. 8 /CNW Telbec/ - Le Château Inc. (TSX: CTU.A) today
reported that net earnings for the second quarter ended July 26, 2008
increased 55.6% to $9.8 million from $6.3 million for the second quarter ended
July 28, 2007. Earnings per share (basic) for the second quarter increased to
$0.39 per share from $0.25 per share the previous year. Earnings before
interest, income taxes, depreciation and amortization (EBITDA) for the second
quarter increased 18.4% to $18.7 million or 21.0% of sales, compared to
$15.8 million or 18.9% of sales last year, resulting primarily from continued
improvements in gross margins.
    Sales for the second quarter increased 6.1% to $88.7 million from
$83.6 million for the same period last year. Comparable store sales increased
by 1.0% over the same period a year ago.
    In June 2008, the Toronto Stock Exchange approved the Company's
previously announced normal course issuer bid to purchase up to 925,148
Class A subordinate voting shares. Since June 19, 2008, the Company purchased
235,900 Class A subordinate voting shares at an average price of $12.70 per
share for a total of $3.0 million.

    Six-month Results
    -----------------

    Net earnings for the six-month period increased 47.6% to $15.5 million or
$0.62 per share from $10.5 million or $0.42 per share the previous year.
Earnings before interest, income taxes, depreciation and amortization (EBITDA)
for the first six months increased 19.2% to $31.0 million or 19.5% of sales,
compared to $26.0 million or 16.9% of sales last year.
    Sales rose 3.4% to $159.3 million for the six months ended July 26, 2008,
compared to $154.0 million last year. Comparable store sales decreased 1.5%
versus the same period a year ago.
    During the first six months of the year, the Company opened nine new
stores and expanded eight existing locations, resulting in the addition of
59,000 square feet or 6.1% to the Le Château network, bringing the total floor
space at end of period to 1,024,000 square feet.

    Dividend increase
    -----------------

    The Board of Directors has declared a quarterly dividend (constituting
eligible dividends for income tax purposes) of $0.175 per Class A subordinate
voting share and Class B voting share, representing an increase of 16.7% from
the previous dividend rate of $0.15 per share. This is the 60th consecutive
dividend declared by Le Château, and is payable on November 10, 2008 to the
shareholders of record at the close of business on October 24, 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 was 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 have 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 have 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 second quarter ended July 26, 2008 of $951,000 or $0.04 per share. The
carrying amount of inventories as at July 26, 2008 increased by $840,000 to
$46.6 million. As a result of the restatement, net earnings for the second
quarter ended July 28, 2007 decreased by $597,000 or $0.03 per share. The
carrying amount of inventories as at July 28, 2007 increased by $2.9 million
to $49.4 million. On a year to date basis, the adoption of the new standard
resulted in a reduction of net earnings for the six months ended July 26, 2008
of $1.4 million or $0.05 per share (2007 - $999,000 or $0.04 per share).

    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
218 retail locations, of which 214 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
    (Unaudited)               July 26, 2008  July 28, 2007  January 26, 2008
    (In thousands of dollars)                    (restated)        (restated)
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents     $  20,216      $  11,813         $   3,846
    Short-term investments           53,728         32,913            66,354
    Accounts receivable, prepaid
     expenses and other assets        6,380          5,063             6,307
    Income taxes refundable               -            303                 -
    Inventories                      46,602         49,393            45,903
    -------------------------------------------------------------------------
    Total current assets            126,926         99,485           122,410
    Fixed assets                     91,318         85,287            84,466
    -------------------------------------------------------------------------
                                  $ 218,244      $ 184,772         $ 206,876
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS'
     EQUITY
    Current
    Accounts payable and accrued
     liabilities                  $  27,217      $  28,053         $  30,377
    Dividend payable                  9,952          3,128             3,133
    Income taxes payable                418              -             5,092
    Derivative financial
     instruments                          -            595                 -
    Current portion of capital
     lease obligations                1,423          1,499             1,384
    Current portion of
     long-term debt                   9,572          7,592             7,113
    Future income taxes                   -            930               927
    -------------------------------------------------------------------------
    Total current liabilities        48,582         41,797            48,026
    Capital lease obligations           341          1,657             1,008
    Long-term debt                   23,095         15,783            12,689
    Future income taxes               2,999          2,690             2,975
    Deferred lease inducements        9,315          6,637             8,573
    -------------------------------------------------------------------------
    Total liabilities                84,332         68,564            73,271
    -------------------------------------------------------------------------

