Reitmans (Canada) Limited announces its results for the nine and three months ended November 2, 2013

MONTREAL, Dec. 3, 2013 /CNW Telbec/ - Sales for the nine months ended November 2, 2013 were $719,720,000 as compared with $732,854,000 for the nine months ended October 27, 2012, a decrease of 1.8%.  Same store sales¹ decreased 3.0%.  Sales were negatively impacted due to a reduction in the number of stores as the Company rationalizes underperforming locations combined with competitive pressures necessitating more promotional pricing.  Sales were also impacted by significantly slower than anticipated acceptance by consumers of the Company's repositioning and rebranding efforts in its Smart Set banner.  The retail environment remains challenging with increased competitive pressure for apparel retailers.  The Company's gross margin for the nine months ended November 2, 2013 decreased to 62.6% from 64.1% for the nine months ended October 27, 2012.  Increased markdowns in the Smart Set banner significantly contributed to the reduction in gross margin.  Net earnings for the nine months ended November 2, 2013 were $13,359,000 ($0.21 diluted earnings per share) as compared with $27,501,000 ($0.42 diluted earnings per share) for the nine months ended October 27, 2012.  In the nine months ended November 2, 2013, adjusted EBITDA¹ was $62,317,000 as compared with $77,543,000 for the nine months ended October 27, 2012, a decrease of 19.6%.

Sales for the three months ended November 2, 2013 increased 5.6% to $249,414,000 as compared with $236,247,000 for the three months ended October 27, 2012.  Same store sales¹ increased 1.6%, however Smart Set sales declined significantly for the third quarter of fiscal 2014 as compared to the third quarter of fiscal 2013.The Company's gross margin for the three months ended November 2, 2013 decreased to 61.0% from 63.0% for the three months ended October 27, 2012.  A highly promotional environment combined with increased markdowns in the Smart Set banner significantly contributed to the gross margin decline.  Net earnings for the three months ended November 2, 2013 were $5,763,000 ($0.09 diluted earnings per share) as compared with a loss of $29,000 ($0.00 diluted earnings per share) for the three months ended October 27, 2012.  Adjusted EBITDA¹ increased by 50.1% to $21,011,000 for the three months ended November 2, 2013 as compared with $14,001,000 for the three months ended October 27, 2012.

During the three months ended November 2, 2013, the Company opened 8 new stores, comprised of 2 Reitmans, 4 RW & CO. , 1 Penningtons and 1 Addition Elle.  Thirteen stores were closed, comprised of 4 Reitmans, 3 Smart Set, 1 RW & CO., 1 Thyme Maternity, 3 Penningtons and 1 Addition Elle.  At November 2, 2013, there were 895 stores in operation, consisting of 355 Reitmans, 138 Smart Set, 77 RW & CO., 71 Thyme Maternity, 151 Penningtons and 103 Addition Elle, as compared with a total of 923 stores as at October 27, 2012.  In addition, there were 22 Thyme Maternity boutiques in select Babies"R"Us locations in Canada and 166 boutiques in Babies"R"Us stores in the United States.  During the three months ended November 2, 2013, the Company began offering consumers Penningtons plus-size apparel, under a wholesale agreement, in five Sears stores in Canada, as well as online at sears.ca.

Sales for the month of November (the four weeks ended November 30, 2013) increased 1.4% with same store sales¹ increasing 1.1% compared to the comparable 4 weeks ended November 24, 2012.

As a result of the disappointing earnings for the nine months ended November 2, 2013, the Board of Directors has decided to reduce the quarterly cash dividend from $0.20 per share to $0.05 per share.  Accordingly, at the Board of Directors meeting held on December 3, 2013, 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 January 30, 2014 to shareholders of record on January 20, 2014.

