Reitmans (Canada) Limited Announces Year-End Results



    MONTREAL, April 8 /CNW Telbec/ - Sales for the year ended January 31,
2009 decreased to $1,050,861,000 or 0.6% as compared with $1,057,720,000 for
the year ended February 2, 2008. Same store sales decreased 4.0%. Operating
earnings before depreciation and amortization (EBITDA(1)) decreased 9.2% to
$180,931,000 as compared with $199,176,000 last year. Net earnings and diluted
EPS decreased 25.3% to $85,806,000 or $1.21 a share. Last year, net earnings
were $114,902,000 or $1.60 per share; excluding the settlement of the Québec
income tax reassessments net earnings were $107,753,000 or $1.50 per share.
    Sales for the fourth quarter ended January 31, 2009 decreased 2.9% to
$261,801,000 as compared with $269,618,000 for the fourth quarter ended
February 2, 2008. Same store sales for the thirteen weeks decreased 5.6% in
the period. Operating earnings before depreciation and amortization
(EBITDA(1)) for the quarter decreased 42.9% to $29,739,000 as compared with
$52,125,000 last year. Net earnings for the quarter decreased 75.8% to
$8,981,000 and diluted EPS amounted to $0.13 per share. Last year, fourth
quarter net earnings amounted to $37,047,000 and diluted EPS of $0.52 per
share; excluding the settlement of the Québec income tax reassessments net
earnings were $28,506,000 or $0.40 per share.
    During the year, the Company opened 47 new stores and closed 32.
Accordingly, at year-end, there were 973 stores in operation, consisting of
372 Reitmans, 166 Smart Set, 59 RW & CO., 76 Thyme Maternity, 161 Penningtons,
123 Addition Elle and 16 Cassis as compared with a total of 958 stores last
year.
    At the Board of Directors meeting held on April 8, 2009, a quarterly cash
dividend (constituting eligible dividends) of $0.18 per share on all
outstanding Class A non-voting and Common shares of the Company was declared,
payable April 30, 2009 to shareholders of record on April 20, 2009.
    Financial statements are attached. For management's commentary on the
full year and fourth quarter results, please refer to the attached
Management's Discussion and Analysis of Financial Conditions and Results of
Operations for the fiscal year ended January 31, 2009.

    Montreal, April 8, 2009

    Jeremy H. Reitman, President
    Telephone: (514) 385-2630
    Corporate Website: www.reitmans.ca

    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. Consequently, actual future results
may differ materially from the anticipated results expressed in
forward-looking statements. The reader should not place undue reliance on the
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.

    
    (1) This release includes reference to certain Non-GAAP Financial
        Measures such as operating earnings before depreciation and
        amortization and EBITDA, which are defined as earnings before
        interest, taxes, depreciation and amortization and investment income.
        The Company believes such measures provide meaningful information on
        the Company's performance and operating results. However, readers
        should know that such Non-GAAP Financial Measures have no
        standardized meaning as prescribed by GAAP and may not be comparable
        to similar measures presented by other companies. Accordingly, they
        should not be considered in isolation.


    CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
    (in thousands except per share amounts)

                                               For                       For
                           the twelve months ended    the three months ended
                           January 31,  February 2,  January 31,  February 2,
                                 2009         2008         2009         2008

    Sales                 $ 1,050,861  $ 1,057,720  $   261,801  $   269,618
    Cost of goods
     sold and selling,
     general and
     administrative
     expenses (note 2)        869,930      858,544      232,062      217,493
                          ------------ ------------ ------------ ------------
                              180,931      199,176       29,739       52,125
    Depreciation and
     amortization              58,184       50,098       14,887       13,598
                          ------------ ------------ ------------ ------------
    Operating earnings
     before the undernoted    122,747      149,078       14,852       38,527
    Investment income
     (loss) (note 15)           5,351       11,128         (528)       1,451
    Interest on long-term
     debt                         921          990          224          241
                          ------------ ------------ ------------ ------------
    Earnings before
     income taxes             127,177      159,216       14,100       39,737

    Income taxes (note 9):
      Current                  46,519       54,614        7,950       11,282
      Future                   (5,148)      (3,151)      (2,831)         (51)
                          ------------ ------------ ------------ ------------
                               41,371       51,463        5,119       11,231
      Québec tax
       reassessments -
       current                      -       (7,149)           -       (8,541)
                          ------------ ------------ ------------ ------------
                               41,371       44,314        5,119        2,690
                          ------------ ------------ ------------ ------------
    Net earnings           $   85,806  $   114,902  $     8,981  $    37,047
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Earnings per share
     (note 11):
      Basic                $     1.21  $      1.61  $      0.13  $      0.52
      Diluted                    1.21         1.60         0.13         0.52


    The accompanying notes are an integral part of these consolidated
    financial statements.


    CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
    (in thousands)
                                               For                       For
                           the twelve months ended    the three months ended
                           January 31,  February 2,  January 31,  February 2,
                                 2009         2008         2009         2008

    CASH FLOWS (USED IN)
     FROM OPERATING
     ACTIVITIES
      Net earnings        $    85,806  $   114,902  $     8,981  $    37,047
      Adjustments for:
        Depreciation and
         amortization          58,184       50,098       14,887       13,598
        Future income
         taxes                 (5,148)      (3,151)      (2,831)         (51)
        Stock-based
         compensation             600          932           81          161
        Amortization of
         deferred lease
         credits               (5,200)      (4,625)      (1,270)      (1,209)
        Deferred lease
         credits                5,859        5,233          572          978
        Pension
         contribution          (1,428)        (307)        (148)        (307)
        Pension expense         2,825        1,533          678          333
        Loss(gain)on
         sale of
         marketable
         securities             2,350         (474)       2,350        1,517
        Foreign exchange
         gain                  (1,371)      (1,011)         (81)        (910)
      Changes in non-cash
       working capital
       relating to
       operations             (13,482)     (29,952)      23,613       11,422
                          ------------ ------------ ------------ ------------
                              128,995      133,178       46,832       62,579

    CASH FLOWS (USED IN)
     FROM INVESTING
     ACTIVITIES
      Purchases of
       marketable
       securities             (17,403)           -      (17,403)           -
      Proceeds on sale
       of marketable
       securities               4,642       21,900        4,642        9,054
      Additions to
       capital assets         (58,152)     (73,402)     (12,645)     (17,284)
                          ------------ ------------ ------------ ------------
                              (70,913)     (51,502)     (25,406)      (8,230)

    CASH FLOWS (USED IN)
     FROM FINANCING
     ACTIVITIES
      Dividends paid          (50,885)     (46,930)     (12,680)     (12,761)
      Purchase of
       Class A non-voting
       shares for
       cancellation            (7,915)     (11,021)      (3,842)           -
      Repayment of
       long-term debt          (1,146)      (1,076)        (294)        (276)
      Proceeds from
       issue of share
       capital                    246        2,150           68          618
                          ------------ ------------ ------------ ------------
                              (59,700)     (56,877)     (16,748)     (12,419)

    FOREIGN EXCHANGE GAIN
     ON CASH HELD IN
     FOREIGN CURRENCY           1,371        1,011           81          910
                          ------------ ------------ ------------ ------------

    NET (DECREASE)
     INCREASE IN CASH
     AND CASH EQUIVALENTS        (247)      25,810        4,759       42,840

    CASH AND CASH
     EQUIVALENTS,
     BEGINNING OF PERIOD      214,301      188,491      209,295      171,461
                          ------------ ------------ ------------ ------------

    CASH AND CASH
     EQUIVALENTS, END OF
     PERIOD               $   214,054  $   214,301  $   214,054  $   214,301
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Supplemental disclosure of cash flow information (note 15)
    Cash and cash equivalents consist of cash balances with banks and
    investments in short-term deposits.
    The accompanying notes are an integral part of these consolidated
    financial statements.


    CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
    (in thousands)
                                               For                       For
                           the twelve months ended    the three months ended
                           January 31,  February 2,  January 31,  February 2,
                                 2009         2008         2009         2008
    SHARE CAPITAL
    Balance, beginning
     of period            $    23,777  $    21,323  $    23,892  $    23,135
      Cash consideration
       on exercise of
       stock options              246        2,150           68          618
      Ascribed value
       credited to share
       capital from
       exercise of
       stock options               63          514           19           24
      Cancellation
       of shares
       pursuant to
       stock repurchase
       program                   (256)        (210)        (149)           -
                          ------------ ------------ ------------ ------------
    Balance, end of
     period                    23,830       23,777       23,830       23,777
                          ------------ ------------ ------------ ------------

    CONTRIBUTED SURPLUS
    Balance, beginning
     of period                  4,001        3,583        4,476        3,864
      Stock option
       compensation
       costs                      600          932           81          161
      Ascribed value
       credited to share
       capital from
       exercise of stock
       options                    (63)        (514)         (19)         (24)
                          ------------ ------------ ------------ ------------
    Balance, end of
     period                     4,538        4,001        4,538        4,001
                          ------------ ------------ ------------ ------------

    RETAINED EARNINGS
    Balance, beginning
     of period                468,374      411,213      509,753      444,088
      Adjustment to
       opening retained
       earnings due to
       adoption of new
       accounting
       standard (net of
       tax of $3,121)
       (note 2)                 6,725            -            -            -
      Net earnings             85,806      114,902        8,981       37,047
      Dividends               (50,885)     (46,930)     (12,680)     (12,761)
      Premium on
       repurchase of
       Class A non-voting
       shares                  (7,659)     (10,811)      (3,693)           -
                          ------------ ------------ ------------ ------------
    Balance, end of
     period                   502,361      468,374      502,361      468,374
                          ------------ ------------ ------------ ------------

    ACCUMULATED OTHER
     COMPREHENSIVE INCOME
     (LOSS)
    Balance, beginning
     of period                 (1,033)           -       (4,140)        (769)
      Adjustment to
       opening balance
       due to the new
       accounting
       policies adopted
       regarding financial
       instruments (net
       of tax of $523)              -        2,883            -            -
      Net unrealized loss
       on available-for-sale
       financial assets
       arising during the
       period (net of tax
       of $811 for the
       year ended and $122
       for the three months
       ended January 31,
       2009; net of tax of
       $611 for the year
       ended and $274 for
       the three months
       ended February 2,
       2008)                   (9,185)      (3,517)      (6,078)      (1,611)
      Reclassification
       adjustment for
       net losses (gains)
       included in net
       earnings (net of
       tax of $322; net
       of tax of $75 for
       the year ended and
       $257 for the three
       months ended
       February 2, 2008)        2,028         (399)       2,028        1,347
                          ------------ ------------ ------------ ------------
    Balance, end of
     period(1)                 (8,190)      (1,033)      (8,190)      (1,033)
                          ------------ ------------ ------------ ------------

    Total Shareholders'
     Equity               $   522,539  $   495,119  $   522,539  $   495,119
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    (1) Available-for-sale financial investments constitute the sole item in
        accumulated other comprehensive income (loss).

    The accompanying notes are an integral part of these consolidated
    financial statements.

    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
    (in thousands)
                                               For                       For
                           the twelve months ended    the three months ended
                           January 31,  February 2,  January 31,  February 2,
                                 2009         2008         2009         2008

    Net earnings          $    85,806  $   114,902  $     8,981  $    37,047
    Other comprehensive
     income (loss):
      Net unrealized
       loss on available-
       for-sale financial
       assets arising
       during the period
       (net of tax of
       $811 for the year
       ended and $122 for
       the three months
       ended January 31,
       2009; net of tax
       of $611 for the
       year ended and
       $274 for the three
       months ended
       February 2, 2008)       (9,185)      (3,517)      (6,078)      (1,611)
      Reclassification
       adjustment for net
       losses (gains)
       included in net
       earnings (net of
       tax of $322; net
       of tax of $75 for
       the year ended and
       $257 for the three
       months ended
       February 2, 2008)        2,028         (399)       2,028        1,347
                          ------------ ------------ ------------ ------------
                               (7,157)      (3,916)      (4,050)        (264)
                          ------------ ------------ ------------ ------------

    Comprehensive income  $    78,649  $   110,986  $     4,931  $    36,783
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    The accompanying notes are an integral part of these consolidated
    financial statements.


    CONSOLIDATED BALANCE SHEETS (Unaudited)
    (in thousands)
                                                     January 31,  February 2,
                                                           2009         2008
                                   ASSETS
    CURRENT ASSETS
      Cash and cash equivalents
      (note 15)                                     $   214,054  $   214,301
      Marketable securities
      (note 5)                                           32,818       30,053
      Accounts receivable                                 2,689        3,546
      Income taxes recoverable                            3,826            -
      Merchandise inventories
      (note 2)                                           64,061       52,441
      Prepaid expenses                                   11,402       22,847
      Future income taxes
      (note 9)                                            3,598        1,772
                                                    ------------ ------------
        Total Current Assets                            332,448      324,960

    CAPITAL ASSETS (note 6)                             249,891      247,963

    GOODWILL                                             42,426       42,426

    FUTURE INCOME TAXES (note 9)                          8,474        5,611
                                                    ------------ ------------

                                                    $   633,239  $   620,960
                                                    ------------ ------------
                                                    ------------ ------------

                     LIABILITIES AND SHAREHOLDERS' EQUITY

    CURRENT LIABILITIES
      Accounts payable and accrued items            $    70,632  $    69,189
      Income taxes payable                                    -       16,546
      Future income taxes (note 9)                            -          761
      Current portion of long-term debt (note 8)          1,220        1,146
                                                    ------------ ------------
      Total Current Liabilities                          71,852       87,642

    DEFERRED LEASE CREDITS                               22,125       21,466

    LONG-TERM DEBT (note 8)                              12,731       13,951

    FUTURE INCOME TAXES (note 9)                             74          261

    ACCRUED PENSION LIABILITY (note 7)                    3,918        2,521

    SHAREHOLDERS' EQUITY
      Share capital (note 10)                            23,830       23,777
      Contributed surplus                                 4,538        4,001
      Retained earnings (note 2)                        502,361      468,374
      Accumulated other comprehensive loss               (8,190)      (1,033)
                                                    ------------ ------------
                                                        494,171      467,341
                                                    ------------ ------------
      Total Shareholders' Equity                        522,539      495,119
                                                    ------------ ------------
    Commitments (note 12)
                                                    $   633,239  $   620,960
                                                    ------------ ------------
                                                    ------------ ------------

    The accompanying notes are an integral part of these consolidated
    financial statements.


