Reitmans (Canada) Limited announces its results for the three and nine months ended October 31, 2015

MONTREAL, Dec. 3, 2015 /CNW Telbec/ -

Three months ended October 31, 2015
Sales for the three months ended October 31, 2015 were $240.3 million as compared with $238.3 million for the three months ended November 1, 2014, an increase of 0.8%, with 68 fewer stores in operation.  Same store sales¹ increased by 7.6% with stores increasing 4.8% and e-commerce increasing 72.2%. 

Gross profit for the three months ended October 31, 2015 decreased $12.9 million or 8.6% to $138.0 million as compared with $151.0 million for the three months ended November 1, 2014 with the weakness of the Canadian dollar vis-à-vis the US dollar negatively impacting gross margin by approximately $7.4 million.  Gross margin for the three months ended October 31, 2015 decreased to 57.4% from 63.4% for the three months ended November 1, 2014.

Net loss for the three months ended October 31, 2015 was $0.3 million ($0.00 basic and diluted loss per share) as compared with net earnings of $12.9 million ($0.20 basic and diluted earnings per share) for the three months ended November 1, 2014.  The net loss was primarily attributable to reduced margins and a $4.3 million loss (on a pre-tax basis) due to a change in the fair value of marketable securities.

Adjusted EBITDA¹ for the three months ended October 31, 2015 was $15.3 million as compared with $31.1 million for the three months ended November 1, 2014, a decrease of $15.8 million.

Nine months ended October 31, 2015
Sales for the nine months ended October 31, 2015 were $695.0 million as compared with $703.1 million for the nine months ended November 1, 2014, a decrease of 1.2%, impacted by a net reduction of 68 stores. Same store sales¹ increased 3.9% with stores increasing 1.3% and e-commerce increasing 77.7%.

Gross profit for the nine months ended October 31, 2015 decreased $25.9 million or 6.1% to $397.3 million as compared with $423.2 million for the nine months ended November 1, 2014, with the weakness of the Canadian dollar vis-à-vis the US dollar negatively impacting gross margin by approximately $17.6 million.  The Company's gross margin for the nine months ended October 31, 2015 decreased to 57.2% from 60.2% for the nine months ended November 1, 2014.

Net loss for the nine months ended October 31, 2015 was $8.2 million ($0.13 basic and diluted loss per share) as compared with net earnings of $9.0 million ($0.14 basic and diluted earnings per share) for the nine months ended November 1, 2014.  The net loss was primarily attributable to reduced gross margins and a $10.7 million loss (on a pre-tax basis) due to a change in the fair value of marketable securities.

Adjusted EBITDA¹ for the nine months ended October 31, 2015 was $34.9 million as compared with $50.7 million for the nine months ended November 1, 2014, a decrease of $15.8 million.

Dividend
At the Board of Directors meeting held on December 3, 2015, 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 28, 2016 to shareholders of record on January 18, 2016.

Sales for the four weeks ended November 28, 2015
Sales for the month of November (the four weeks ended November 28, 2015) increased 1.0% with same store sales¹ increasing 9.1%, stores increasing 5.5% and e-commerce increasing 78.0%.

About Reitmans (Canada) Limited
The Company is a leading ladieswear specialty apparel retailer with retail outlets throughout Canada.  The Company operates 775 stores consisting of 332 Reitmans, 136 Penningtons, 107 Addition Elle, 83 RW & CO., 68 Thyme Maternity, 17 Hyba and 32 Smart Set. The Company also operates 21 Thyme Maternity shop-in-shop boutiques in select Babies"R"Us locations in Canada.

¹Non-GAAP Financial Measures
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, other income, dividend income, interest income, net change in fair value of marketable securities, realized gains or losses on disposal of marketable securities, interest expense, depreciation, amortization and net impairment losses.  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, interest income, net change in fair value of marketable securities and realized gains or losses on disposal of marketable securities eliminates the impact on earnings derived from non-operational activities.  The exclusion of 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 and the measure does not have any standardized meaning under IFRS.  Adjusted EBITDA should therefore not be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS.  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.

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.  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 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 therefore 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 for the three and nine months ended October 31, 2015 and November 1, 2014:

(in millions of Canadian dollars) (unaudited)	For the three months ended				For the nine months ended
	October 31, 2015		November 1, 2014		October 31, 2015		November 1, 2014
Net (loss) earnings	$	(0.3)	$	12.9	$	(8.2)	$	9.0
Depreciation, amortization and net impairment losses	11.6		15.9		35.7		41.8
Dividend income	(0.6)		(0.6)		(1.9)		(1.9)
Interest income	(0.1)		(0.3)		(0.4)		(0.6)
Realized gain on disposal of marketable securities	-		(0.8)		-		(0.8)
Net change in fair value of marketable securities	4.3		-		10.7		-
Impairment loss on marketable securities	-		0.5		-		0.6
Interest expense	0.1		0.1		0.2		0.3
Income tax expense (recovery)	0.3		3.4		(1.2)		2.3
ADJUSTED EBITDA	$	15.3	$	31.1	$	34.9	$	50.7
ADJUSTED EBITDA as % of Sales	6.4%		13.1%		5.0%		7.2%

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, including those listed in the "Operating Risk Management and Financial Risk Management" sections of the Company's Management Discussion and Analysis for the year ended January 31, 2015.  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.  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.  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 third quarter ended October 31, 2015 are available on the SEDAR website at www.sedar.com.

