Reitmans (Canada) Limited Reports Second Quarter Fiscal 2023 Financial Results

Q2 revenue increased by 33.0% to $229.2 million
Q2 Adjusted ROA¹ increased by 193% to $37.8 million
Q2 Adjusted EBITDA from continuing operations¹ increased by 144% to $39.6 million

MONTREAL, Sept. 22, 2022 /CNW/ - The Company is  very encouraged with its results of operating activities for the second quarter of fiscal 2023.  Results from operating activities for the second quarter of fiscal 2023 are the strongest in the last ten comparative quarters.  The Company successfully emerged from the Companies' Creditors Arrangement Act ("CCAA") proceedings in January 2022 with a clear vision and direction.  Effective restructuring of the banners, new branding initiatives and a customer-centric product offering all contributed to the success reflected in our year to date fiscal 2023 results. The Company successfully mitigated difficult economic headwinds and supply chain delays by closely managing logistics and inventory levels. In addition, the Company benefited from increased consumer spending and favorable year-over-year exchange rates.  Short-term, preferential rent arrangements put in place while under CCAA protection also contributed to the quarter performance. 

Unless otherwise indicated, all comparisons of results for the 13 weeks ended July 30, 2022 ("second quarter of 2023") are against results for the 13 weeks ended July 31, 2021 ("second quarter of 2022") and all comparisons of results for the 26 weeks ended July 30, 2022 ("year to date fiscal 2023") are against results for the 26 weeks ended July 31, 2021 ("year to date fiscal 2022").

13 weeks ended July 30, 2022

Sales for the second quarter of 2023 increased by $56.9 million, or 33.0%, to $229.2 million. More of the Company's stores were open as there were no government imposed lockdowns during the second quarter of 2023 as compared to a partial lockdown of the Company's stores network during the second quarter of 2022.   Increased customer traffic in stores, higher average transaction value and less markdowns and promotional discounting contributed to the increase in sales, despite an overall net reduction of 7 stores. The Company's e-commerce sales continue to be strong representing approximately 25%¹ of the total sales for the second quarter of 2023.

Gross profit for the second quarter of 2023 increased $43.0 million to $138.7 million as compared with $95.7 million for the second quarter of 2022. Gross profit as a percentage of sales for the second quarter of 2023 increased to 60.5% from 55.5% for the second quarter of 2022. The increase both in gross profit and as a percentage of sales is primarily attributable to lower markdowns and promotional activity in the second quarter of 2023, partially offset by higher supply chain costs, including merchandise freight costs as ongoing global shipping industry disruptions required utilizing air and premium-rate ocean freight shipments to meet customer demand.

Net earnings from continuing operations for the second quarter of 2023 was $37.3 million ($0.76 basic and diluted earnings per share) as compared with $23.9 million net earnings ($0.49 basic and diluted earnings per share) for the second quarter of 2022.

Adjusted results from operating activities ("Adjusted ROA") for the second quarter of 2023 was $37.8 million as compared with $12.9 million for the second quarter of 2022, an increase of $24.9 million.

Adjusted EBITDA from continuing operations for the second quarter of 2023 was $39.6 million as compared to $16.2 million for the second quarter of 2022, an increase of $23.4 million.

26 weeks ended July 30, 2022

Sales for the year to date fiscal 2023 increased by $89.6 million, or 30.5%, to $383.1 million. More of the Company's stores were open as there were no government imposed lockdowns during the year to date fiscal 2023 as compared to a partial lockdown of the Company's stores network during the year to date fiscal 2022. Increased customer traffic in stores, higher average transaction value  and less markdowns and promotional discounting contributed to the increase in sales, despite an overall net reduction of 7 stores. The Company's e-commerce sales continue to be strong representing approximately 27%¹ of the total sales for the year to date fiscal 2023.

