Reitmans (Canada) Limited announces its results for the three and six months ended August 2, 2014

MONTREAL, Sept. 11, 2014 /CNW Telbec/ -

Three months ended August 2, 2014

Sales for the three months ended August 2, 2014 increased 1.9%, despite a net reduction of 55 stores, to $258.3 million as compared with $253.4 million for the three months ended August 3, 2013.  Same store sales¹ increased 4.6%, excluding e-commerce which increased 48.3%.  Sales improved in the second quarter of fiscal 2015 in most banners, as consumers responded well to rebranding efforts and new product offerings.  The Smart Set banner is showing improved performance as it continues to eliminate underperforming locations and gains consumer acceptance through its repositioning and rebranding efforts.

The Company's gross margin for the three months ended August 2, 2014 decreased to 59.5% from 62.4% for the three months ended August 3, 2013. The weaker Canadian dollar against the U.S. dollar negatively impacted margins, with the average rate for a U.S. dollar ranging between $1.06 and $1.10 during the three months ended August 2, 2014 as compared to $1.00 and $1.06 in the three months ended August 3, 2013.

Net earnings for the three months ended August 2, 2014 were $9.6 million ($0.15 diluted earnings per share) as compared with net earnings of $10.2 million ($0.16 diluted earnings per share) for the three months ended August 3, 2013.  Adjusted EBITDA¹ decreased by 22.9% to $23.6 million for the three months ended August 2, 2014 as compared with $30.6 million for the three months ended August 3, 2013.  The decrease in net earnings and reduction in adjusted EBITDA were primarily attributable to the significant decline in the Canadian dollar vis-à-vis the U.S. dollar resulting in increased costs of goods sold and a significant loss on the remeasurement to fair value of option contracts.

Six months ended August 2, 2014

Sales for the six months ended August 2, 2014 were $464.8 million as compared with $470.3 million for the six months ended August 3, 2013, a decrease of 1.2%, impacted by a net reduction of 55 stores.  Same store sales¹ increased by 0.6%, excluding e-commerce which increased 36.9%. The Company's banners showed improvement in the second quarter of fiscal 2015 after experiencing weak sales in the first quarter.  The Company's e-commerce direct to consumer channel continues to show significant sales growth, although representing a small proportion of total Company sales.

The Company's gross margin for the six months ended August 2, 2014 decreased to 59.5% from 63.4% for the six months ended August 3, 2013. The weaker Canadian dollar against the U.S. dollar negatively impacted margins, with the average rate for a U.S. dollar ranging between $1.06 and $1.13 during the six months ended August 2, 2014 as compared to $1.00 and $1.06 in the six months ended August 3, 2013.

Net loss for the six months ended August 2, 2014 was $3.9 million ($0.06 diluted loss per share) as compared with net earnings of $7.6 million ($0.12 diluted earnings per share) for the six months ended August 3, 2013. For the six months ended August 2, 2014, adjusted EBITDA¹ was $19.5 million as compared with $41.3 million for the six months ended August 3, 2013, a decrease of $21.8 million.  The net loss and reduction in adjusted EBITDA were primarily attributable to the significant decline in the Canadian dollar vis-à-vis the U.S. dollar resulting in increased costs of goods sold and a significant loss on the remeasurement to fair value of U.S. dollar option contracts.

A reduction in the number of employees in both head office and field operations, in conjunction with a reduction in the number of store locations has resulted in wages and benefit savings.  Additional savings have been achieved through improved cost management in non-wage areas.  These initiatives aimed at reducing costs across the organization have yielded savings in both the three and six months ended August 2, 2014.

Dividends

At the Board of Directors meeting held on September 11, 2014, 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 October 23, 2014 to shareholders of record on October 9, 2014.

Sales for the four weeks ended August 30, 2014

Sales for the month of August (the four weeks ended August 30, 2014) increased 1.8% with same store sales¹ increasing 5.0%, excluding e-commerce which increased 62.7%.

About Reitmans (Canada) Limited

The Company is a leading ladieswear specialty apparel retailer with retail outlets throughout Canada.  The Company operates 845 stores consisting of 343 Reitmans, 143 Penningtons, 102 Addition Elle, 76 RW & CO., 68 Thyme Maternity and 113 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, realized gains or losses on disposal of available-for-sale financial assets, interest expense, depreciation, amortization and impairment charges.  The following table reconciles the most comparable GAAP measure, net earnings (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 and interest income eliminates the impact of revenue 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 and sales growth.  Same store sales is defined as sales generated by stores that have been continuously open during both of the periods being compared.  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 earnings (loss) to adjusted EBITDA for the three and six months ended August 2, 2014 and August 3, 2013:

(unaudited) (in thousands of Canadian dollars)	For the three months ended				For the six months ended
	August 2, 2014		August 3, 2013		August 2, 2014			August 3, 2013
Net earnings (loss)	$	9,557	$	10,182	$		(3,858)	$	7,596
Depreciation, amortization and net impairment losses		12,364		17,503			25,831		32,499
Dividend income		(630)		(868)			(1,297)		(1,736)
Interest income		(181)		(170)			(344)		(304)
Realized loss on disposal of available-for-sale financial assets		37		-			61		-
Impairment losses on available-for-sale financial assets		-		452			10		502
Interest expense		103		127			211		261
Income tax expense (recovery)		2,346		3,397			(1,079)		2,488
ADJUSTED EBITDA	$	23,596	$	30,623	$		19,535	$	41,306

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 described in the Operating Risk Management and Financial Risk Management sections of the Company's Management Discussion and Analysis.  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 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 six months ended August 2, 2014 are available online at www.sedar.com.