¹Non-GAAP Financial Measures
In addition to discussing earnings in accordance with IFRS, this press release provides adjusted EBITDA as a supplementary earnings measure, which is defined as earnings (loss) before income taxes, dividend income, interest income, realized gains or losses on disposal of available-for-sale financial assets, impairment losses on available-for-sale financial assets, interest expense, depreciation, amortization and net impairment losses related to property and equipment. The Company also discloses same store sales, which are defined as sales generated by stores that have been open for at least one year and includes e-commerce sales for banners that have been operational for at least one year.  The Company believes these measures provide meaningful information on the Company's performance and operating results. However, readers should know that these non-GAAP financial measures have no standardized meaning as prescribed by IFRS and may not be comparable to similar measures presented by other companies.  Accordingly, they should not be considered in isolation.

The following table reconciles adjusted EBITDA to earnings before income taxes for the nine and three months ended November 2, 2013 and October 27, 2012:

(unaudited)	For the nine months ended				For the three months ended
	November 2, 2013		October 27, 2012^2		November 2, 2013		October 27, 2012^2
Earnings (loss) before income taxes	$	17,876,000	$	36,317,000	$	7,792,000	$	(193,000)
Dividend income		(2,608,000)		(2,615,000)		(872,000)		(874,000)
Interest income		(437,000)		(859,000)		(133,000)		(198,000)
Impairment losses on available-for-sale financial assets		692,000		106,000		190,000		-
Interest expense		382,000		453,000		121,000		145,000
Depreciation, amortization and net impairment losses		46,412,000		44,141,000		13,913,000		15,121,000
ADJUSTED EBITDA	$	62,317,000	$	77,543,000	$	21,011,000	$	14,001,000

^2	Adjusted to reflect the impact from the implementation of the amendments to IAS 19, Employee Benefits, which can be found in Note 3 of the November 2, 2013 unaudited condensed consolidated interim financial statements

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. Consequently, actual future results may differ materially from the anticipated results expressed in forward-looking statements. The reader should not place undue reliance on the 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 unaudited condensed consolidated interim financial statements including notes and Management's Discussion and Analysis for the nine and three months ended November 2, 2013 are available online at www.sedar.com.

Montreal, December 3, 2013

Jeremy H. Reitman
Chairman and Chief Executive Officer

Telephone:  [phone]
Corporate Website: www.reitmans.ca

REITMANS (CANADA) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands of Canadian dollars except per share amounts)

		For the nine months ended				For the three months ended
		November 2, 2013		October 27, 2012		November 2, 2013		October 27, 2012
				(note 3a)				(note 3a)
Sales		$	719,720	$	732,854	$	249,414	$	236,247
Cost of goods sold			269,119		262,803		97,190		87,417
Gross profit			450,601		470,051		152,224		148,830
Selling and distribution expenses			405,235		402,769		135,956		138,276
Administrative expenses			33,837		34,087		10,946		11,537
Results from operating activities			11,529		33,195		5,322		(983)
Finance income			7,421		4,332		2,781		1,464
Finance costs			1,074		1,210		311		674
Earnings (loss) before income taxes			17,876		36,317		7,792		(193)
Income tax expense (recovery)			4,517		8,816		2,029		(164)
Net earnings (loss)		$	13,359	$	27,501	$	5,763	$	(29)
Earnings per share:
	Basic	$	0.21	$	0.42	$	0.09	$	0.00
	Diluted		0.21		0.42		0.09		0.00

REITMANS (CANADA) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in thousands of Canadian dollars)

		For the nine months ended				For the three months ended
		November 2, 2013		October 27, 2012		November 2, 2013		October 27, 2012
Net earnings (loss)		$	13,359	$	27,501	$	5,763	$	(29)
Other comprehensive (loss) income
Items that are or may be reclassified subsequently to net earnings:
	Reclassification of impairment loss on available-for-sale financial assets to net earnings (net of tax of $93 for nine months and $25 for three months ended November 2, 2013; $14 for nine months ended October 27, 2012)		599		92		165		-
	Net change in fair value of available-for-sale financial assets (net of tax of $422 for nine months and $237 for the three months ended November 2, 2013; $100 for nine months and $29 for the three months ended October 27, 2012)		(2,770)		(704)		(1,547)		184
	Cumulative translation reserve		223		-		223		-
Total other comprehensive (loss) income			(1,948)		(612)		(1,159)		184
Total comprehensive income		$	11,411	$	26,889	$	4,604	$	155