                          REITMANS (CANADA) LIMITED
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          For the years ended January 31, 2009 and February 2, 2008
             (all amounts in thousands except per share amounts)

    Reitmans (Canada) Limited ("the Company") is incorporated under the Canada
Business Corporations Act and its principal business activity is the sale of
women's wear at retail.

    1. BASIS OF PRESENTATION

       The financial statements and accompanying notes have been prepared on
       a consolidated basis and reflect the consolidated financial position
       of the Company and its wholly-owned subsidiaries. All intercompany
       balances and transactions have been eliminated from these financial
       statements. The Company's fiscal year ends on the Saturday closest to
       the end of January. All references to 2009 and 2008 represent the
       fiscal years ended January 31, 2009 and February 2, 2008,
       respectively.

    2. ADOPTION OF NEW ACCOUNTING STANDARDS

       CICA Section 3031 - Inventories

       In June 2007, the CICA issued Handbook Section 3031, Inventories,
       which replaced Section 3030 and harmonizes the Canadian standards
       related to inventories with International Financial Reporting
       Standards ("IFRS"). This section provided changes to the measurement
       and more extensive guidance on the determination of cost, including
       allocation of overhead; narrows the permitted cost formulas; requires
       impairment testing and expands the disclosure requirements to increase
       transparency. This section applies to interim and annual financial
       statements for fiscal years beginning on or after January 1, 2008. The
       Company adopted this standard in the first quarter of fiscal 2009
       retrospectively, without restatement of prior periods.

       The transitional adjustments resulting from the implementation of
       Section 3031 were recognized in the first quarter of fiscal 2009
       opening balance of retained earnings and prior periods have not been
       restated. Upon implementation of these requirements, an increase in
       opening inventories of $9,846, an increase in taxes payable of $3,121
       and an increase of $6,725 to opening retained earnings were recorded
       on the consolidated balance sheet resulting from the application of
       this new standard. The cost of inventory recognized as an expense and
       included in cost of goods sold and selling, general and administrative
       expenses for the year ended January 31, 2009 was $363,523. During the
       year, the Company recorded $2,275 of write-downs of inventory as a
       result of net realizable value being lower than cost and no inventory
       write-downs recognized in previous periods were reversed. The impact
       of the adoption of the new accounting standard on net earnings for the
       year ended January 31, 2009 was a decrease of $394.

       CICA Section 1400 - General Standards of Financial Statement
       Presentation

       In June 2007, the CICA amended Handbook Section 1400, General
       Standards of Financial Statement Presentation, which is effective for
       interim periods beginning on or after January 1, 2008 and which
       includes requirements to assess and disclose the Company's ability to
       continue as a going concern. The adoption of the amended Section had
       no impact on the consolidated financial statements of the Company.

       EIC 173 - Credit Risk and the Fair Value of Financial Assets and
       Financial Liabilities

       In January 2009, the CICA issued Emerging Issue Committee Abstract 173
       ("EIC 173") Credit Risk and the Fair Value of Financial Assets and
       Financial Liabilities. EIC 173 requires that a company take into
       account its own credit risk and the credit risk of its counterparty in
       determining the fair value of financial assets and financial
       liabilities. This Abstract must be applied retrospectively without
       restatement of prior periods to all financial assets and liabilities
       measured at fair value in interim and annual financial statements for
       periods ending on or after January 20, 2009. The adoption of these new
       recommendations had no impact on the Company's consolidated
       financial results.

    3. RECENT ACCOUNTING PRONOUNCEMENTS

       CICA Section 3064 - Goodwill and Intangible Assets

       In February 2008, the CICA issued Handbook Section 3064, Goodwill and
       Intangible Assets, which replaces Section 3062, Goodwill and Other
       Intangible Assets, and amends Section 1000, Financial Statement
       Concepts. The new section establishes standards for the recognition,
       measurement, presentation and disclosure of goodwill and other
       intangible assets subsequent to its initial recognition. Standards
       concerning goodwill are unchanged from the standards included in the
       previous Section 3062. This new standard is applicable to fiscal
       years beginning on or after October 1, 2008. The Company has
       evaluated the new section and determined that there is no impact of
       its adoption on its consolidated financial statements.

       International Financial Reporting Standards

       The Canadian Accounting Standards Board has confirmed that the use of
       IFRS will be required for publicly accountable profit-oriented
       enterprises. IFRS will replace Canada's current GAAP for those
       enterprises. These new standards are applicable to fiscal years
       beginning on or after January 1, 2011. Companies will be required to
       provide comparative IFRS information for the previous fiscal year. The
       Company will implement this standard in its first quarter of fiscal
       year ending January 28, 2012 and is currently evaluating the impact of
       the transition to IFRS and will continue to invest in training and
       resources throughout the transition to facilitate a timely conversion.

    4. SIGNIFICANT ACCOUNTING POLICIES

    a) Revenue Recognition

       Sales are recognized when a customer purchases and takes delivery of
       the product. Reported sales are net of returns and an estimated
       allowance for returns and excludes sales taxes. Gift
       certificates/cards sold are recorded as a liability and revenue is
       recognized when the gift certificates/cards are redeemed.

    b) Cash and Cash Equivalents

       Cash and cash equivalents consist of cash and short-term deposits with
       original maturities of three months or less.

    c) Marketable Securities

       Marketable securities consist primarily of preferred shares of
       Canadian public companies.

    d) Inventories

       Merchandise inventories are valued at the lower of cost, determined on
       an average basis using the retail inventory method and net realizable
       value. Costs include the cost of purchase, transportation costs that
       are directly incurred to bring inventories to their present location
       and condition and certain distribution centre costs related to
       inventories. The Company estimates net realizable value as the amount
       that inventories are expected to be sold taking into consideration
       fluctuations of retail prices due to seasonality. Inventories are
       written down to net realizable value when the cost of inventories is
       not estimated to be recoverable due to declining selling prices.

    e) Capital Assets

       Capital assets are recorded at cost and are depreciated at the
       following annual rates applied to their cost, commencing with the year
       of acquisition:

            Buildings and improvements                              4% to 15%
            Fixtures and equipment                             10% to 33 1/3%

       Leasehold improvements are depreciated at the lesser of the estimated
       useful life of the asset and the lease term. Tenant allowances are
       recorded as deferred lease credits and amortized as a reduction of
       rent expense over the term of the related leases.

       Expenditures associated with the opening of new stores, other than
       fixtures, equipment and leasehold improvements, are expensed as
       incurred.

       The Company carries on its operations in premises under leases of
       varying terms, which are accounted for as operating leases.

       Depreciation and amortization expense includes the write-off of assets
       associated with store closings and renovations.

       Long-lived assets are reviewed for recoverability whenever events
       indicate an impairment may exist. An impairment loss is measured as
       the amount by which the carrying value of an asset or a group of
       assets exceeds its fair value. If such assets or group of assets are
       considered impaired, an impairment loss is recognized and the carrying
       value of the long-lived asset is adjusted.

    f) Goodwill

       Goodwill is not amortized but is tested for impairment annually or
       more frequently if events or changes in circumstances indicate that
       the asset might be impaired. The impairment test is carried out in two
       steps. In the first step the carrying amount of the reporting unit is
       compared with its fair value. When the fair value of a reporting unit
       exceeds its carrying amount, goodwill of the reporting unit is
       considered not to be impaired and the second step of the impairment
       test is unnecessary. The second step is carried out when the carrying
       amount of a reporting unit exceeds its fair value, in which case the
       implied fair value of the reporting unit's goodwill is compared with
       its carrying amount to measure the amount of the impairment loss, if
       any.

       The Company conducted the annual impairment test on January 31, 2009
       and concluded that there was no indication of impairment in the
       carrying value of goodwill.

    g) Income Taxes

       The Company uses the asset and liability method when accounting for
       income taxes. Under this method, future income taxes are recognized
       for the future income tax consequences attributable to differences
       between the financial statement carrying values and their respective
       income tax basis (temporary differences). Future income tax assets and
       liabilities are measured using enacted or substantively enacted income
       tax rates expected to apply to taxable income in the years in which
       temporary differences are expected to be recovered or settled. The
       effect on future income tax assets and liabilities of a change in tax
       rates is included in income in the period that includes the enactment
       date. Future income tax assets are evaluated and if realization is not
       considered to be more likely than not, a valuation allowance is
       provided.

       The Company's income tax provision is based on tax rules and
       regulations that are subject to interpretation and require estimates
       and assumptions that may be challenged by taxation authorities. The
       Company's estimates of income tax assets and liabilities are
       periodically reviewed and adjusted as circumstances warrant, such as
       changes to tax laws and administrative guidance, and the resolution of
       uncertainties through either the conclusion of tax audits or
       expiration of prescribed time limits within the relevant statutes. The
       final results of government tax audits and other events may vary
       materially compared to estimates and assumptions used by management in
       determining the provision for income taxes and in valuing income tax
       assets and liabilities.

    h) Pension

       The Company maintains a contributory defined benefit plan that
       provides for pensions based on length of service and average earnings
       in the best five consecutive years. The Company also sponsors a
       Supplemental Executive Retirement Plan ("SERP"), which is neither
       registered nor pre-funded. The costs of these retirement plans are
       determined periodically by independent actuaries. Pension
       expense/income is included annually in operations.

       The Company records its pension costs according to the following
       policies:

       - The cost of pensions is actuarially determined using the projected
         benefit method prorated on service.
       - For the purpose of calculating expected return on plan assets, the
         valuation of those assets are based on quoted market values.
       - Past service costs from plan amendments are amortized on a straight-
         line basis over the average remaining service period of employees
         active at the date of the amendment.
       - Experience gains or losses arising on accrued benefit obligations
         and plan assets are recognized in the period in which they occur.

       The difference between the cumulative amounts expensed and the funding
       contributions is recorded on the balance sheet as an accrued pension
       asset or an accrued pension liability, as the case may be.

    i) Stock-Based Compensation

       The Company accounts for stock-based compensation and other stock-
       based payments using the fair value based method. Compensation cost is
       measured at the fair value at the date of grant and is expensed over
       the vesting period, which is normally five years. The Company accounts
       for forfeitures as they occur.

    j) Earnings per Share

       Basic earnings per share is determined using the weighted average
       number of Class A non-voting and Common shares outstanding during the
       year. The treasury stock method is used for calculating diluted
       earnings per share. In calculating diluted earnings per share, the
       weighted average number of shares outstanding is increased to include
       additional shares issued from the assumed exercise of options, if
       dilutive. The number of additional shares is calculated by assuming
       that the proceeds from such exercises, as well as the amount of
       unrecognized stock-based compensation, are used to purchase Class A
       non-voting shares at the average market share price during the
       reporting period.

    k) Foreign Currency Translation

       Monetary assets and liabilities denominated in foreign currencies are
       translated into Canadian dollars at the year-end exchange rate. Other
       balance sheet items denominated in foreign currencies are translated
       into Canadian dollars at the exchange rates prevailing at the
       respective transaction date. Revenues and expenses denominated in
       foreign currencies are translated into Canadian dollars at average
       rates of exchange prevailing during the year. The resulting gains or
       losses on translation are included in the determination of net
       earnings.

    l) Financial Instruments

       Cash and cash equivalents are classified as "financial assets held-
       for-trading" and are measured at fair value. These financial assets
       are marked-to-market through net earnings and recorded as investment
       income at each period end.

       Accounts receivable are classified as "loans and receivables" and are
       recorded at cost, which at initial measurement corresponds to fair
       value. After their initial fair value measurement, they are measured
       at amortized cost using the effective interest rate method.

       Marketable securities are classified as "available-for-sale
       securities". These financial assets are marked-to-market through other
       comprehensive income at each period end.

       Accounts payable and accrued items and long-term debt are classified
       as "other financial liabilities". They are initially measured at fair
       value and subsequent revaluations are recorded at amortized cost using
       the effective interest rate method.

       The Company makes use of foreign exchange option contracts to manage
       its US dollar exposure. These derivative financial instruments are not
       used for trading or speculative purposes and are reported on a mark-
       to-market basis. The related gains and losses are included in the
       determination of net earnings.

       The Company does not separately account for embedded US dollar foreign
       exchange derivatives in its purchase contracts of merchandise from
       suppliers in China because the US dollar has been determined to be
       commonly used in that country's economic environment.

    m) Use of Estimates

       In preparing the Company's financial statements, management is
       required to make estimates and assumptions that affect the reported
       amounts of assets and liabilities, the disclosure of contingent assets
       and liabilities at the date of the financial statements and reported
       amounts of revenues and expenses during the period. Financial results
       as determined by actual events may differ from these estimates.

       Significant areas requiring the use of management estimates and
       assumptions include the key assumptions used in determining the useful
       life and recoverability of capital assets, stock-based compensation
       costs, future income tax assets and liabilities, inventory valuation,
       sales returns provision and gift certificate/card liabilities.

    5. MARKETABLE SECURITIES

       At January 31, 2009, marketable securities amounted to $32,818
       reported at fair value (cost of $41,660) as compared with $30,053 last
       year (cost of $31,249).

