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Reitmans (Canada) Limited announces its results for the 13 and 26 weeks ended August 3, 2019

MONTREAL , Sept. 3, 2019 /CNW Telbec/ - Unless otherwise indicated, the Company's results for the 13 weeks ended August 3, 2019 ("second quarter of 2020") and the results for the 26 weeks ended August 3, 2019 ("year to date fiscal 2020") reflect the impact of the implementation of IFRS 16, as described below under "Adoption of IFRS 16 – Leases".

13 weeks ended August 3, 2019

Sales for the second quarter of 2020 were $232.8 million , as compared with $248.8 million for the 13 weeks ended August 4, 2018 ("second quarter of 2019"). The decrease of $16.0 million is primarily attributable to a net reduction of 45 stores, lower than anticipated sales and unseasonable weather conditions that were prevalent during the early portion of the second quarter of 2020. The Company continues to execute against a plan adapting to the new retail environment by reducing its store presence in select markets while enhancing its e-commerce capabilities. Comparable sales1, which include e-commerce sales, decreased 1.9%. The decrease was primarily due to store traffic being down 3.2% for the second quarter of 2020. The Company continues to experience strong growth through its online channel.

Gross profit for the second quarter of 2020 decreased $14.9 million or 10.8%, to $122.7 million as compared with $137.6 million for the second quarter of 2019, primarily attributable to a net reduction of 45 stores and lower than anticipated sales. Gross profit as a percentage of sales for the second quarter of 2020 decreased to 52.7% from 55.3% for the second quarter of 2019.

Results from operating activities for the second quarter of 2020 were $1.9 million as compared with $10.2 million for the second quarter of 2019, a decrease of $8.3 million . This decrease is primarily attributable to the decrease in gross profit of $14.9 million , partially offset by a reduction in selling, distribution and administrative costs of $6.6 million .

Net loss for the second quarter of 2020 was $0.1 million ( $0.00 basic and diluted loss per share) as compared with $10.0 million net earnings ( $0.16 basic and diluted earnings per share) for the second quarter of 2019. The unfavourable change of $10.1 million included an unfavourable impact of IFRS 16 of $1.0 million . Excluding this $1.0 million impact of IFRS 16, the deterioration in net earnings of $9.1 million is primarily attributable to lower sales, the decrease in gross profit and the increase in net finance costs partially offset by reduced store operating costs and an increase in income tax recovery.

Adjusted EBITDA1 for the second quarter of 2020 was $27.4 million , as compared with $21.4 million for the second quarter of 2019, an increase of $6.0 million . The increase in adjusted EBITDA includes a favourable impact from the adoption of IFRS 16 of $18.1 million . Excluding this $18.1 million impact of IFRS 16, adjusted EBITDA for the second quarter of 2020 was $9.3 million as compared with $21.4 million for the second quarter of 2019, a decrease of $12.1 million . The decrease is primarily attributable to the decrease in gross profit.  

26 weeks ended August 3, 2019

Sales for the year to date fiscal 2020 were $418.0 million , as compared with $456.4 million for the 26 weeks ended August 4, 2018 ("year to date fiscal 2019"). The decrease of $38.4 million is primarily attributable to a net reduction of 45 stores, lower than anticipated sales and unseasonable weather conditions that were prevalent during the earlier portion of year to date fiscal 2020. The Company continues to execute against a plan adapting to the new retail environment by reducing its store presence in select markets while enhancing its e-commerce capabilities. Comparable sales1, which include e-commerce sales, decreased 3.6%. The decrease was primarily due to store traffic being down 4.2% for the year to date fiscal 2020. The Company continues to experience strong growth through its online channel.

Gross profit for the year to date fiscal 2020 decreased $29.4 million or 11.6%, to $224.5 million as compared with $253.9 million for the year to date fiscal 2019. The decrease is primarily attributable to a net reduction of 45 stores and lower than anticipated sales. Gross profit as a percentage of sales for the year to date fiscal 2020 decreased to 53.7% from 55.6% for the year to date fiscal 2019.

Results from operating activities for the year to date fiscal 2020 were a loss of $11.2 million as compared with earnings of $5.9 million for the year to date fiscal 2019, a decrease of $17.1 million . This decrease is primarily attributable to the decrease in gross profit of $29.4 million , partially offset by a reduction in selling, distribution and administrative costs of $12.3 million .

Net loss for the year to date fiscal 2020 was $12.7 million ( $0.20 basic and diluted loss per share) as compared with $6.8 million net earnings ( $0.11 basic and diluted earnings per share) for the year to date fiscal 2019. The unfavourable change of $19.5 million included an unfavourable impact of IFRS 16 of $2.3 million . Excluding this $2.3 million impact of IFRS 16, the deterioration in net earnings of $17.2 million is primarily attributable to lower sales, the decrease in gross profit and the increase in net finance costs partially offset by reduced store operating costs and an increase in income tax recovery.