Montreal, December 3, 2015

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

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands of Canadian dollars except per share amounts)
		For the three months ended				For the nine months ended
		October 31, 2015		November 1, 2014		October 31, 2015		November 1, 2014
Sales		$	240,270	$	238,295	$	694,999	$	703,099
Cost of goods sold		102,236		87,319		297,707		279,860
Gross profit		138,034		150,976		397,292		423,239
Selling and distribution expenses		123,728		126,711		367,388		378,853
Administrative expenses		11,309		10,189		34,388		36,033
Results from operating activities		2,997		14,076		(4,484)		8,353
Finance income		1,426		2,811		6,072		3,818
Finance costs		4,401		659		10,974		880
Earnings (loss) before income taxes		22		16,228		(9,386)		11,291
Income tax (expense) recovery		(291)		(3,362)		1,224		(2,283)
Net (loss) earnings		$	(269)	$	12,866	$	(8,162)	$	9,008
(Loss) earnings per share:
	Basic	$	0.00	$	0.20	$	(0.13)	$	0.14
	Diluted	0.00		0.20		(0.13)		0.14

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in thousands of Canadian dollars)
			For the three months ended				For the nine months ended
			October 31, 2015		November 1, 2014		October 31, 2015		November 1, 2014
Net (loss) earnings			$	(269)	$	12,866	$	(8,162)	$	9,008
Other comprehensive (loss) income
	Items that are or may be reclassified subsequently to net earnings:
		Available-for-sale financial assets (2015 – nil; net of tax of $263 for the three months and $99 for the nine months ended November 1, 2014)	-		(1,718)		-		649
		Cash flow hedges (net of tax of $2,228 for the three months and $905 for the nine months ended October 31, 2015; 2014 - nil)	(6,125)		-		(2,486)		-
		Foreign currency translation differences	-		(112)		(119)		(263)
Total other comprehensive (loss) income			(6,125)		(1,830)		(2,605)		386
Total comprehensive (loss) income			$	(6,394)	$	11,036	$	(10,767)	$	9,394

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands of Canadian dollars)
			October 31, 2015		November 1, 2014		January 31, 2015
ASSETS
CURRENT ASSETS
	Cash and cash equivalents		$	97,192	$	121,014	$	139,913
	Marketable securities		50,597		48,373		57,364
	Trade and other receivables		5,107		6,536		4,599
	Derivative financial asset		6,439		4,154		20,635
	Income taxes recoverable		1,134		-		1,977
	Inventories		142,617		124,324		106,440
	Prepaid expenses		9,956		12,820		12,148
		Total Current Assets	313,042		317,221		343,076
NON-CURRENT ASSETS
	Property and equipment		138,128		157,211		152,349
	Intangible assets		23,575		18,532		20,077
	Goodwill		42,426		42,426		42,426
	Deferred income taxes		29,508		32,254		26,463
		Total Non-Current Assets	233,637		250,423		241,315
TOTAL ASSETS			$	546,679	$	567,644	$	584,391
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Trade and other payables		$	92,167	$	79,763	$	91,719
	Derivative financial liability		616		469		96
	Deferred revenue		11,277		12,422		21,073
	Income taxes payable		-		1,663		-
	Current portion of long-term debt		1,867		1,753		1,780
		Total Current Liabilities	105,927		96,070		114,668
NON-CURRENT LIABILITIES
	Other payables		8,468		10,451		9,903
	Deferred lease credits		11,407		14,294		13,178
	Long-term debt		2,141		4,007		3,551
	Pension liability		22,355		19,026		21,968
		Total Non-Current Liabilities	44,371		47,778		48,600
SHAREHOLDERS' EQUITY
	Share capital		38,687		39,227		39,227
	Contributed surplus		8,809		7,847		8,014
	Retained earnings		346,189		368,980		368,241
	Accumulated other comprehensive income		2,696		7,742		5,641
		Total Shareholders' Equity	396,381		423,796		421,123
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$	546,679	$	567,644	$	584,391

