Le Château reports first quarter results

MONTREAL, June 8, 2012 /CNW Telbec/ - Le Château Inc. (TSX: CTU.A) today reported that sales for the first quarter ended April 28, 2012 amounted to $57.8 million, a decrease of 11.1% from $65.0 million for the first quarter ended April 30, 2011. Comparable store sales decreased 13.1% for the first quarter versus the same period a year ago.

Loss before interest, income taxes, depreciation and amortization for the first quarter amounted to $3.2 million, compared to earnings before interest, income taxes, depreciation and amortization ("EBITDA") of $1.1 million or 1.7% of sales last year. Net loss for the first quarter amounted to $6.5 million or $(0.26) per share (diluted) compared to a net loss of $2.9 million or $(0.12) per share (diluted) the previous year. Earnings and margins for the first quarter were negatively impacted by increased promotional activity.

During the first three months of the year, the Company opened one new store and closed four stores. Total square footage for the Le Château network at the end of the first quarter ended April 28, 2012 amounted to 1,284,000 square feet.

Credit Facilities
Effective April 25, 2012, the Company entered into a new 3-year Credit Agreement with GE Capital Canada as the lead lender for an asset based credit facility of $70.0 million, replacing its previous credit facility of $22.0 million. The revolving credit facility is collateralized by the Company's credit card accounts receivable and inventories, as defined in the agreement. Further details regarding the facility are set out in the Management's Discussion and Analysis for the first quarter ended April 28, 2012 which is available at the Company's profile on sedar.com.

In addition, the Company has an import line of credit of $25.0 million which includes a $1.0 million loan facility. The import line is for letters of credit which guarantee the payment of purchases from foreign suppliers.

The Company uses the above facilities and lines of credit from time to time in the ordinary course of its business.

Le Château is a leading Canadian brand in specialty retailing, offering a broad array of contemporary fashion apparel, accessories and footwear for style-conscious women and men. The Le Château brand is sold exclusively through the Company's 236 retail locations, of which 235 are located in Canada. The Company's retail locations are primarily found in major urban shopping malls, as well as street-front locations with high pedestrian traffic. In addition, the Company has 10 stores under license in the Middle East. Le Château's web-based marketing is further broadening the Company's customer base among Internet shoppers in both Canada and the United States. With its 52-year tradition of vertical integration, emphasizing a design and manufacturing approach to retailing, Le Château is unique among Canadian fashion merchants. 

Non-GAAP Measures
In addition to discussing earnings measures in accordance with IFRS, this press release provides EBITDA as a supplementary earnings measure. Depreciation and amortization includes the write-off and impairment of property and equipment. EBITDA is provided to assist readers in determining the ability of the Company to generate cash from operations and to cover financial charges. It is also widely used for valuation purposes for public companies in our industry.

The Company also discloses comparable store sales which are defined as sales generated by stores that have been open for at least one year.

The above measures do not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies.

Forward-Looking Statements
This news release may contain forward-looking statements relating to the Company and/or the environment in which it operates that are based on the Company's expectations, estimates and forecasts. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict and/or are beyond the Company's control. A number of factors may cause actual outcomes and results to differ materially from those expressed. These factors include those set forth in other public filings of the Company. Therefore, readers should not place undue reliance on these forward-looking statements. In addition, these forward-looking statements speak only as of the date made and the Company disavows any intention or obligation to update or revise any such statements as a result of any event, circumstance or otherwise except to the extent required under applicable securities law.

Factors which could cause actual results or events to differ materially from current expectations include, among other things: the ability of the Company to successfully implement its business initiatives and whether such business initiatives will yield the expected benefits; competitive conditions in the businesses in which the Company participates; changes in consumer spending; general economic conditions and normal business uncertainty; customer preferences towards product offerings; seasonal weather patterns; fluctuations in foreign currency exchange rates; changes in the Company's relationship with its suppliers; interest rate fluctuations and other changes in borrowing costs; and changes in laws, rules and regulations applicable to the Company.

The Company's unaudited interim condensed financial statements and Management's Discussion and Analysis for the first quarter ended April 28, 2012 are available online at www.sedar.com

(In thousands of Canadian dollars)
As at
April 28, 2012
As at
April 30, 2011
As at
January 28, 2012
Current assets            
Cash and cash equivalents $ 4,919 $ 15,306 $ 7,193
Short-term investments   -   18,580   -
Accounts receivable   1,595   3,001   2,358
Income taxes refundable   4,248   4,875   2,137
Derivative financial instruments   -     129
Inventories   127,448   97,007   119,325
Prepaid expenses   2,030   1,952   1,564
Total current assets   140,240   140,721   132,706
Property and equipment   94,002   95,250   95,744
Intangible assets   5,286   5,602   5,344
Deferred income taxes   110   428   -
  $ 239,638 $ 242,001 $ 233,794
Current liabilities            
Bank indebtedness $ 19,800 $ - $ -
Trade and other payables   19,760   22,921   21,820
Dividend payable   -   4,338   -
Deferred revenue   3,437   3,696   3,918
Current portion of provisions   109   1,018   300
Derivative financial instruments   393   1,475   -
Current portion of long-term debt    14,910   17,860   16,323
Total current liabilities   58,409   51,308   42,361
Long-term debt   26,098   24,251   29,145
Provisions   108   150   120
Deferred income taxes   2,917   2,883   2,954
Deferred lease credits   15,862   15,804   16,109
Total liabilities   103,394   94,396   90,689
Shareholders' equity            
Share capital   37,729   37,729   37,729
Contributed surplus   2,374   2,129   2,328
Retained earnings   96,424   108,794   102,956
Accumulated other comprehensive income (loss)   (283)   (1,047)   92
Total shareholders' equity   136,244   147,605   143,105
  $ 239,638 $ 242,001 $ 233,794