    6. CAPITAL ASSETS

                                                      2009
                                     ----------------------------------------
                                                   Accumulated
                                                  Depreciation
                                                           and      Net Book
                                            Cost  Amortization         Value
                                     ----------------------------------------

       Land                          $     5,860   $         -   $     5,860
       Buildings and improvements         52,153        15,517        36,636
       Fixtures and equipment            198,992        92,619       106,373
       Leasehold improvements            192,281        91,259       101,022
                                     ----------------------------------------
                                     $   449,286   $   199,395   $   249,891
                                     ----------------------------------------
                                     ----------------------------------------

                                                      2008
                                     ----------------------------------------
                                                   Accumulated
                                                  Depreciation
                                                           and      Net Book
                                            Cost  Amortization         Value
                                     ----------------------------------------
       Land                          $     4,615   $         -   $     4,615
       Buildings and improvements         49,507        11,671        37,836
       Fixtures and equipment            187,333        79,282       108,051
       Leasehold improvements            176,367        78,906        97,461
                                     ----------------------------------------
                                     $   417,822   $   169,859   $   247,963
                                     ----------------------------------------
                                     ----------------------------------------

       During the year, due to various store closings and renovations, the
       Company wrote-off assets with a net book value of $2,577 (2008 -
       $1,793). The write-offs are included in depreciation and amortization
       expense.

    7. PENSION

       The Company's contributory defined benefit plan ("Plan") was
       actuarially valued as at December 31, 2007 and the obligation was
       projected to January 31, 2009.

       Actuarial assumptions, based upon data as of December 31, 2008, used
       in calculating the Company's accrued benefit plan obligations and the
       net pension cost were as follows:

                                                           2009         2008
                                                    ------------ ------------
         Accrued benefit obligation
           Discount rate                                   6.30%        5.17%
           Rate of increase in salary levels               3.00%        3.00%

         Net pension cost
           Discount rate                                   5.17%        4.95%
           Expected long-term rate of return
            on plan assets                                 7.50%        7.50%
           Rate of increase in salary levels               3.00%        3.00%

       In addition, the Company sponsors a Supplemental Executive Retirement
       Plan ("SERP") covering certain pension plan members. This special plan
       is subject to the same actuarial assumptions and methods as the Plan.

       The following tables present reconciliations of the pension
       obligations, the plan assets and the funded status of the benefit
       plans:

                                                       2009
                                     ----------------------------------------
    Pension Obligation                      Plan          SERP         Total
                                     ----------------------------------------
    Pension obligation, beginning
     of year                         $    11,180   $    10,114   $    21,294
    Employee contributions                   140             -           140
    Current service cost                     521           284           805
    Interest cost                            594           537         1,131
    Benefits paid                         (1,920)          (44)       (1,964)
    Actuarial gains                         (839)       (1,256)       (2,095)
                                     ------------  ------------  ------------
    Pension obligation, end of year  $     9,676   $     9,635   $    19,311
                                     ------------  ------------  ------------
                                     ------------  ------------  ------------
    Plan Assets

    Fair value of plan assets,
     beginning of year               $    11,683   $         -   $    11,683
    Employer contributions                 1,384            44         1,428
    Employee contributions                   140             -           140
    Actual return on plan assets          (2,311)            -        (2,311)
    Benefits paid                         (1,920)          (44)       (1,964)
                                     ------------  ------------  ------------
    Fair value of plan assets,
     end of year                     $     8,976   $         -   $     8,976
                                     ------------  ------------  ------------
                                     ------------  ------------  ------------
    Funded Status

    Accrued benefit obligation       $     9,676   $     9,635   $    19,311
    Fair value of plan assets              8,976             -         8,976
                                     ------------  ------------  ------------
    Funded status                           (700)       (9,635)      (10,335)
    Unamortized past service cost              -         6,417         6,417
                                     ------------  ------------  ------------
    Accrued pension benefit
     (liability) asset               $      (700)  $    (3,218)  $    (3,918)
                                     ------------  ------------  ------------
                                     ------------  ------------  ------------

                                                       2008
                                     ----------------------------------------
    Pension Obligation                      Plan          SERP         Total
                                     ----------------------------------------
    Pension obligation, beginning
     of year                         $    10,734   $     9,717   $    20,451
    Employee contributions                   138             -           138
    Current service cost                     493           217           710
    Interest cost                            551           492         1,043
    Benefits paid                           (444)            -          (444)
    Actuarial gains                         (292)         (312)         (604)
                                     ------------  ------------  ------------
    Pension obligation, end of year  $    11,180   $    10,114   $    21,294
                                     ------------  ------------  ------------
    Plan Assets

    Fair value of plan assets,
     beginning of year               $    11,391   $         -   $    11,391
    Employer contributions                   307             -           307
    Employee contributions                   138             -           138
    Actual return on plan assets             291             -           291
    Benefits paid                           (444)            -          (444)
                                     ------------  ------------  ------------
    Fair value of plan assets,
     end of year                     $    11,683   $         -   $    11,683
                                     ------------  ------------  ------------
                                     ------------  ------------  ------------
    Funded Status

    Accrued benefit obligation       $    11,180   $    10,114   $    21,294
    Fair value of plan assets             11,683             -        11,683
                                     ------------  ------------  ------------
    Funded status                            503       (10,114)       (9,611)
    Unamortized past service cost              -         7,090         7,090
                                     ------------  ------------  ------------
    Accrued pension benefit
     (liability) asset               $       503   $    (3,024)  $    (2,521)
                                     ------------  ------------  ------------
                                     ------------  ------------  ------------


    The Company's net annual benefit plans costs consist of the following:

                                                       2009
                                     ----------------------------------------
                                            Plan          SERP         Total
                                     ----------------------------------------
    Pension Costs

    Current service cost             $       521   $       284   $       805
    Interest cost                            594           537         1,131
    Actual return on plan assets           2,311             -         2,311
    Actuarial gains                         (839)       (1,256)       (2,095)
                                     ------------  ------------  ------------
    Elements of employee future
     benefits costs before
     adjustments to recognize the
     long-term nature of employee
     future benefit costs                  2,587          (435)        2,152

    Difference between expected
     return and actual return on
     plan assets for year                 (3,189)            -        (3,189)

    Difference between actuarial
     (gains)/losses recognized
     for year and actual actuarial
     (gains)/losses on accrued
     benefit obligation for year           3,189             -         3,189

    Difference between amortization
     of past service costs and
     actual plan amendments for year           -           673           673
                                     ------------  ------------  ------------
    Net pension costs recognized     $     2,587   $       238   $     2,825
                                     ------------  ------------  ------------
                                     ------------  ------------  ------------

                                                       2008
                                    ----------------------------------------
                                            Plan          SERP         Total
                                    ----------------------------------------
    Pension Costs

    Current service cost             $       493   $       217   $       710
    Interest cost                            551           492         1,043
    Actual return on plan assets            (291)            -          (291)
    Actuarial gains                         (292)         (312)         (604)
                                     ------------  ------------  ------------
    Elements of employee future
     benefits costs before
     adjustments to recognize the
     long-term nature of employee
     future benefit costs                    461           397           858

    Difference between expected
     return and actual return on
     plan assets for year                   (560)            -          (560)

    Difference between actuarial
     (gains)/losses recognized
     for year and actual actuarial
     (gains)/losses on accrued
     benefit obligation for year             560             -           560

    Difference between amortization
     of past service costs and
     actual plan amendments for year           -           675           675
                                     ------------  ------------  ------------
    Net pension costs recognized     $       461   $     1,072   $     1,533
                                     ------------  ------------  ------------
                                     ------------  ------------  ------------

    The asset allocation of the major asset categories for each of the years
    was as follows:
                                                           2009         2008
                                                    ------------ ------------
       Equity securities                                     60%          64%
       Debt securities                                       37%          34%
       Cash and cash equivalents                              3%           2%
                                                    ------------ ------------
                                                            100%         100%
                                                    ------------ ------------
                                                    ------------ ------------

    8. LONG-TERM DEBT

                                                           2009         2008
                                                    ------------ ------------
       Mortgage bearing interest at 6.40%,
        payable in monthly instalments of
        principal and interest of $172,
        due November 2017 and secured by
        the Company's distribution centre           $    13,951  $    15,097

       Less current portion                               1,220        1,146
                                                    ------------ ------------
                                                    $    12,731  $    13,951
                                                    ------------ ------------
                                                    ------------ ------------


    Principal repayments on long-term debt are as follows:

    Fiscal years ending
    2010                                            $     1,220
    2011                                                  1,300
    2012                                                  1,384
    2013                                                  1,474
    2014                                                  1,570
    Subsequent years                                      7,003
                                                   ------------
                                                    $    13,951
                                                   ------------
                                                   ------------

    9. INCOME TAXES

    a) Future income taxes reflect the net effects of temporary differences
       between the carrying amounts of assets and liabilities for financial
       reporting purposes and the amounts used for income tax purposes.
       Significant components of the Company's future tax assets
       (liabilities) are as follows:

                                                           2009         2008
                                                    ------------ ------------
    Current assets
      Marketable securities                         $     1,205  $       163
      Inventory                                             280        1,609
      Accrued liabilities                                 2,667           -
                                                    ------------ ------------
                                                          4,152        1,772
      Valuation allowance                                  (554)           -
                                                    ------------ ------------
                                                    $     3,598  $     1,772
                                                    ------------ ------------
                                                    ------------ ------------
    Long-term assets
      Capital assets                                $     7,351  $     4,861
      Pension liability                                   1,068          690
      Other                                                  55           60
                                                    ------------ ------------
                                                    $     8,474  $     5,611
                                                    ------------ ------------
                                                    ------------ ------------
    Current liabilities
      Accrued liabilities                           $         -  $      (761)
                                                    ------------ ------------
                                                    $         -  $      (761)
                                                    ------------ ------------
                                                    ------------ ------------

    Long-term liabilities
      Marketable securities                         $       (33) $       (27)
      Capital assets                                        (41)        (234)
                                                    ------------ ------------
                                                    $       (74) $      (261)
                                                    ------------ ------------
                                                    ------------ ------------


    b) The Company's provision for income taxes is made up as follows:

                                                           2009         2008
                                                    ------------ ------------
    Provision for income taxes based on combined
     statutory rate of 32.22% (2008 - 34.37%)       $    40,976  $    54,723
    Changes in provision resulting from:
      Reserve for tax contingencies                           -       (2,504)
      Difference in tax rates of subsidiaries              (621)        (826)
      Tax recovery due to net capital loss
       carryback                                            402            -
      Tax exempt investment income                         (412)        (810)
      Permanent and other differences                       496          560
      Adjustment to prior years' taxes                      337            -
      Stock-based compensation                              193          320
      Québec tax reassessments                                -       (7,149)
                                                    ------------ ------------
    Income taxes                                    $    41,371  $    44,314
                                                    ------------ ------------
                                                    ------------ ------------

    Represented by:
      Current                                       $    46,519  $    54,614
      Future                                             (5,148)      (3,151)
      Québec tax reassessments - current                      -       (7,149)
                                                    ------------ ------------
                                                    $    41,371  $    44,314
                                                    ------------ ------------
                                                    ------------ ------------

    c) In January 2008, the Company entered into an agreement with the Canada
       Revenue Agency, Alberta Finance, the Ontario Ministry of Revenue and
       Revenue Québec to settle all matters arising from retroactive Quebec
       income tax reassessments. The final agreement called for the Company
       to pay $12,905 to settle all related outstanding matters which
       resulted in reduction in the Company's income tax expense in the
       amount of $7,149.

    10. SHARE CAPITAL

    a) The Class A non-voting shares and the Common shares of the Company
       rank equally and pari passu with respect to the right to receive
       dividends and upon any distribution of the assets of the Company.
       However, in the case of stock dividends, the holders of Class A non-
       voting shares shall have the right to receive Class A non-voting
       shares and the holders of Common shares shall have the right to
       receive Common shares.

    b) The Company has authorized an unlimited number of Class A non-voting
       shares.

       The following table summarizes Class A non-voting shares issued for
       each of the years listed:
                                                    -------------------------
                                                      Number of         Book
                                                         Shares        Value
                                                    ------------ ------------
         Balance February 3, 2007                        57,817  $    20,841
         Shares issued pursuant to exercise
          of stock options                                  217        2,664
         Shares purchased under issuer bid                 (561)        (210)
                                                    ------------ ------------
         Balance February 2, 2008                        57,473       23,295
         Shares issued pursuant to exercise
          of stock options                                   46          309
         Shares purchased under issuer bid                 (655)        (256)
                                                    ------------ ------------
         Balance January 31, 2009                         56,864  $    23,348
                                                    ------------ ------------
                                                    ------------ ------------

       The amounts credited to share capital from the exercise of stock
       options include a cash consideration of $246 (2008 - $2,150), as well
       as an ascribed value from contributed surplus of $63 (2008 - $514).

       The Company has authorized an unlimited number of Common shares. At
       January 31, 2009, there were 13,440 Common shares issued (2008 -
       13,440) with a book value of $482 (2008 - $482).

    c) The Company has reserved 5,520 Class A non-voting shares for issuance
       under its Share Option Plan of which, as at January 31, 2009, 952
       Class A non-voting shares remain authorized for future issuance. The
       granting of options and the related vesting period are at the
       discretion of the Board of Directors and have a maximum term of 10
       years. The exercise price payable for each Class A non-voting share
       covered by a stock option is determined by the Board of Directors at
       the date of grant, but may not be less than the closing price of the
       Company's shares on the trading day immediately preceding the
       effective date of the grant.

       The Company granted 50 stock options during 2009 (2008 - 50), the cost
       of which will be expensed over their vesting period based on their
       estimated fair values on the date of grant, determined using the
       Black-Scholes option-pricing model, while 27 (2008 - 28) stock options
       were cancelled.

