Reitmans (Canada) Limited announces its results for the three months ended May 3, 2014

MONTREAL, June 10, 2014 /CNW Telbec/ - Sales for the first quarter ended May 3, 2014 were $206,478,000 as compared with $216,861,000 for the first quarter ended May 4, 2013, a decrease of 4.8%.  Same store sales¹ decreased by 3.6%.  Poor weather in the first quarter ended May 3, 2014 contributed to weak demand for spring and summer apparel.  A net reduction of 47 stores contributed to a sales reduction of approximately $5,000,000 in the quarter, as the Company continued to rationalize underperforming locations.  The Company's gross margin for the first quarter ended May 3, 2014 decreased to 59.4% from 64.6% for the first quarter ended May 4, 2013, negatively impacted by the weaker Canadian dollar against the U.S. dollar and increased promotional activity in a highly competitive market.  Net loss for the first quarter ended May 3, 2014 increased to $13,415,000 ($0.21 diluted loss per share) as compared with a net loss of $2,586,000 ($0.04 diluted loss per share) for the first quarter ended May 4, 2013. For the first quarter ended May 3, 2014, adjusted EBITDA¹ was $(4,061,000) as compared with $10,683,000 for the first quarter ended May 4, 2013, a decrease of $14,744,000.

Previously reported initiatives aimed at reducing costs across the organization have yielded savings.  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 of approximately $2,000,000 in the first quarter ended May 3, 2014.  These reductions are anticipated to exceed earlier projected annualized wage and benefit savings of approximately $6,000,000.  Additional savings have been achieved through improved cost management in non-wage areas.

During the quarter, the Company opened 3 new stores and closed 19.  Accordingly, at May 3, 2014, there were 862 stores in operation, consisting of 345 Reitmans, 146 Penningtons, 102 Addition Elle, 77 RW & CO., 68 Thyme Maternity and 124 Smart Set, as compared with a total of 909 stores as at May 4, 2013. The Company operates 23 Thyme Maternity shop-in-shop boutiques in select Babies"R"Us locations in Canada. At May 3, 2014, the Company operated 67 Thyme Maternity shop-in-shop boutiques in the United States which were closed at June 2, 2014.

Sales for the month of May (the four weeks ended May 31, 2014) decreased 1.5% with same store sales¹ increasing 1.2%.

At the Board of Directors meeting held on June 10, 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 July 31, 2014 to shareholders of record on July 17, 2014.

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 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 (including each banner's e-commerce store) 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 and includes 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 to adjusted EBITDA for the three months ended May 3, 2014 and May 4, 2013:

(unaudited)	For the three months ended
	May 3, 2014		May 4, 2013
Net loss	$	(13,415,000)	$	(2,586,000)
Depreciation, amortization and net impairment losses		13,467,000		14,996,000
Dividend income		(667,000)		(868,000)
Interest income		(163,000)		(134,000)
Realized loss on disposal of available-for-sale financial assets		24,000		-
Impairment losses on available-for-sale financial assets		10,000		50,000
Interest expense		108,000		134,000
Income tax recovery		(3,425,000)		(909,000)
ADJUSTED EBITDA	$	(4,061,000)	$	10,683,000

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 first quarter ended May 3, 2014 are available online at www.sedar.com.

Montreal, June 10, 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 three months ended
		May 3, 2014		May 4, 2013
Sales		$	206,478	$	216,861
Cost of goods sold			83,733		76,687
Gross profit			122,745		140,174
Selling and distribution expenses			125,530		131,971
Administrative expenses			10,869		12,276
Results from operating activities			(13,654)		(4,073)
Finance income			3,985		2,361
Finance costs			7,171		1,783
Loss before income taxes			(16,840)		(3,495)
Income tax recovery			3,425		909
Net loss		$	(13,415)	$	(2,586)
Loss per share:
	Basic	$	(0.21)	$	(0.04)
	Diluted		(0.21)		(0.04)

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

			For the three months ended
			May 3, 2014		May 4, 2013
Net loss			$	(13,415)	$	(2,586)
Other comprehensive income
	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; 2013 - $8)		9		42
		Net change in fair value of available-for-sale financial assets (net of tax of $312; 2013 - $101)		2,041		663
	Foreign currency translation differences			(173)		-
Total other comprehensive income				1,877		705
Total comprehensive loss			$	(11,538)	$	(1,881)

