Reitmans (Canada) Limited announces its results for the three and six months ended August 1, 2015

MONTREAL, Sept. 10, 2015 /CNW Telbec/ -

Three months ended August 1, 2015
Sales for the three months ended August 1, 2015 were $253.0 million as compared with $258.3 million for the three months ended August 2, 2014, a decrease of 2.1%, with 51 fewer stores in operation. Same store sales¹ increased by 1.7% with stores decreasing 0.6% and e-commerce increasing 70.1%.

Gross profit for the three months ended August 1, 2015 decreased $13.3 million or 8.7% to $139.2 million as compared with $152.5 million for the three months ended August 2, 2014. Gross margin for the three months ended August 1, 2015 decreased to 55.0% from 59.0% for the three months ended August 2, 2014, with the fluctuation of the US dollar negatively impacting gross margin by approximately $8.2 million.

Net loss for the three months ended August 1, 2015 was $0.2 million ($0.00 basic and diluted loss per share) as compared with net earnings of $9.6 million ($0.15 basic and diluted earnings per share) for the three months ended August 2, 2014. The net loss was primarily attributable to reduced margins and a $5.2 million loss (on a pre-tax basis) due to a change in the fair value of marketable securities mitigated by reduced operating costs both at the store level and head office.

Adjusted EBITDA¹ for the three months ended August 1, 2015 was $17.4 million as compared with $23.6 million for the three months ended August 2, 2014, a decrease of $6.2 million.

Six months ended August 1, 2015
Sales for the six months ended August 1, 2015 were $454.7 million as compared with $464.8 million for the six months ended August 2, 2014, a decrease of 2.2%, impacted by a net reduction of 51 stores. Same store sales¹ increased 2.1% with stores decreasing 0.3% and e-commerce increasing 81.3%.

Gross profit for the six months ended August 1, 2015 decreased $13.0 million or 4.8% to $259.3 million as compared with $272.3 million for the six months ended August 2, 2014.  The Company's gross margin for the six months ended August 1, 2015 decreased to 57.0% from 58.6% for the six months ended August 2, 2014, with the fluctuation of the US dollar negatively impacting gross margin by approximately $10.3 million. 

Net loss for the six months ended August 1, 2015 was $7.9 million ($0.12 basic and diluted loss per share) as compared with $3.9 million ($0.06 basic and diluted loss per share) for the six months ended August 2, 2014.  The increased loss was primarily attributable to reduced gross margins and a $6.4 million loss (on a pre-tax basis) due to a change in the fair value of marketable securities mitigated by reduced operating costs both at the store level and head office.

Adjusted EBITDA¹ for the six months ended August 1, 2015 was $19.7 million as compared with $19.5 million for the six months ended August 2, 2014, an increase of $0.2 million. 

Dividend
At the Board of Directors meeting held on September 10, 2015, a quarterly cash dividend (constituting eligible dividends) of $0.05 per share on all outstanding Class A non-voting and Common shares of the Company was declared, payable October 29, 2015 to shareholders of record on October 15, 2015.

Sales for the four weeks ended August 29, 2015
Sales for the month of August (the four weeks ended August 29, 2015) increased 0.9% with same store sales¹ increasing 6.8%, stores increasing 4.5% and e-commerce increasing 81.8%.

About Reitmans (Canada) Limited
The Company is a leading ladieswear specialty apparel retailer with retail outlets throughout Canada. The Company operates 794 stores consisting of 333 Reitmans, 135 Penningtons, 107 Addition Elle, 80 RW & CO., 69 Thyme Maternity and 70 Smart Set. The Company also operates 21 Thyme Maternity shop-in-shop boutiques in select Babies"R"Us locations in Canada.

¹Non-GAAP Financial Measures
In addition to discussing earnings in accordance with IFRS, this press announcement provides adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA") as a non-GAAP financial measure. Adjusted EBITDA is defined as net earnings before income tax expense, other income, dividend income, interest income, net change in fair value of marketable securities, realized gains or losses on disposal of marketable securities, interest expense, depreciation, amortization and net impairment losses. The following table reconciles the most comparable GAAP measure, net earnings or loss, to adjusted EBITDA. Management believes that adjusted EBITDA is an important indicator of the Company's ability to generate liquidity through operating cash flow to fund working capital needs and fund capital expenditures and uses the metric for this purpose. The exclusion of dividend, interest income, net change in fair value of marketable securities and realized gains or losses on disposal of marketable securities eliminates the impact on earnings derived from non-operational activities. The exclusion of depreciation, amortization and impairment charges eliminates the non-cash impact. The intent of adjusted EBITDA is to provide additional useful information to investors and analysts and the measure does not have any standardized meaning under IFRS. Adjusted EBITDA should therefore not be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS. Other companies may calculate adjusted EBITDA differently. From time to time, the Company may exclude additional items if it believes doing so would result in a more effective analysis of underlying operating performance. The exclusion of certain items does not imply that they are non-recurring.