Adjusted EBITDA1 for the year to date fiscal 2020 was $40.9 million , as compared with $28.3 million for the year to date fiscal 2019, an increase of $12.6 million . The increase in adjusted EBITDA includes a favourable impact of IFRS 16 of $36.3 million . Excluding this $36.3 million impact of IFRS 16, adjusted EBITDA for the year to date fiscal 2020 was $4.6 million as compared with $28.3 million for the year to date fiscal 2019, a decrease of $23.7 million . The decrease is primarily attributable to the decrease in gross profit. 

Adoption of IFRS 16 - Leases

The Company adopted IFRS 16 – Leases, replacing IAS 17 – Leases and related interpretations, using the modified retrospective approach, effective for the annual reporting period beginning on February 3, 2019 . As a result, the Company's results for the second quarter of 2020 and year to date fiscal 2020 reflect lease accounting under IFRS 16. Comparative figures for the second quarter of 2019 and year to date fiscal 2019 have not been restated and continue to be reported under IAS 17, Leases. Refer to Note 3 of the unaudited condensed consolidated interim financial statements for the second quarter of 2020 for additional details on the implementation of IFRS 16.

Dividends

At the Board of Directors meeting held on September 3, 2019 , 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 24, 2019 to shareholders of record on October 10, 2019 .

Sales for the four weeks ended August 31, 2019

Sales for the month of August (the four weeks ended August 31, 2019 ) decreased 7.1%. Comparable sales1 decreased 3.6%.

About Reitmans ( Canada ) Limited

The Company is a leading ladieswear specialty apparel retailer with retail outlets throughout Canada. The Company operates 591 stores consisting of 258 Reitmans, 114 Penningtons, 80 Addition Elle, 81 RW & CO. and 58 Thyme Maternity.

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, realized gains or losses on disposal of marketable securities, interest expense, impairment of goodwill, depreciation, amortization and net impairment charges. 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"), comparable sales, to assess store performance and sales growth. The Company has embarked on an omnichannel approach to engaging with customers. Due to the cross-channel behaviour of consumers, the Company has launched its initiative aimed at appealing to its customers' shopping habits through either online or store channels. This approach allows customers to shop online for home delivery, pickup in-store, purchase in any of our store locations or ship to home from our stores when products are unavailable. Due to customer cross-channel behaviour, the Company reports a single comparable sales metric, inclusive of store and e-commerce channels. Comparable 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. Comparable sales exclude sales from wholesale accounts. The comparable 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 comparable 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. Comparable sales is a measure widely used amongst retailers and is considered useful information for both investors and analysts. Comparable 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) earnings to adjusted EBITDA:

 





For the second quarter of

Year to date fiscal


2020

2020
Excluding
impact of
IFRS 16 (1)

2019

2020

2020

Excluding
impact of
IFRS 16 (1)

2019

Net (loss) earnings

$

(0.1)

$

0.9

$

10.0

$

(12.7)

$

(10.4)

$

6.8

Depreciation, amortization and net impairment losses

25.9

8.5

10.4

52.5

17.0

20.3

Dividend income

(0.6)

(0.6)

(0.6)

(1.3)

(1.3)

(1.3)

Interest income

(0.5)

(0.5)

(0.5)

(0.9)

(0.9)

(0.8)

Net change in fair value of marketable securities

1.8

1.8

(0.7)

3.9

3.9

1.1

Interest expense

2.0

-

-

3.9

-

-

Income tax (recovery) expense

(1.1)

(0.8)

2.8

(4.5)

(3.7)

2.2

Adjusted EBITDA

$

27.4

$

9.3

$

21.4

$

40.9

$

4.6

$

28.3

Adjusted EBITDA as % of Sales

11.8%

4.0%

8.6%

9.8%

1.1%

6.2%

 

1

 Adjusted EBITDA for the second quarter of 2020 and year to date fiscal 2020 excluding impact of IFRS 16 assumes the Company continued to report under IAS 17, Leases and did not adopt IFRS 16. Under IFRS 16, the nature and timing of expenses related to operating leases have changed as the straight-line operating lease expenses have been replaced with a depreciation charge for right-of-use assets and interest expense on lease liabilities. Accordingly, IFRS 16 had a favourable impact of approximately $18.1 million and $36.3 million on adjusted EBITDA for the second quarter of 2020 and for year to date fiscal 2020, respectively, as operating lease expenses have been replaced with depreciation and interest expenses, which are not included in the calculation of adjusted EBITDA.