Gross profit for the year to date fiscal 2023 increased $67.1 million to $222.7 million as compared with $155.6 million for the year to date fiscal 2022. Gross profit as a percentage of sales for the year to date fiscal 2023 increased to 58.1% from 53.0% for the year to date fiscal 2022. The increase both in gross profit and as a percentage of sales is primarily attributable to lower markdowns and promotional activity in the year to date  fiscal 2023 combined with a favourable foreign exchange impact on U.S. dollar denominated purchases included in cost of goods sold, partially offset by higher supply chain costs, including merchandise freight costs as ongoing global shipping industry disruptions required utilizing air and premium-rate ocean freight shipments to meet customer demand.

Net earnings from continuing operations for the year to date fiscal 2023 was $35.6 million ($0.73 basic and diluted earnings per share) as compared with $23.9 million ($0.49 basic and diluted earnings per share) for the year to date fiscal 2022, an increase of $11.7 million.

Adjusted ROA for the year to date fiscal 2023 was $36.8 million as compared with a loss of $3.5 million for the year to date fiscal 2022, an increase of $40.3 million.

Adjusted EBITDA from continuing operations for the year to date fiscal 2023 was $42.7 million as compared to $4.0 million for the year to date fiscal 2022, an increase of $38.7 million.

About Reitmans (Canada) Limited

The Company is a leading women's specialty apparel retailer with retail outlets throughout Canada.  As at July 30, 2022, the Company operated 404 stores consisting of 236 Reitmans, 91 Penningtons and 77 RW&CO.

¹Non-GAAP Financial Measures & Supplementary  Financial measures

This press announcement makes reference to certain non-GAAP measures. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS. They are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement IFRS measures by providing further understanding of the Company's results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for the Company's analysis of its financial information reported under IFRS.

Non-GAAP Financial Measures

This press announcement discusses adjusted earnings from continuing operations before interest, taxes, depreciation and amortization ("Adjusted EBITDA from continuing operations") and adjusted results from operating activities ("Adjusted ROA") and both are considered non-GAAP financial measures. This press announcement also indicates Adjusted EBITDA from continuing operations  as a percentage of sales and is considered a non-GAAP financial ratio. The intent of presenting Adjusted EBITDA from continuing operations and Adjusted ROA is to provide additional useful information to investors and analysts. Adjusted EBITDA from continuing operations is defined as net earnings (loss) before income tax expense/recovery, interest income, interest expense, depreciation, amortization, impairment of non-financial assets, adjusted for the impact of  certain items, including a deduction of interest expense and depreciation relating to leases accounted for under IFRS 16, Leases, Federal subsidies and restructuring costs and recoveries. Management believes that Adjusted EBITDA from continuing operations  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. Management believes that Adjusted EBITDA from continuing operations as a percentage of sales indicates how much liquidity is generated for each dollar of sales. The exclusion of interest income and expenses, other than interest expense related to lease liabilities as explained hereafter, eliminates the impact on earnings derived from non-operational activities. The exclusion of depreciation, amortization and impairment charges, other than depreciation related to right-of -use assets as explained hereafter, eliminates the non-cash impact, and the exclusion of restructuring items and Federal subsidies presents the results of the on-going business. Under IFRS 16, Leases, the characteristics of some leases result in lease payments being recognized in net earnings in the period in which the performance or use occurs while other leases are recorded as right-of-use assets with a corresponding lease liability recognized, which results in depreciation of those assets and interest expense from those liabilities. Management is presenting its Adjusted EBITDA from continuing operations to reflect the payments of its store and equipment lease obligations on a consistent basis. As such, the initial add-back of depreciation of right-of-use assets and interest on lease obligations are removed from the calculation of Adjusted EDITDA from continuing operations, as this better reflects the operational cash flow impact of its leases.

Adjusted ROA is defined as results from operating activities excluding Federal subsidies and restructuring costs and recoveries. Management believes that Adjusted ROA provides a more relevant indicator in assessing current operational performance. The exclusion of restructuring items and Federal subsidies presents the on-going operational performance of the business.