The Company uses a key performance indicator ("KPI"), same store sales, to assess store performance (including each banner's e-commerce store) and sales growth.  Same store sales are defined as sales generated by stores that have been continuously open during both of the periods being compared and include e-commerce sales. The same store sales metric compares the same calendar days for each period. Although this KPI is expressed as a ratio, it is a non-GAAP financial measure that does not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures used by other companies. Management uses same store sales in evaluating the performance of stores and considers it useful in helping to determine what portion of new sales has come from sales growth and what portion can be attributed to the opening of new stores. Same store sales is a measure widely used amongst retailers and is considered useful information for both investors and analysts. Same store sales should therefore not be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS.

The following table reconciles net (loss) earnings to adjusted EBITDA for the three and six months ended August 1, 2015 and August 2, 2014:

(in millions of Canadian dollars) (unaudited)	For the three months ended				For the six months ended
	August 1, 2015		August 2, 2014		August 1, 2015		August 2, 2014
Net (loss) earnings	$	(0.2)	$	9.6	$	(7.9)	$	(3.9)
Depreciation, amortization and net impairment losses		12.2		12.4		24.1		25.8
Dividend income		(0.6)		(0.6)		(1.3)		(1.3)
Interest income		(0.1)		(0.2)		(0.3)		(0.3)
Realized loss on disposal of marketable securities		-		-		-		0.1
Net change in fair value of marketable securities		5.2		-		6.4		-
Interest expense		0.1		0.1		0.2		0.2
Income tax expense (recovery)		0.8		2.3		(1.5)		(1.1)
ADJUSTED EBITDA	$	17.4	$	23.6	$	19.7	$	19.5
ADJUSTED EBITDA as % of Sales		6.9%		9.1%		4.3%		4.2%

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, including those listed in the "Operating Risk Management and Financial Risk Management" sections of the Company's Management Discussion and Analysis for the year ended January 31, 2015.  Consequently, actual future results may differ materially from the anticipated results expressed in forward-looking statements, which reflect the Company's expectations only as of the date of this press announcement.  Forward-looking statements are based upon the Company's current estimates, beliefs and assumptions, which are based on management's perception of historical trends, current conditions and currently expected future developments, as well as other factors it believes are appropriate in the circumstances.  Specific forward-looking statements in this press announcement include, but are not limited to, statements with respect to the Company's anticipated future results and events, future liquidity, planned capital expenditures, amount of pension plan contributions, status and impact of systems implementation, the ability of the Company to successfully implement its strategic initiatives and cost reduction and productivity improvement initiatives as well as the impact of such initiatives.  The reader should not place undue reliance on any 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.

The Company's complete financial statements including notes and Management's Discussion and Analysis for the second quarter ended August 1, 2015 are available on the SEDAR website at www.sedar.com.

Montreal, September 10, 2015

Jeremy H. Reitman
Chairman and Chief Executive Officer
Telephone: [phone]
Corporate Website: www.reitmanscanadalimited.com

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (in thousands of Canadian dollars except per share amounts)
		For the three months ended				For the six months ended
		August 1, 2015		August 2, 2014		August 1, 2015		August 2, 2014
Sales		$	252,998	$	258,326	$	454,729	$	464,804
Cost of goods sold			113,835		105,833		195,471		192,541
Gross profit			139,163		152,493		259,258		272,263
Selling and distribution expenses			124,779		126,881		243,660		252,142
Administrative expenses			11,701		14,706		23,079		25,844
Results from operating activities			2,683		10,906		(7,481)		(5,723)
Finance income			3,169		1,137		4,646		1,641
Finance costs			5,323		140		6,573		855
Earnings (loss) before income taxes			529		11,903		(9,408)		(4,937)
Income tax (expense) recovery			(751)		(2,346)		1,515		1,079
Net (loss) earnings		$	(222)	$	9,557	$	(7,893)	$	(3,858)
Earnings (loss) per share:
	Basic	$	0.00	$	0.15	$	(0.12)	$	(0.06)
	Diluted		0.00		0.15		(0.12)		(0.06)

