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Reitmans (Canada) Limited announces its results for the three and nine months ended October 28, 2017

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MONTREAL, Nov. 30, 2017 /CNW Telbec/ -

Three months ended October 28, 2017

Sales for the three months ended October 28, 2017 were $242.4 million as compared with $245.6 million for the three months ended October 29, 2016, a decrease of 1.3%, with a net reduction of 42 stores.  Same store sales1 increased 0.8%, with store sales decreasing 1.9% and e-commerce sales increasing 29.7%.  This marks the fourteenth consecutive quarter of positive same store sales.

Gross profit for the three months ended October 28, 2017 decreased by $4.0 million or 2.9% to $135.9 million as compared with $139.9 million for the three months ended October 29, 2016.  Gross margin was 56.1% for the three months ended October 28, 2017 as compared to 57.0% for the three months ended October 29, 2016 impacted by higher promotional activity as unseasonably warm fall weather contributed to lower customer traffic.  This was partially offset by a positive foreign exchange impact of approximately $2.1 million on U.S. dollar denominated purchases for the three months ended October 28, 2017 and continued focus on cost efficiencies realized from global sourcing activities.

Results from operating activities for the three months ended October 28, 2017 were $(19.0) million as compared to $6.5 million for the three months ended October 29, 2016, a decrease of $25.5 million. As a result of weakness in recent operating performance at Addition Elle, an impairment test was performed as at October 28, 2017. Results from operating activities for the three months ended October 28, 2017 include a non-cash goodwill impairment charge of $26.3 million related to the Addition Elle banner. Changes have been made to the leadership team and the Company is optimistic that it has a strong team in place to drive growth and execute on its strategy. The Company continues to believe that Addition Elle is a premium brand with excellent digital capabilities, a strong online presence with the plus-size consumer, highly recognizable celebrity collaborations and strategies in place with the potential to generate long-term profitable growth for the Company.  Results from operating activities excluding the impairment of goodwill for the three months ended October 28, 2017 were $7.3 million as compared to $6.5 million for the three months ended October 29, 2016, an increase of $0.8 million.

Net loss for the three months ended October 28, 2017 was $16.8 million ($0.27 basic and diluted loss per share) as compared with net earnings of $7.6 million ($0.12 basic and diluted earnings per share) for the three months ended October 29, 2016.  Excluding the impairment of goodwill, net earnings increased 25.0% to $9.5 million ($0.15 basic and diluted earnings per share) for the three months ended October 28, 2017 as compared with net earnings of $7.6 million ($0.12 basic and diluted earnings per share) for the three months ended October 29, 2016, an increase of $1.9 million.

Adjusted EBITDA1 for the three months ended October 28, 2017 was $18.9 million, comparable with $18.4 million for the three months ended October 29, 2016.

Nine months ended October 28, 2017

Sales for the nine months ended October 28, 2017 were $700.6 million as compared with $703.5 million for the nine months ended October 29, 2016, a decrease of 0.4%, with a net reduction of 42 stores.  Same store sales1 increased 2.7%, with store sales decreasing 0.5% and e-commerce sales increasing 40.4%.

Gross profit for the nine months ended October 28, 2017 decreased by $8.8 million or 2.2% to $387.8 million as compared with $396.6 million for the nine months ended October 29, 2016.  Gross margin was 55.4% for the nine months ended October 28, 2017 as compared to 56.4% for the nine months ended October 29, 2016 driven primarily by the adverse foreign exchange impact of approximately $9.2 million on U.S. dollar denominated purchases.  The Company continues to drive cost efficiencies through its global sourcing activities thereby helping to mitigate the negative impact of foreign exchange.

Results from operating activities for the nine months ended October 28, 2017 were $(20.5) million as compared to $6.5 million for the nine months ended October 29, 2016, a decrease of $27.0 million due to an impairment of goodwill charge of $26.3 million.  Results from operating activities excluding the impairment of goodwill for the nine months ended October 28, 2017 were $5.8 million as compared to $6.5 million for the nine months ended October 29, 2016, a decrease of $0.7 million.

Net loss was $13.7 million for the nine months ended October 28, 2017 ($0.22 basic and diluted loss per share) as compared with net earnings of $10.6 million ($0.17 basic and diluted earnings per share) for the nine months ended October 29, 2016.  Excluding the impairment of goodwill, net earnings increased 18.9% to $12.6 million ($0.20 basic and diluted earnings per share) for the nine months ended October 28, 2017 as compared with net earnings of $10.6 million ($0.17 basic and diluted earnings per share) for the nine months ended October 29, 2016, an increase of $2.0 million.

Adjusted EBITDA1 for the nine months ended October 28, 2017 was $38.7 million comparable with $37.2 million for the nine months ended October 29, 2016.

Dividends

At the Board of Directors meeting held on November 30, 2017, 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 January 25, 2018 to shareholders of record on January 15, 2018.

Sales for the four weeks ending November 25, 2017

Sales for the month of November (the four weeks ended November 25, 2017) increased 0.7%. Same store sales1 increased 2.8% with stores decreasing 0.8% and e-commerce sales increasing 31.4%.

About Reitmans (Canada) Limited

The Company is a leading ladieswear specialty apparel retailer with retail outlets throughout Canada.  The Company operates 652 stores consisting of 276 Reitmans, 122 Penningtons, 93 Addition Elle, 84 RW & CO., 61 Thyme Maternity and 16 Hyba.

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, 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 impairment of goodwill, 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 considers results from operating activities a useful measure of the Company's performance from its retail operations.  The Company has also determined that a useful measure would be results from operating activities before impairment of goodwill excluding the impact of impairment of goodwill which is a non-cash item.  Additionally, earnings per share excluding impairment of goodwill both on a basic and diluted basis have been presented which removes the impact of impairment of goodwill on net earnings used for calculation purposes.  Both of these supplementary measures are considered useful information and should not be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS. 