Reconciliation of Non-GAAP Financial Measures

The tables below provide a reconciliation of net earnings from continuing operations to Adjusted EBITDA from continuing operations and results from operating activities to Adjusted ROA:

	For the second quarter of				Year to date fiscal
	2023		2022		2023		2022
Net earnings from continuing operations	$	37.3	$	23.9	$	35.6	$	23.9
Depreciation, amortization and net impairment losses on property and equipment, and intangible assets		3.1		4.3		8.2		8.9
Depreciation on right -of-use assets		7.3		7.5		13.1		15.2
Interest income		(0.2)		(0.1)		(0.2)		(0.1)
Interest expense on lease liabilities		1.3		1.0		2.3		2.2
Interest expense on revolving credit facility		0.1		-		0.4		-
Income tax expense (recovery)		(0.5)		0.2		(0.5)		0.2
Rent impact from IFRS 16, Leases^1		(8.6)		(8.5)		(15.4)		(17.4)
Federal subsidies		-		(6.2)		(1.2)		(16.5)
Restructuring costs (recoveries), net		(0.2)		(5.9)		0.4		(12.4)
Adjusted EBITDA from continuing operations ^2	$	39.6	$	16.2	$	42.7	$	4.0
Adjusted EBITDA from continuing operations as % of Sales		17.3 %		9.4 %		11.1 %		1.4 %

	^1 Rent Impact from IFRS 16, Leases is comprised as follows;

	For the second quarter of				Year to date fiscal
	2023		2022		2023		2022
Depreciation on right-of use assets	$	7.3	$	7.5	$	13.1	$	15.2
Interest expense on lease liabilities		1.3		1.0		2.3		2.2
Rent impact from IFRS 16, Leases	$	8.6	$	8.5	$	15.4	$	17.4

² As a result of the current definition of Adjusted EBITDA from continuing operations, the comparative figure has been restated to include the rent impact from IFRS 16, Leases of $8.5 million for the second quarter of 2022 and $17.4 million for the year to date of fiscal 2022 and to exclude Federal subsidies recognized of $6.2 million for the second quarter of 2022 and $16.5 million recognized for the year to date of fiscal 2022. Management believes that the current definition of Adjusted EBITDA better reflects the operational cash flow of the Company.  

	For the second quarter of				Year to date fiscal
	2023		2022		2023		2022
Results from operating activities	$	38.0	$	25.0	$	37.6	$	25.4
Federal subsidies		-		(6.2)		(1.2)		(16.5)
Restructuring costs (recoveries), net		(0.2)		(5.9)		0.4		(12.4)
Adjusted ROA	$	37.8	$	12.9	$	36.8	$	(3.5)

Supplementary Financial Measures

This press announcement discloses the Company's e-commerce net sales as a percentage of the Company's net sales and is defined as the net sales recognized from its e-commerce in relation to the Company's net sales. This supplementary financial measure does not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures used by other companies. Management uses this measure to analyze trends in the customers' cross-channel behaviour for operating and capital expenditure funding allocation decisions.

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, including statements regarding the impact of COVID-19 on the Company's business, financial position and operations, and are based on several assumptions which give rise to the possibility that actual results could differ materially from the Company's expectations expressed in or implied by such forward-looking statements and that the objectives, plans, strategic priorities and business outlook may not be achieved.  Consequently, the Company cannot guarantee that any forward-looking statement will materialize, or if any of them do, what benefits the Company will derive from them. Forward-looking statements are provided in this press announcement for the purpose of giving information about management's current expectations and plans as of the date of this press announcement, and allowing investors and others to get a better understanding of the Company's operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose. 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, expectations, 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 belief in its strategies and its brands and their capacity to generate long-term profitable growth, 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 Risk Management" and "Financial Risk Management" sections of the 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 second quarter of 2023.

This is not an exhaustive list of the factors that may affect the Company's forward-looking statements. 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 second quarter of 2023 are available online at www.sedar.com.

