Reitmans (Canada) Limited announces its results for the three and nine months ended October 28, 2017

MONTREAL, Nov. 30, 2017 /CNW Telbec/ -

Three months ended October 28, 2017

Sales for the three months ended October 28, 2017 were $242.4 million as compared with $245.6 million for the three months ended October 29, 2016, a decrease of 1.3%, with a net reduction of 42 stores.  Same store sales¹ increased 0.8%, with store sales decreasing 1.9% and e-commerce sales increasing 29.7%.  This marks the fourteenth consecutive quarter of positive same store sales.

Gross profit for the three months ended October 28, 2017 decreased by $4.0 million or 2.9% to $135.9 million as compared with $139.9 million for the three months ended October 29, 2016.  Gross margin was 56.1% for the three months ended October 28, 2017 as compared to 57.0% for the three months ended October 29, 2016 impacted by higher promotional activity as unseasonably warm fall weather contributed to lower customer traffic.  This was partially offset by a positive foreign exchange impact of approximately $2.1 million on U.S. dollar denominated purchases for the three months ended October 28, 2017 and continued focus on cost efficiencies realized from global sourcing activities.

Results from operating activities for the three months ended October 28, 2017 were $(19.0) million as compared to $6.5 million for the three months ended October 29, 2016, a decrease of $25.5 million. As a result of weakness in recent operating performance at Addition Elle, an impairment test was performed as at October 28, 2017. Results from operating activities for the three months ended October 28, 2017 include a non-cash goodwill impairment charge of $26.3 million related to the Addition Elle banner. Changes have been made to the leadership team and the Company is optimistic that it has a strong team in place to drive growth and execute on its strategy. The Company continues to believe that Addition Elle is a premium brand with excellent digital capabilities, a strong online presence with the plus-size consumer, highly recognizable celebrity collaborations and strategies in place with the potential to generate long-term profitable growth for the Company.  Results from operating activities excluding the impairment of goodwill for the three months ended October 28, 2017 were $7.3 million as compared to $6.5 million for the three months ended October 29, 2016, an increase of $0.8 million.

Net loss for the three months ended October 28, 2017 was $16.8 million ($0.27 basic and diluted loss per share) as compared with net earnings of $7.6 million ($0.12 basic and diluted earnings per share) for the three months ended October 29, 2016.  Excluding the impairment of goodwill, net earnings increased 25.0% to $9.5 million ($0.15 basic and diluted earnings per share) for the three months ended October 28, 2017 as compared with net earnings of $7.6 million ($0.12 basic and diluted earnings per share) for the three months ended October 29, 2016, an increase of $1.9 million.

Adjusted EBITDA¹ for the three months ended October 28, 2017 was $18.9 million, comparable with $18.4 million for the three months ended October 29, 2016.

Nine months ended October 28, 2017

Sales for the nine months ended October 28, 2017 were $700.6 million as compared with $703.5 million for the nine months ended October 29, 2016, a decrease of 0.4%, with a net reduction of 42 stores.  Same store sales¹ increased 2.7%, with store sales decreasing 0.5% and e-commerce sales increasing 40.4%.

Gross profit for the nine months ended October 28, 2017 decreased by $8.8 million or 2.2% to $387.8 million as compared with $396.6 million for the nine months ended October 29, 2016.  Gross margin was 55.4% for the nine months ended October 28, 2017 as compared to 56.4% for the nine months ended October 29, 2016 driven primarily by the adverse foreign exchange impact of approximately $9.2 million on U.S. dollar denominated purchases.  The Company continues to drive cost efficiencies through its global sourcing activities thereby helping to mitigate the negative impact of foreign exchange.

Results from operating activities for the nine months ended October 28, 2017 were $(20.5) million as compared to $6.5 million for the nine months ended October 29, 2016, a decrease of $27.0 million due to an impairment of goodwill charge of $26.3 million.  Results from operating activities excluding the impairment of goodwill for the nine months ended October 28, 2017 were $5.8 million as compared to $6.5 million for the nine months ended October 29, 2016, a decrease of $0.7 million.

Net loss was $13.7 million for the nine months ended October 28, 2017 ($0.22 basic and diluted loss per share) as compared with net earnings of $10.6 million ($0.17 basic and diluted earnings per share) for the nine months ended October 29, 2016.  Excluding the impairment of goodwill, net earnings increased 18.9% to $12.6 million ($0.20 basic and diluted earnings per share) for the nine months ended October 28, 2017 as compared with net earnings of $10.6 million ($0.17 basic and diluted earnings per share) for the nine months ended October 29, 2016, an increase of $2.0 million.

