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.

Profile
Le Château is a leading Canadian brand in specialty retailing, offering a broad array of contemporary fashion apparel, accessories and footwear for style-conscious women and men. The Le Château brand is 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

CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands of Canadian dollars)	As at April 28, 2012			As at April 30, 2011		As at January 28, 2012
ASSETS
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
LIABILITIES AND SHAREHOLDERS' EQUITY
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

CONSOLIDATED STATEMENTS OF LOSS
(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
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(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)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)			For the three months ended
(In thousands of Canadian dollars)			April 28, 2012		April 30, 2011
SHARE CAPITAL		$	37,729	$	37,729
CONTRIBUTED SURPLUS
Balance, beginning of period		$	2,328	$	2,006
Stock-based compensation expense			46		123
Balance, end of period		$	2,374	$	2,129
RETAINED EARNINGS
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
ACCUMULATED OTHER COMPREHENSIVE LOSS
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
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)			For the three months ended
(In thousands of Canadian dollars)			April 28, 2012		April 30, 2011
OPERATING ACTIVITIES
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)
FINANCING ACTIVITIES
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
INVESTING ACTIVITIES
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
TOTAL SALES BY DIVISION
(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

 

Emilia Di Raddo, CPA, CA, President [phone]
Johnny Del Ciancio, CPA, CA, Vice-President, Finance, [phone]
MaisonBrison:  Pierre Boucher, [phone]
Source:  Le Château Inc.