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

MONTREAL, May 30, 2017 /CNW/ - Sales for the three months ended April 29, 2017 were $207.1 million as compared with $203.5 million for the three months ended April 30, 2016, an increase of 1.8%, despite a net reduction of 81 stores. Same store sales¹ increased 5.4%, marking the twelfth consecutive quarter of positive same store sales. Store sales increased 1.2% and e-commerce sales increased 55.5% as the Company continues to experience strong growth in its e-commerce channel.

Gross profit for the three months ended April 29, 2017 decreased $0.3 million or 0.3% to $113.2 million as compared with $113.5 million for the three months ended April 30, 2016. Gross margin was 54.7% for the three months ended April 29, 2017 as compared to 55.8% for the three months ended April 30, 2016 driven primarily by the adverse foreign exchange impact of approximately $7.0 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 April 29, 2017 were a loss of $12.3 million as compared with a loss of $12.5 million for the three months ended April 30, 2016, an improvement of $0.2 million.  Decreased store operating costs due to the reduction of stores were partially offset by higher depreciation, amortization and net impairment losses and initiatives aimed at reinvesting in growth areas of the Company.

Net loss for the three months ended April 29, 2017 was $6.6 million ($0.10 basic and diluted loss per share) as compared with a $6.0 million net loss ($0.09 basic and diluted loss per share) for the three months ended April 30, 2016. The increased loss of $0.6 million is primarily due to a lower income tax recovery partially offset by increased net finance income.

Adjusted EBITDA¹ for the three months ended April 29, 2017 was a loss of $0.1 million as compared with a loss of $4.3 million for the three months ended April 30, 2016. The improvement of $4.2 million in adjusted EBITDA was primarily attributable to a positive net foreign exchange impact of $3.1 million on U.S. denominated monetary assets and liabilities included in net finance income.

Dividends

At the Board of Directors meeting held on May 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 July 27, 2017 to shareholders of record on July 13, 2017.

Sales for the four weeks ended May 27, 2017

Sales for the month of May (the four weeks ended May 27, 2017) decreased 6.4%. Same store sales¹ decreased 2.6% with stores decreasing 6.6% and e-commerce sales increasing 46.9%.

About Reitmans (Canada) Limited

The Company is a leading ladieswear specialty apparel retailer with retail outlets throughout Canada.  The Company operates 669 stores consisting of 283 Reitmans, 126 Penningtons, 96 Addition Elle, 84 RW & CO., 61 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, 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 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 loss to adjusted EBITDA for the three months ended April 29, 2017 and April 30, 2016:

(in millions of Canadian dollars) (unaudited)	For the three months ended
	April 29, 2017		April 30, 2016
Net loss	$	(6.6)	$	(6.0)
Depreciation, amortization and net impairment losses	11.3		10.3
Dividend income	(0.6)		(0.6)
Interest income	(0.2)		(0.1)
Net change in fair value of marketable securities	(1.5)		(4.1)
Interest expense	-		0.1
Income tax recovery	(2.5)		(3.9)
ADJUSTED EBITDA	$	(0.1)	$	(4.3)
ADJUSTED EBITDA as % of Sales	(0.0%)		(2.1%)

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 year ended January 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 months ended April 29, 2017 are available online at www.sedar.com.

Montreal, May 30, 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
			April 29, 2017		April 30, 2016
Sales			$	207,107	$	203,487
Cost of goods sold			93,885		89,993
Gross profit			113,222		113,494
Selling and distribution expenses			114,994		115,476
Administrative expenses			10,478		10,492
Results from operating activities			(12,250)		(12,474)
Finance income			3,161		4,826
Finance costs			24		2,237
Loss before income taxes			(9,113)		(9,885)
Income tax recovery			2,541		3,903
Net loss			$	(6,572)	$	(5,982)
Loss per share:
	Basic		$	(0.10)	$	(0.09)
	Diluted		(0.10)		(0.09)

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (in thousands of Canadian dollars)
				For the three months ended
				April 29, 2017		April 30, 2016
Net loss				$	(6,572)	$	(5,982)
Other comprehensive income (loss)
	Items that are or may be reclassified subsequently to net earnings:
		Cash flow hedges (net of tax of $2,160; 2016 - $7,716)		5,962		(21,117)
		Foreign currency translation differences		(178)		479
Total other comprehensive income (loss)				5,784		(20,638)
Total comprehensive loss				$	(788)	$	(26,620)