       Compensation cost related to stock option awards granted during the
       year under the fair value based approach was calculated using the
       following assumptions:

                                                     40 Options   10 Options
                                                        Granted      Granted
                                                       April 23,      June 4,
                                                           2008         2008

         Expected option life                         4.2 years    4.1 years
         Risk-free interest rate                           3.55%        3.55%
         Expected stock price volatility                  32.29%       31.54%
         Average dividend yield                            4.27%        3.94%
         Weighted average fair value of
          options granted                           $      3.46  $      3.76


    Changes in outstanding stock options were as follows:

                                     2009                      2008
                           --------------------------------------------------
                                          Weighted                  Weighted
                                           Average                   Average
                                          Exercise                  Exercise
                              Options        Price      Options        Price
                           --------------------------------------------------
    Outstanding, at
     beginning of year          1,617  $     12.49        1,812  $     12.08
    Granted                        50        17.14           50        15.90
    Exercised                     (46)        5.41         (217)        9.91
    Forfeited                     (27)       12.23          (28)       11.95
                           --------------------------------------------------
    Outstanding, at end
     of year                    1,594  $     12.84        1,617  $     12.49
                           --------------------------------------------------
                           --------------------------------------------------

    Options exercisable,
     at end of year             1,145  $     12.17          772  $     12.18
                           --------------------------------------------------
                           --------------------------------------------------


       The following table summarizes information about share options
       outstanding at January 31, 2009:


                                Options Outstanding      Options Exercisable
                      -------------------------------------------------------
                                      Weighted
                                       Average  Weighted            Weighted
    Range of                         Remaining   Average    Number   Average
    Exercise               Number  Contractual  Exercise   Exercis- Exercise
    Prices            Outstanding         Life     Price      able     Price
    -------------------------------------------------------------------------
    $4.25 - $5.68              99    1.00 year   $  4.43        99   $  4.43
    $12.23 - $16.86         1,312    3.14          12.51       962     12.30
    $18.26 - $22.02           183    3.68          19.83        84     19.78
                      -------------------------------------------------------
                            1,594    3.07 years  $ 12.84     1,145   $ 12.17
                      -------------------------------------------------------
                      -------------------------------------------------------

       For the year ended January 31, 2009, the Company recognized
       compensation cost of $600 (2008 - $932) with an offsetting credit to
       contributed surplus.

    d) The Company purchased, under the prior year's normal course issuer
       bid, 275 Class A non-voting shares having a book value of $107 under
       its stock repurchase program for a total cash consideration of $4,073.
       The excess of the purchase price over book value of the shares in the
       amount of $3,966 was charged to retained earnings.

       The Company received, in November 2008, approval from the Toronto
       Stock Exchange to proceed with a normal course issuer bid. Under the
       bid, the Company may purchase up to 2,861 Class A non-voting shares of
       the Company, representing 5% of the issued and outstanding Class A
       non-voting shares as at November 1, 2008. The bid commenced on
       November 28, 2008 and may continue to November 27, 2009. To date 380
       Class A non-voting shares having a book value of $149 have been
       purchased for a total cash consideration of $3,842. The excess of the
       purchase price over book value of the shares in the amount of $3,693
       was charged to retained earnings.

    11. EARNINGS PER SHARE

        The number of shares used in the earnings per share calculation is as
        follows:
                                                           2009        2008
                                                    ------------ ------------
    Weighted average number of shares per basic
     earnings per share calculations                     70,731      71,152
    Effect of dilutive options outstanding                  273         654
                                                    ------------ ------------

    Weighted average number of shares per diluted
     earnings per share calculations                     71,004      71,806
                                                    ------------ ------------
                                                    ------------ ------------

    As at January 31, 2009, there were 1,495 (2008 - 173) stock options that
    were excluded from the calculation of diluted earnings per share as these
    options were deemed to be anti-dilutive.

    12. COMMITMENTS

    Minimum lease payments under operating leases for retail stores, offices,
    automobiles and equipment, exclusive of additional amounts based on
    sales, taxes and other costs are payable as follows:

         Fiscal years ending
         2010                                                    $   101,065
         2011                                                         85,798
         2012                                                         68,997
         2013                                                         54,570
         2014                                                         42,182
         Subsequent years                                             97,466
                                                                 ------------
                                                                 $   450,078
                                                                 ------------
                                                                 ------------

    13. CREDIT FACILITY

        At January 31, 2009, the Company had unsecured operating lines of
        credit available with Canadian chartered banks to a maximum of
        $125,000 or its US dollar equivalent. As at January 31, 2009, $61,759
        (February 2, 2008 - $48,274) of the operating lines of credit was
        committed for documentary and standby letters of credit.

    14. GUARANTEES

        The Company has granted irrevocable standby letters of credit, issued
        by highly-rated financial institutions, to third parties to indemnify
        them in the event the Company does not perform its contractual
        obligations. As at January 31, 2009, the maximum potential liability
        under these guarantees was $5,774. The standby letters of credit
        mature at various dates during fiscal 2010. The Company has recorded
        no liability with respect to these guarantees, as the Company does
        not expect to make any payments for these items. Management believes
        that the fair value of the non-contingent obligations requiring
        performance under the guarantees in the event that specified
        triggering events or conditions occur approximates the cost of
        obtaining the standby letters of credit.

    15. OTHER INFORMATION

        a) Included in determination of the Company's net earnings is a
           foreign exchange gain of $1,998 (2008 - gain of $504).

        b) Supplementary cash flow information:

                                                           2009         2008
                                                    ------------ ------------

    Balance with banks                              $     1,069  $     2,474
    Short-term deposits, bearing interest at 1.0%
     (February 2, 2008 - 4.0%)                          212,985      211,827
                                                    ------------ ------------
                                                    $   214,054  $   214,301
                                                    ------------ ------------
                                                    ------------ ------------

    Non-cash transactions:
      Capital asset additions included in accounts
       payable                                      $     3,289  $     1,329
      Ascribed value accredited to share capital
       from exercise of stock options                        63          514

    Cash paid during the year for:
      Income taxes                                  $    70,886  $    73,305
      Interest                                              975        1,045

    Investment income:
      Available-for-sale financial assets:
      Interest income                                        42           62
      Dividends                                           1,719        2,398
      Realized (loss) gain on disposal                   (2,350)         474
    Held-for-trading financial assets:
      Interest income                                     5,940        8,194
                                                    ------------ ------------
                                                    $     5,351  $    11,128
                                                    ------------ ------------
                                                    ------------ ------------

    16. RELATED PARTY TRANSACTIONS

        The Company leases two retail locations which are owned by a related
        party. The leases for such premises were entered into on commercial
        terms similar to those for leases entered into with third parties for
        similar premises. The annual rent payable under these leases is, in
        the aggregate, approximately $184 (2008 - $182).

        The Company incurred $395 in fiscal 2009 (2008 - $302) with a firm
        connected to outside directors of the Company for fees in conjunction
        with general legal advice. The Company believes that such
        remuneration was based on normal terms for business transactions
        between unrelated parties.

        These transactions are recorded at the amount of consideration paid
        as established and agreed to by the related parties.

    17. FINANCIAL INSTRUMENTS

        a) Fair Value Disclosure

           Fair value estimates are made at a specific point in time, using
           available information about the financial instrument. These
           estimates are subjective in nature and often cannot be determined
           with precision.

           The Company has determined that the carrying value of its short-
           term financial assets and liabilities approximates fair value at
           the year-end dates due to the short-term maturity of these
           instruments. The fair values of the marketable securities are
           based on published market prices at year-end.

           The fair value of long-term debt is $12,751 compared to its
           carrying value of $13,951.

           The fair value of the Company's long-term debt bearing interest at
           a fixed rate was calculated using the present value of future
           payments of principal and interest discounted at the current
           market rates of interest available to the Company for the same or
           similar debt instruments with the same remaining maturities.

        b) Risk Management

           Disclosures relating to exposure to risks, in particular credit
           risk, liquidity risk, foreign currency risk, interest rate risk
           and equity price risk are provided below.

           Credit Risk

           Credit risk is the risk of an unexpected loss if a customer or
           counterparty to a financial instrument fails to meet its
           contractual obligations. The Company's financial instruments that
           are exposed to concentrations of credit risk are primarily cash
           and cash equivalents, marketable securities, accounts receivable
           and foreign exchange option contracts. The Company limits its
           exposure to credit risk with respect to cash and cash equivalents
           by investing available cash in short-term deposits with Canadian
           financial institutions and commercial paper with a rating not less
           than R1. Marketable securities consist primarily of preferred
           shares of highly rated Canadian public companies. The Company's
           receivables consist primarily of credit card receivables from the
           last few days of the fiscal year, which are settled within the
           first days of the new fiscal year.

           As at January 31, 2009, the Company's maximum exposure to credit
           risk for these financial instruments was as follows:

             Cash and cash equivalents                             $ 214,054
             Marketable securities                                    32,818
             Accounts receivable                                       2,689
                                                                 ------------
                                                                 $   249,561
                                                                 ------------
                                                                 ------------

           Liquidity Risk

           Liquidity risk is the risk that the Company will not be able to
           meet its financial obligations as they fall due. The Company's
           approach to managing liquidity risk is to ensure, as far as
           possible, that it will always have sufficient liquidity to meet
           liabilities when due. The contractual maturity of the majority of
           accounts payable is within six months. As at January 31, 2009, the
           Company had a high degree of liquidity with $246,872 in cash and
           cash equivalents and marketable securities. In addition, the
           Company has unsecured credit facilities of $125,000, subject to
           annual renewals. The Company has financed its store expansion
           through internally-generated funds and its unsecured credit
           facilities are used to finance seasonal working capital
           requirements for US dollar merchandise purchases. The Company's
           long-term debt consists of a mortgage bearing interest at 6.40%,
           due November 2017, which is secured by the Company's distribution
           centre.

           Foreign Currency Risk

           The Company purchases a significant amount of its merchandise with
           US dollars. The Company uses a combination of foreign exchange
           option contracts and spot purchases to manage its foreign exchange
           exposure on cash flows related to these purchases. These option
           contracts generally do not exceed three months. A foreign exchange
           option contract represents an option to buy a foreign currency
           from a counterparty to meet its obligations. Credit risks exist
           in the event of failure by a counterparty to fulfill its
           obligations. The Company reduces this risk by dealing only with
           highly-rated counterparties, normally major Canadian financial
           institutions.

           As at January 31, 2009 and February 2, 2008, there were no
           outstanding foreign exchange option contracts.

           The Company has performed a sensitivity analysis on its US dollar
           denominated financial instruments, which consist principally of
           cash and cash equivalents of $72 and accounts payable of $1,081 to
           determine how a change in the US dollar exchange rate would impact
           net earnings. On January 31, 2009, a 10% rise or fall in the
           Canadian dollar against the US dollar, assuming that all other
           variables, in particular interest rates, had remained the same,
           would not have a material impact on the consolidated financial
           statements.

           Interest Rate Risk

           The Company's exposure to interest rate fluctuations is primarily
           related to any overdraft denominated in Canadian or US dollars
           drawn on its bank accounts and interest earned on its cash and
           cash equivalents. The Company has unsecured borrowing and working
           capital credit facilities available that it utilizes for
           documentary and standby letters of credit, and the Company funds
           the drawings on these facilities as the payments are due.

           The Company has performed a sensitivity analysis on interest rate
           risk at January 31, 2009, to determine how a change in interest
           rates would impact equity and net earnings. During fiscal 2009,
           the Company earned $5,940 of interest income on its cash and cash
           equivalents. An increase or decrease of 100 basis points in the
           average interest rate earned during the year would have increased
           or decreased equity and net earnings by $1,304. This analysis
           assumes that all other variables, in particular foreign currency
           rates, remain constant.

           Equity Price Risk

           Equity price risk arises from available-for-sale equity
           securities. The Company monitors the mix of equity securities in
           its investment portfolio based on market expectations. Material
           investments within the portfolio are managed on an individual
           basis and all buy and sell decisions are approved by the Chief
           Executive Officer.

           The Company has performed a sensitivity analysis on equity price
           risk at January 31, 2009, to determine how a change in the market
           price of the Company's marketable securities would impact equity
           and other comprehensive income. The Company's equity investments
           consist principally of preferred shares of Canadian public
           companies. The Company believes that changes in interest rates
           influence the market price of these securities. A 5% increase or
           decrease in the market price of the securities at January 31,
           2009, would result in a $1,374 increase or decrease in equity and
           other comprehensive income. The Company's equity securities are
           subject to market risk and, as a result, the impact on equity and
           other comprehensive income may ultimately be greater than that
           indicated above.


    18. CAPITAL DISCLOSURES

        The Company's objectives in managing capital are:

          - to ensure sufficient liquidity to enable the internal financing
            of capital projects thereby facilitating its expansion;

          - to maintain a strong capital base so as to maintain investor,
            creditor and market confidence;

          - to provide an adequate return to shareholders.

        The Company's capital is composed of long-term debt, including the
        current portion and shareholders' equity. The Company's primary uses
        of capital are to finance increases in non-cash working capital along
        with capital expenditures for new store additions, existing store
        renovation projects and office and distribution centre improvements.
        The Company currently funds these requirements out of its internally-
        generated cash flows. The Company's long-term debt constitutes a
        mortgage on the distribution centre facility. The Company maintains
        an unsecured operating line of credit that it uses to satisfy
        commitments for US dollar denominated merchandise purchases. The
        Company does not have any long-term debt, other than the mortgage
        related to the distribution centre, and therefore net earnings
        generated from operations are available for reinvestment in the
        Company or distribution to the Company's shareholders. The Board of
        Directors does not establish quantitative return on capital criteria
        for management; but rather promotes year over year sustainable
        profitable growth. On a quarterly basis, the Board of Directors also
        reviews the level of dividends paid to the Company's shareholders and
        monitors the share repurchase program activities. The Company does
        not have a defined share repurchase plan and buy and sell decisions
        are made on a specific transaction basis and depend on market prices
        and regulatory restrictions. The Company is not subject to any
        externally imposed capital requirements.


