Le Château reports second quarter results



    MONTREAL, Sept. 10 /CNW Telbec/ - Le Château Inc. (TSX: CTU.A) today
reported that sales for the second quarter ended August 1, 2009 decreased 8.2%
to $81.4 million from $88.7 million for the second quarter ended July 26,
2008. Comparable store sales decreased 8.1% versus the same period a year ago.
    Net earnings for the second quarter ended August 1, 2009 were $7.8
million compared to $9.8 million for the second quarter ended July 26, 2008.
Earnings per share (diluted) for the second quarter were $0.32 per share
versus $0.39 per share the previous year. Earnings before interest, income
taxes, depreciation and amortization (EBITDA) for the second quarter amounted
to $16.3 million or 20.0% of sales, compared to $18.7 million or 21.1% of
sales last year.
    In June 2009, the Toronto Stock Exchange approved the Company's
previously announced normal course issuer bid to purchase up to 987,173 Class
A subordinate voting shares. Since June 19, 2009, no Class A subordinate
voting shares have been purchased by the Company.

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

    Net earnings for the six-month period were $12.9 million or $0.53 per
share (diluted) compared to $15.5 million or $0.61 per share the previous
year. Earnings before interest, income taxes, depreciation and amortization
(EBITDA) for the first six months amounted to $28.3 million or 18.5% of sales,
compared to $31.0 million or 19.5% of sales last year.
    Sales decreased 3.8% to $153.2 million for the six months ended August 1,
2009, compared to $159.3 million last year. Comparable store sales decreased
7.1% versus the same period a year ago.
    During the first six months of the year, the Company opened 5 stores,
closed 1 and expanded 3 existing locations, resulting in the addition of
37,000 square feet or 3.5% to the Le Château network, bringing the total floor
space at end of period to 1,085,000 square feet.

    
    Dividend declaration
    --------------------

    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. This is the 64th consecutive dividend
declared by Le Château, and is payable on November 17, 2009 to the
shareholders of record at the close of business on October 30, 2009.

    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 227
retail locations, of which 223 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 9 stores under license in the Middle East.
    The Company's 49-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 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.

    
    CONSOLIDATED BALANCE SHEETS
    ---------------------------
                                             As at        As at        As at
    (Unaudited)                           August 1,    July  26,  January 31,
    (In thousands of dollars)                 2009         2008         2009
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents          $    19,626  $    20,216  $    10,034
    Short-term investments                  20,000       53,728       56,643
    Accounts receivable and other
     assets                                  2,502        4,200        4,791
    Income taxes refundable                  3,139            -            -
    Derivative financial instruments             -          340        1,530
    Inventories                             58,899       46,602       54,012
    Future income taxes                        406            -            -
    Prepaid expenses                         7,250        1,840          778
    -------------------------------------------------------------------------
    Total current assets                   111,822      126,926      127,788
    Long-term investments                   10,000            -            -
    Fixed assets                            91,686       91,318       88,643
    -------------------------------------------------------------------------
                                       $   213,508  $   218,244  $   216,431
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued
     liabilities                       $    25,197  $    27,217  $    25,403
    Dividend payable                         4,262        9,952        4,239
    Income taxes payable                         -          418        2,285
    Derivative financial instruments         1,277            -            -
    Current portion of capital lease
     obligations                               341        1,423        1,008
    Current portion of long-term debt        7,565        9,572        8,746
    Future income taxes                          -            -          487
    -------------------------------------------------------------------------
    Total current liabilities               38,642       48,582       42,168
    Capital lease obligations                    -          341            -
    Long-term debt                          15,529       23,095       18,982
    Future income taxes                      3,176        2,999        3,176
    Deferred lease inducements              10,139        9,315        9,691
    -------------------------------------------------------------------------
    Total liabilities                       67,486       84,332       74,017
    -------------------------------------------------------------------------

    Shareholders' equity
    Capital stock                           32,241       32,191       30,997
    Contributed surplus                      2,389        2,116        2,460
    Retained earnings                      112,263       99,373      107,914
    Accumulated other comprehensive
     income (loss)                            (871)         232        1,043
    -------------------------------------------------------------------------
    Total shareholders' equity             146,022      133,912      142,414
    -------------------------------------------------------------------------
                                       $   213,508  $   218,244  $   216,431
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                                     For the three               For the six
                                      months ended              months ended
    (Unaudited)              August 1,     July 26,    August 1,     July 26,
    (In thousands of dollars)    2009         2008         2009         2008
    -------------------------------------------------------------------------
    Balance, beginning of
     period               $   108,745  $   102,396  $   107,914  $    99,884
    Excess of cost over
     stated value of
     Class A subordinate
     voting shares
     purchased and
     cancelled                      -       (2,892)           -       (2,892)
    Net earnings                7,780        9,821       12,850       15,466
    -------------------------------------------------------------------------
                              116,525      109,325      120,764      112,458
    Dividends declared          4,262        9,952        8,501       13,085
    -------------------------------------------------------------------------
    Balance, end of
     period               $   112,263  $    99,373  $   112,263  $    99,373
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    (Unaudited)                      For the three               For the six
    (In thousands of                  months ended              months ended
     dollars, except per     August 1,     July 26,    August 1,     July 26,
     share data)                 2009         2008         2009         2008
    -------------------------------------------------------------------------
    Sales                 $    81,437  $    88,680  $   153,212  $   159,296
    -------------------------------------------------------------------------

