Reitmans (Canada) Limited announces its results for the three and six months ended July 30, 2016

MONTREAL, Sept. 8, 2016 /CNW Telbec/ -

Three months ended July 30, 2016
Sales for the three months ended July 30, 2016 were $254.4 million as compared with $253.0 million for the three months ended August 1, 2015, an increase of 0.6%, with a net reduction of 75 stores primarily attributable to the closure of Smart Set stores. Same store sales¹ increased 6.3%, being the ninth consecutive quarter of increased same store sales¹, with stores increasing 4.0% and e-commerce increasing 45.4%. 

The Company's gross margin for the three months ended July 30, 2016 increased to 56.3% from 55.0% for the three months ended August 1, 2015. Gross profit for the three months ended July 30, 2016 increased $4.0 million or 2.9% to $143.2 million as compared with $139.2 million for three months ended August 1, 2015, with the weakness of the Canadian dollar vis-à-vis the US dollar negatively impacting gross profit by approximately $1.7 million.

Results from operating activities for the three months ended July 30, 2016 were $12.5 million as compared with $2.7 million for the three months ended August 1, 2015, an increase of $9.8 million.  

Net earnings increased $9.2 million for the three months ended July 30, 2016 to $9.0 million ($0.14 basic and diluted earnings per share) as compared with a net loss of $0.2 million ($0.00 basic and diluted loss per share) for the three months ended August 1, 2015.

Adjusted EBITDA¹ for the three months ended July 30, 2016 was $23.1 million as compared with $17.4 million for the three months ended August 1, 2015, an increase of $5.7 million. The increase in adjusted EBITDA was primarily attributable to improvements in gross profit and reduced store operating costs.

Six months ended July 30, 2016
Sales for the six months ended July 30, 2016 were $457.9 million as compared with $454.7 million for the six months ended August 1, 2015, an increase of 0.7%, with a net reduction of 75 stores primarily attributable to the closure of Smart Set stores. Same store sales¹ increased 7.5% with stores increasing 5.0% and e-commerce increasing 49.0%.

The Company's gross margin for the six months ended July 30, 2016 decreased to 56.0% from 57.0% for the six months ended August 1, 2015.  Gross profit for the six months ended July 30, 2016 decreased $2.7 million or 1.0 % to $256.6 million as compared with $259.3 million for the six months ended August 1, 2015.  The weakness of the Canadian dollar vis-à-vis the U.S. dollar negatively impacted gross profit by approximately $5.5 million.

Net earnings increased $10.9 million for the six months ended July 30, 2016 to $3.0 million ($0.05 basic and diluted earnings per share) as compared with a $7.9 million loss ($0.12 basic and diluted loss per share) for the six months ended August 1, 2015.

Adjusted EBITDA¹ for the six months ended July 30, 2016 was $18.8 million as compared with $19.7 million for the six months ended August 1, 2015, a decrease of $0.9 million. The decrease in adjusted EBITDA was primarily attributable to the impact of lower gross profit in the first quarter of fiscal 2017 partially offset by reduced store operating costs.

Dividends
At the Board of Directors meeting held on September 8, 2016, 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 27, 2016 to shareholders of record on October 13, 2016.

Sales for the four weeks ended August 27, 2016
Sales for the month of August (the four weeks ended August 27, 2016) increased 1.1% with same store sales¹ increasing 6.2%, stores increasing 2.5% and e-commerce increasing 63.6%.

About Reitmans (Canada) Limited
The Company is a leading ladieswear specialty apparel retailer with retail outlets throughout Canada.  The Company operates 719 stores consisting of 307 Reitmans, 130 Penningtons, 103 Addition Elle, 82 RW & CO., 63 Thyme Maternity, 19 Hyba and 15 Smart Set. The Company also operated 18 Thyme Maternity shop-in-shop boutiques in select Babies"R"Us locations in Canada.  The Company terminated its agreement with Toys"R"Us and no longer operates Babies"R"Us shop-in-shop locations as of August 31, 2016.