    MANAGEMENT'S DISCUSSION AND ANALYSIS
    OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    FOR THE FISCAL YEAR ENDED JANUARY 31, 2009

    The following Management's Discussion and Analysis of Financial Condition
and Results of Operations ("MD&A") of Reitmans (Canada) Limited ("Reitmans" or
the "Company") should be read in conjunction with the unaudited consolidated
financial statements of Reitmans for the fiscal year ended January 31, 2009
and the notes thereto which are available at www.sedar.com. This MD&A is dated
April 8, 2009.
    All financial information contained in this MD&A and Reitmans'
consolidated financial statements have been prepared in accordance with
Canadian generally accepted accounting principles ("GAAP"), except for certain
information referred to as Non-GAAP financial measures discussed below. All
amounts in this report are in Canadian dollars, unless otherwise noted. The
consolidated financial statements and this MD&A were reviewed by Reitmans'
Audit Committee and were approved by its Board of Directors on April 8, 2009.
    Additional information about Reitmans, including the Company's 2008 Annual
Information Form, is available on the Company's website at www.reitmans.ca, or
on the SEDAR website at www.sedar.com.

    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. Consequently, actual future results
may differ materially from the anticipated results expressed in
forward-looking statements. The reader should not place undue reliance on the
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.

    NON-GAAP FINANCIAL MEASURES

    This MD&A includes references to certain Non-GAAP financial measures such
as operating earnings before depreciation and amortization ("EBITDA"), which
is defined as earnings before interest, taxes, depreciation and amortization
and investment income and adjusted net earnings and adjusted earnings per
share, which are defined on page 8. The Company believes such measures provide
meaningful information on the Company's performance and operating results.
However, readers should know that such Non-GAAP financial measures have no
standardized meaning as prescribed by GAAP and may not be comparable to
similar measures presented by other companies. Accordingly, these should not
be considered in isolation.

    CORPORATE OVERVIEW

    Reitmans is a Canadian ladies' wear specialty apparel retailer. The
Company has seven banners: Reitmans, Smart Set, RW & CO., Thyme Maternity,
Penningtons, Addition Elle and Cassis. Each banner is focused on a particular
niche in the retail marketplace. Each banner has a distinct marketing program
as well as a specific website thereby allowing the Company to continue to
enhance its brands and strengthen customer loyalty. The Company has several
competitors in each niche, including local, regional and national chains of
specialty stores and department stores as well as foreign based competitors.
The Company's stores are located in malls, strip plazas, retail power centres
and on major shopping streets across Canada. The Company continues to grow all
areas of its business by investing in stores, technology and people. The
Company's growth has been driven by continuing to offer Canadian consumers
affordable fashions and accessories at the best value reflecting price and
quality.
    The Company embarked on an e-commerce initiative in its plus-size banners
(Penningtons and Addition Elle) and launched an e-commerce website for these
banners in November 2007. The Company is encouraged with the acceptance shown
by customers using the e-commerce website which has shown promising results,
while offering customers the convenience of online purchasing. The Company is
considering launching additional banners in the e-commerce domain in the
coming year.


    SELECTED FINANCIAL INFORMATION
    (in thousands, except per share amounts)

                                             For the fiscal years ended
                                   January 31,   February 2,   February 3,
                                         2009          2008          2007(*)

    Sales                         $ 1,050,861   $ 1,057,720   $ 1,042,509
    Earnings before income taxes      127,177       159,216       153,366
    Net earnings                       85,806       114,902 (1)    82,469 (2)
    Earnings per share ("EPS")
      Basic                              1.21          1.61 (1)      1.17 (2)
      Diluted                            1.21          1.60 (1)      1.15 (2)
    Total assets                      633,239       620,960       600,411
    Long-term debt (3)                 12,731        13,951        15,097
    Dividends per share                  0.72          0.66          0.58

    (*) 53 week fiscal year

    (1) Excluding the impact of the retroactive Québec income tax
        reassessments, net earnings for the year would have been $107,753,
        Basic EPS $1.51 and Diluted EPS $1.50.

    (2) Excluding the impact of the retroactive Québec income tax
        reassessments, net earnings for the year would have been $102,523,
        Basic EPS $1.46 and Diluted EPS $1.43.

    (3) Excluding current portion of long-term debt, deferred lease credits
        and accrued pension liability.


    CONSOLIDATED OPERATING RESULTS FOR THE 52 WEEK FISCAL YEAR ENDED
    JANUARY 31, 2009 ("FISCAL 2009") AND COMPARISON TO CONSOLIDATED OPERATING
    RESULTS FOR 52 WEEK FISCAL YEAR ENDED FEBRUARY 2, 2008 ("FISCAL 2008")

    Sales for fiscal 2009 decreased 0.6% to $1,050,861,000 as compared with
$1,057,720,000 for fiscal 2008. Same store sales decreased 4.0%. In the first
and second quarters of fiscal 2009, weakness in the US economy and sharp
increases in the price of certain commodities in Canada, most notably oil and
gas, negatively impacted consumer confidence, which led to reduced traffic in
all venues as consumers cut back on spending for apparel. Particularly
unfavourable weather conditions yielded close to historical records for
snowfall which persisted into the spring in Central and Eastern Canada,
contributing to a softening in the demand for spring merchandise as customers
delayed their purchases. Unseasonable weather continued throughout Canada
during the months of May, June and July with higher than average levels of
rainfall and below normal temperatures. This impacted traditional buying
patterns as consumers delayed purchases resulting in the Company's merchandise
being more heavily promoted to manage inventory levels. In the third quarter
of fiscal 2009, global economic conditions deteriorated significantly. Despite
a relatively positive outlook in Canada, consumer confidence continued to
weaken over financial markets concerns and the fear of recession. This
resulted in downward pressure on retail prices for apparel as concern over
inventory levels rose. In the fourth quarter of fiscal 2009, economic
conditions deteriorated further as the impact of the US financial crisis moved
into Canada and consumer spending patterns reflected increased concern over
the recession. Statistics Canada reported sales in the clothing and
accessories stores sector fell 3.7% in December 2008, continuing several
months of declines. With a continued weakening of consumer confidence and
facing rising unemployment, consumers reduced their spending in all areas and
particularly on apparel.
    For fiscal 2009, EBITDA decreased by $18,245,000 or 9.2% to $180,931,000
as compared with $199,176,000 for fiscal 2008. The Company's gross margin of
65.4% for fiscal 2009 remained unchanged from fiscal 2008 after adjusting for
transportation costs and certain distribution centre costs which were excluded
from the computation of gross margin in fiscal 2008 and included in fiscal
2009 as a result of the adoption of a new accounting standard (as explained
below in "Adoption of New Accounting Standards") . The decline in sales of
$6,859,000 in fiscal 2009 as compared to fiscal 2008 resulted in a reduction
of approximately $4,500,000 in gross margin (and EBITDA). As the Company
purchases the majority of its merchandise with US dollars, a significant
fluctuation of the Canadian dollar vis-à-vis the US dollar can impact
earnings. Despite the effect of a weaker Canadian dollar vis-à-vis the US
dollar in fiscal 2009 as compared to fiscal 2008, EBITDA was not significantly
impacted. This was largely the result of a relatively comparable average rate
for a US dollar for fiscal 2009 as compared to fiscal 2008. The average rate
for a US dollar in fiscal 2009 was $1.08 Canadian as compared to $1.06
Canadian in fiscal 2008. The Canadian dollar was close to par with the US
dollar throughout the first six months of fiscal 2009, weakening somewhat in
the third quarter and more significantly in the fourth quarter of fiscal 2009.
Spot prices for $1.00 US during fiscal 2009 ranged between a high of $1.30 and
a low of $0.97 Canadian ($1.19 and $0.91 respectively during fiscal 2008).
Significant components of store operating costs that negatively impacted
EBITDA included wages, which increased by 48 basis points as a percentage of
sales and rent and occupancy costs which increased by 97 basis points as a
percentage of sales. The combined increase of 145 basis points as a percentage
of sales negatively impacted EBITDA by approximately $15,000,000, offset by
modest improvements in other store expenses.
    Depreciation and amortization expense for fiscal 2009 was $58,184,000
compared to $50,098,000 for the prior year. This increase reflects the
increased new store construction and store renovation activities of the
Company. As well, it includes $2,577,000 of write-offs as a result of closed
and renovated stores, compared to $1,793,000 in the prior year.
    Investment income for fiscal 2009 decreased 51.9% to $5,351,000 as
compared to $11,128,000 in the prior year. The disposal of marketable
securities in the fourth quarter of fiscal 2008 contributed to a reduction in
dividend income for fiscal 2009 to $1,719,000 as compared to $2,398,000 for
fiscal 2008. The disposal of marketable securities in the fourth quarter of
fiscal 2009 resulted in net capital losses of $2,350,000 for fiscal 2009,
which allowed for net capital losses to be carried back for income tax
purposes to recover previous years' taxes, as compared to net capital gains of
$474,000 for fiscal 2008. Interest income decreased for fiscal 2009 to
$5,982,000 as compared to $8,256,000 for fiscal 2008 due to significantly
lower rates of interest.
    Interest expense on long-term debt decreased to $921,000 for fiscal 2009
from $990,000 in fiscal 2008. This decrease reflects the continued repayment
of the mortgage on the Company's distribution centre.
    Income tax expense for fiscal 2009 amounted to $41,371,000, for an
effective tax rate of 32.5%. For fiscal 2008, income tax expense was
$44,314,000, for an effective tax rate of 27.8% (32.3% prior to a Québec tax
reassessments recovery). The variation in the effective tax rate is primarily
due to a reduction in the Company's income tax expense in fiscal 2008 of
$7,149,000 related to settlement of the retroactive income tax reassessments
issued in connection with Bill 15 enacted by the Québec National Assembly.
    Net earnings for fiscal 2009 decreased 25.3% to $85,806,000 ($1.21 diluted
earnings per share) as compared with $114,902,000 ($1.60 diluted earnings per
share) for fiscal 2008.
    The Company in its normal course of business makes long lead time
commitments for a significant portion of its merchandise purchases, in some
cases as long as eight months. In fiscal 2009, these merchandise purchases,
which are payable in US dollars, exceeded $200,000,000 US. The Canadian dollar
remained strong through September 2008. In October 2008, the Canadian dollar
weakened significantly against the US dollar and continued to remain below
rates experienced earlier in the year. Due to the strength of the Canadian
dollar throughout most of fiscal 2009, the Company satisfied its US dollar
requirements through spot rate purchases. The Company considers a variety of
strategies designed to fix the cost of its continuing US dollar long-term
commitments, including foreign exchange option contracts with maturities not
exceeding three months.
    During fiscal 2009, the Company opened 47 stores comprised of 17 Reitmans,
5 Smart Set, 7 RW & CO., 4 Thyme Maternity, 4 Penningtons, 8 Addition Elle and
2 Cassis; 32 stores were closed. Accordingly, at January 31, 2009, there were
973 stores in operation, consisting of 372 Reitmans, 166 Smart Set, 59 RW &
CO., 76 Thyme Maternity, 16 Cassis, 161 Penningtons and 123 Addition Elle, as
compared with a total of 958 stores last year.
    Store closings take place for a variety of reasons as the viability of
each store and its location is constantly monitored and assessed for
continuing profitability. In most cases when a store is closed, merchandise at
that location is sold off in the normal course of business and any unsold
merchandise remaining at the closing date is generally transferred to other
stores operating under the same banner for sale in the normal course of
business.

    CONSOLIDATED OPERATING RESULTS FOR THE 52 WEEK FISCAL YEAR ENDED
    FEBRUARY 2, 2008 ("FISCAL 2008") AND COMPARISON TO CONSOLIDATED OPERATING
    RESULTS FOR THE 53 WEEK FISCAL YEAR ENDED FEBRUARY 3, 2007 ("FISCAL
    2007")