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 1, 2015		$	39,227	$	8,014	$	368,241	$	5,641	$	421,123
IFRS 9 (2014) adoption adjustment		-		-		340		(340)		-
Adjusted balance as at February 1, 2015		39,227		8,014		368,581		5,301		421,123
Total comprehensive loss for the period
	Net loss	-		-		(8,162)		-		(8,162)
	Total other comprehensive loss	-		-		-		(2,605)		(2,605)
Total comprehensive loss for the period		-		-		(8,162)		(2,605)		(10,767)
Contributions by (distributions to) owners of the Company
	Cash consideration on exercise of share options	2		-		-		-		2
	Cancellation of shares pursuant to share repurchase program	(542)		-		-		-		(542)
	Share-based compensation costs	-		795		-		-		795
	Dividends	-		-		(9,616)		-		(9,616)
	Premium on repurchase of Class A non-voting shares	-		-		(4,614)		-		(4,614)
Total (distributions to) contributions by owners of the Company		(540)		795		(14,230)		-		(13,975)
Balance as at October 31, 2015		$	38,687	$	8,809	$	346,189	$	2,696	$	396,381
Balance as at February 2, 2014		$	39,227	$	7,188	$	369,660	$	7,356	$	423,431
Total comprehensive income for the period
	Net earnings	-		-		9,008		-		9,008
	Total other comprehensive income							386		386
Total comprehensive income for the period		-		-		9,008		386		9,394
Contributions by (distributions to) owners of the Company
	Share-based compensation costs	-		659		-		-		659
	Dividends	-		-		(9,688)		-		(9,688)
Total contributions by (distributions to) owners of the Company		-		659		(9,688)		-		(9,029)
Balance as at November 1, 2014		$	39,227	$	7,847	$	368,980	$	7,742	$	423,796

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of Canadian dollars)
		For the three months ended				For the nine months ended
		October 31, 2015		November 1, 2014		October 31, 2015		November 1, 2014
CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES
Net (loss) earnings		$	(269)	$	12,866	$	(8,162)	$	9,008
Adjustments for:
	Depreciation, amortization and net impairment losses	11,593		15,942		35,699		41,773
	Share-based compensation costs	345		344		795		659
	Amortization of deferred lease credits	(1,189)		(986)		(3,623)		(2,941)
	Deferred lease credits	682		1,359		1,852		1,628
	Pension contribution	(485)		(215)		(1,188)		(709)
	Pension expense	525		492		1,575		1,476
	Realized (gain) loss on disposal of marketable securities	-		(836)		15		(775)
	Impairment loss on marketable securities	-		564		-		574
	Net change in fair value of marketable securities	4,333		-		10,734		-
	Net change in fair value of derivatives	-		(4,399)		12,335		5,025
	Foreign exchange gain on cash and cash equivalents	(2,342)		(502)		(7,809)		(1,588)
	Interest and dividend income, net	(667)		(831)		(2,095)		(2,200)
	Interest paid	(68)		(95)		(225)		(306)
	Interest received	113		182		492		563
	Dividends received	636		470		1,884		1,909
	Income tax expense (recovery)	291		3,362		(1,224)		2,283
		13,498		27,717		41,055		56,379
Changes in:
	Trade and other receivables	(318)		(1,192)		(564)		(164)
	Inventories	(11,129)		(11,869)		(36,177)		(14,723)
	Prepaid expenses	(973)		14,314		2,192		(308)
	Trade and other payables	(3,677)		(7,802)		1,556		(12,135)
	Deferred revenue	(4,679)		(2,937)		(9,796)		(7,576)
Cash (used in) from operating activities		(7,278)		18,231		(1,734)		21,473
Income taxes received		1,859		-		1,861		5,133
Income taxes paid		(365)		(839)		(1,935)		(3,872)
Net cash flows (used in) from operating activities		(5,784)		17,392		(1,808)		22,734
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of marketable securities		-		-		(5,660)		(185)
Proceeds on sale of marketable securities		-		2,822		1,678		7,822
Proceeds on sales of trademarks		-		29		-		84
Additions to property and equipment and intangible assets		(8,293)		(9,412)		(27,519)		(22,191)
Cash flows used in investing activities		(8,293)		(6,561)		(31,501)		(14,470)
CASH FLOWS USED IN FINANCING ACTIVITIES
Dividends paid		(3,189)		(3,229)		(9,616)		(9,688)
Purchase of Class A non-voting shares for cancellation		(850)		-		(5,156)		-
Repayment of long-term debt		(447)		(421)		(1,323)		(1,243)
Proceeds from issuance of share capital		-		-		2		-
Cash flows used in financing activities		(4,486)		(3,650)		(16,093)		(10,931)
FOREIGN EXCHANGE GAIN ON CASH HELD IN FOREIGN CURRENCY		1,333		453		6,681		1,326
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(17,230)		7,634		(42,721)		(1,341)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD		114,422		113,380		139,913		122,355
CASH AND CASH EQUIVALENTS, END OF THE PERIOD		$	97,192	$	121,014	$	97,192	$	121,014

SOURCE Reitmans (Canada) Limited

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