Montreal, September 11, 2014

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 six months ended				For the three months ended
		August 2, 2014		August 3, 2013		August 2, 2014		August 3, 2013
Sales		$	464,804	$	470,306	$	258,326	$	253,445
Cost of goods sold			188,278		171,929		104,545		95,242
Gross profit			276,526		298,377		153,781		158,203
Selling and distribution expenses			252,681		268,066		127,151		136,095
Administrative expenses			25,305		24,104		14,436		11,828
Results from operating activities			(1,460)		6,207		12,194		10,280
Finance income			6,229		4,640		2,244		3,878
Finance costs			9,706		763		2,535		579
(Loss) earnings before income taxes			(4,937)		10,084		11,903		13,579
Income tax recovery (expense)			1,079		(2,488)		(2,346)		(3,397)
Net (loss) earnings		$	(3,858)	$	7,596	$	9,557	$	10,182
(Loss) earnings per share:
	Basic	$	(0.06)	$	0.12	$	0.15	$	0.16
	Diluted		(0.06)		0.12		0.15		0.16

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

			For the six months ended				For the three months ended
			August 2, 2014		August 3, 2013		August 2, 2014		August 3, 2013
Net (loss) earnings			$	(3,858)	$	7,596	$	9,557	$	10,182
Other comprehensive income (loss)
	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 $1 for the six months ended August 2, 2014; $68 for the six months and $60 for the three months ended August 3, 2013)		9		434		-		392
		Net change in fair value of available-for-sale financial assets (net of tax of $361 for the six months and $49 for the three months ended August 2, 2014; $185 for the six months and $286 for the three months ended August 3, 2013)		2,358		(1,223)		317		(1,886)
		Foreign currency translation differences		(151)		-		22		-
Total other comprehensive income (loss)				2,216		(789)		339		(1,494)
Total comprehensive (loss) income			$	(1,642)	$	6,807	$	9,896	$	8,688

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

			August 2, 2014		August 3, 2013		February 1, 2014
ASSETS
CURRENT ASSETS
	Cash and cash equivalents		$	113,380	$	76,559	$	122,355
	Marketable securities			52,905		70,432		55,062
	Trade and other receivables			5,160		3,585		6,422
	Derivative financial asset			3,343		2,475		11,775
	Income taxes recoverable			2,123		5,436		5,656
	Inventories			112,455		116,595		109,601
	Prepaid expenses			27,134		27,869		12,512
		Total Current Assets		316,500		302,951		323,383
NON-CURRENT ASSETS
	Property and equipment			164,375		193,556		178,341
	Intangible assets			18,287		17,291		17,211
	Goodwill			42,426		42,426		42,426
	Deferred income taxes			30,729		29,003		28,578
		Total Non-Current Assets		255,817		282,276		266,556
TOTAL ASSETS			$	572,317	$	585,227	$	589,939
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Trade and other payables		$	87,550	$	81,891	$	90,734
	Derivative financial liability			4,057		1,256		3,065
	Deferred revenue			15,359		10,962		19,998
	Current portion of long-term debt			1,725		1,620		1,672
		Total Current Liabilities		108,691		95,729		115,469
NON-CURRENT LIABILITIES
	Other payables			10,855		11,265		11,842
	Deferred lease credits			13,921		17,374		15,607
	Long-term debt			4,456		6,181		5,331
	Pension liability			18,749		18,336		18,259
		Total Non-Current Liabilities		47,981		53,156		51,039
SHAREHOLDERS' EQUITY
	Share capital			39,227		39,227		39,227
	Contributed surplus			7,503		6,997		7,188
	Retained earnings			359,343		382,242		369,660
	Accumulated other comprehensive income			9,572		7,876		7,356
		Total Shareholders' Equity		415,645		436,342		423,431
TOTAL LIABILITIES AND       SHAREHOLDERS' EQUITY			$	572,317	$	585,227	$	589,939