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, other income, dividend income, interest income, net change in fair value of marketable securities, interest expense, impairment of goodwill, 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 and 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 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 earnings (loss) to adjusted EBITDA for the three and six months ended July 30, 2016 and August 1, 2015:

(in millions of Canadian dollars) (unaudited)	For the three months ended				For the six months ended
	July 30, 2016		August 1, 2015		July 30, 2016		August 1, 2015
Net earnings (loss)	$	9.0	$	(0.2)	$	3.0	$	(7.9)
Depreciation, amortization and net impairment losses		10.7		12.2		21.1		24.1
Dividend income		(0.6)		(0.6)		(1.3)		(1.3)
Interest income		(0.2)		(0.1)		(0.3)		(0.3)
Net change in fair value of marketable securities		0.5		5.2		(3.6)		6.4
Interest expense		-		0.1		0.1		0.2
Income tax expense (recovery)		3.7		0.8		(0.2)		(1.5)
ADJUSTED EBITDA	$	23.1	$	17.4	$	18.8	$	19.7
ADJUSTED EBITDA as % of Sales		9.1%		6.9%		4.1%		4.3%

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, for the Company 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 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 Management Discussion & Analysis for the three and six months ended July 30, 2016.

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 30, 2016 are available online at www.sedar.com.

Montreal, September 8, 2016

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 30, 2016		August 1, 2015		July 30, 2016		August 1, 2015
Sales			$	254,447	$	252,998	$	457,934	$	454,729
Cost of goods sold				111,297		113,835		201,290		195,471
Gross profit				143,150		139,163		256,644		259,258
Selling and distribution expenses				119,704		124,779		234,897		243,660
Administrative expenses				10,996		11,701		21,771		23,079
Results from operating activities				12,450		2,683		(24)		(7,481)
Finance income				824		3,169		5,163		4,646
Finance costs				612		5,323		2,362		6,573
Earnings (loss) before income taxes				12,662		529		2,777		(9,408)
Income tax expense (recovery)				3,691		751		(212)		(1,515)
Net earnings (loss)			$	8,971	$	(222)	$	2,989	$	(7,893)
Earnings (loss) per share :
	Basic		$	0.14	$	0.00	$	0.05	$	(0.12)
	Diluted		$	0.14	$	0.00	$	0.05	$	(0.12)

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 30, 2016		August 1, 2015		July 30, 2016		August 1, 2015
Net earnings (loss)		$	8,971	$	(222)	$	2,989	$	(7,893)
Other comprehensive income (loss)
	Items that are or may be reclassified subsequently to net earnings (loss):
	Cash flow hedges (net of tax of $2,777 for the three months ended July 30, 2016 and $4,939 for the six months ended July 30, 2016; net of tax of $2,829 for three months ended August 1, 2015 and $1,323 for the six months ended August 1, 2015)	7,617		7,808		(13,500)		3,639
	Foreign currency translation differences	(220)		(301)		259		(119)
Total other comprehensive income (loss)		7,397		7,507		(13,241)		3,520
Total comprehensive income (loss)		$	16,368	$	7,285	$	(10,252)	$	(4,373)

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (in thousands of Canadian dollars)
			July 30, 2016		August 1, 2015		January 30, 2016
ASSETS
CURRENT ASSETS
	Cash and cash equivalents		$	114,538	$	114,422	$	118,595
	Marketable securities		48,772		54,930		45,189
	Trade and other receivables		5,361		4,803		4,103
	Derivative financial asset		623		13,166		14,405
	Income taxes recoverable		3,367		2,226		3,301
	Inventories		147,159		131,488		124,848
	Prepaid expenses		8,647		8,983		8,921
		Total Current Assets	328,467		330,018		319,362
NON-CURRENT ASSETS
	Property and equipment		128,289		141,957		134,363
	Intangible assets		23,741		22,535		24,347
	Goodwill		38,183		42,426		38,183
	Deferred income taxes		30,973		27,975		25,828
		Total Non-Current Assets	221,186		234,893		222,721
TOTAL ASSETS			$	549,653	$	564,911	$	542,083
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Trade and other payables		$	119,272	$	94,741	$	98,135
	Derivative financial liability		8,962		1		1,816
	Deferred revenue		17,228		15,956		19,325
	Current portion of long-term debt		1,957		1,837		1,896
		Total Current Liabilities	147,419		112,535		121,172
NON-CURRENT LIABILITIES
	Other payables		7,468		9,060		8,112
	Deferred lease credits		9,236		11,914		10,640
	Long-term debt		661		2,618		1,655
	Pension liability		19,897		22,315		19,336
		Total Non-Current Liabilities	37,262		45,907		39,743
SHAREHOLDERS' EQUITY
	Share capital		38,397		38,814		38,397
	Contributed surplus		9,397		8,464		9,007
	Retained earnings		324,025		350,370		327,370
	Accumulated other comprehensive income		(6,847)		8,821		6,394
		Total Shareholders' Equity	364,972		406,469		381,168
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$	549,653	$	564,911	$	542,083