    Sales in fiscal 2008 increased 1.5% to $1,057,720,000 as compared with
$1,042,509,000 for fiscal 2007. The increase in sales is attributable to the
net addition of 38 stores year over year, despite the inclusion of an extra
week in the prior year. Same store sales for the comparable 52 weeks decreased
2.0%. Factors contributing to the challenging sales environment in fiscal 2008
included prolonged unseasonable weather conditions in virtually all
significant markets, cross border shopping, which gained significant momentum
due to the continuing strength of the Canadian dollar and significant cost
increases in certain commodities, most notably oil and gas. These factors led
to a decline in consumer confidence and reduced traffic in all venues as
consumers cut back on spending for apparel.
    Sales in the Cassis stores in the first six months of fiscal 2008 were
below expectations and as a result, the Company re-positioned its merchandise
offerings to better address the targeted market. All Cassis stores were
temporarily closed for a two week period in August 2007 to allow for
modifications in the store design and to re-merchandise the stores with new
and better focused goods. All stores reopened in early September 2007 and
results showed improvement with increased customer traffic. As a result of
these initiatives, management expects the performance of this banner to
continue to improve significantly and is encouraged by the recent results.
    For fiscal 2008, EBITDA increased by $12,364,000 or 6.6% to $199,176,000
as compared to $186,812,000 for fiscal 2007. The Company maintained its gross
margin during the year despite a very competitive and highly promotional
environment. Gross margin improved by 27 basis points when compared with the
prior year (on a comparable 52 week basis). The strengthening of the Canadian
dollar continued to favourably impact the gross margin during the year. Spot
prices for $1.00 US for the year ranged between a high of Canadian $1.19 and a
low of $0.91 ($1.18 and $1.09 respectively for fiscal 2007). Inventory did
build up as consumer demand softened, which resulted in all banners taking
more markdowns to sell the merchandise. Pressure due to cross border shopping,
excess merchandise caused by delayed consumer demand attributable to weather
issues and a more competitive retail environment impacted operating earnings.
The Company has an employee incentive bonus plan that is based on operating
performance targets and the related expense is recorded in relation to the
attainment of such targets. Bonus expense in fiscal 2008 was $20,750,000 less
than the bonus expense in fiscal 2007 due to a shortfall in attaining
operating performance targets set for fiscal 2008.
    Depreciation and amortization expense for fiscal 2008 was $50,098,000
compared to $44,946,000 for the prior year. This increase reflects the
increased new store construction and store renovation activities of the
Company. As well, it includes $1,793,000 of write-offs as a result of closed
and renovated stores, compared to $4,216,000 in the prior year.
    Investment income for fiscal 2008 decreased 11.4% to $11,128,000 as
compared to $12,556,000 in the prior year. Dividend income for fiscal 2008 was
$2,398,000 as compared to $3,258,000 for fiscal 2007, while net capital gains
for fiscal 2008 were $474,000 as compared to $2,289,000 for the prior year.
Interest income increased for fiscal 2008 to $8,256,000 as compared to
$7,009,000 for fiscal 2007 due to interest being earned on larger cash
balances.
    Interest expense on long-term debt decreased to $990,000 in fiscal 2008
from $1,056,000 in fiscal 2007. This decrease reflects the continued repayment
of the mortgage on the Company's distribution centre.
    Net earnings for fiscal 2008 increased 39.3% to $114,902,000 ($1.60
diluted earnings per share) as compared with $82,469,000 ($1.15 diluted
earnings per share) for fiscal 2007. Excluding the impact of the retroactive
Québec income tax reassessments of $20,054,000 in fiscal 2007 and the
adjustment due to the settlement in fiscal 2008 discussed below, net earnings
and diluted earnings per share for the year ended February 2, 2008 would have
amounted to $107,753,000 or $1.50 per share as compared to $102,523,000 or
$1.43 per share in fiscal 2007.
    In June 2006, the Québec National Assembly enacted legislation (Bill 15)
that retroactively changed certain tax laws that subject the Company to
additional taxes and interest for the 2003, 2004 and 2005 years. In accordance
with Canadian generally accepted accounting principles, as a result of Québec
income tax reassessments received, $20,054,000 for retroactive taxes and
interest were expensed in fiscal 2007 and an additional amount of $1,877,000
was expensed in fiscal 2008. In January 2008, the Company entered into an
agreement with the Canada Revenue Agency, Alberta Finance, the Ontario
Ministry of Revenue and Revenue Québec to settle all matters arising from the
reassessments. The final agreement called for the Company to pay $12,905,000
to settle all related outstanding matters and as such a reduction in the
Company's income tax expense in the amount of $7,149,000, net of the reversal
of the current year's interest charges of $1,877,000, has been recognized in
fiscal 2008. The Company paid the outstanding liability subsequent to year-end
fiscal 2008.
    The Company in its normal course of business makes long lead time
commitments for a significant portion of its merchandise purchases, in some
cases as long as eight months. Most of these purchases must be paid for in US
dollars. In fiscal 2008, these merchandise purchases exceeded $198,000,000 US.
The Company uses a variety of strategies designed to fix the cost of its
continuing US dollar long-term commitments at the lowest possible cost, while
at the same time allowing itself the opportunity to take advantage of an
increase in the value of the Canadian dollar. For fiscal 2008, these
strategies helped the Company's gross margin as the Canadian dollar
strengthened.
    During fiscal 2008, the Company opened 65 stores comprised of 18 Reitmans,
9 Smart Set, 8 RW & CO., 8 Thyme Maternity, 4 Cassis, 7 Penningtons and 11
Addition Elle; 27 stores were closed. Accordingly, at February 2, 2008, there
were 958 stores in operation, consisting of 369 Reitmans, 162 Smart Set, 53 RW
& CO., 73 Thyme Maternity, 14 Cassis, 162 Penningtons and 125 Addition Elle as
compared with a total of 920 stores in the prior year.
    Store closings take place for a variety of reasons as the viability of
each store and its location is constantly monitored and assessed for
continuing profitability. In most cases when a store is closed, merchandise at
that location is sold off in the normal course of business and any unsold
merchandise remaining at the closing date is generally transferred to other
stores operating under the same banner for sale in the normal course of
business.

    FOURTH QUARTER RESULTS FOR THE 13 WEEKS ENDED JANUARY 31, 2009 AND
    COMPARISON TO THE 13 WEEKS ENDED FEBRUARY 2, 2008

    Sales for the fourth quarter of fiscal 2009 decreased 2.9% to $261,801,000
as compared with $269,618,000 for the fourth quarter of fiscal 2008. Same
store sales decreased 5.6% for the comparable 13 weeks. In the fourth quarter,
global economic conditions deteriorated significantly with confirmation of a
recession in both Canada and the US. Consumer confidence continued to weaken
over financial markets concerns and increasing unemployment. This resulted in
a downward pressure on retail prices for apparel as concern over inventory
levels rose. Statistics Canada reported sales in the clothing and accessories
stores sector fell 3.7% in December 2008, continuing several months of
declines. With a continued weakening of consumer confidence and facing rising
unemployment, consumers reduced their spending in all areas and particularly
on apparel.
    In the fourth quarter of fiscal 2009, EBITDA decreased by $22,386,000 or
42.9% to $29,739,000 as compared with $52,125,000 for the fourth quarter of
fiscal 2008. The Company's gross margin for the fourth quarter of fiscal 2009
decreased by 340 basis points to 60.8% from 64.2% for the fourth quarter of
fiscal 2008 after adjusting for transportation costs and certain distribution
centre costs.  These costs were excluded from the computation of gross margin
in the fourth quarter of fiscal 2008 and included in the fourth quarter of
fiscal 2009 as a result of the adoption of a new accounting standard (as
explained below in "Adoption of New Accounting Standards"). The decline in
sales of $7,817,000 in the fourth quarter of fiscal 2009 as compared to the
fourth quarter of fiscal 2008 resulted in a reduction of approximately
$4,800,000 in gross margin (and EBITDA). As the Company purchases the majority
of its merchandise with US dollars, a significant fluctuation of the Canadian
dollar vis-à-vis the US dollar in the fourth quarter of fiscal 2009 resulted
in a decrease of approximately $12,000,000 in EBITDA. The Canadian dollar was
significantly weaker in the fourth quarter of fiscal 2009 as compared to the
fourth quarter of fiscal 2008, contributing substantially to the decline in
gross profit. The average rate for a US dollar for the fourth quarter of
fiscal 2009 was $1.23 Canadian as compared to $1.00 for the fourth quarter of
fiscal 2008. Spot prices for $1.00 US during the fourth quarter of fiscal 2009
ranged between a high of $1.30 and a low of $1.15 Canadian ($1.03 and $0.92
respectively during the fourth quarter of fiscal 2008). The fourth quarter of
fiscal 2009 store operating costs were comparable with the same period for the
prior year despite an increase in rent and occupancy costs of 129 basis points
as a percentage of sales. The Company's overhead expenses increased by
approximately $5,000,000, which increase was primarily due to adjustments
amounting to $3,250,000 relating to the Company's performance incentive plan.
    Depreciation and amortization expense for the fourth quarter was
$14,887,000 compared to $13,598,000 for the fourth quarter of fiscal 2008.
This increase reflects the increased new store construction and store
renovation activities of the Company. As well, it includes $191,000 of
write-offs as a result of closed and renovated stores, compared to $522,000 in
the fourth quarter of fiscal 2008.
    Investment income for the fourth quarter was a loss of $528,000 as
compared to income of $1,451,000 in fiscal 2008. Dividend income in the fourth
quarter of fiscal 2009 was $495,000 as compared to $565,000 for the fourth
quarter of fiscal 2008. There were net capital losses of $2,350,000 for the
fourth quarter as compared to net capital losses of $1,517,000 for the fourth
quarter of fiscal 2008. Interest income decreased for the fourth quarter to
$1,327,000 as compared to $2,403,000 for the fourth quarter of fiscal 2008 due
to significantly lower rates of interest.
    Interest expense on long-term debt decreased to $224,000 in the fourth
quarter of fiscal 2009 from $241,000 in the fourth quarter of fiscal 2008.
This decrease reflects the continued repayment of the mortgage on the
Company's distribution centre.
    Income tax expense for the fourth quarter of fiscal 2009 amounted to
$5,119,000, for an effective tax rate of 36.3% (30.0% prior to giving effect
to an adjustment for prior year's tax). For the fourth quarter of fiscal 2008,
income tax expense was $2,690,000, for an effective tax rate of 6.8% (28.3%
prior to a Québec tax reassessments recovery). The variation in the effective
tax rate is primarily due to the impact of an income tax recovery recorded in
the fourth quarter of fiscal 2008 related to the retroactive income tax
reassessments issued in connection with Bill 15 enacted by the Québec National
Assembly.
    Net earnings for the fourth quarter of fiscal 2009 decreased 75.8% to
$8,981,000 ($0.13 diluted earnings per share) as compared with $37,047,000
($0.52 diluted earnings per share) for the fourth quarter of fiscal 2008.
    The Company in its normal course of business makes long lead time
commitments for a significant portion of its merchandise purchases, in some
cases as long as eight months. In the fourth quarter, these merchandise
purchases, which are payable in US dollars, approximated $37,000,000 US. The
Company satisfied its US dollar requirements through spot rate purchases in
the fourth quarter, despite the weakening of the Canadian dollar. The Company
considers a variety of strategies designed to fix the cost of its continuing
US dollar long-term commitments, including foreign exchange option contracts
with maturities not exceeding three months. The Company did not enter into any
foreign exchange option contracts during the fourth quarter.
    During the fourth quarter, the Company opened 8 stores comprised of 1
Reitmans, 1 Smart Set, 1 RW & CO., 1 Thyme Maternity, 2 Cassis, 1 Penningtons
and 1 Addition Elle; 13 stores were closed. Accordingly, at January 31, 2009,
there were 973 stores in operation, consisting of 372 Reitmans, 166 Smart Set,
59 RW & CO., 76 Thyme Maternity, 16 Cassis, 161 Penningtons and 123 Addition
Elle, as compared with a total of 958 stores last year.
    Store closings take place for a variety of reasons as the viability of
each store and its location is constantly monitored and assessed for
continuing profitability. In most cases when a store is closed, merchandise at
that location is sold off in the normal course of business and any unsold
merchandise remaining at the closing date is generally transferred to other
stores operating under the same banner for sale in the normal course of
business.

    SUMMARY OF QUARTERLY RESULTS

    The table below sets forth selected consolidated financial data for the
eight most recently completed quarters. This unaudited quarterly information
has been prepared on the same basis as the annual consolidated financial
statements. The operating results for any quarter are not necessarily
indicative of the results to be expected for any future period.
    To measure the Company's performance from one period to the next without
the variations caused by the impact of the retroactive Québec income tax
reassessments as discussed on page 5, the Company uses adjusted net earnings
and adjusted earnings per share (basic and diluted), which are calculated as
net earnings and earnings per share (basic and diluted) excluding this item.
While the inclusion of this item is required by Canadian GAAP, the Company
believes that the exclusion of this item allows for better comparability of
its financial results and understanding of trends in business performance.

    -------------------------------------------------------------------------
                                                                    Adjusted
    (in thousands,                   Earnings per               Earnings per
    except per share                 share ("EPS")              share ("EPS")
    amounts)
                                                    Adjusted
                               Net                       Net
                   Sales  Earnings   Basic Diluted  Earnings   Basic Diluted
                -------------------------------------------------------------

    January 31,
     2009      $ 261,801  $  8,981  $ 0.13  $ 0.13  $  8,981  $ 0.13  $ 0.13

    November 1,
     2008        271,240    23,004    0.33    0.32    23,004    0.33    0.32

    August 2,
     2008        289,502    35,385    0.50    0.50    35,385    0.50    0.50

    May 3,
     2008        228,318    18,436    0.26    0.26    18,436    0.26    0.26

    February 2,
     2008        269,618    37,047    0.52    0.52    28,506    0.40    0.40

    November 3,
     2007        265,465    27,394    0.39    0.38    27,869    0.40    0.39

    August 4,
     2007        291,942    32,077    0.45    0.44    32,540    0.46    0.45

    May 5,
     2007        230,695    18,384    0.26    0.26    18,838    0.27    0.27
    -------------------------------------------------------------------------

    The retail business is seasonal and results of operations for any interim
    period are not necessarily indicative of the results of operations for
    the full fiscal year.