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

			May 3, 2014		May 4, 2013		February 1, 2014
ASSETS
CURRENT ASSETS
	Cash and cash equivalents		$	67,848	$	66,729	$	122,355
	Marketable securities			54,996		72,499		55,062
	Trade and other receivables			7,131		5,194		6,422
	Derivative financial asset			4,627		903		11,775
	Income taxes recoverable			9,069		10,174		5,656
	Inventories			120,742		112,253		109,601
	Prepaid expenses			25,762		25,791		12,512
		Total Current Assets		290,175		293,543		323,383
NON-CURRENT ASSETS
	Property and equipment			170,445		200,953		178,341
	Intangible assets			17,440		18,892		17,211
	Goodwill			42,426		42,426		42,426
	Deferred income taxes			30,471		27,439		28,578
		Total Non-Current Assets		260,782		289,710		266,556
TOTAL ASSETS			$	550,957	$	583,253	$	589,939
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Trade and other payables		$	72,590	$	75,158	$	90,734
	Derivative financial liability			2,946		2,220		3,065
	Deferred revenue			15,527		11,126		19,998
	Current portion of long-term debt			1,698		1,595		1,672
		Total Current Liabilities		92,761		90,099		115,469
NON-CURRENT LIABILITIES
	Other payables			11,323		11,415		11,842
	Deferred lease credits			14,774		16,797		15,607
	Long-term debt			4,898		6,596		5,331
	Pension liability			18,464		17,977		18,259
		Total Non-Current Liabilities		49,459		52,785		51,039
SHAREHOLDERS' EQUITY
	Share capital			39,227		39,227		39,227
	Contributed surplus			7,261		6,795		7,188
	Retained earnings			353,016		384,977		369,660
	Accumulated other comprehensive income			9,233		9,370		7,356
		Total Shareholders' Equity		408,737		440,369		423,431
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$	550,957	$	583,253	$	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									(13,415)						(13,415)
	Total other comprehensive income												1,877			1,877
Total comprehensive loss for the period				-			-			(13,415)			1,877			(11,538)
Contributions by (distributions to) owners of the Company
	Share-based compensation costs						73									73
	Dividends									(3,229)						(3,229)
Total contributions by (distributions to) owners of the Company				-			73			(3,229)			-			(3,156)
Balance as at May 3, 2014			$	39,227		$	7,261		$	353,016		$	9,233		$	408,737
Balance as at February 3, 2013			$	39,227		$	6,521		$	400,480		$	8,665		$	454,893
Total comprehensive loss for the period
	Net loss									(2,586)						(2,586)
	Total other comprehensive income												705			705
Total comprehensive loss for the period				-			-			(2,586)			705			(1,881)
Contributions by (distributions to) owners of the Company
	Share-based compensation costs						274									274
	Dividends									(12,917)						(12,917)
Total contributions by (distributions to) owners of the Company				-			274			(12,917)			-			(12,643)
Balance as at May 4, 2013			$	39,227		$	6,795		$	384,977		$	9,370		$	440,369

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

				For the three months ended
				May 3, 2014			May 4, 2013
CASH FLOWS USED IN OPERATING ACTIVITIES
	Net loss			$	(13,415)		$	(2,586)
	Adjustments for:
		Depreciation, amortization and net impairment losses			13,467			14,996
		Share-based compensation costs			73			274
		Amortization of deferred lease credits			(1,029)			(1,176)
		Deferred lease credits			196			1,168
		Pension contribution			(287)			(32)
		Pension expense			492			450
		Realized loss on sale of marketable securities			24			-
		Impairment loss on available-for-sale financial assets			10			50
		Net change in fair value of derivatives			7,029			1,599
		Foreign exchange (gain) loss on cash and cash equivalents			(680)			41
		Interest and dividend income, net			(698)			(868)
		Interest paid			(108)			(134)
		Interest received			198			138
		Dividends received			810			867
		Income tax recovery			(3,425)			(909)
					2,657			13,878
	Changes in:
		Trade and other receivables			(916)			(1,598)
		Inventories			(11,141)			(18,936)
		Prepaid expenses			(13,250)			153
		Trade and other payables			(18,128)			5,987
		Deferred revenue			(4,471)			(5,171)
	Cash used in operating activities				(45,249)			(5,687)
	Income taxes received				-			647
	Income taxes paid				(2,195)			(2,306)
	Net cash flows used in operating activities				(47,444)			(7,346)
CASH FLOWS USED IN INVESTING ACTIVITIES
	Purchases of marketable securities				(105)			(105)
	Proceeds on sale of marketable securities				2,500			-
	Proceeds on sale of trademarks				29			-
	Additions to property and equipment and intangible assets				(6,335)			(10,106)
	Cash flows used in investing activities				(3,911)			(10,211)
CASH FLOWS USED IN FINANCING ACTIVITIES
	Dividends paid				(3,229)			(12,917)
	Repayment of long-term debt				(407)			(382)
	Cash flows used in financing activities				(3,636)			(13,299)
FOREIGN EXCHANGE GAIN (LOSS) ON CASH HELD IN FOREIGN CURRENCY					484			(41)
NET DECREASE IN CASH AND CASH EQUIVALENTS					(54,507)			(30,897)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD					122,355			97,626
CASH AND CASH EQUIVALENTS, END OF THE PERIOD				$	67,848		$	66,729

 

 

SOURCE: Reitmans (Canada) Limited

Jeremy H. Reitman
Chairman and Chief Executive Officer

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