Adjusted EBITDA¹ for the nine months ended October 28, 2017 was $38.7 million comparable with $37.2 million for the nine months ended October 29, 2016.

Dividends

At the Board of Directors meeting held on November 30, 2017, 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 25, 2018 to shareholders of record on January 15, 2018.

Sales for the four weeks ending November 25, 2017

Sales for the month of November (the four weeks ended November 25, 2017) increased 0.7%. Same store sales¹ increased 2.8% with stores decreasing 0.8% and e-commerce sales increasing 31.4%.

About Reitmans (Canada) Limited

The Company is a leading ladieswear specialty apparel retailer with retail outlets throughout Canada.  The Company operates 652 stores consisting of 276 Reitmans, 122 Penningtons, 93 Addition Elle, 84 RW & CO., 61 Thyme Maternity and 16 Hyba.

¹Non-GAAP Financial Measures

The Company has identified several key operating performance measures and non-GAAP financial measures which management believes are useful in assessing the performance of the Company; however, readers are cautioned that some of these measures may not have standardized meanings under IFRS and, therefore, may not be comparable to similar terms used by other companies.

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/recovery, dividend income, interest income, net change in fair value of marketable securities, interest expense, impairment of goodwill, depreciation, amortization and net impairment charges.  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 income, interest income and expense and the net change in fair value of marketable securities eliminates the impact on earnings derived from non-operational activities.  The exclusion of impairment of goodwill, 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.  The measure does not have any standardized meaning under IFRS.  Although depreciation, amortization and impairment charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, as such, adjusted EBITDA does not reflect any cash requirements for these replacements.  Adjusted EBITDA should not be considered either as discretionary cash available to invest in the growth of the business or as a measure of cash that will be available to meet the Company's obligations.  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.  Adjusted EBITDA should not be used in substitute for measures of performance prepared in accordance with IFRS or as an alternative to net earnings, net cash provided by operating, investing or financing activities or any other financial statement data presented as indicators of financial performance or liquidity, each as presented in accordance with IFRS. Although adjusted EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, it has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of the Company's results as reported under IFRS.

The Company considers results from operating activities a useful measure of the Company's performance from its retail operations.  The Company has also determined that a useful measure would be results from operating activities before impairment of goodwill excluding the impact of impairment of goodwill which is a non-cash item.  Additionally, earnings per share excluding impairment of goodwill both on a basic and diluted basis have been presented which removes the impact of impairment of goodwill on net earnings used for calculation purposes.  Both of these supplementary measures are considered useful information and should not be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS. 

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.  Same store sales exclude sales from wholesale accounts.  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 online sales 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 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:

(in millions of Canadian dollars) (unaudited)	For the three months ended				For the nine months ended
	October 28, 2017		October 29, 2016		October 28, 2017		October 29, 2016
Net (loss) earnings	$	(16.8)	$	7.6	$	(13.7)	$	10.6
Depreciation, amortization and net impairment losses	10.6		11.2		32.3		32.3
Dividend income	(0.6)		(0.6)		(1.8)		(1.9)
Interest income	(0.3)		(0.2)		(0.7)		(0.5)
Impairment of goodwill	26.3		-		26.3		-
Net change in fair value of marketable securities	(2.1)		(0.5)		(5.3)		(4.1)
Interest expense	-		-		-		0.1
Income tax expense	1.8		0.9		1.6		0.7
ADJUSTED EBITDA	$	18.9	$	18.4	$	38.7	$	37.2
ADJUSTED EBITDA as % of Sales	7.8%		7.5%		5.5%		5.3%

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.  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.  This Press Announcement contains forward-looking statements about the Company's objectives, plans, goals, aspirations, strategies, financial condition, results of operations, cash flows, performance, prospects, opportunities and legal and regulatory matters. 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.  These specific forward-looking statements are contained throughout the Company's Management Discussion & Analysis ("MD&A") including those listed in the "Operating and Financial Risk Management" section of the Company's MD&A. Forward-looking statements are typically identified by words such as "expect", "anticipate", "believe", "foresee", "could", "estimate", "goal", "intend", "plan", "seek", "strive", "will", "may" and "should" and similar expressions, as they relate to the Company and its management.