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 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 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
Balance as at February 1, 2015	$	39,227	$	8,014	$	368,581	$	5,301	$	421,123
Net loss	-		-		(7,893)		-		(7,893)
Total other comprehensive income	-		-		-		3,520		3,520
Total comprehensive loss for the period	-		-		(7,893)		3,520		(4,373)
Cash consideration on exercise of share options	2		-		-		-		2
Cancellation of shares pursuant to share repurchase program	(415)		-		-		-		(415)
Share-based compensation costs	-		450		-		-		450
Dividends	-		-		(6,427)		-		(6,427)
Premium on repurchase of Class A non-voting shares	-		-		(3,891)		-		(3,891)
Total contributions by (distributions to) owners of the Company	(413)		450		(10,318)		-		(10,281)
Balance as at August 1, 2015	$	38,814	$	8,464	$	350,370	$	8,821	$	406,469

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 30, 2016		August 1, 2015		July 30, 2016		August 1, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)		$	8,971	$	(222)	$	2,989	$	(7,893)
Adjustments for:
	Depreciation, amortization and net impairment losses	10,720		12,226		21,067		24,106
	Share-based compensation costs	277		312		478		450
	Amortization of deferred lease credits	(773)		(991)		(1,568)		(2,434)
	Deferred lease credits	32		785		164		1,170
	Pension contribution	(291)		(428)		(659)		(703)
	Pension expense	610		525		1,220		1,050
	Realized loss on sale of marketable securities	-		15		-		15
	Net change in fair value of marketable securities	487		5,233		(3,583)		6,401
	Net change in fair value of derivatives	-		2,799		-		12,335
	Foreign exchange (gain) loss on cash and cash equivalents	(960)		(4,521)		2,674		(5,467)
	Interest and dividend income, net	(778)		(643)		(1,480)		(1,428)
	Interest paid	(46)		(75)		(100)		(157)
	Interest received	156		127		317		379
	Dividends received	632		635		1,192		1,248
	Income tax expense (recovery)	3,691		751		(212)		(1,515)
		22,728		16,528		22,499		27,557
Changes in:
	Trade and other receivables	404		1,248		(1,187)		(246)
	Inventories	(7,609)		3,489		(22,311)		(25,048)
	Prepaid expenses	820		15,413		274		3,165
	Trade and other payables	35,178		24,702		21,960		5,233
	Deferred revenue	(1,248)		(159)		(2,097)		(5,117)
Cash from operating activities		50,273		61,221		19,138		5,544
Income taxes received		370		-		370		2
Income taxes paid		(1)		(392)		(431)		(1,570)
Net cash flows from operating activities		50,642		60,829		19,077		3,976
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of marketable securities		-		(2,924)		-		(5,660)
Proceeds on sale of marketable securities		-		1,678		-		1,678
Additions to property and equipment and intangible assets		(8,141)		(9,094)		(16,359)		(19,226)
Proceeds on disposal of property and equipment and intangibles		-		-		416		-
Cash flows used in investing activities		(8,141)		(10,340)		(15,943)		(23,208)
CASH FLOWS USED IN FINANCING ACTIVITIES
Dividends paid		(3,167)		(3,198)		(6,334)		(6,427)
Purchase of Class A non-voting shares for cancellation		-		(4,306)		-		(4,306)
Repayment of long-term debt		(470)		(441)		(933)		(876)
Proceeds from issuance of share capital		-		-		-		2
Cash flows used in financing activities		(3,637)		(7,945)		(7,267)		(11,607)
FOREIGN EXCHANGE (LOSS) GAIN ON CASH HELD IN FOREIGN CURRENCY		(75)		4,220		76		5,348
NET INCREASE (DECREASE)  IN CASH AND CASH EQUIVALENTS		38,789		46,764		(4,057)		(25,491)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD		75,749		67,658		118,595		139,913
CASH AND CASH EQUIVALENTS, END OF THE PERIOD		$	114,538	$	114,422	$	114,538	$	114,422

SOURCE Reitmans (Canada) Limited

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