REITMANS (CANADA) LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands of Canadian dollars)

			November 2, 2013		October 27, 2012		February 2, 2013
ASSETS						(note 3a)		(note 3a)
CURRENT ASSETS
	Cash and cash equivalents		$	52,381	$	108,935	$	97,626
	Marketable securities			68,753		70,954		71,630
	Trade and other receivables			5,163		4,382		3,969
	Derivative financial asset			2,794		527		548
	Income taxes recoverable			2,951		8,283		8,709
	Inventories			127,749		117,795		93,317
	Prepaid expenses			27,433		11,789		25,944
		Total Current Assets		287,224		322,665		301,743
NON-CURRENT ASSETS
	Property and equipment			189,851		203,401		205,131
	Intangible assets			17,089		18,652		19,224
	Goodwill			42,426		42,426		42,426
	Deferred income taxes			29,680		26,265		26,444
		Total Non-Current Assets		279,046		290,744		293,225
TOTAL ASSETS			$	566,270	$	613,409	$	594,968
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Trade and other payables		$	76,040	$	81,896	$	69,150
	Derivative financial liability			1,472		423		266
	Deferred revenue			6,424		8,153		16,297
	Current portion of long-term debt			1,646		1,545		1,570
		Total Current Liabilities		85,582		92,017		87,283
NON-CURRENT LIABILITIES
	Other payables			11,910		11,541		11,425
	Deferred lease credits			16,613		17,719		16,805
	Long-term debt			5,760		7,406		7,003
	Pension liability			18,247		16,117		17,559
		Total Non-Current Liabilities		52,530		52,783		52,792
SHAREHOLDERS' EQUITY
	Share capital			39,227		39,227		39,227
	Contributed surplus			7,126		5,979		6,521
	Retained earnings			375,088		415,278		400,480
	Accumulated other comprehensive income			6,717		8,125		8,665
		Total Shareholders' Equity		428,158		468,609		454,893
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$	566,270	$	613,409	$	594,968

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 3, 2013			$	39,227	$	6,521	$	400,480	$	8,665	$	454,893
Total comprehensive income for the period
	Net earnings							13,359				13,359
	Total other comprehensive loss									(1,948)		(1,948)
Total comprehensive income for the period				-		-		13,359		(1,948)		11,411
Contributions by (distributions to) owners of the Company
	Share-based compensation costs					605						605
	Dividends							(38,751)				(38,751)
Total contributions by (distributions to) owners of the Company				-		605		(38,751)		-		(38,146)
Balance as at November 2, 2013			$	39,227	$	7,126	$	375,088	$	6,717	$	428,158
Balance as at August 4, 2013			$	39,227	$	6,997	$	382,242	$	7,876	$	436,342
Total comprehensive income for the period
	Net earnings							5,763				5,763
	Total other comprehensive loss									(1,159)		(1,159)
Total comprehensive income for the period				-		-		5,763		(1,159)		4,604
Contributions by (distributions to) owners of the Company
	Share-based compensation costs					129						129
	Dividends							(12,917)				(12,917)
Total contributions by (distributions to) owners of the Company				-		129		(12,917)		-		(12,788)
Balance as at November 2, 2013			$	39,227	$	7,126	$	375,088	$	6,717	$	428,158
			Share Capital		Contributed Surplus		Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders' Equity
Balance as at January 29, 2012			$	39,890	$	5,158	$	438,880	$	8,737	$	492,665
Total comprehensive income for the period
	Net earnings							27,501				27,501
	Total other comprehensive loss									(612)		(612)
Total comprehensive income for the period				-		-		27,501		(612)		26,889
Contributions by (distributions to) owners of the Company
	Cancellation of shares pursuant to share repurchase program			(663)								(663)
	Share-based compensation costs					821						821
	Dividends							(39,151)				(39,151)
	Premium on repurchases of Class A non-voting shares							(11,952)				(11,952)
Total contributions by (distributions to) owners of the Company				(663)		821		(51,103)		-		(50,945)
Balance as at October 27, 2012			$	39,227	$	5,979	$	415,278	$	8,125	$	468,609
Balance as at July 29, 2012			$	39,890	$	5,694	$	440,176	$	7,941	$	493,701
Total comprehensive income for the period
Net loss								(29)				(29)
Total other comprehensive income										184		184
Total comprehensive income for the period				-		-		(29)		184		155
Contributions by (distributions to) owners of the Company
	Cancellation of shares pursuant to share repurchase program			(663)								(663)
	Share-based compensation costs					285						285
	Dividends							(12,917)				(12,917)
	Premium on repurchases of Class A non-voting shares							(11,952)				(11,952)
Total contributions by (distributions to) owners of the Company				(663)		285		(24,869)		-		(25,247)
Balance as at October 27, 2012			$	39,227	$	5,979	$	415,278	$	8,125	$	468,609