Numerous risks and uncertainties could cause the Company's actual results to differ materially from those expressed, implied or projected in the forward-looking statements.  Please refer to the "Forward-Looking Statements" section of the Company's MD&A for the three and nine months ended October 28, 2017.

Other risks and uncertainties not presently known to the Company or that the Company presently believes are not material could also cause actual results or events to differ materially from those expressed in its forward-looking statements. Additional risks and uncertainties are discussed in the Company's materials filed with the Canadian securities regulatory authorities from time to time. 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 three and nine months ended October 28, 2017 are available online at www.sedar.com.

Montreal, November 30, 2017

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

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF EARNINGS (Unaudited) (in thousands of Canadian dollars except per share amounts)
			For the three months ended				For the nine months ended
			October 28, 2017		October 29, 2016		October 28, 2017		October 29, 2016
Sales			$	242,373	$	245,604	$	700,601	$	703,538
Cost of goods sold			106,468		105,687		312,800		306,977
Gross profit			135,905		139,917		387,801		396,561
Selling and distribution expenses			118,767		122,164		350,778		357,627
Administrative expenses			9,806		11,229		31,180		32,434
Impairment of goodwill			26,340		-		26,340		-
Results from operating activities			(19,008)		6,524		(20,497)		6,500
Finance income			4,026		2,033		8,423		6,474
Finance costs			8		39		47		1,679
(Loss) earnings before income taxes			(14,990)		8,518		(12,121)		11,295
Income tax expense			1,846		903		1,610		691
Net (loss) earnings			$	(16,836)	$	7,615	$	(13,731)	$	10,604
(Loss) earnings per share :
	Basic		$	(0.27)	$	0.12	$	(0.22)	$	0.17
	Diluted		(0.27)		0.12		(0.22)		0.17

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (in thousands of Canadian dollars)
				For the three months ended				For the nine months ended
				October 28, 2017		October 29, 2016		October 28, 2017		October 29, 2016
Net (loss) earnings				$	(16,836)	$	7,615	$	(13,731)	$	10,604
Other comprehensive income (loss)
	Items that are or may be reclassified subsequently to net earnings:
		Cash flow hedges (net of tax of $2,725 for the three months and $535 for the nine months ended October 28, 2017; $2,599 for the three months and $2,340 for the nine months ended October 29, 2016)		7,524		7,103		(1,480)		(6,397)
		Foreign currency translation differences		(159)		(146)		71		113
Total other comprehensive income (loss)				7,365		6,957		(1,409)		(6,284)
Total comprehensive (loss) income				$	(9,471)	$	14,572	$	(15,140)	$	4,320

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (Unaudited) (in thousands of Canadian dollars)
				October 28, 2017	October 29, 2016	January 28, 2017
ASSETS
CURRENT ASSETS
	Cash and cash equivalents			$  119,055	$  101,794	$  120,265
	Marketable securities			60,040	49,270	54,764
	Trade and other receivables			7,044	6,048	4,256
	Derivative financial asset			1,638	3,267	1,386
	Income taxes recoverable			1,307	868	3,480
	Inventories			146,654	167,672	146,059
	Prepaid expenses			7,938	7,433	6,846
		Total Current Assets		343,676	336,352	337,056
NON-CURRENT ASSETS
	Property and equipment			113,219	126,602	124,106
	Intangible assets			19,285	23,363	23,110
	Goodwill			11,843	38,183	38,183
	Deferred income taxes			26,335	27,859	25,891
		Total Non-Current Assets		170,682	216,007	211,290
TOTAL ASSETS				$  514,358	$  552,359	$  548,346
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Trade and other payables			$  113,757	$  120,847	$  114,254
	Derivative financial liability			5,521	3,678	3,160
	Deferred revenue			13,892	12,705	21,478
	Current portion of long-term debt			153	1,988	1,655
		Total Current Liabilities		133,323	139,218	140,547
NON-CURRENT LIABILITIES
	Other payables			6,024	7,380	7,186
	Deferred lease credits			6,424	9,053	8,230
	Long-term debt			-	153	-
	Pension liability			19,322	20,005	18,869
		Total Non-Current Liabilities		31,770	36,591	34,285
SHAREHOLDERS' EQUITY
	Share capital			38,397	38,397	38,397
	Contributed surplus			10,161	9,570	9,769
	Retained earnings			303,443	328,473	326,675
	Accumulated other comprehensive (loss) income			(2,736)	110	(1,327)
		Total Shareholders' Equity		349,265	376,550	373,514
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY				$  514,358	$  552,359	$  548,346

