Le Château reports fourth quarter and year-end results

MONTREAL, April 25, 2012 /CNW Telbec/ - Le Château Inc. (TSX: CTU.A) today reported that sales for the fourth quarter ended January 28, 2012 amounted to $82.5 million, a decrease of 5.3% from $87.1 million for the fourth quarter ended January 29, 2011. Comparable store sales decreased 7.2% for the fourth quarter versus the same period a year ago.

Earnings before interest, income taxes, depreciation and amortization ("EBITDA") for the fourth quarter amounted to $8.8 million or 10.6% of sales, compared to $11.1 million or 12.7% of sales last year. Net earnings for the fourth quarter amounted to $1.1 million or $0.05 per share (diluted) compared to net earnings of $4.2 million or $0.17 per share the previous year.

Year-end Results
Sales for the year ended January 28, 2012 amounted to $302.7 million, a decrease of 5.1% from $319.0 million for the year ended January 29, 2011. Comparable store sales decreased by 7.9% versus the same period a year ago. Sales were negatively impacted throughout 2011 by several factors including: a reduction in store traffic as consumers continued to remain cautious on discretionary spending within a challenging retail environment; the impact of an unseasonably warm winter on demand for winter-wear; and a shift out of the junior casual wear market in order to re-align all of the product categories under one clear, focused lifestyle brand targeting contemporary fashion for today's modern man and woman.

EBITDA for the year amounted to $20.2 million or 6.7% of sales, compared to $47.0 million or 14.7% of sales last year. Net loss for the year ended January 28, 2012 amounted to $2.4 million or $(0.10) per share (diluted) compared to net earnings of $19.6 million or $0.79 per share for the year ended January 29, 2011. Earnings and margins for the year were negatively impacted by increased promotional activity. The Company incurred some non-recurring expenses related to the temporary ramp-up in marketing expenses to accelerate brand repositioning efforts and start-up costs related to the e-commerce initiative which totaled $5.8 million for the year. The Company also recorded $2.0 million for write-offs and impairment of property and equipment related to store closures and renovations. In fiscal 2013, the Company is planning to close eight stores in Canada and one store in the U.S., the latter being the Broadway store in New York.

During the year, the Company opened six stores, closed one and expanded twelve existing locations, resulting in the addition of 62,000 square feet or 5.1% to the Le Château network, bringing the total floor space at end of period to 1,284,000 square feet.

Effective for the first quarter ended April 30, 2011, the Company began reporting its financial results in accordance with International Financial Reporting Standards ("IFRS"). Previously reported financial results prepared in accordance with Canadian generally accepted accounting principles have been restated to conform to the new standards adopted.

Credit Facilities
Effective April 25, 2012, the Company entered into a Credit Agreement with GE Capital Canada as the lead lender for an asset based credit facility of up to $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. The facility has a term of 3 years and consists of revolving credit loans, which include both a swing line loan facility limited to $15.0 million and a letter of credit facility limited to $15.0 million. Further details regarding the facility are set out in the Management's Discussion and Analysis for fiscal 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 240 retail locations, of which 239 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 consolidated financial statements and Management's Discussion and Analysis for the year ended January 28, 2012 are available online at www.sedar.com

CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands of Canadian dollars)	As at January 28, 2012			As at January 29, 2011			As at January 31, 2010
ASSETS
Current assets
Cash and cash equivalents	$	7,193		$	17,661		$	23,411
Short-term investments		-			30,300			45,000
Accounts receivable		2,358			2,439			2,454
Income taxes refundable		2,137			3,629			1,602
Derivative financial instruments		129			-			59
Inventories		119,325			91,773			61,234
Prepaid expenses		1,564			1,614			1,308
Total current assets		132,706			147,416			135,068
Long-term investments		-			-			10,000
Property and equipment		95,744			93,490			87,679
Intangible assets		5,344			5,240			2,527
	$	233,794		$	246,146		$	235,274
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade and other payables		21,820			25,338			22,730
Dividend payable		-			4,338			4,293
Deferred revenue		3,918			4,261			4,421
Current portion of provisions		300			1,060			1,112
Derivative financial instruments		-			118			-
Current portion of long-term debt		16,323			15,920			11,752
Total current liabilities		42,361			51,035			44,308
Long-term debt		29,145			20,260			21,464
Provisions		120			414			1,538
Deferred income taxes		2,954			2,848			2,266
Deferred lease credits		16,109			15,936			15,421
Total liabilities		90,689			90,493			84,997
Shareholders' equity
Share capital		37,729			37,729			34,335
Contributed surplus		2,328			2,006			2,159
Retained earnings		102,956			116,001			113,743
Accumulated other comprehensive income (loss)		92			(83)			40
Total shareholders' equity		143,105			155,653			150,277
	$	233,794		$	246,146		$	235,274

