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

·20 min read

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, Leases1


(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:                 (514) 384-1140
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

Cision
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