REITMANS (CANADA) LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of Canadian dollars)

			For the nine months ended				For the three months ended
			November 2, 2013		October 27, 2012		November 2, 2013		October 27, 2012
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
	Net earnings (loss)		$	13,359	$	27,501	$	5,763	$	(29)
	Adjustments for:
		Depreciation, amortization and net impairment losses		46,412		44,141		13,913		15,121
		Share-based compensation costs		605		821		129		285
		Amortization of deferred lease credits		(3,407)		(3,381)		(1,149)		(1,123)
		Deferred lease credits		3,215		3,783		388		2,243
		Pension contribution		(662)		(271)		(539)		(32)
		Pension expense		1,350		1,258		450		420
		Impairment loss on available-for-sale financial assets		692		106		190		-
		Net change in fair value of derivatives		(1,040)		(858)		(103)		(392)
		Foreign exchange (gain) loss on cash and cash equivalents		(270)		203		(115)		(651)
		Interest and dividend income, net		(2,663)		(3,021)		(884)		(927)
		Interest paid		(382)		(453)		(121)		(145)
		Interest received		445		977		135		250
		Dividends received		2,603		2,610		869		872
		Income tax expense		4,517		8,816		2,029		(164)
				64,774		82,232		20,955		15,728
	Changes in:
		Trade and other receivables		(1,163)		(968)		(1,542)		(994)
		Inventories		(34,272)		(24,607)		(10,994)		(15,860)
		Prepaid expenses		(1,489)		113		436		3,483
		Trade and other payables		7,436		3,880		(5,054)		184
		Deferred revenue		(9,873)		(14,125)		(4,538)		(1,806)
	Cash generated from (used in) operating activities			25,413		46,525		(737)		735
	Income taxes received			650		4,497		-		22
	Income taxes paid			(2,306)		(19,800)		-		(2,354)
	Net cash flows from (used in) operating activities			23,757		31,222		(737)		(1,597)
CASH FLOWS USED IN INVESTING ACTIVITIES
	Purchases of marketable securities			(315)		(315)		(105)		(105)
	Additions to property and equipment and intangible assets			(29,039)		(65,742)		(10,139)		(24,243)
	Cash flows used in investing activities			(29,354)		(66,057)		(10,244)		(24,348)
CASH FLOWS USED IN FINANCING ACTIVITIES
	Dividends paid			(38,751)		(39,151)		(12,917)		(12,917)
	Purchase of Class A non-voting shares for cancellation			-		(12,615)		-		(12,615)
	Repayment of long-term debt			(1,167)		(1,096)		(395)		(371)
	Cash flows used in financing activities			(39,918)		(52,862)		(13,312)		(25,903)
FOREIGN EXCHANGE GAIN (LOSS) ON CASH HELD IN FOREIGN CURRENCY				270		(203)		115		651
NET DECREASE IN CASH AND CASH EQUIVALENTS				(45,245)		(87,900)		(24,178)		(51,197)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD				97,626		196,835		76,559		160,132
CASH AND CASH EQUIVALENTS, END OF THE PERIOD			$	52,381	$	108,935	$	52,381	$	108,935

 

 

SOURCE: Reitmans (Canada) Limited

Jeremy H. Reitman
Chairman and Chief Executive Officer

Telephone:  [phone]
Corporate Website: www.reitmans.ca