Le Château reports third quarter results

MONTREAL, Dec. 7, 2012 /CNW Telbec/ - Le Château Inc. (TSX: CTU.A), a leading Canadian brand in specialty retailing, offering a broad array of contemporary fashion apparel, accessories and footwear for style-conscious women and men, today reported its results for the third quarter ended October 27, 2012.

Sales for the third quarter amounted to $63.7 million, a decrease of 9.5% from $70.4 million for the third quarter ended October 29, 2011. Comparable store sales decreased 9.3% for the third quarter versus the same period a year ago and continue to be impacted by the emphasis on our inventory reduction strategy resulting in lower average selling prices. In addition, store traffic continued to be impacted by consumers remaining cautious with discretionary spending.

Included in comparable store sales are online sales which increased 92% for the third quarter. While the contribution from online sales remains a small percentage of overall sales, the e-commerce business continues to gain traction and is expanding customer reach.

Net loss for the third quarter amounted to $3.6 million or $(0.14) per share (diluted) compared to a net loss of $4.1 million or $(0.17) per share the previous year. Earnings before interest, income taxes, depreciation and amortization ("EBITDA") for the third quarter amounted to $252,000 or 0.4% of sales, compared to a negative amount of $104,000 last year. The increase of $356,000 in EBITDA for the third quarter was primarily attributable to cost reduction initiatives resulting in a decline of $6.4 million in selling, general and administrative expenses offset by a $6.0 million decrease in gross margin.

Nine-month Results
Net loss for the nine-month period ended October 27, 2012 amounted to $8.9 million or $(0.35) per share (diluted) compared to a net loss of $3.5 million or $(0.15) per share the previous year. EBITDA for the first nine months amounted to $5.5 million or 2.9% of sales, compared to $11.4 million or 5.2% of sales last year.

Sales for the nine months ended October 27, 2012 decreased 11.9% to $194.0 million from $220.2 million last year. Comparable store sales decreased 12.4% versus the same period a year ago for the reasons stated above.

During the first nine months of the year, the Company opened two new stores and, as planned, closed ten stores. Total square footage for the Le Château network at the end of the third quarter ended October 27, 2012 amounted to 1,282,000 square feet.

Fourth Quarter of Fiscal 2012
For the first five weeks ended December 1, 2012, total retail sales decreased 5.8% and comparable store sales decreased 4.8% compared to the same period last year.

Appointment of new directors
The Company also announced that Andrew M. Cohen and Michael Pesner have been appointed to the Board of Directors. Mr. Cohen and Mr. Pesner are replacing Neil Kravitz and Max Mendelsohn who have left the Board.

Mr. Cohen has more than 25 years of experience as a lawyer and is a partner at Heenan Blaikie. He is a member of the Bars of the Provinces of Quebec and Ontario. He has acted as an officer or director of several subsidiaries of multinational companies doing business in Canada.

Michael Pesner, CPA, CA, has been President of Hermitage Canada Finance Inc. since 2002, a firm specializing in financial advisory services. He was previously a senior partner in financial advisory services at KPMG LLP, Chartered Accountants. Mr. Pesner is also a director of several public companies.

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 235 retail locations, of which 234 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 53-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 third quarter ended October 27, 2012 are available online at www.sedar.com

CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands of Canadian dollars)		As at October 27, 2012		As at October 29, 2011		As at January 28, 2012
ASSETS
Current assets
Cash and cash equivalents	$	3,269	$	-	$	7,193
Accounts receivable		2,259		2,127		2,358
Income taxes refundable		4,504		6,230		2,137
Derivative financial instruments		188		444		129
Inventories		134,190		118,972		119,325
Prepaid expenses		1,746		2,283		1,564
Total current assets		146,156		130,056		132,706
Property and equipment		88,570		97,460		95,744
Intangible assets		5,030		5,470		5,344
	$	239,756	$	232,986	$	233,794
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness	$	29,814	$	5,213	$	-
Trade and other payables		20,065		28,090		21,820
Dividend payable		-		1,983		-
Deferred revenue		3,209		3,169		3,918
Current portion of provisions		128		701		300
Current portion of long-term debt		10,823		16,445		16,323
Total current liabilities		64,039		55,601		42,361
Long-term debt		16,711		16,545		29,145
Provisions		359		76		120
Deferred income taxes		2,970		3,011		2,954
Deferred lease credits		16,177		15,607		16,109
Total liabilities		100,256		90,840		90,689
Shareholders' equity
Share capital		42,740		37,729		37,729
Contributed surplus		2,544		2,287		2,328
Retained earnings		94,081		101,814		102,956
Accumulated other comprehensive income		135		316		92
Total shareholders' equity		139,500		142,146		143,105
	$	239,756	$	232,986	$	233,794