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (in thousands of Canadian dollars)
		Share Capital	Contributed Surplus	Retained Earnings	Accumulated Other Comprehensive (Loss) Income	Total Shareholders' Equity
Balance as at January 29, 2017		$     38,397	$     9,769	$  326,675	$    (1,327)	$   373,514
Net loss		-	-	(13,731)	-	(13,731)
Total other comprehensive loss		-	-	-	(1,409)	(1,409)
Total comprehensive loss for the period		-	-	(13,731)	(1,409)	(15,140)
Share-based compensation costs		-	392	-	-	392
Dividends		-	-	(9,501)	-	(9,501)
Total contributions by (distributions to) owners of the Company		-	392	(9,501)	-	(9,109)
Balance as at October 28, 2017		$     38,397	$   10,161	$  303,443	$    (2,736)	$   349,265
Balance as at January 31, 2016		$     38,397	$     9,007	$  327,370	$     6,394	$   381,168
Net earnings		-	-	10,604	-	10,604
Total other comprehensive loss		-	-	-	(6,284)	(6,284)
Total comprehensive income (loss) for the period		-	-	10,604	(6,284)	4,320
Share-based compensation costs		-	563	-	-	563
Dividends		-	-	(9,501)	-	(9,501)
Total contributions by (distributions to) owners of the Company		-	563	(9,501)	-	(8,938)
Balance as at October 29, 2016		$     38,397	$     9,570	$  328,473	$         110	$   376,550

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of Canadian dollars)
				For the three months ended		For the nine months ended
				October 28, 2017	October 29, 2016	October 28, 2017	October 29, 2016
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
	Net (loss) earnings			$  (16,836)	$     7,615	$  (13,731)	$   10,604
	Adjustments for:
		Depreciation, amortization and net impairment losses		10,596	11,235	32,311	32,302
		Impairment of goodwill		26,340	-	26,340	-
		Share-based compensation costs		(643)	430	(123)	908
		Net change in fair value of marketable securities		(2,089)	(498)	(5,276)	(4,081)
		Net change in transfer of realized (gain) loss on cash flow hedges to inventory		(282)	1,773	94	4,263
		Foreign exchange loss (gain)		2,151	(263)	1,859	(79)
		Interest and dividend income, net		(953)	(774)	(2,523)	(2,254)
		Income tax expense		1,846	903	1,610	691
				20,130	20,421	40,561	42,354
	Changes in:
		Trade and other receivables		(1,727)	(722)	(2,785)	(1,909)
		Inventories		619	(20,513)	(595)	(42,824)
		Prepaid expenses		1,411	1,214	(1,092)	1,488
		Trade and other payables		(714)	944	(3,147)	22,904
		Pension liability		140	108	453	669
		Deferred lease credits		(550)	(183)	(1,806)	(1,587)
		Deferred revenue		(3,928)	(4,523)	(7,586)	(6,620)
	Cash from operating activities			15,381	(3,254)	24,003	14,475
	Interest paid			(8)	(39)	(47)	(139)
	Interest received			317	215	749	532
	Dividends received			611	633	1,818	1,825
	Income taxes received			114	2,119	662	2,489
	Income taxes paid			-	(7)	(7)	(438)
	Net cash flows from operating activities			16,415	(333)	27,178	18,744
CASH FLOWS USED IN INVESTING ACTIVITIES
	Additions to property and equipment and intangible assets			(6,816)	(8,885)	(15,596)	(25,244)
	Proceeds on disposal of property and equipment and intangibles			-	-	-	416
	Cash flows used in investing activities			(6,816)	(8,885)	(15,596)	(24,828)
CASH FLOWS USED IN FINANCING ACTIVITIES
	Dividends paid			(3,167)	(3,167)	(9,501)	(9,501)
	Repayment of long-term debt			(508)	(477)	(1,502)	(1,410)
	Cash flows used in financing activities			(3,675)	(3,644)	(11,003)	(10,911)
FOREIGN EXCHANGE (LOSS) GAIN ON CASH HELD IN FOREIGN CURRENCY				(2,310)	118	(1,789)	194
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				3,614	(12,744)	(1,210)	(16,801)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD				115,441	114,538	120,265	118,595
CASH AND CASH EQUIVALENTS, END OF THE PERIOD				$ 119,055	$ 101,794	$ 119,055	$ 101,794

SOURCE Reitmans (Canada) Limited

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

Related Links

www.reitmanscanadalimited.com