Reitmans (Canada) Limited announces its results for the three and six months ended July 29, 2017

MONTREAL, Sept. 7, 2017 /CNW Telbec/ -

Three months ended July 29, 2017

Sales for the three months ended July 29, 2017 were $251.1 million as compared with $254.4 million for the three months ended July 30, 2016, a decrease of 1.3%, with a net reduction of 55 stores.  Same store sales¹ increased 2.5%, with store sales decreasing 0.6% and e-commerce sales increasing 39.9%.  This marks the thirteenth consecutive quarter of positive same store sales.

Gross profit for the three months ended July 29, 2017 decreased by $4.5 million or 3.1% to $138.7 million as compared with $143.2 million for the three months ended July 30, 2016.  Gross margin was 55.2% for the three months ended July 29, 2017 as compared to 56.3% for the three months ended July 30, 2016 driven primarily by the adverse foreign exchange impact of approximately $3.7 million on U.S. 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 three months ended July 29, 2017 were $10.8 million as compared to $12.5 million for the three months ended July 30, 2016, a decrease of $1.7 million.

Net earnings for the three months ended July 29, 2017 was $9.7 million ($0.15 basic and diluted earnings per share) as compared with a $9.0 million net earnings ($0.14 basic and diluted earnings per share) for the three months ended July 30, 2016.  The increased net earnings of $0.7 million is due to increased net finance income and a lower income tax expense offsetting reduced results from operating activities.

Adjusted EBITDA¹ for the three months ended July 29, 2017 was $19.9 million as compared with $23.1 million for the three months ended July 30, 2016.  The decrease of $3.2 million in adjusted EBITDA was primarily attributable to lower results from operating activities and an unfavorable net foreign exchange impact of $1.2 million on U.S. denominated monetary assets and liabilities included in net finance income.

Six months ended July 29, 2017

Sales for the six months ended July 29, 2017 were $458.2 million as compared with $457.9 million for the six months ended July 30, 2016, an increase of 0.1%, with a net reduction of 55 stores.  Same store sales¹ increased 3.8%, with store sales increasing 0.2% and e-commerce sales increasing 46.9%.

Gross profit for the six months ended July 29, 2017 decreased by $4.7 million or 1.8% to $251.9 million as compared with $256.6 million for the six months ended July 30, 2016.  Gross margin was 55.0% for the six months ended July 29, 2017 as compared to 56.0% for the six months ended July 30, 2016 driven primarily by the adverse foreign exchange impact of approximately $11.2 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.

Net earnings were $3.1 million for the six months ended July 29, 2017 ($0.05 basic and diluted earnings per share) as compared with a $3.0 million net earnings ($0.05 basic and diluted earnings per share) for the six months ended July 30, 2016. The increase in net earnings of $0.1 million is due to increased net finance income offsetting reduced results from operating activities.

Adjusted EBITDA¹ for the six months ended July 29, 2017 was $19.8 million as compared with $18.8 million for the six months ended July 30, 2016. The improvement of $1.0 million in adjusted EBITDA was primarily attributable to a favorable net foreign exchange impact of $1.9 million on U.S. denominated monetary assets and liabilities included in net finance income partially offset by reduced results from operating activities.

Dividends

At the Board of Directors meeting held on September 7, 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 October 26, 2017 to shareholders of record on October 12, 2017.

Sales for the four weeks ended August 26, 2017

Sales for the month of August (the four weeks ended August 26, 2017) increased 0.2%. Same store sales¹ increased 2.4% with stores increasing 1.1% and e-commerce sales increasing 16.3%.

About Reitmans (Canada) Limited

The Company is a leading ladieswear specialty apparel retailer with retail outlets throughout Canada.  The Company operates 664 stores consisting of 280 Reitmans, 125 Penningtons, 95 Addition Elle, 85 RW & CO., 60 Thyme Maternity and 19 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, 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 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 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 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 earnings to adjusted EBITDA:

(in millions of Canadian dollars) (unaudited)	For the three months ended				For the six months ended
	July 29, 2017		July 30, 2016		July 29, 2017		July 30, 2016
Net earnings	$	9.7	$	9.0	$	3.1	$	3.0
Depreciation, amortization and net impairment losses		10.4		10.7		21.7		21.1
Dividend income		(0.6)		(0.6)		(1.2)		(1.3)
Interest income		(0.2)		(0.2)		(0.4)		(0.3)
Net change in fair value of marketable securities		(1.7)		0.5		(3.2)		(3.6)
Interest expense		-		-		-		0.1
Income tax expense (recovery)		2.3		3.7		(0.2)		(0.2)
ADJUSTED EBITDA	$	19.9	$	23.1	$	19.8	$	18.8
ADJUSTED EBITDA as % of Sales		7.9%		9.1%		4.3%		4.1%

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 six months ended July 29, 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 six months ended July 29, 2017 are available online at www.sedar.com.