    Shareholders' Equity
    Capital stock                    32,191         31,383            31,794
    Contributed surplus               2,116          1,183             1,761
    Retained earnings                99,373         84,036            99,884
    Accumulated other comprehensive
     income                             232           (394)              166
    -------------------------------------------------------------------------
    Total shareholders' equity      133,912        116,208           133,605
    -------------------------------------------------------------------------
                                  $ 218,244      $ 184,772         $ 206,876
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
    --------------------------------------------

                                For the three months      For the six months
                                        ended                   ended
                                 July 26,    July 28,    July 26,    July 28,
    (Unaudited)                     2008        2007        2008        2007
    (In thousands of dollars)              (restated)              (restated)
    -------------------------------------------------------------------------
    Balance, beginning of period
     - as previously reported  $ 102,396   $  78,283   $  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 - 3 month period
     $1,211; 2007 - 6 month
     period $1,400)                    -       2,576       1,970       2,978
    Excess of cost over stated
     value of Class A
     subordinate voting shares
     purchased and cancelled      (2,892)          -      (2,892)          -
    Net earnings                   9,821       6,305      15,466      10,486
    -------------------------------------------------------------------------
                                 109,325      87,164     112,458      90,278
    Dividends declared             9,952       3,128      13,085       6,242
    -------------------------------------------------------------------------
    Balance, end of period     $  99,373   $  84,036   $  99,373   $  84,036
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF EARNINGS
    -----------------------------------

                                For the three months      For the six months
                                        ended                   ended
    (Unaudited)                  July 26,    July 28,    July 26,    July 28,
    (In thousands of dollars,       2008        2007        2008        2007
     except per share data)                (restated)              (restated)
    -------------------------------------------------------------------------
    Sales                      $  88,680   $  83,609   $ 159,296   $ 153,994
    -------------------------------------------------------------------------

    Cost of sales and expenses
    Cost of sales and selling,
     general and administrative   70,022      67,848     128,284     128,036
    Depreciation and amortization  4,166       4,123       8,205       7,969
    Write-off of fixed assets         73       1,597         173       1,597
    Interest on long-term debt
     and capital lease obligations   494         386         928         733
    Interest income                 (611)       (444)     (1,310)       (932)
    -------------------------------------------------------------------------
                                  74,144      73,510     136,280     137,403
    -------------------------------------------------------------------------
    Earnings before income taxes  14,536      10,099      23,016      16,591
    Provision for income taxes     4,715       3,794       7,550       6,105
    -------------------------------------------------------------------------
    Net earnings               $   9,821   $   6,305   $  15,466   $  10,486
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings per share
      Basic                    $    0.39   $    0.25   $    0.62   $    0.42
      Diluted                       0.39        0.25        0.61        0.42

    Weighted average number of
     shares outstanding ('000)    25,083      24,967      25,073      24,925


    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    -----------------------------------------------

                                For the three months      For the six months
                                        ended                   ended
                                 July 26,    July 28,    July 26,    July 28,
    (Unaudited)                     2008        2007        2008        2007
    (In thousands of dollars)              (restated)              (restated)
    -------------------------------------------------------------------------
    Net earnings               $   9,821   $   6,305   $  15,466   $  10,486
    -------------------------------------------------------------------------
    Other comprehensive income
    Change in fair value of
     forward exchange contracts      283        (349)        492      (1,178)
    Realized forward exchange
     contracts reclassified to
     net earnings                   (147)        583        (402)        263
    Income tax (expense) recovery    (43)        (78)        (24)        309
    -------------------------------------------------------------------------
                                      93         156          66        (606)
    -------------------------------------------------------------------------
    Comprehensive income       $   9,914   $   6,461   $  15,532   $   9,880
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF CASH FLOWS
    -------------------------------------