Montreal, September 22, 2022

Stephen F. Reitman
President and Chief Executive Officer
Telephone:                 [phone]
Corporate Website:    www.reitmanscanadalimited.com 

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF EARNINGS (Unaudited) (in thousands of Canadian dollars except per share amounts)
	For the 13 weeks ended				For the 26 weeks ended
	July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021
Sales	$	229,222	$	172,298	$	383,081	$	293,548
Cost of goods sold		90,549		76,546		160,445		137,935
Gross profit		138,673		95,752		222,636		155,613
Selling and distribution expenses		88,207		68,103		161,464		125,256
Administrative expenses		12,702		8,483		23,184		17,357
Restructuring		(213)		(5,857)		407		(12,419)
Results from operating activities		37,977		25,023		37,581		25,419
Finance income		147		90		227		853
Finance costs		1,357		1,030		2,718		2,167
Earnings before income taxes		36,767		24,083		35,090		24,105
Income tax (recovery) expense		(552)		162		(512)		186
Net earnings from continuing operations		37,319		23,921		35,602		23,919
Earnings from discontinued operations, net of tax		-		10,193		-		10,193
Net earnings	$	37,319	$	34,114	$	35,602	$	34,112
Earnings per share:
Basic	$	0.76	$	0.70	$	0.73	$	0.70
Diluted		0.76		0.70		0.73		0.70
Earnings per share from continuing operations:
Basic	$	0.76	$	0.49	$	0.73	$	0.49
Diluted		0.76		0.49		0.73		0.49

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (in thousands of Canadian dollars)
	For the 13 weeks ended						For the 26 weeks ended
		July 30, 2022			July 31, 2021			July 30, 2022		July 31, 2021
Net earnings	$	37,319		$	34,114		$	35,602	$	34,112
Other comprehensive (loss) income
Items that are or may be reclassified subsequently to net earnings:
Foreign currency translation differences		(11)			(75)			(18)		123
		(11)			(75)			(18)		123
Items that will not be reclassified to net earnings:
Net actuarial loss on defined benefit plan (net of tax of $838 for the 13 and 26 weeks ended July 30, 2022)		(1,040)			-			(129)		-
Total other comprehensive (loss) income		(1,051)			(75)			(147)		123
Total comprehensive income	$	36,268		$	34,039		$	35,455	$	34,235

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (Unaudited) (in thousands of Canadian dollars)
		July 30, 2022	July 31, 2021^(1)	January 29, 2022
ASSETS
CURRENT ASSETS
Cash		$    38,173	$    87,587	$    25,502
Restricted cash		2,765	-	-
Trade and other receivables		4,947	5,318	7,606
Inventories		153,750	109,800	118,972
Prepaid expenses and other assets		31,215	37,616	42,590
Total Current Assets		230,850	240,321	194,670
NON-CURRENT ASSETS
Restricted cash		-	2,755	2,757
Property and equipment		61,735	62,578	65,970
Intangible assets		3,469	7,894	5,613
Right-of-use assets		71,533	41,559	44,978
Pension asset		664	-	100
Deferred income taxes		186	151	186
Total Non-Current Assets		137,587	114,937	119,604
TOTAL ASSETS		$  368,437	$  355,258	$  314,274
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving credit facility		$             -	$             -	$    29,634
Trade and other payables		57,098	37,612	34,478
Deferred revenue		11,961	11,289	13,490
Income taxes payable		816	475	537
Current portion of lease liabilities		27,299	25,511	20,888
Liabilities subject to compromise		-	193,440	-
Total Current Liabilities		97,174	268,327	99,027
NON-CURRENT LIABILITIES
Lease liabilities		51,790	27,552	31,419
Pension liability		-	3,459	-
Total Non-Current Liabilities		51,790	31,011	31,419
SHAREHOLDERS' EQUITY
Share capital		27,406	27,406	27,406
Contributed surplus		10,485	10,295	10,295
Retained earnings		182,453	18,950	146,980
Accumulated other comprehensive loss		(871)	(731)	(853)
Total Shareholders' Equity		219,473	55,920	183,828
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$  368,437	$  355,258	$  314,274

(1)     As at July 31, 2021, restricted cash of $2,755 has been classified as non-current assets to correctly reflect the presentation of this caption.