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(Unaudited)		For the three months ended						For the year ended
(In thousands of Canadian dollars, except per share information)		January 28, 2012			January 29, 2011			January 28, 2012			January 29, 2011
Sales		$	82,526		$	87,149		$	302,707		$	319,039
Cost of sales and expenses
Cost of sales			25,681			31,339			96,145			98,327
Selling			44,169			41,550			168,035			155,891
General and administrative			10,165			8,284			39,752			36,283
			80,015			81,173			303,932			290,501
Results from operating activities			2,511			5,976			(1,225)			28,538
Finance costs			532			379			1,974			1,588
Finance income			(7)			(160)			(217)			(616)
Earnings (loss) before income taxes			1,986			5,757			(2,982)			27,566
Income tax expense (recovery)			844			1,515			(596)			8,009
Net earnings (loss)		$	1,142		$	4,242		$	(2,386)		$	19,557
Net earnings (loss) per share
Basic		$	0.05		$	0.17		$	(0.10)		$	0.79
Diluted			0.05			0.17			(0.10)			0.79
Weighted average number of shares outstanding ('000)			24,789			24,788			24,789			24,668
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)		For the three months ended						For the year ended
(In thousands of Canadian dollars)		January 28, 2012			January 29, 2011			January 28, 2012			January 29, 2011
Net earnings (loss)		$	1,142		$	4,242		$	(2,386)		$	19,557
Other comprehensive income (loss)
Change in fair value of forward exchange contracts			(17)			(211)			(949)			157
Income tax recovery (expense)			5			62			275			(47)
			(12)			(149)			(674)			110
Realized forward exchange contracts reclassified to net earnings			(298)			18			1,196			(334)
Income tax recovery (expense)			86			(5)			(347)			101
			(212)			13			849			(233)
Total other comprehensive income (loss)			(224)			(136)			175			(123)
Comprehensive income (loss)		$	918		$	4,106		$	(2,211)		$	19,434
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)		For the three months ended						For the year ended
(In thousands of Canadian dollars)		January 28, 2012			January 29, 2011			January 28, 2012			January 29, 2011
SHARE CAPITAL
Balance, beginning of period		$	37,729		$	37,707		$	37,729		$	34,335
Issuance of subordinate voting shares upon exercise of options			-			19			-			2,735
Reclassification from contributed surplus due to exercise of share options			-			3			-			659
Balance, end of period		$	37,729		$	37,729		$	37,729		$	37,729
CONTRIBUTED SURPLUS
Balance, beginning of period		$	2,287		$	1,880		$	2,006		$	2,159
Stock-based compensation expense			41			129			322			506
Exercise of share options			-			(3)			-			(659)
Balance, end of period		$	2,328		$	2,006		$	2,328		$	2,006
RETAINED EARNINGS
Balance, beginning of period		$	101,814		$	116,097		$	116,001		$	113,743
Net earnings (loss)			1,142			4,242			(2,386)			19,557
Dividends declared			-			(4,338)			(10,659)			(17,299)
Balance, end of period		$	102,956		$	116,001		$	102,956		$	116,001
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of period		$	316		$	53		$	(83)		$	40
Other comprehensive income (loss) for the period			(224)			(136)			175			(123)
Balance, end of period		$	92		$	(83)		$	92		$	(83)
Total shareholders' equity		$	143,105		$	155,653		$	143,105		$	155,653
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)		For the three months ended						For the year ended
(In thousands of Canadian dollars)		January 28, 2012			January 29, 2011			January 28, 2012			January 29, 2011
OPERATING ACTIVITIES
Net earnings (loss)		$	1,142		$	4,242		$	(2,386)		$	19,557
Adjustments to determine net cash from operating activities
	Depreciation and amortization		4,959			4,537			19,364			17,480
	Write-off and impairment of property and equipment		1,311			582			2,033			965
	Amortization of deferred lease credits		(272)			(402)			(1,127)			(906)
	Deferred lease credits		774			168			1,300			1,421
	Stock-based compensation		41			129			322			506
	Provisions		(357)			(294)			(1,054)			(1,176)
	Deferred income taxes		-			165			-			-
	Finance costs		532			379			1,974			1,588
	Finance income		(7)			(160)			(217)			(616)
	Interest paid		(538)			(385)			(1,998)			(1,612)
	Interest received		1			76			513			813
	Income tax expense (recovery)		844			1,515			(596)			8,009
			8,430			10,552			18,128			46,029
Net change in non-cash working capital items related to operations			(5,796)			229			(31,976)			(28,576)
			2,634			10,781			(13,848)			17,453
Income taxes refunded (paid)			3,705			(728)			2,544			(9,379)
Cash flows related to operating activities			6,339			10,053			(11,304)			8,074
FINANCING ACTIVITIES
Proceeds of long-term debt			17,522			15,000			27,546			15,000
Repayment of long-term debt			(5,044)			(3,283)			(18,258)			(12,036)
Issue of capital stock upon exercise of options			-			19			-			2,735
Dividends paid			(1,983)			(4,338)			(14,997)			(17,254)
Cash flows related to financing activities			10,495			7,398			(5,709)			(11,555)
INVESTING ACTIVITIES
Decrease in short-term investments			-			(5,000)			30,300			14,700
Decrease in long-term investments			-			-			-			10,000
Additions to property and equipment and intangible assets			(4,428)			(4,536)			(23,755)			(26,969)
Cash flows related to investing activities			(4,428)			(9,536)			6,545			(2,269)
Decrease in cash and cash equivalents			12,406			7,915			(10,468)			(5,750)
Cash and cash equivalents, beginning of period			(5,213)			9,746			17,661			23,411
Cash and cash equivalents, end of period		$	7,193		$	17,661		$	7,193		$	17,661
TOTAL SALES BY DIVISION
(Unaudited)		For the three months ended						For the year ended
(In thousands of Canadian dollars)		January 28, 2012			January 29, 2011			January 28, 2012			January 29, 2011
Ladies' clothing		$	44,658		$	48,799		$	172,221		$	185,490
Men's clothing			15,708			15,616			53,360			53,128
Footwear			8,078			8,501			31,480			32,865
Accessories			14,082			14,233			45,646			47,556
		$	82,526		$	87,149		$	302,707		$	319,039

 

 

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