    BALANCE SHEET

    Cash and cash equivalents amounted to $214,054,000 or 0.1% lower than
$214,301,000 last year. The Company does not hold any asset-backed commercial
paper. Marketable securities held by the Company consist primarily of
preferred shares of Canadian public companies. At January 31, 2009, marketable
securities (reported at fair value) amounted to $32,818,000 as compared with
$30,053,000 last year, $2,765,000 higher. The Company's investment portfolio
is subject to stock market volatility and recent widespread declines in the
stock market have resulted in reductions in the market value of these
securities. The Company is highly liquid with over 85% of its cash, cash
equivalents and marketable securities being invested in bank bearer deposit
notes and bank term deposits of short duration with major Canadian chartered
banks.
    Accounts receivable are $2,689,000 or $857,000 lower than last year. The
Company's accounts receivable are essentially the credit card sales from the
last few days of the fiscal quarter. Income taxes recoverable are $3,826,000
as compared to income taxes payable of $16,546,000 last year. The reduction of
the tax liability is attributed to the payment by the Company of $12,905,000
in March 2008 to settle all matters related to the retroactive Québec income
tax reassessments issued in connection with Bill 15 enacted by the Québec
National Assembly, along with increased instalments that resulted in a
reduction of the current year's taxes payable. Merchandise inventories this
year were $64,061,000 or $11,620,000 higher than last year, primarily due to
the Company adopting a new accounting standard as described below in "Adoption
of New Accounting Standard". The adoption of this new standard increased the
inventory at the end of the fourth quarter by $9,262,000. As a result of the
Company's change in accounting policy for inventories, the inventory balance
as at January 31, 2009 is not comparable with February 2, 2008. Prepaid
expenses are $11,402,000 or $11,445,000 lower than last year, principally due
to February 2008 rent that was paid and classified as a prepaid item in fiscal
2008.
    Future income taxes are attributable to differences between the carrying
values of assets and liabilities and their respective income tax bases and are
recognized at enacted or substantively enacted tax rates for the future income
tax consequences. The Company has recorded a future income tax valuation
allowance of $554,000 on its net unrealized losses on available-for-sale
financial assets as realization of these future tax assets did not meet the
more likely than not criteria. This valuation allowance reduces the future
income tax assets on these unrealized losses with the offsetting amount to
accumulated other comprehensive loss. The recording of this valuation
allowance does not have any impact on cash, nor does such an allowance
preclude the Company from using its unrealized tax loss carry forwards in the
future when results demonstrate a pattern of profitability.
    The Company invested $58,152,000 in additions to capital assets in fiscal
2009 compared to $73,402,000 last year. This included $52,430,000 (2008 -
$59,648,000) in new store construction and existing store renovation costs and
$5,722,000 (2008 - $13,754,000) to the Sauvé Street office and Henri-Bourassa
Boulevard distribution centre. The Company has reduced its planned capital
expenditures for new stores and existing store renovations in fiscal 2010 due
to the difficult economic environment.
    Accounts payable and accrued items are $70,632,000, or $1,443,000 higher
than last year. The Company's accounts payable consist largely of trade
payables and liabilities for unredeemed gift cards/certificates.
    The Company maintains a defined benefit pension plan ("plan"). An
actuarial valuation was performed as at December 31, 2007 to determine the
estimated liability the Company incurred with respect to the provisions of the
plan. This valuation was updated to consider the widespread stock market
declines that occurred during fiscal 2009, which led to declines in the market
value of the plan assets. As a result, the Company recognized a larger expense
than was projected. In addition, in the third quarter the Company elected to
contribute $865,000 to the plan to fully fund a solvency requirement as
determined by its actuaries. The Company also sponsors a Supplemental
Executive Retirement Plan ("SERP") for certain senior executives. The SERP is
unfunded and when the obligation arises to make any payment called for under
the SERP (e.g. when an eligible plan member retires and begins receiving
payments under the SERP), the payments reduce the accrual amount as the
payments are actually made. An amount of $2,825,000 (2008 - $1,533,000) was
expensed in fiscal 2009 with respect to both plans.
    To develop its expected long-term rate of return assumption used in the
calculation of net periodic benefit costs applicable to the fair value of
assets, the Company considers both its past experience and future estimates of
long-term investment returns, the expected composition of the plan's assets as
well as the expected long-term market returns in the future. For fiscal 2009,
the Company used a long-term rate of return assumption of 7.50% on the fair
value of plan assets to compute net periodic benefit cost. However, given the
recent performance of its plan assets and the equity markets in North America,
the Company will, effective for 2010, reduce the expected long-term rate of
return on plan assets from 7.50% to 7.0% to reflect management's current view
of long-term investment returns.

    OPERATING RISK MANAGEMENT

    Economic Environment

    Retail sales in Canada remained stronger than in the United States for
most of 2008, but they began slowing noticeably in the latter half of 2008 as
the impact of the financial crisis moved into Canada. Canadian apparel
retailers began discounting further as consumer demand softened. Despite the
impact of reduced access to credit for many businesses, the Company is in a
strong financial position with significant liquidity available and ample
financial credit resources to draw upon as deemed necessary.

    Competitive Environment

    The apparel business in Canada is highly competitive with competitors
including department stores, specialty apparel chains and independent
retailers. There is no effective barrier to entry into the Canadian apparel
retailing marketplace by any potential competitor, foreign or domestic, and in
fact the Company has witnessed the arrival over the past few years of a number
of foreign-based competitors now operating in virtually all of the Company's
Canadian retail sectors. The Company believes that it is well positioned to
compete with any competitors. The Company operates under seven banners and our
product offerings are diversified as each banner is directed to and focused on
a different niche in the Canadian women's apparel market. Our stores, located
throughout Canada, offer affordable fashions to consumers. Additionally,
Canadian women have a significant number of e-commerce shopping alternatives
available to them on a global basis.

    Seasonality

    The Company is principally engaged in the sale of women's apparel through
973 leased retail outlets operating under seven banners located across Canada.
The Company's business is seasonal and is also subject to a number of factors,
which directly impact retail sales of apparel over which it has no control,
namely fluctuations in weather patterns, swings in consumer confidence and
buying habits and the potential of rapid changes in fashion preferences.

    Distribution and Supply Chain

    The Company depends on the efficient operation of its sole distribution
centre, such that any significant disruption in the operation thereof (e.g.
natural disaster, system failures, destruction or major damage by fire), could
materially delay or impair its ability to replenish its stores on a timely
basis causing a loss of future sales, which could have a significant effect on
the Company's results of operations.

    Information Technology

    The Company depends on information systems to manage its operations,
including a full range of retail, financial, merchandising and inventory
control, planning, forecasting, reporting and distribution systems. The
Company regularly invests to upgrade, enhance, maintain and replace these
systems. Any significant disruptions in the performance of these systems could
have a material adverse impact on the Company's operations and financial
results.

    Government Regulation

    The Company is structured in a manner that management considers to be most
effective to conduct its business in every Canadian province and territory.
The Company is therefore subject to all manner of material and adverse changes
that can take place in any one or more of these jurisdictions as they might
impact income and sales, taxation, duties, quota impositions or re-impositions
and other legislated or government regulated matters.

    Merchandise Sourcing

    Virtually all of the Company's merchandise is private label. In fiscal
2009, no supplier represented more than 10% of the Company's purchases (in
dollars and/or units) and there are a variety of alternative sources (both
domestic and offshore) for virtually all of the Company's merchandise. The
Company has good relationships with its suppliers and has no reason to believe
that it is exposed to any material risk that would operate to prevent the
Company from acquiring, distributing and/or selling merchandise on an ongoing
basis.

    FINANCIAL RISK MANAGEMENT

    Disclosures relating to exposure to risks, in particular credit risk,
liquidity risk, foreign currency risk, interest rate risk and equity price
risk are provided below.

    Credit Risk

    Credit risk is the risk of an unexpected loss if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. The Company's financial instruments that are exposed to
concentrations of credit risk are primarily cash and cash equivalents,
marketable securities, accounts receivable and foreign exchange option
contracts. The Company limits its exposure to credit risk with respect to cash
and cash equivalents by investing available cash in short-term deposits with
Canadian financial institutions and commercial paper with a rating not less
than R1. Marketable securities consist primarily of preferred shares of highly
rated Canadian public companies. The Company's receivables consist primarily
of credit card receivables from the last few days of the fiscal year, which
are settled within the first days of the new fiscal year.

    As at January 31, 2009, the Company's maximum exposure to credit risk for
these financial instruments was as follows:

      Cash and cash equivalents                                 $ 214,054,000
      Marketable securities                                        32,818,000
      Accounts receivable                                           2,689,000
                                                               --------------
                                                                $ 249,561,000
                                                               --------------
                                                               --------------

    Liquidity Risk

    Liquidity risk is the risk that the Company will not be able to meet its
financial obligations as they fall due. The Company's approach to managing
liquidity risk is to ensure, as far as possible, that it will always have
sufficient liquidity to meet liabilities when due. The contractual maturity of
the majority of accounts payable is within six months. As at January 31, 2009,
the Company had a high degree of liquidity with $246,872,000 in cash and cash
equivalents and marketable securities. In addition, the Company has unsecured
credit facilities of $125,000,000, subject to annual renewals. The Company has
financed its store expansion through internally-generated funds and its
unsecured credit facilities are used to finance seasonal working capital
requirements for US dollar merchandise purchases. The Company's long-term debt
consists of a mortgage bearing interest at 6.40%, due November 2017, which is
secured by the Company's distribution centre.

    Foreign Currency Risk

    The Company purchases a significant amount of its merchandise with US
dollars. The Company uses a combination of foreign exchange option contracts
and spot purchases to manage its foreign exchange exposure on cash flows
related to these purchases. These option contracts generally do not exceed
three months. A foreign exchange option contract represents an option to buy a
foreign currency from a counterparty to meet its obligations. Credit risks
exist in the event of failure by a counterparty to fulfill its obligations.
The Company reduces this risk by dealing only with highly-rated
counterparties, normally major Canadian financial institutions.
    As at January 31, 2009 and February 2, 2008, there were no outstanding
foreign exchange option contracts.
    The Company has performed a sensitivity analysis on its US dollar
denominated financial instruments, which consist principally of cash and cash
equivalents of $72,000 and accounts payable of $1,081,000 to determine how a
change in the US dollar exchange rate would impact net earnings. On January
31, 2009, a 10% rise or fall in the Canadian dollar against the US dollar,
assuming that all other variables, in particular interest rates, had remained
the same, would not have a material impact on the consolidated financial
statements.

    Interest Rate Risk

    The Company's exposure to interest rate fluctuations is primarily related
to any overdraft denominated in Canadian or US dollars drawn on its bank
accounts and interest earned on its cash and cash equivalents. The Company has
available unsecured borrowing and working capital credit facilities up to an
amount of $125,000,000 available that it utilizes for documentary and standby
letters of credit, and the Company funds the drawings on these facilities as
the payments are due.
    The Company has performed a sensitivity analysis on interest rate risk at
January 31, 2009 to determine how a change in interest rates would impact
equity and net earnings. During fiscal 2009, the Company earned $5,940,000 of
interest income on its cash and cash equivalents. An increase or decrease of
100 basis points in the average interest rate earned during the year would
have increased or decreased equity and net earnings by $1,304,000. This
analysis assumes that all other variables, in particular foreign currency
rates, remain constant.

    Equity Price Risk

    Equity price risk arises from available-for-sale equity securities. The
Company monitors the mix of equity securities in its investment portfolio
based on market expectations. Material investments within the portfolio are
managed on an individual basis and all buy and sell decisions are approved by
the Chief Executive Officer.
    The Company has performed a sensitivity analysis on equity price risk at
January 31, 2009 to determine how a change in the market price of the
Company's marketable securities would impact equity and other comprehensive
income. The Company's equity investments consist principally of preferred
shares of Canadian public companies. The Company believes that changes in
interest rates influence the market price of these securities. A 5% increase
or decrease in the market price of the securities at January 31, 2009 would
result in a $1,374,000 increase or decrease in equity and other comprehensive
income. The Company's equity securities are subject to market risk and, as a
result, the impact on equity and other comprehensive income may ultimately be
greater than that indicated above.