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands of Canadian dollars)
				April 29, 2017		April 30, 2016		January 28, 2017
ASSETS
CURRENT ASSETS
	Cash and cash equivalents			$	90,475	$	75,749	$	120,265
	Marketable securities			56,219		49,259		54,764
	Trade and other receivables			6,857		5,729		4,256
	Derivative financial asset			9,274		-		1,386
	Income taxes recoverable			4,334		5,413		3,480
	Inventories			154,728		139,550		146,059
	Prepaid expenses			9,082		9,467		6,846
		Total Current Assets		330,969		285,167		337,056
NON-CURRENT ASSETS
	Property and equipment			117,234		131,165		124,106
	Intangible assets			21,241		24,459		23,110
	Goodwill			38,183		38,183		38,183
	Deferred income taxes			25,421		35,764		25,891
		Total Non-Current Assets		202,079		229,571		211,290
TOTAL ASSETS				$	533,048	$	514,738	$	548,346
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Trade and other payables			$	110,262	$	84,789	$	114,254
	Derivative financial liability			-		19,549		3,160
	Deferred revenue			18,322		18,476		21,478
	Current portion of long-term debt			1,162		1,926		1,655
		Total Current Liabilities		129,746		124,740		140,547
NON-CURRENT LIABILITIES
	Other payables			6,988		7,699		7,186
	Deferred lease credits			7,549		9,977		8,230
	Long-term debt			-		1,162		-
	Pension liability			19,029		19,578		18,869
		Total Non-Current Liabilities		33,566		38,416		34,285
SHAREHOLDERS' EQUITY
	Share capital			38,397		38,397		38,397
	Contributed surplus			9,946		9,208		9,769
	Retained earnings			316,936		318,221		326,675
	Accumulated other comprehensive income (loss)			4,457		(14,244)		(1,327)
		Total Shareholders' Equity		369,736		351,582		373,514
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY				$	533,048	$	514,738	$	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 loss		-		-		(6,572)		-		(6,572)
Total other comprehensive income		-		-		-		5,784		5,784
Total comprehensive (loss) income for the period		-		-		(6,572)		5,784		(788)
Share-based compensation costs		-		177		-		-		177
Dividends		-		-		(3,167)		-		(3,167)
Total contributions by (distributions to) owners of the Company		-		177		(3,167)		-		(2,990)
Balance as at April 29, 2017		$	38,397	$	9,946	$	316,936	$	4,457	$	369,736
Balance as at January 31, 2016		$	38,397	$	9,007	$	327,370	$	6,394	$	381,168
Net loss		-		-		(5,982)		-		(5,982)
Total other comprehensive loss		-		-		-		(20,638)		(20,638)
Total comprehensive loss for the period		-		-		(5,982)		(20,638)		(26,620)
Share-based compensation costs		-		201		-		-		201
Dividends		-		-		(3,167)		-		(3,167)
Total contributions by (distributions to) owners of the Company		-		201		(3,167)		-		(2,966)
Balance as at April 30, 2016		$	38,397	$	9,208	$	318,221	$	(14,244)	$	351,582

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of Canadian dollars)
				For the three months ended
				April 29, 2017		April 30, 2016
CASH FLOWS USED IN OPERATING ACTIVITIES
	Net loss			$	(6,572)	$	(5,982)
	Adjustments for:
		Depreciation, amortization and net impairment losses		11,303		10,347
		Share-based compensation costs		311		201
		Net change in fair value of marketable securities		(1,455)		(4,070)
		Net change in transfer of realized (gain) loss on cash flow hedges to inventory		(2,926)		3,304
		Foreign exchange (gain) loss		(406)		330
		Interest and dividend income, net		(777)		(702)
		Income tax recovery		(2,541)		(3,903)
				(3,063)		(475)
	Changes in:
		Trade and other receivables		(2,621)		(1,591)
		Inventories		(8,669)		(14,702)
		Prepaid expenses		(2,236)		(546)
		Trade and other payables		(3,757)		(13,218)
		Pension liability		159		242
		Deferred lease credits		(681)		(663)
		Deferred revenue		(3,156)		(849)
	Cash used in operating activities			(24,024)		(31,802)
	Interest paid			(24)		(54)
	Interest received			217		161
	Dividends received			604		560
	Income taxes paid			(3)		(430)
	Net cash flows used in operating activities			(23,230)		(31,565)
	CASH FLOWS USED IN INVESTING ACTIVITIES
		Additions to property and equipment and intangible assets		(3,129)		(8,218)
		Proceeds on disposal of property and equipment and intangibles		-		416
		Cash flows used in investing activities		(3,129)		(7,802)
	CASH FLOWS USED IN FINANCING ACTIVITIES
		Dividends paid		(3,167)		(3,167)
		Repayment of long-term debt		(493)		(463)
		Cash flows used in financing activities		(3,660)		(3,630)
	FOREIGN EXCHANGE GAIN ON CASH HELD IN FOREIGN CURRENCY			229		151
	NET DECREASE IN CASH AND CASH EQUIVALENTS			(29,790)		(42,846)
	CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD			120,265		118,595
	CASH AND CASH EQUIVALENTS, END OF THE PERIOD			$	90,475	$	75,749

SOURCE Reitmans (Canada) Limited

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

Related Links

www.reitmanscanadalimited.com