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 2, 2014		$	39,227	$	7,188	$	369,660	$	7,356	$	423,431
Total comprehensive loss for the period
	Net loss						(3,858)				(3,858)
	Total other comprehensive income								2,216		2,216
Total comprehensive loss for the period			-		-		(3,858)		2,216		(1,642)
Contributions by and distributions to owners of the Company
	Share-based compensation costs				315						315
	Dividends						(6,459)				(6,459)
Total contributions by and distributions to owners of the Company			-		315		(6,459)		-		(6,144)
Balance as at August 2, 2014		$	39,227	$	7,503	$	359,343	$	9,572	$	415,645
Balance as at May 4, 2014		$	39,227	$	7,261	$	353,016	$	9,233	$	408,737
Total comprehensive income for the period
	Net earnings						9,557				9,557
	Total other comprehensive income								339		339
Total comprehensive income for the period			-		-		9,557		339		9,896
Contributions by and distributions to owners of the Company
	Share-based compensation costs				242						242
	Dividends						(3,230)				(3,230)
Total contributions by and distributions to owners of the Company			-		242		(3,230)		-		(2,988)
Balance as at August 2, 2014		$	39,227	$	7,503	$	359,343	$	9,572	$	415,645
Balance as at February 3, 2013		$	39,227	$	6,521	$	400,480	$	8,665	$	454,893
Total comprehensive income for the period
	Net earnings						7,596				7,596
	Total other comprehensive loss								(789)		(789)
Total comprehensive income for the period			-		-		7,596		(789)		6,807
Contributions by and distributions to owners of the Company
	Share-based compensation costs				476						476
	Dividends						(25,834)				(25,834)
Total contributions by and distributions to owners of the Company			-		476		(25,834)		-		(25,358)
Balance as at August 3, 2013		$	39,227	$	6,997	$	382,242	$	7,876	$	436,342
Balance as at May 5, 2013		$	39,227	$	6,795	$	384,977	$	9,370	$	440,369
Total comprehensive income for the period
	Net earnings						10,182				10,182
	Total other comprehensive loss								(1,494)		(1,494)
Total comprehensive income for the period			-		-		10,182		(1,494)		8,688
Contributions by and distributions to owners of the Company
	Share-based compensation costs				202						202
	Dividends						(12,917)				(12,917)
Total contributions by and distributions to owners of the Company			-		202		(12,917)		-		(12,715)
Balance as at August 3, 2013		$	39,227	$	6,997	$	382,242	$	7,876	$	436,342

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

			For the six months ended				For the three months ended
			August 2, 2014		August 3, 2013		August 2, 2014		August 3, 2013
CASH FLOWS FROM OPERATING ACTIVITIES
	Net (loss) earnings		$	(3,858)	$	7,596	$	9,557	$	10,182
	Adjustments for:
		Depreciation, amortization and net impairment losses		25,831		32,499		12,364		17,503
		Share-based compensation costs		315		476		242		202
		Amortization of deferred lease credits		(1,955)		(2,258)		(926)		(1,082)
		Deferred lease credits		269		2,827		73		1,659
		Pension contribution		(494)		(123)		(207)		(91)
		Pension expense		984		900		492		450
		Realized loss on sale of marketable securities		61		-		37		-
		Impairment loss on available-for-sale financial assets		10		502		-		452
		Net change in fair value of derivatives		9,424		(937)		2,395		(2,536)
		Foreign exchange gain on cash and cash equivalents		(1,086)		(155)		(406)		(196)
		Interest and dividend income, net		(1,369)		(1,779)		(671)		(911)
		Interest paid		(211)		(261)		(103)		(127)
		Interest received		381		310		183		172
		Dividends received		1,439		1,734		629		867
		Income tax (recovery) expense		(1,079)		2,488		2,346		3,397
				28,662		43,819		26,005		29,941
Changes in:
		Trade and other receivables		1,028		379		1,944		1,977
		Inventories		(2,854)		(23,278)		8,287		(4,342)
		Prepaid expenses		(14,622)		(1,925)		(1,372)		(2,078)
		Trade and other payables		(4,333)		12,490		13,795		6,503
		Deferred revenue		(4,639)		(5,335)		(168)		(164)
	Cash from operating activities			3,242		26,150		48,491		31,837
	Income taxes received			5,133		650		5,133		3
	Income taxes paid			(3,033)		(2,306)		(838)		-
	Net cash flows from operating activities			5,342		24,494		52,786		31,840
CASH FLOWS USED IN INVESTING ACTIVITIES
	Purchases of marketable securities			(185)		(210)		(80)		(105)
	Proceeds on sale of marketable securities			5,000		-		2,500		-
	Proceeds on sales of trademarks			55		-		26		-
	Additions to property and equipment and intangible assets			(12,779)		(18,900)		(6,444)		(8,794)
	Cash flows used in investing activities			(7,909)		(19,110)		(3,998)		(8,899)
CASH FLOWS USED IN FINANCING ACTIVITIES
	Dividends paid			(6,459)		(25,834)		(3,230)		(12,917)
	Repayment of long-term debt			(822)		(772)		(415)		(390)
	Cash flows used in financing activities			(7,281)		(26,606)		(3,645)		(13,307)
FOREIGN EXCHANGE GAIN ON CASH HELD IN FOREIGN CURRENCY				873		155		389		196
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS				(8,975)		(21,067)		45,532		9,830
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD				122,355		97,626		67,848		66,729
CASH AND CASH EQUIVALENTS, END OF THE PERIOD			$	113,380	$	76,559	$	113,380	$	76,559

 

 

SOURCE: Reitmans (Canada) Limited

Jeremy H. Reitman
Chairman and Chief Executive Officer

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