    Cost of sales and expenses
    Cost of sales and
     selling, general and
     administrative            65,150       70,022      124,948      128,284
    Depreciation and
     amortization               4,484        4,166        8,787        8,205
    Write-off of fixed
     assets                        89           73           89          173
    Interest on long-term
     debt and capital
     lease obligations            326          494          703          928
    Interest income              (162)        (611)        (435)      (1,310)
    -------------------------------------------------------------------------
                               69,887       74,144      134,092      136,280
    -------------------------------------------------------------------------
    Earnings before income
     taxes                     11,550       14,536       19,120       23,016
    Provision for income
     taxes                      3,770        4,715        6,270        7,550
    -------------------------------------------------------------------------
    Net earnings          $     7,780  $     9,821  $    12,850  $    15,466
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings per share
      Basic               $      0.32  $      0.39  $      0.53  $      0.62
      Diluted                    0.32         0.39         0.53         0.61

    Weighted average
     number of shares
     outstanding ('000)        24,312       25,083       24,268       25,073



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

                                     For the three               For the six
                                      months ended              months ended
    (Unaudited)              August 1,     July 26,    August 1,     July 26,
    (In thousands of dollars)    2009         2008         2009         2008
    -------------------------------------------------------------------------
    Net earnings          $     7,780  $     9,821  $    12,850  $    15,466
    -------------------------------------------------------------------------
    Other comprehensive income
    Change in fair value
     of forward exchange
     contracts                 (1,152)         283       (1,703)         492
    Realized forward
     exchange contracts
     reclassified to
     net earnings                 345         (147)      (1,104)        (402)
    Income tax recovery
     (expense)                    257          (43)         893          (24)
    -------------------------------------------------------------------------
                                 (550)          93       (1,914)          66
    -------------------------------------------------------------------------
    Comprehensive income  $     7,230  $     9,914  $    10,936  $    15,532
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                                     For the three               For the six
                                      months ended              months ended
    (Unaudited)              August 1,     July 26,    August 1,     July 26,
    (In thousands of dollars)    2009         2008         2009         2008
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net earnings          $     7,780  $     9,821  $    12,850  $    15,466
    Adjustments to
     determine net cash
     from operating
     activities
      Depreciation and
       amortization             4,484        4,166        8,787        8,205
      Write-off of
       fixed assets                89           73           89          173
      Amortization of
       deferred lease
       inducements               (373)        (346)        (729)        (684)
      Stock-based
       compensation               (20)         180          163          453
      Future income
       taxes                        -            -            -         (927)
    -------------------------------------------------------------------------
                               11,960       13,894       21,160       22,686
    Net change in non-
     cash working
     capital items
     related to
     operations                (1,523)       1,186      (14,700)      (8,516)
    Deferred lease
     inducements                  998          957        1,176        1,426
    -------------------------------------------------------------------------
    Cash flows related
     to operating
     activities                11,435       16,037        7,636       15,596
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Repayment of capital
     lease obligations           (336)        (316)        (667)        (628)
    Proceeds of long-
     term debt                      -            -            -       18,000
    Repayment of long-
     term debt                 (2,058)      (2,717)      (4,634)      (5,135)
    Issue of capital
     stock upon
     exercise of
     options                    1,010          402        1,010          402
    Purchase of Class A
     subordinate voting
     shares for
     cancellation                   -       (2,995)           -       (2,995)
    Dividends paid             (4,239)      (3,133)      (8,478)      (6,266)
    -------------------------------------------------------------------------
    Cash flows related
     to financing
     activities                (5,623)      (8,759)     (12,769)       3,378
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Decrease (increase)
     in short-term
     investments                    -         (648)      36,643       12,626
    Increase in long-
     term investments               -            -      (10,000)           -
    Additions to fixed
     assets                    (6,344)      (3,343)     (11,918)     (15,230)
    -------------------------------------------------------------------------
    Cash flows related
     to investing
     activities                (6,344)      (3,991)      14,725       (2,604)
    -------------------------------------------------------------------------

    Increase (decrease)
     in cash and cash
     equivalents                 (532)       3,287        9,592       16,370
    Cash and cash
     equivalents,
     beginning of period       20,158       16,929       10,034        3,846
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end
     of period            $    19,626  $    20,216  $    19,626  $    20,216
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary information:
    Interest paid during
     the period           $       326  $       494  $       703  $       928
    Income taxes paid
     during the period          5,275        4,753       11,344       13,151
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                                     For the three               For the six
                                      months ended              months ended
    (Unaudited)              August 1,     July 26,    August 1,     July 26,
    (In thousands of dollars)    2009         2008         2009         2008
    -------------------------------------------------------------------------
    Sales by country
    Canada                $    80,180  $    87,076  $   150,518  $   156,282
    United States               1,257        1,604        2,694        3,014
    -------------------------------------------------------------------------
                          $    81,437  $    88,680  $   153,212  $   159,296
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Sales by division
    Ladies' Clothing      $    44,869  $    48,932  $    86,572  $    90,592
    Men's Clothing             14,275       14,944       25,419       25,809
    Footwear                    9,051       10,339       16,712       17,810
    Accessories                13,242       14,465       24,509       25,085
    -------------------------------------------------------------------------
                          $    81,437  $    88,680  $   153,212  $   159,296
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings (loss)
    Canada                $     8,119  $     9,841  $    13,427  $    15,571
    United States                (339)         (20)        (577)        (105)
    -------------------------------------------------------------------------
                          $     7,780  $     9,821  $    12,850  $    15,466
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Fixed assets
    Canada                $    90,831  $    90,220  $    90,831  $    90,220
    United States                 855        1,098          855        1,098
    -------------------------------------------------------------------------
                          $    91,686  $    91,318  $    91,686  $    91,318
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




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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