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (in thousands of Canadian dollars)
		Share Capital	Contributed Surplus	Retained Earnings (Deficit)	Accumulated Other Comprehensive Loss	Total Shareholders' Equity
Balance as at January 30, 2022		$     27,406	$   10,295	$   146,980	$       (853)	$   183,828
Net earnings		-	-	35,602	-	35,602
Total other comprehensive loss		-	-	(129)	(18)	(147)
Total comprehensive income (loss) for the period		-	-	35,473	(18)	35,455
Share-based compensation costs		-	190	-	-	190
Total contributions by owners of the Company		-	190	-	-	190
Balance as at July 30, 2022		$     27,406	$   10,485	$   182,453	$       (871)	$   219,473
Balance as at January 31, 2021		$     27,406	$   10,295	$    (15,162)	$       (854)	$     21,685
Net earnings		-	-	34,112	-	34,112
Total other comprehensive income		-	-	-	123	123
Total comprehensive income for the period		-	-	34,112	123	34,235
Balance as at July 31, 2021		$     27,406	$   10,295	$     18,950	$       (731)	$     55,920

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of Canadian dollars)
			For the 13 weeks ended				For the 26 weeks ended
		July 30, 2022			July 31, 2021		July 30, 2022		July 31, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings			$    37,319		$    34,114		$    35,602		$    34,112
Adjustments for:
Depreciation, amortization and net impairment losses on property and equipment, and intangible assets			3,130		4,327		8,210		8,893
Depreciation on right-of-use assets			7,282		7,516		13,093		15,248
Share-based compensation costs			190		-		190		-
Foreign exchange loss (gain)			1,262		(569)		(585)		1,455
Gain on lease re-measurements due to restructuring			-		(1,553)		-		(5,002)
Interest on lease liabilities			1,258		1,030		2,273		2,167
Interest on revolving credit			99		-		445		-
Interest income			(121)		(86)		(155)		(136)
Income tax (recovery) expense			(552)		162		(512)		186
			49,867		44,941		58,561		56,923
Changes in:
Trade and other receivables			-		4,226		2,666		5,353
Inventories			(16,245)		(7,882)		(34,778)		(13,678)
Prepaid expenses and other assets			5,463		(3,828)		11,375		(5,516)
Pension asset			(449)		181		144		367
Trade and other payables			3,843		3,974		24,074		6,020
Liabilities subject to compromise			-		(8,730)		-		(10,354)
Deferred revenue			(189)		(26)		(1,529)		(1,173)
Cash from operating activities			42,290		32,856		60,513		37,942
Interest paid			(165)		-		(481)		-
Interest received			97		70		148		133
Income taxes paid			-		(4)		(46)		(1,168)
Net cash flows from operating activities			42,222		32,922		60,134		36,907
CASH FLOWS USED IN INVESTING ACTIVITIES
Additions to property and equipment and intangible assets, net			(774)		(1,914)		(3,250)		(2,850)
Cash flows used in investing activities			(774)		(1,914)		(3,250)		(2,850)
CASH FLOWS USED IN FINANCING ACTIVITIES
Restricted cash			(6)		(1)		(8)		(2)
Net repayment of revolving credit facility			(34,439)		-		(29,634)		-
Payment of lease liabilities			(7,714)		(10,776)		(15,078)		(20,265)
Cash flows used in financing activities			(42,159)		(10,777)		(44,720)		(20,267)
FOREIGN EXCHANGE (LOSS) GAIN ON CASH HELD IN FOREIGN CURRENCY			(1,326)		265		507		(1,365)
NET (DECREASE) INCREASE IN CASH			(2,037)		20,496		12,671		12,425
CASH, BEGINNING OF THE PERIOD			40,210		67,091		25,502		75,162
CASH, END OF THE PERIOD			$    38,173		$    87,587		$    38,173		$    87,587

SOURCE Reitmans (Canada) Limited

Stephen F. Reitman, President and Chief Executive Officer, Telephone: [phone], Corporate Website: www.reitmanscanadalimited.com