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

CNW Group

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:  (514) 385-2630
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

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.
Contact:

Jeremy H. Reitman
Chairman and Chief Executive Officer

Telephone:  (514) 385-2630
Corporate Website: www.reitmans.ca

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