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(in thousands of Canadian dollars)
			For the three months ended				For the six months ended
			August 1, 2015		August 2, 2014		August 1, 2015		August 2, 2014
Net (loss) earnings			$	(222)	$	9,557	$	(7,893)	$	(3,858)
Other comprehensive income (loss)
	Items that are or may be reclassified subsequently to net earnings:
		Net change in fair value of available-for-sale financial assets (net of tax of $49 for the three months ended August 2, 2014 and $362 for the six months ended August 2, 2014)		-		317		-		2,367
		Net gain on derivatives designated as cash flow hedges (net of tax of $2,829 for the three months ended August 1, 2015 and $1,323 for the six months ended August 1, 2015; 2014 -nil)		7,808		-		3,639		-
		Foreign currency translation differences		(301)		22		(119)		(151)
Total other comprehensive income				7,507		339		3,520		2,216
Total comprehensive income (loss)			$	7,285	$	9,896	$	(4,373)	$	(1,642)

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands of Canadian dollars)
			August 1, 2015		August 2, 2014		January 31, 2015
ASSETS
CURRENT ASSETS
	Cash and cash equivalents		$	114,422	$	113,380	$	139,913
	Marketable securities			54,930		52,905		57,364
	Trade and other receivables			4,803		5,160		4,599
	Derivative financial asset			13,166		3,343		20,635
	Income taxes recoverable			2,226		2,123		1,977
	Inventories			131,488		112,455		106,440
	Prepaid expenses			8,983		27,134		12,148
		Total Current Assets		330,018		316,500		343,076
NON-CURRENT ASSETS
	Property and equipment			141,957		164,375		152,349
	Intangible assets			22,535		18,287		20,077
	Goodwill			42,426		42,426		42,426
	Deferred income taxes			27,975		30,729		26,463
		Total Non-Current Assets		234,893		255,817		241,315
TOTAL ASSETS			$	564,911	$	572,317	$	584,391
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Trade and other payables		$	94,741	$	87,550	$	91,719
	Derivative financial liability			1		4,057		96
	Deferred revenue			15,956		15,359		21,073
	Current portion of long-term debt			1,837		1,725		1,780
		Total Current Liabilities		112,535		108,691		114,668
NON-CURRENT LIABILITIES
	Other payables			9,060		10,855		9,903
	Deferred lease credits			11,914		13,921		13,178
	Long-term debt			2,618		4,456		3,551
	Pension liability			22,315		18,749		21,968
		Total Non-Current Liabilities		45,907		47,981		48,600
SHAREHOLDERS' EQUITY
	Share capital			38,814		39,227		39,227
	Contributed surplus			8,464		7,503		8,014
	Retained earnings			350,370		359,343		368,241
	Accumulated other comprehensive income			8,821		9,572		5,641
		Total Shareholders' Equity		406,469		415,645		421,123
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$	564,911	$	572,317	$	584,391

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (in thousands of Canadian dollars)
		Share Capital		Contributed Surplus		Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders' Equity
Balance as at February 1, 2015		$	39,227	$	8,014	$	368,241	$	5,641	$	421,123
IFRS 9 (2014) adoption adjustment			-		-		340		(340)		-
Adjusted balance as at February 1, 2015			39,227		8,014		368,581		5,301		421,123
Total comprehensive loss for the period
	Net loss		-		-		(7,893)		-		(7,893)
	Total other comprehensive income		-		-		-		3,520		3,520
Total comprehensive loss for the period			-		-		(7,893)		3,520		(4,373)
Contributions by (distributions to) owners of the Company
	Cash consideration on exercise of share options		2		-		-		-		2
	Cancellation of shares pursuant to share repurchase program		(415)		-		-		-		(415)
	Share-based compensation costs		-		450		-		-		450
	Dividends		-		-		(6,427)		-		(6,427)
	Premium on repurchase of Class A non-voting shares		-		-		(3,891)		-		(3,891)
Total (distributions to) contributions by owners of the Company			(413)		450		(10,318)		-		(10,281)
Balance as at August 1, 2015		$	38,814	$	8,464	$	350,370	$	8,821	$	406,469
Balance as at February 2, 2014		$	39,227	$	7,188	$	369,660	$	7,356	$	423,431
Total comprehensive loss for the period
	Net loss		-		-		(3,858)		-		(3,858)
	Total other comprehensive income		-		-		-		2,216		2,216
Total comprehensive loss for the period			-		-		(3,858)		2,216		(1,642)
Contributions by (distributions to) owners of the Company
	Share-based compensation costs		-		315		-		-		315
	Dividends		-		-		(6,459)		-		(6,459)
Total contributions by (distributions to) owners of the Company			-		315		(6,459)		-		(6,144)
Balance as at August 2, 2014		$	39,227	$	7,503	$	359,343	$	9,572	$	415,645