(Unaudited)   For the three months ended
(In thousands of Canadian dollars, except per share information)   April 28, 2012   April 30, 2011
Sales $ 57,777 $ 64,959
Cost of sales and expenses        
Cost of sales     18,018   19,312
Selling   38,483   39,490
General and administrative   9,660   9,803
    66,161   68,605
Results from operating activities   (8,384)   (3,646)
Finance costs   689   485
Finance income   (1)   (92)
Loss before income taxes   (9,072)   (4,039)
Income tax recovery   (2,540)   (1,170)
Net loss $ (6,532) $ (2,869)
Net loss per share          
  Basic $ (0.26) $ (0.12)
  Diluted   (0.26)   (0.12)
Weighted average number of shares outstanding ('000)   24,789   24,789
(Unaudited)   For the three months ended
(In thousands of Canadian dollars)   April 28, 2012   April 30, 2011
Net loss $ (6,532) $ (2,869)
Other comprehensive loss        
Change in fair value of forward exchange contracts   (393)   (1,488)
Income tax recovery   110   431
    (283)   (1,057)
Realized forward exchange contracts reclassified to net loss   (129)   131
Income tax recovery (expense)   37   (38)
    (92)   93
Total other comprehensive loss   (375)   (964)
Comprehensive loss $ (6,907) $ (3,833)
(Unaudited)   For the three months ended
(In thousands of Canadian dollars)   April 28, 2012   April 30, 2011
SHARE CAPITAL $ 37,729 $ 37,729
Balance, beginning of period $ 2,328 $ 2,006
Stock-based compensation expense   46   123
Balance, end of period $ 2,374 $ 2,129
Balance, beginning of period $ 102,956 $ 116,001
Net loss   (6,532)   (2,869)
Dividends declared   -   (4,338)
Balance, end of period $ 96,424 $ 108,794
Balance, beginning of period $ 92 $ (83)
Other comprehensive loss for the period   (375)   (964)
Balance, end of period $ (283) $ (1,047)
Total shareholders' equity $ 136,244 $ 147,605
(Unaudited)   For the three months ended
(In thousands of Canadian dollars)   April 28, 2012   April 30, 2011
Net loss $ (6,532) $ (2,869)
Adjustments to determine net cash from operating activities        
  Depreciation and amortization   4,950   4,704
  Write-off and impairment of property and equipment    229   -
  Amortization of deferred lease credits   (266)   (240)
  Deferred lease credits   19   108
  Stock-based compensation expense   46   123
  Provisions   (203)   (306)
  Finance costs   689   485
  Finance income   (1)   (92)
  Interest paid   (689)   (491)
  Interest received   7   348
  Income tax recovery   (2,540)   (1,170)
    (4,291)   600
Net change in non-cash working capital items related to operations   (10,448)   (9,366)
    (14,739)   (8,766)
Income taxes refunded (paid)   504   (76)
Cash flows related to operating activities   (14,235)   (8,842)
Proceeds of long-term debt   -   10,024
Repayment of long-term debt   (4,460)   (4,093)
Dividends paid   -   (4,338)
Cash flows related to financing activities   (4,460)   1,593
Decrease in short-term investments   -   11,720
Additions to property and equipment and intangible assets   (3,379)   (6,826)
Cash flows related to investing activities   (3,379)   4,894
Decrease in cash and cash equivalents, net of bank indebtedness   (22,074)   (2,355)
Cash and cash equivalents, beginning of period   7,193   17,661
Cash and cash equivalents, net of bank indebtedness, end of period $ (14,881) $ 15,306
(Unaudited)   For the three months ended
(In thousands of Canadian dollars)   April 28, 2012   April 30, 2011
Ladies' clothing $ 34,402 $ 39,319
Men's clothing   9,492   10,174
Footwear   6,362   6,675
Accessories   7,521   8,791
  $ 57,777 $ 64,959



For further information:

Emilia Di Raddo, CPA, CA, President (514) 738-7000
Johnny Del Ciancio, CPA, CA, Vice-President, Finance, (514) 738-7000
MaisonBrison:  Pierre Boucher, (514) 731-0000
Source:  Le Château Inc.

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