    LIQUIDITY, CASH FLOWS AND CAPITAL RE

SOURCES Shareholders' equity at January 31, 2009 amounted to $522,539,000 or $7.43 per share as compared to $495,119,000 or $6.98 per share last year. Despite recent developments in the Canadian equity market that has resulted in a significant drop in the Toronto Stock Exchange composite index, the Company, by virtue of its holdings in cash and cash equivalents, has sustained minimal loss in value in its liquid assets. The Company continues to be in a strong financial position. The Company's principal sources of liquidity are its cash, cash equivalents and investments in marketable securities (reported at fair value) of $246,872,000 as compared with $244,354,000 last year. Short-term cash is conservatively invested in bank bearer deposit notes and bank term deposits with major Canadian chartered banks. The Company closely monitors its risk with respect to short-term cash investments and does not hold any asset-backed commercial paper. The Company has borrowing and working capital credit facilities (unsecured) available of $125,000,000. As at January 31, 2009, $61,759,000 (February 2, 2008 - $48,274,000) of the operating line of credit was committed for documentary and standby letters of credit. These credit facilities are used principally for US dollar letters of credit to satisfy offshore third-party vendors, which require such backing before confirming purchase orders issued by the Company. The Company rarely uses such credit facilities for other purposes. The Company has granted standby letters of credit, issued by highly-rated financial institutions, to third parties to indemnify them in the event the Company does not perform its contractual obligations. As at January 31, 2009, the maximum potential liability under these guarantees was $5,774,000. The standby letters of credit mature at various dates during fiscal 2010. The Company has recorded no liability with respect to these guarantees, as the Company does not expect to make any payments for these items. The Company is self-insured on a limited basis with respect to certain property risks and also purchases excess insurance coverage from financially stable third-party insurance companies. The Company maintains comprehensive loss prevention programs aimed at mitigating the financial impact of operational risks. The Company continued repayment on its long-term debt, relating to the mortgage on the distribution centre, paying down $1,146,000 in fiscal 2009. The Company paid dividends amounting to $50,885,000 in fiscal 2009 compared to $46,930,000 in fiscal 2008. In fiscal 2009, the Company invested $58,152,000 on new and renovated stores, the Sauvé Street office and Henri-Bourassa Boulevard distribution centre. The Company has completed its repairs and renovation of its Sauvé Street office. In the fiscal year ending January 30, 2010, the Company expects to invest approximately $30,000,000 in capital expenditures related to new stores and renovations. These expenditures, together with ongoing store construction and renovation programs, the payment of cash dividends and the repayments related to the Company's bank credit facility and long-term debt obligations, are expected to be funded by the Company's existing financial resources and funds derived from its operations. FINANCIAL COMMITMENTS The following table sets forth the Company's financial commitments as at January 31, 2009, the details of which are described in the previous commentary. Payments Due by Period ----------------------------------------------------------- Contractual Within 2 to 4 5 years Obligations Total 1 year years and over ----------------------------------------------------------- Long-term debt $ 13,951,000 $ 1,220,000 $ 4,158,000 $ 8,573,000 Store leases and equipment 450,078,000 101,065,000 209,365,000 139,648,000 ----------------------------------------------------------- Total contractual obligations $ 464,029,000 $ 102,285,000 $ 213,523,000 $ 148,221,000 ----------------------------------------------------------- ----------------------------------------------------------- OFF-BALANCE SHEET ARRANGEMENTS Derivative Financial Instruments The Company in its normal course of business must make long lead time commitments for a significant portion of its merchandise purchases, in some cases as long as eight months. Most of these purchases must be paid for in US dollars. The Company uses a variety of strategies, such as foreign exchange option contracts, designed to fix the cost of its continuing US dollar commitments. Due to the strength of the Canadian dollar throughout most of fiscal 2009, the Company satisfied its US dollar requirements through spot rate purchases. A foreign exchange option contract represents an option to buy a foreign currency from a counterparty at a predetermined date and amount. Credit risks exist in the event of failure by a counterparty to fulfill its obligations. The Company reduces this risk by dealing only with highly rated counterparties, normally Canadian chartered banks. The Company does not use derivative financial instruments for speculative purposes. Foreign exchange option contracts are entered into with maturities not exceeding three months. As at January 31, 2009, the Company had no outstanding foreign exchange option contracts. Included in the determination of the Company's net earnings for fiscal 2009 is a foreign exchange gain of $1,998,000 (2008 - gain of $504,000). RELATED PARTY TRANSACTIONS The Company leases two retail locations which are owned by a related party. The leases for such premises were entered into on commercial terms similar to those for leases entered into with third parties for similar premises. The annual rent expense under these leases is, in the aggregate, approximately $184,000 (2008 - $182,000). The Company incurred fees of $395,000 in fiscal 2009 (2008 - $302,000) with a law firm, of which two of the Company's outside directors are partners. The Company believes that such remuneration was based on normal terms for transactions between unrelated parties. These transactions are recorded at the amount of consideration paid, as established and agreed to by the related parties. FINANCIAL INSTRUMENTS The Company's significant financial instruments consist of cash and cash equivalents along with marketable securities. The Company uses its cash resources to fund ongoing store construction and renovations along with working capital needs. Financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company reduces its credit risks by investing available cash in bank bearer deposit notes and bank term deposits with major Canadian chartered banks. The Company closely monitors its risk with respect to short-term cash investments. Marketable securities consist primarily of preferred shares of Canadian public companies. The Company's investment portfolio is subject to stock market volatility and recent widespread declines in the stock market have resulted in reduction in the market value of these securities. The Company is highly liquid with over 85% of its cash, cash equivalents and marketable securities being invested in bank bearer deposit notes and bank term deposits of short duration with major Canadian chartered banks. The volatility of the Canadian dollar impacts earnings and while the Company considers a variety of strategies, such as foreign exchange option contracts, designed to fix the cost of its continuing US dollar commitments, this unpredictability can result in exposure to risk. CRITICAL ACCOUNTING ESTIMATES Inventory Valuation The Company uses the retail inventory method in arriving at cost. Merchandise inventories are valued at the lower of cost and net realizable value. Excess or slow moving items are identified and a provision is taken using management's best estimate. In addition, a provision for shrinkage and sales returns are also recorded using historical rates experienced. Given that inventory and cost of sales are significant components of the consolidated financial statements, any changes in assumptions and estimates could have a material impact on the Company's financial position and results of operations. Stock-Based Compensation The Company accounts for stock-based compensation and other stock-based payments using the fair value method. Stock options granted result in an expense over their vesting period based on their estimated fair values on the date of grant, determined using the Black-Scholes option pricing model. In computing the compensation cost related to stock option awards granted during the year under the fair value approach, various assumptions are used to determine the expected option life, risk-free interest rate, expected stock price volatility and average dividend yield. The use of different assumptions could result in a stock compensation expense that differs from that which the Company has recorded. Pension The Company maintains a contributory, defined benefit plan and sponsors a SERP. The costs of the defined benefit plan and SERP are determined periodically by independent actuaries. Pension expense is included annually in operations. Assumptions used in developing the net pension expense and projected benefit obligation include a discount rate, rate of increase in salary levels and expected long-term rate of return on plan assets. The use of different assumptions could result in a pension expense that differs from that which the Company has recorded. The defined benefit plan is fully funded and solvent and the SERP is an unfunded pay as you go plan. Goodwill Goodwill is not amortized but rather is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. If the Company determines in the future that impairment has occurred, the Company would be required to write-off the impaired portion of goodwill. Gift Cards/Certificates Gift cards/certificates sold are recorded as a liability and revenue is recognized when the gift card/certificate is redeemed. The Company no longer issues credit vouchers as these have been replaced by gift cards. The Company, for each reporting period, reviews the gift card/certificate liability and assesses its adequacy. In its review, the Company estimates expected usages and evaluates specific trends and patterns, which can result in an adjustment to the liability for unredeemed gift cards/certificates. RECENT ACCOUNTING PRONOUNCEMENTS CICA Section 3064 - Goodwill and Intangible Assets In February 2008, the CICA issued Handbook Section 3064, Goodwill and Intangible Assets, which replaces Section 3062, Goodwill and Other Intangible Assets, and amends Section 1000, Financial Statement Concepts. The new section establishes standards for the recognition, measurement, presentation and disclosure of goodwill and other intangible assets subsequent to its initial recognition. Standards concerning goodwill are unchanged from the standards included in the previous Section 3062. This new standard is applicable to fiscal years beginning on or after October 1, 2008. The Company has evaluated the new section and determined that there is no impact of its adoption on its consolidated financial statements. INTERNATIONAL FINANCIAL REPORTING STANDARDS In February 2008, the Canadian Accounting Standards Board confirmed that publicly accountable enterprises will be required to adopt International Financial Reporting Standards ("IFRS"), for interim and annual reporting purposes, beginning on or after January 1, 2011. The Company will be required to begin reporting under IFRS for the quarter ending May 1, 2011 and will be required to prepare an opening balance sheet and provide information that conforms to IFRS for comparative periods presented. The Company began planning the transition from current Canadian GAAP to IFRS in 2008 by establishing a project plan and a project team. The project team is led by senior finance executives that provide overall project governance, management and support. Members also include representatives from various areas of the organization as necessary and external advisors that have been engaged to assist in the IFRS conversion project. The project team reports quarterly to the Audit Committee of the Company. The project plan consists of three phases: the initial assessment, detailed assessment and design, and implementation. The Company has completed the initial assessment phase, which included the completion of a high level review of the major differences between current Canadian GAAP and IFRS, and an initial evaluation of IFRS 1 transition exemptions. The initial assessment also included training sessions for project team members and discussions with the Company's external auditors and advisors. The Company is now engaged in the detailed assessment and design phase. The detailed assessment and design phase involves completing a comprehensive analysis of the impact of the IFRS differences identified in the initial assessment phase. During the implementation phase, the Company will implement the identified changes to business processes, financial systems, accounting policies, disclosure controls and internal controls over financial reporting. The Company continues to assess the financial reporting impacts of converting to IFRS and, at this time, the impact on future financial position and results of operations is not reasonably determinable or estimable. ADOPTION OF NEW ACCOUNTING STANDARDS In June 2007, the CICA issued Section 3031, Inventories, which replaced Section 3030 and harmonizes the Canadian standards related to inventories with IFRS. This section provided changes to the measurement and more extensive guidance on the determination of cost, including allocation of overhead; narrowing the permitted cost formulas; requiring impairment testing and expanding the disclosure requirements to increase transparency. This section applies to interim and annual financial statements for fiscal years beginning on or after January 1, 2008. The Company adopted this standard in the first quarter of fiscal 2009 retrospectively, without restatement of prior periods. Merchandise inventories are valued at the lower of cost, determined principally on an average basis using the retail inventory method and net realizable value. Costs include the cost of purchase, transportation costs that are directly incurred to bring inventories to their present location and condition and certain distribution centre costs related to inventories. The Company estimates net realizable value as the amount that inventories are expected to be sold taking into consideration fluctuations of retail prices due to seasonality. Inventories are written down to net realizable value when the cost of inventories is not estimated to be recoverable due to declining selling prices. The transitional adjustments resulting from the implementation of Section 3031 are recognized in the first quarter of fiscal 2009 opening balance of retained earnings and prior periods have not been restated. Upon implementation of these requirements, an increase in opening inventories of $9,846,000, an increase in taxes payable of $3,121,000 and an increase of $6,725,000 to opening retained earnings were recorded on the consolidated balance sheet resulting from the application of this new standard. The cost of inventory recognized as an expense and included in cost of goods sold and selling, general and administrative expenses for fiscal 2009 was $363,523,000. For fiscal 2009, the Company recorded $2,275,000 of write-downs of inventory as a result of net realizable value being lower than cost and no inventory write-downs recognized in previous periods were reversed. The impact of the adoption of the new accounting standard on net earnings for fiscal 2009 was an decrease of $394,000. CICA Section 1400 - General Standards of Financial Statement Presentation In June 2007, the CICA amended Handbook Section 1400, General Standards of Financial Statement Presentation, which is effective for interim periods beginning on or after January 1, 2008 and which includes requirements to assess and disclose the Company's ability to continue as a going concern. The adoption of the amended Section had no impact on the consolidated financial statements of the Company. EIC 173 - Credit Risk and the Fair Value of Financial Assets and Financial Liabilities In January 2009, the CICA issued Emerging Issue Committee Abstract 173 ("EIC 173") Credit Risk and the Fair Value of Financial Assets and Financial Liabilities. EIC 173 requires that a company take into account its own credit risk and the credit risk of its counterparty in determining the fair value of financial assets and financial liabilities. This Abstract must be applied retrospectively without restatement of prior periods to all financial assets and liabilities measured at fair value in interim and annual financial statements for periods ending on or after January 20, 2009. The adoption of these new recommendations had no impact on the Company's consolidated financial results. OUTSTANDING SHARE DATA At April 8, 2009, 13,440,000 Common shares of the Company and 56,863,656 Class A non-voting shares of the Company were issued and outstanding. Each Common share entitles the holder thereof to one vote at meetings of shareholders of the Company. The Company has reserved 5,520,000 Class A non-voting shares for issuance under its Share Option Plan of which 952,000 Class A non-voting shares remained authorized for future issuance. The Company has 1,594,000 options outstanding at an average exercise price of $12.84. Each stock option entitles the holder to purchase one Class A non-voting share of the Company at an exercise price established based on the market price of the shares at the date the option was granted. The Company purchased, under the prior year's normal course issuer bid, 275,000 Class A non-voting shares having a book value of $107,000 under its stock repurchase program for a total cash consideration of $4,073,000. The excess of the purchase price over book value of the shares in the amount of $3,966,000 was charged to retained earnings. In November 2008, the Company received approval from the Toronto Stock Exchange to proceed with a normal course issuer bid. Under the bid, the Company may purchase up to 2,861,390 Class A non-voting shares of the Company, representing 5% of the issued and outstanding Class A non-voting shares as at November 1, 2008. The average daily trading volume for the six-month period preceding November 1, 2008 is 111,325 shares. In accordance with Toronto Stock Exchange requirements and until March 31, 2009 (unless extended), a maximum daily repurchase of 50% of this average may be made, representing 55,662 shares. Thereafter, the maximum daily repurchase will be 25% of the average, representing 27,831 shares. The bid commenced on November 28, 2008 and may continue to November 27, 2009. 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's management. All shares purchased by the Company will be cancelled. To date 380,000 Class A non-voting shares having a book value of $149,000 have been purchased for a total cash consideration of $3,842,000. The excess of the purchase price over book value of the shares in the amount of $3,693,000 was charged to retained earnings. CONTROLS AND PROCEDURES Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the President and Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO"), on a timely basis so that appropriate decisions can be made regarding public disclosure. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures was conducted as of January 31, 2009. Based on this evaluation, the CEO and the CFO have concluded that, as of January 31, 2009, the disclosure controls and procedures, as defined by National Instrument 52-109, were appropriately designed and were operating effectively. INTERNAL CONTROLS OVER FINANCIAL REPORTING Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with Canadian generally accepted accounting principles. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. An evaluation of the effectiveness of the design and operation of the Company's internal control over financial reporting was conducted as of January 31, 2009. Based on that evaluation, the CEO and the CFO concluded that the internal control over financial reporting, as defined by National Instrument 52-109, was appropriately designed and was operating effectively. The evaluations were conducted in accordance with the framework and criteria established in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"), a recognized control model, and the requirements of National Instrument 52-109, Certification of Disclosure in Issuers' Annual and Interim Filings. The Company did not make any changes to the design of internal controls over financial reporting during the year ended January 31, 2009 that would have materially affected or would reasonably likely to materially affect the Company's internal controls over financial reporting. OUTLOOK The downturn in the US economy in 2009 has developed into a recession and despite Canada's economic conditions being more favourable than other global economies, consumer confidence has fallen to a near record low. This has impacted consumer discretionary spending on many consumables, most notably apparel. The Company believes that it is well positioned for the future despite current economic conditions, offering a broad assortment of quality merchandise at affordable prices. The Company operates stores in all provinces and territories of Canada and sources its merchandise domestically and in over twenty different countries around the globe. At the present time we are operating in what we consider to be a global recession, and it is our expectation that this recession will continue to deepen before any significant recovery will be experienced. In Canada, we expect that the employment situation will continue to deteriorate for the rest of this calendar year, that general credit and liquidity will remain constrained and that consumer discretionary spending will be curtailed. We are being guided by these expectations in conducting all facets of our business. On the positive side, we believe that we remain poised to strengthen the Company's market position in all of our market niches. The Company has virtually no debt and has liquid cash reserves which provide us with the ability to act when opportunities present themselves in whatever format including, merchandising, store acquisition/construction, system replacements/upgrading or expansion by acquisition. The Company's Hong Kong office continues to serve the Company well, with over 110 full-time employees dedicated to seeking out the highest quality, affordable and fashionable apparel for all our banners. On an annual basis, the Company directly imports approximately 80% of its merchandise, largely from China. We believe that, in general, our merchandise offerings will continue to remain attractive values to the consumer, even in these difficult times. The Company has a strong balance sheet, with excellent liquidity and borrowing capacity. Its systems, including merchandise procurement, inventory control, planning, allocation and distribution, distribution centre management, point-of-sale, financial management and information technology are fully integrated. The Company is committed to continue to invest in training for all levels of its employees. %SEDAR: 00002316EF

For further information:

For further information: Jeremy H. Reitman, President, (514) 385-2630,
www.reitmans.ca


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