REITMANS (CANADA) LIMITED CONDENSED  CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS (Unaudited)
(in thousands of Canadian dollars)
		For the three months ended				For the six months ended
		August 1, 2015		August 2, 2014		August 1, 2015		August 2, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) earnings		$	(222)	$	9,557	$	(7,893)	$	(3,858)
Adjustments for:
	Depreciation, amortization and net impairment losses		12,226		12,364		24,106		25,831
	Share-based compensation costs		312		242		450		315
	Amortization of deferred lease credits		(991)		(926)		(2,434)		(1,955)
	Deferred lease credits		785		73		1,170		269
	Pension contribution		(428)		(207)		(703)		(494)
	Pension expense		525		492		1,050		984
	Realized loss on sale of marketable securities		15		37		15		61
	Impairment loss on available-for-sale financial assets		-		-		-		10
	Net change in fair value of marketable securities		5,233		-		6,401		-
	Net change in fair value of derivatives		2,799		2,395		12,335		9,424
	Foreign exchange gain on cash and cash equivalents		(4,521)		(406)		(5,467)		(1,086)
	Interest and dividend income, net		(643)		(671)		(1,428)		(1,369)
	Interest paid		(75)		(103)		(157)		(211)
	Interest received		127		183		379		381
	Dividends received		635		629		1,248		1,439
	Income tax expense (recovery)		751		2,346		(1,515)		(1,079)
			16,528		26,005		27,557		28,662
Changes in:
	Trade and other receivables		1,248		1,944		(246)		1,028
	Inventories		3,489		8,287		(25,048)		(2,854)
	Prepaid expenses		15,413		(1,372)		3,165		(14,622)
	Trade and other payables		24,702		13,795		5,233		(4,333)
	Deferred revenue		(159)		(168)		(5,117)		(4,639)
Cash from operating activities			61,221		48,491		5,544		3,242
Income taxes received			-		5,133		2		5,133
Income taxes paid			(392)		(838)		(1,570)		(3,033)
Net cash flows from operating activities			60,829		52,786		3,976		5,342
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of marketable securities			(2,924)		(80)		(5,660)		(185)
Proceeds on sale of marketable securities			1,678		2,500		1,678		5,000
Proceeds on sales of trademarks			-		26		-		55
Additions to property and equipment and intangible assets			(9,094)		(6,444)		(19,226)		(12,779)
Cash flows used in investing activities			(10,340)		(3,998)		(23,208)		(7,909)
CASH FLOWS USED IN FINANCING ACTIVITIES
Dividends paid			(3,198)		(3,230)		(6,427)		(6,459)
Purchase of Class A non-voting shares for cancellation			(4,306)		-		(4,306)		-
Repayment of long-term debt			(441)		(415)		(876)		(822)
Proceeds from issuance of share capital			-		-		2		-
Cash flows used in financing activities			(7,945)		(3,645)		(11,607)		(7,281)
FOREIGN EXCHANGE GAIN ON CASH HELD IN FOREIGN CURRENCY			4,220		389		5,348		873
NET INCREASE (DECREASE)  IN CASH AND CASH EQUIVALENTS			46,764		45,532		(25,491)		(8,975)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD			67,658		67,848		139,913		122,355
CASH AND CASH EQUIVALENTS, END OF THE PERIOD		$	114,422	$	113,380	$	114,422	$	113,380

SOURCE Reitmans (Canada) Limited

Jeremy H. Reitman, Chairman and Chief Executive Officer, Telephone: [phone], Corporate Website: www.reitmanscanadalimited.com