                                For the three months      For the six months
                                        ended                   ended
                                 July 26,    July 28,    July 26,    July 28,
    (Unaudited)                     2008        2007        2008        2007
    (In thousands of dollars)              (restated)              (restated)
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net earnings               $   9,821   $   6,305   $  15,466   $  10,486
    Adjustments to determine
     net cash from operating
     activities
      Depreciation and
       amortization                4,166       4,123       8,205       7,969
      Write-off of fixed assets       73       1,597         173       1,597
      Amortization of deferred
       lease inducements            (346)       (235)       (684)       (440)
      Stock-based compensation       180         (21)        453         198
      Future income taxes              -        (281)       (927)       (470)
    -------------------------------------------------------------------------
                                  13,894      11,488      22,686      19,340
    Net change in non-cash
     working capital items
     related to operations         1,186      (3,256)     (8,516)    (10,607)
    Deferred lease inducements       957       1,364       1,426       1,793
    -------------------------------------------------------------------------
    Cash flows related to
     operating activities         16,037       9,596      15,596      10,526
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Repayment of capital lease
     obligations                    (316)       (499)       (628)     (1,183)
    Proceeds of long-term debt         -           -      18,000      16,344
    Repayment of long-term debt   (2,717)     (1,742)     (5,135)     (3,295)
    Issue of capital stock upon
     exercise of options             402         862         402       1,008
    Purchase of Class A
     subordinate voting shares
     for cancellation             (2,995)          -      (2,995)          -
    Dividends paid                (3,133)     (3,114)     (6,266)    (24,106)
    -------------------------------------------------------------------------
    Cash flows related to
     financing activities         (8,759)     (4,493)      3,378     (11,232)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Decrease (increase) in
     short-term investments         (648)       (397)     12,626      25,986
    Additions to fixed assets     (3,343)     (4,613)    (15,230)    (16,210)
    -------------------------------------------------------------------------
    Cash flows related to
     investing activities         (3,991)     (5,010)     (2,604)      9,776
    -------------------------------------------------------------------------

    Increase in cash and cash
     equivalents                   3,287          93      16,370       9,070
    Cash and cash equivalents,
    beginning of period           16,929      11,720       3,846       2,743
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period             $  20,216   $  11,813   $  20,216   $  11,813
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary information:
    Interest paid during the
     period                    $     494   $     386   $     928   $     733
    Income taxes paid during
     the period                    4,753       3,576      13,151       7,689
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

                                For the three months      For the six months
                                        ended                   ended
    (Unaudited)                  July 26,    July 28,    July 26,    July 28,
    (In thousands of dollars)       2008        2007        2008        2007
    -------------------------------------------------------------------------
    Sales by country
    Canada                     $  87,076   $  81,711   $ 156,282   $ 150,015
    United States                  1,604       1,898       3,014       3,979
    -------------------------------------------------------------------------
                               $  88,680   $  83,609   $ 159,296   $ 153,994
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Sales by division
    Ladies' Clothing           $  48,932   $  46,808   $  90,592   $  88,228
    Men's Clothing                14,944      12,503      25,809      22,257
    Footwear                      10,339      11,565      17,810      19,900
    Accessories                   14,465      12,733      25,085      23,609
    -------------------------------------------------------------------------
                               $  88,680   $  83,609   $ 159,296   $ 153,994
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings (loss)
    Canada                     $   9,841   $   7,737   $  15,571   $  12,127
    United States                    (20)     (1,432)       (105)     (1,641)
    -------------------------------------------------------------------------
                               $   9,821   $   6,305   $  15,466   $  10,486
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Identifiable assets
    Canada                     $ 216,079   $ 181,808   $ 216,079   $ 181,808
    United States                  2,165       2,964       2,165       2,964
    -------------------------------------------------------------------------
                               $ 218,244   $ 184,772   $ 218,244   $ 184,772
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




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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