 

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 second quarter of 2020.

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 2020 are available online at www.sedar.com.

Montreal , September 3, 2019

Jeremy H. Reitman
Chairman and Chief Executive Officer
Telephone: (514) 385-2630
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



August 3, 2019

August 4, 2018

August 3, 2019

August 4, 2018







Sales


$

232,779

$

248,797

$

417,973

$

456,418

Cost of goods sold


110,122

111,160

193,505

202,468

Gross profit


122,657

137,637

224,468

253,950

Selling and distribution expenses


109,376

115,534

213,217

225,480

Administrative expenses


11,382

11,854

22,450

22,532

Results from operating activities


1,899

10,249

(11,199)

5,938







Finance income


1,114

2,578

2,234

4,128

Finance costs


4,147

-

8,203

1,065

(Loss) earnings before income taxes


(1,134)

12,827

(17,168)

9,001







Income tax (recovery) expense


(1,079)

2,800

(4,499)

2,182







Net (loss) earnings


$

(55)

$

10,027

$

(12,669)

$

6,819







(Loss) earnings per share :






        Basic


$

(0.00)

$

0.16

$

(0.20)

$

0.11

        Diluted


(0.00)

0.16

(0.20)

0.11

 

REITMANS (CANADA) LIMITED

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands of Canadian dollars)







For the 13 weeks ended

For the 26 weeks ended



August 3, 2019

August 4, 2018

August 3, 2019

August 4, 2018







Net (loss) earnings


$

(55)

$

10,027

$

(12,669)

$

6,819

Other comprehensive (loss) income






        Items that are or may be reclassified subsequently to net earnings:






Cash flow hedges (net of tax of $726 for the
13 weeks and $16 for the 26 weeks ended
August 3, 2019; net of tax of $189 for the
13 weeks and $2,731 for the 26 weeks
ended August 4, 2018)


(1,981)

516

42

7,441

Foreign currency translation differences


49

(43)

(48)

(230)







Total other comprehensive (loss) income


(1,932)

473

(6)

7,211







Total comprehensive (loss) income


$

(1,987)

$

10,500

$

(12,675)

$

14,030

 

REITMANS (CANADA) LIMITED

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(Unaudited)

(in thousands of Canadian dollars)








August 3, 2019

August 4, 2018

February 2, 2019

ASSETS





CURRENT ASSETS





        Cash and cash equivalents


$

49,562

$

115,201

$

112,518

        Marketable securities


45,834

60,960

49,690

        Trade and other receivables


6,759

6,346

7,897

        Derivative financial asset


423

4,871

1,900

        Income taxes recoverable


294

-

-

        Inventories


165,510

143,144

146,809

        Prepaid expenses


16,277

20,519

19,771

               Total Current Assets


284,659

351,041

338,585






NON-CURRENT ASSETS





        Property and equipment


91,599

100,867

95,921

        Intangible assets


20,439

19,241

21,639

        Right-of-use assets


203,262

-

-

        Goodwill


11,843

11,843

11,843

        Deferred income taxes


28,219

24,872

24,829

               Total Non-Current Assets


355,362

156,823

154,232






TOTAL ASSETS


$

640,021

$

507,864

$

492,817






LIABILITIES AND SHAREHOLDERS' EQUITY





CURRENT LIABILITIES





        Trade and other payables


$

114,858

$

106,629

$

98,842

        Derivative financial liability


739

-

966

        Deferred revenue


12,695

15,876

15,209

        Income taxes payable


-

1,824

4,201

        Current portion of lease liabilities


63,539

-

-

               Total Current Liabilities


191,831

124,329

119,218






NON-CURRENT LIABILITIES





        Trade and other payables


377

7,117

5,170

        Deferred lease credits


-

7,209

7,789

        Lease liabilities


148,949

-

-

        Pension liability


21,191

19,488

21,043

               Total Non-Current Liabilities


170,517

33,814

34,002






SHAREHOLDERS' EQUITY





        Share capital


27,406

38,397

38,397

        Contributed surplus


10,274

10,157

10,245

        Retained earnings


241,283

299,537

292,239

        Accumulated other comprehensive (loss) income


(1,290)

1,630

(1,284)

               Total Shareholders' Equity


277,673

349,721

339,597






TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY


$

640,021

$

507,864

$

492,817

 

REITMANS (CANADA) LIMITED

CONDENSED CONSOLIDATED INTERIM 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 February 3, 2019


$

38,397

$

10,245

$

292,239

$

(1,284)

$

339,597

IFRS 16 adoption adjustment (net of tax)