Montreal, September 7, 2017

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 six months ended
		July 29, 2017		July 30, 2016		July 29, 2017		July 30, 2016
Sales		$	251,121	$	254,447	$	458,228	$	457,934
Cost of goods sold			112,447		111,297		206,332		201,290
Gross profit			138,674		143,150		251,896		256,644
Selling and distribution expenses			117,017		119,987		232,011		235,463
Administrative expenses			10,896		10,713		21,374		21,205
Results from operating activities			10,761		12,450		(1,489)		(24)
Finance income			2,540		824		4,796		5,163
Finance costs			1,319		612		438		2,362
Earnings before income taxes			11,982		12,662		2,869		2,777
Income tax expense (recovery)			2,305		3,691		(236)		(212)
Net earnings		$	9,677	$	8,971	$	3,105	$	2,989
Earnings per share :
	Basic	$	0.15	$	0.14	$	0.05	$	0.05
	Diluted	$	0.15	$	0.14	$	0.05	$	0.05

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (in thousands of Canadian dollars)
			For the three months ended				For the six months ended
			July 29, 2017		July 30, 2016		July 29, 2017		July 30, 2016
Net earnings			$	9,677	$	8,971	$	3,105	$	2,989
Other comprehensive (loss) income
	Items that are or may be reclassified subsequently to net earnings:
		Cash flow hedges (net of tax of $5,420 for the three months and $3,260 for the six months ended July 29, 2017; net of tax of $2,777 for the three months ended and $4,939 for the six months ended July 30, 2016)		(14,966)		7,617		(9,004)		(13,500)
		Foreign currency translation differences		408		(220)		230		259
Total other comprehensive (loss) income				(14,558)		7,397		(8,774)		(13,241)
Total comprehensive (loss) income			$	(4,881)	$	16,368	$	(5,669)	$	(10,252)

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands of Canadian dollars)
			July 29, 2017		July 30, 2016		January 28, 2017
ASSETS
CURRENT ASSETS
	Cash and cash equivalents		$	115,441	$	114,538	$	120,265
	Marketable securities			57,951		48,772		54,764
	Trade and other receivables			5,284		5,361		4,256
	Derivative financial asset			-		623		1,386
	Income taxes recoverable			2,434		3,367		3,480
	Inventories			147,273		147,159		146,059
	Prepaid expenses			9,349		8,647		6,846
		Total Current Assets		337,732		328,467		337,056
NON-CURRENT ASSETS
	Property and equipment			113,732		128,289		124,106
	Intangible assets			19,828		23,741		23,110
	Goodwill			38,183		38,183		38,183
	Deferred income taxes			29,892		30,973		25,891
		Total Non-Current Assets		201,635		221,186		211,290
TOTAL ASSETS			$	539,367	$	549,653	$	548,346
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Trade and other payables		$	111,426	$	119,272	$	114,254
	Derivative financial liability			14,414		8,962		3,160
	Deferred revenue			17,820		17,228		21,478
	Current portion of long-term debt			661		1,957		1,655
		Total Current Liabilities		144,321		147,419		140,547
NON-CURRENT LIABILITIES
	Other payables			7,101		7,468		7,186
	Deferred lease credits			6,973		9,236		8,230
	Long-term debt			-		661		-
	Pension liability			19,182		19,897		18,869
		Total Non-Current Liabilities		33,256		37,262		34,285
SHAREHOLDERS' EQUITY
	Share capital			38,397		38,397		38,397
	Contributed surplus			10,048		9,397		9,769
	Retained earnings			323,446		324,025		326,675
	Accumulated other comprehensive loss			(10,101)		(6,847)		(1,327)
		Total Shareholders' Equity		361,790		364,972		373,514
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$	539,367	$	549,653	$	548,346