CONSOLIDATED STATEMENTS OF LOSS
(Unaudited)		For the three months ended				For the nine months ended
(In thousands of Canadian dollars, except per share information)		October 27, 2012		October 29, 2011		October 27, 2012		October 29, 2011
Sales		$	63,736	$	70,412	$	194,027	$	220,181
Cost of sales and expenses
Cost of sales			21,311		21,949		61,832		70,464
Selling			38,157		43,557		115,021		123,866
General and administrative			9,014		10,311		27,390		29,587
			68,482		75,817		204,243		223,917
Results from operating activities			(4,746)		(5,405)		(10,216)		(3,736)
Finance costs			823		455		2,391		1,442
Finance income			(4)		(27)		(12)		(210)
Loss before income taxes			(5,565)		(5,833)		(12,595)		(4,968)
Income tax recovery			(1,940)		(1,690)		(3,720)		(1,440)
Net loss		$	(3,625)	$	(4,143)	$	(8,875)	$	(3,528)
Net loss per share
Basic		$	(0.14)	$	(0.17)	$	(0.35)	$	(0.15)
Diluted			(0.14)		(0.17)		(0.35)		(0.15)
Weighted average number of shares outstanding ('000)			25,814		24,789		25,130		24,789
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)		For the three months ended				For the nine months ended
(In thousands of Canadian dollars)		October 27, 2012		October 29, 2011		October 27, 2012		October 29, 2011
Net loss		$	(3,625)	$	(4,143)	$	(8,875)	$	(3,528)
Other comprehensive income
Change in fair value of forward exchange contracts			188		527		90		(932)
Income tax (expense) recovery			(53)		(153)		(25)		270
			135		374		65		(662)
Realized forward exchange contracts reclassified to net loss			(69)		496		(31)		1,494
Income tax (expense) recovery			19		(144)		9		(433)
			(50)		352		(22)		1,061
Total other comprehensive income			85		726		43		399
Comprehensive loss		$	(3,540)	$	(3,417)	$	(8,832)	$	(3,129)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)		For the three months ended				For the nine months ended
(In thousands of Canadian dollars)		October 27, 2012		October 29, 2011		October 27, 2012		October 29, 2011
SHARE CAPITAL		$	37,729	$	37,729	$	37,729	$	37,729
Balance, beginning of period
Issuance of subordinate voting shares upon conversion of long-term debt			5,011		-		5,011		-
Balance, end of period		$	42,740	$	37,729	$	42,740	$	37,729
CONTRIBUTED SURPLUS
Balance, beginning of period		$	2,426	$	2,216	$	2,328	$	2,006
Stock-based compensation expense			118		71		216		281
Balance, end of period		$	2,544	$	2,287	$	2,544	$	2,287
RETAINED EARNINGS
Balance, beginning of period		$	97,706	$	107,940	$	102,956	$	116,001
Net loss			(3,625)		(4,143)		(8,875)		(3,528)
Dividends declared			-		(1,983)		-		(10,659)
Balance, end of period		$	94,081	$	101,814	$	94,081	$	101,814
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of period		$	50	$	(410)	$	92	$	(83)
Other comprehensive income for the period			85		726		43		399
Balance, end of period		$	135	$	316	$	135	$	316
Total shareholders' equity		$	139,500	$	142,146	$	139,500	$	142,146
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)		For the three months ended				For the nine months ended
(In thousands of Canadian dollars)		October 27, 2012		October 29, 2011		October 27, 2012		October 29, 2011
OPERATING ACTIVITIES
Net loss		$	(3,625)	$	(4,143)	$	(8,875)	$	(3,528)
Adjustments to determine net cash from operating activities
	Depreciation and amortization		4,849		4,834		14,768		14,405
	Write-off and impairment of property and equipment		149		467		985		722
	Amortization of deferred lease credits		(338)		(376)		(914)		(855)
	Deferred lease credits		482		178		982		526
	Stock-based compensation		118		71		216		281
	Provisions		56		(140)		67		(697)
	Finance costs		823		455		2,391		1,442
	Finance income		(4)		(27)		(12)		(210)
	Interest paid		(820)		(461)		(2,253)		(1,460)
	Interest received		5		133		17		512
	Income tax recovery		(1,940)		(1,690)		(3,720)		(1,440)
			(245)		(699)		3,652		9,698
Net change in non-cash working capital items related to operations			(6,136)		(15,642)		(17,820)		(26,180)
			(6,381)		(16,341)		(14,168)		(16,482)
Income taxes refunded (paid)			625		338		1,618		(1,161)
Cash flows related to operating activities			(5,756)		(16,003)		(12,550)		(17,643)
FINANCING ACTIVITIES
Proceeds of long-term debt			-		-		-		10,024
Repayment of long-term debt			(4,258)		(4,591)		(12,923)		(13,214)
Dividends paid			-		(4,338)		-		(13,014)
Cash flows related to financing activities			(4,258)		(8,929)		(12,923)		(16,204)
INVESTING ACTIVITIES
Decrease in short-term investments			-		18,580		-		30,300
Additions to property and equipment and intangible assets			(1,292)		(6,166)		(8,265)		(19,327)
Cash flows related to investing activities			(1,292)		12,414		(8,265)		10,973
Decrease in cash and cash equivalents, net of bank indebtedness			(11,306)		(12,518)		(33,738)		(22,874)
Cash and cash equivalents, net of bank indebtedness, beginning of period			(15,239)		7,305		7,193		17,661
Cash and cash equivalents, net of bank indebtedness, end of period		$	(26,545)	$	(5,213)	$	(26,545)	$	(5,213)

 

 

 

 

SOURCE: LE CHATEAU INC.

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