-

-

767

-

767

Restated balance as at February 3, 2019


38,397

10,245

293,006

(1,284)

340,364








Net loss


-

-

(12,669)

-

(12,669)

Total other comprehensive loss


-

-

-

(6)

(6)

Total comprehensive loss for the period


-

-

(12,669)

(6)

(12,675)








Share-based compensation costs


-

29

-

-

29

Dividends


-

-

(6,334)

-

(6,334)

Purchase of Class A non-voting shares
pursuant to substantial issuer bid


(10,991)

-

-

-

(10,991)

Excess of purchase price of Class A non-voting
shares over carrying amount


-

-

(32,720)

-

(32,720)

Total (distributions to) contributions by
owners of the Company


(10,991)

29

(39,054)

-

(50,016)








Balance as at August 3, 2019


$

27,406

$

10,274

$

241,283

$

(1,290)

$

277,673






















Balance as at February 4, 2018


$

38,397

$

10,119

$

297,895

$

(5,581)

$

340,830

IFRS 15 adoption adjustment (net of tax)


-

-

1,157

-

1,157

Restated balance as at February 4, 2018


38,397

10,119

299,052

(5,581)

341,987








Net earnings


-

-

6,819

-

6,819

Total other comprehensive income


-

-

-

7,211

7,211

Total comprehensive income for the period


-

-

6,819

7,211

14,030








Share-based compensation costs


-

38

-

-

38

Dividends


-

-

(6,334)

-

(6,334)

Total contributions by (distributions to)
owners of the Company


-

38

(6,334)

-

(6,296)








Balance as at August 4, 2018


$

38,397

$

10,157

$

299,537

$

1,630

$

349,721

 

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



August 3, 2019

August 4, 2018

August 3, 2019

August 4, 2018

CASH FLOWS FROM OPERATING ACTIVITIES






Net (loss) earnings


$

(55)

$

10,027

$

(12,669)

$

6,819

Adjustments for:






Depreciation, amortization and net impairment losses


25,864

10,470

52,475

20,339

Share-based compensation costs


(69)

131

67

175

Net change in fair value of marketable securities


1,792

(740)

3,855

1,065

Net change in transfer of realized loss (gain) on cash flow
hedges to inventory


1,307

(2,962)

1,307

(4,407)

Foreign exchange (gain) loss


(1,127)

485

(4,095)

1,675

Interest on lease liabilities


1,943

-

3,864

-

Interest and dividend income, net


(1,114)

(1,118)

(2,234)

(2,104)

Income tax (recovery) expense


(1,079)

2,800

(4,499)

2,182



27,462

19,093

38,071

25,744

Changes in:






Trade and other receivables


2,345

2,347

1,587

(1,429)

Inventories


(6,180)

4,245

(18,701)

(6,039)

Prepaid expenses


(1,157)

(472)

(2,699)

(1,332)

Trade and other payables


25,416

2,856

18,387

11,806

Pension liability


26

135

147

252

Deferred lease credits


-

735

-

759

Deferred revenue


(1,104)

(224)

(2,514)

(4,118)

Cash from operating activities


46,808

28,715

34,278

25,643

Interest received


418

453

1,066

813

Dividends received


648

628

1,294

1,254

Income taxes received


-

76

12

2,306

Income taxes paid


(2,268)

(1)

(3,697)

(4)

Net cash flows from operating activities


45,606

29,871

32,953

30,012







CASH FLOWS USED IN INVESTING ACTIVITIES






Additions to property and equipment and intangible assets, net


(5,970)

(6,539)

(12,141)

(11,227)

Cash flows used in investing activities


(5,970)

(6,539)

(12,141)

(11,227)







CASH FLOWS USED IN FINANCING ACTIVITIES






Dividends paid


(3,167)

(3,167)

(6,334)

(6,334)

Payment of lease liabilities


(19,028)

-

(37,773)

-

Purchases of Class A non-voting shares pursuant to substantial issuer bid


(43,711)

-

(43,711)

-

Cash flows used in financing activities


(65,906)

(3,167)

(87,818)

(6,334)







FOREIGN EXCHANGE GAIN (LOSS) ON CASH HELD IN
FOREIGN CURRENCY


1,179

(530)

4,050

(1,906)







NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS


(25,091)

19,635

(62,956)

10,545







CASH AND CASH EQUIVALENTS, BEGINNING OF THE
PERIOD


74,653

95,566

112,518

104,656







CASH AND CASH EQUIVALENTS, END OF THE PERIOD


$

49,562

$

115,201

$

49,562

$

115,201

 

SOURCE Reitmans ( Canada ) Limited


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