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 (Loss)		Total Shareholders' Equity
Balance as at January 29, 2017	$	38,397	$	9,769	$	326,675	$	(1,327)	$	373,514
Net earnings		-		-		3,105		-		3,105
Total other comprehensive loss		-		-		-		(8,774)		(8,774)
Total comprehensive income (loss) for the period		-		-		3,105		(8,774)		(5,669)
Share-based compensation costs		-		279		-		-		279
Dividends		-		-		(6,334)		-		(6,334)
Total contributions by (distributions to) owners of the Company		-		279		(6,334)		-		(6,055)
Balance as at July 29, 2017	$	38,397	$	10,048	$	323,446	$	(10,101)	$	361,790
Balance as at January 31, 2016	$	38,397	$	9,007	$	327,370	$	6,394	$	381,168
Net earnings		-		-		2,989		-		2,989
Total other comprehensive loss		-		-		-		(13,241)		(13,241)
Total comprehensive income (loss) for the period		-		-		2,989		(13,241)		(10,252)
Share-based compensation costs		-		390		-		-		390
Dividends		-		-		(6,334)		-		(6,334)
Total contributions by (distributions to) owners of the Company		-		390		(6,334)		-		(5,944)
Balance as at July 30, 2016	$	38,397	$	9,397	$	324,025	$	(6,847)	$	364,972

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of Canadian dollars)
			For the three months ended				For the six months ended
			July 29, 2017		July 30, 2016		July 29, 2017		July 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
	Net earnings		$	9,677	$	8,971	$	3,105	$	2,989
	Adjustments for:
		Depreciation, amortization and net impairment losses		10,412		10,720		21,715		21,067
		Share-based compensation costs		208		277		520		478
		Net change in fair value of marketable securities		(1,732)		487		(3,187)		(3,583)
		Net change in transfer of realized loss (gain) on cash flow hedges to inventory		3,302		(814)		376		2,490
		Foreign exchange loss (gain)		115		(146)		(292)		184
		Interest and dividend income, net		(793)		(778)		(1,570)		(1,480)
		Income tax expense (recovery)		2,305		3,691		(236)		(212)
				23,494		22,408		20,431		21,933
	Changes in:
		Trade and other receivables		1,563		404		(1,058)		(1,187)
		Inventories		7,455		(7,609)		(1,214)		(22,311)
		Prepaid expenses		(267)		820		(2,503)		274
		Trade and other payables		1,324		35,178		(2,433)		21,960
		Pension liability		154		319		313		561
		Deferred lease credits		(575)		(741)		(1,256)		(1,404)
		Deferred revenue		(502)		(1,248)		(3,658)		(2,097)
	Cash from operating activities			32,646		49,531		8,622		17,729
	Interest paid			(15)		(46)		(39)		(100)
	Interest received			215		156		432		317
	Dividends received			603		632		1,207		1,192
	Income taxes received			548		370		548		370
	Income taxes paid			(4)		(1)		(7)		(431)
	Net cash flows from operating activities			33,993		50,642		10,763		19,077
CASH FLOWS USED IN INVESTING ACTIVITIES
	Additions to property and equipment and intangible assets			(5,651)		(8,141)		(8,780)		(16,359)
	Proceeds on disposal of property and equipment and intangibles			-		-		-		416
	Cash flows used in investing activities			(5,651)		(8,141)		(8,780)		(15,943)
CASH FLOWS USED IN FINANCING ACTIVITIES
	Dividends paid			(3,167)		(3,167)		(6,334)		(6,334)
	Repayment of long-term debt			(501)		(470)		(994)		(933)
	Cash flows used in financing activities			(3,668)		(3,637)		(7,328)		(7,267)
FOREIGN EXCHANGE GAIN (LOSS) ON CASH HELD IN FOREIGN CURRENCY				292		(75)		521		76
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				24,966		38,789		(4,824)		(4,057)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD				90,475		75,749		120,265		118,595
CASH AND CASH EQUIVALENTS, END OF THE PERIOD			$	115,441	$	114,538	$	115,441	$	114,538

SOURCE Reitmans (Canada) Limited

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

Related Links

www.reitmanscanadalimited.com