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 are defined as sales generated by stores that have been continuously open during both of the periods being compared and include e-commerce sales.  Same store sales exclude sales from wholesale accounts.  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 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.  Same store sales is a measure widely used amongst retailers and is considered useful information for both investors and analysts.  Same store 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:




(in millions of Canadian dollars)

(unaudited)

For the three months ended

For the nine months ended


October 28, 2017

October 29, 2016

October 28, 2017

October 29, 2016

Net (loss) earnings

$

(16.8)

$

7.6

$

(13.7)

$

10.6

Depreciation, amortization and net impairment losses

10.6

11.2

32.3

32.3

Dividend income

(0.6)

(0.6)

(1.8)

(1.9)

Interest income

(0.3)

(0.2)

(0.7)

(0.5)

Impairment of goodwill

26.3

-

26.3

-

Net change in fair value of marketable securities

(2.1)

(0.5)

(5.3)

(4.1)

Interest expense

-

-

-

0.1

Income tax expense

1.8

0.9

1.6

0.7

ADJUSTED EBITDA

$

18.9

$

18.4

$

38.7

$

37.2

ADJUSTED EBITDA as % of Sales

7.8%

7.5%

5.5%

5.3%

 

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 three and nine months ended October 28, 2017.

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 three and nine months ended October 28, 2017 are available online at www.sedar.com.

Montreal, November 30, 2017

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 three months ended

For the nine months ended



October 28, 2017

October 29, 2016

October 28, 2017

October 29, 2016







Sales


$

242,373

$

245,604

$

700,601

$

703,538

Cost of goods sold


106,468

105,687

312,800

306,977

Gross profit


135,905

139,917

387,801

396,561

Selling and distribution expenses


118,767

122,164

350,778

357,627

Administrative expenses


9,806

11,229

31,180

32,434

Impairment of goodwill


26,340

-

26,340

-

Results from operating activities


(19,008)

6,524

(20,497)

6,500







Finance income


4,026

2,033

8,423

6,474

Finance costs


8

39

47

1,679

(Loss) earnings before income taxes


(14,990)

8,518

(12,121)

11,295







Income tax expense


1,846

903

1,610

691







Net (loss) earnings


$

(16,836)

$

7,615

$

(13,731)

$

10,604







(Loss) earnings per share :







Basic


$

(0.27)

$

0.12

$

(0.22)

$

0.17


Diluted


(0.27)

0.12

(0.22)

0.17

 

REITMANS (CANADA) LIMITED

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands of Canadian dollars)





For the three months ended

For the nine months ended



October 28, 2017

October 29, 2016

October 28, 2017

October 29, 2016







Net (loss) earnings


$

(16,836)

$

7,615

$

(13,731)

$

10,604

Other comprehensive income (loss)







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








Cash flow hedges (net of tax of $2,725 for the three months and $535 for the nine months ended October 28, 2017; $2,599 for the three months and $2,340 for the nine months ended October 29, 2016)


7,524

7,103

(1,480)

(6,397)



Foreign currency translation differences


(159)

(146)

71

113







Total other comprehensive income (loss)


7,365

6,957

(1,409)

(6,284)







Total comprehensive (loss) income


$

(9,471)

$

14,572

$

(15,140)

$

4,320

 

REITMANS (CANADA) LIMITED

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(Unaudited)

(in thousands of Canadian dollars)





October 28, 2017

October 29, 2016

January 28, 2017

ASSETS





CURRENT ASSETS






Cash and cash equivalents


$  119,055

$  101,794

$  120,265


Marketable securities


60,040

49,270

54,764


Trade and other receivables


7,044

6,048

4,256


Derivative financial asset


1,638

3,267

1,386


Income taxes recoverable


1,307

868

3,480


Inventories


146,654

167,672

146,059


Prepaid expenses


7,938

7,433

6,846



Total Current Assets


343,676

336,352

337,056






NON-CURRENT ASSETS






Property and equipment


113,219

126,602

124,106


Intangible assets


19,285

23,363

23,110


Goodwill


11,843

38,183

38,183


Deferred income taxes


26,335

27,859

25,891



Total Non-Current Assets


170,682

216,007

211,290






TOTAL ASSETS


$  514,358

$  552,359

$  548,346






LIABILITIES AND SHAREHOLDERS' EQUITY





CURRENT LIABILITIES






Trade and other payables


$  113,757

$  120,847

$  114,254


Derivative financial liability


5,521

3,678

3,160


Deferred revenue


13,892

12,705

21,478


Current portion of long-term debt


153

1,988

1,655



Total Current Liabilities


133,323

139,218

140,547






NON-CURRENT LIABILITIES






Other payables


6,024

7,380

7,186


Deferred lease credits


6,424

9,053

8,230


Long-term debt


-

153

-


Pension liability


19,322

20,005

18,869



Total Non-Current Liabilities


31,770

36,591

34,285






SHAREHOLDERS' EQUITY






Share capital


38,397

38,397

38,397


Contributed surplus


10,161

9,570

9,769


Retained earnings


303,443

328,473

326,675


Accumulated other comprehensive (loss) income


(2,736)

110

(1,327)



Total Shareholders' Equity


349,265

376,550

373,514






TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY


$  514,358

$  552,359

$  548,346


 

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
(Loss) Income

Total
Shareholders'
Equity















Balance as at January 29, 2017


$     38,397

$     9,769

$  326,675

$    (1,327)

$   373,514








Net loss


-

-

(13,731)

-

(13,731)

Total other comprehensive loss


-

-

-

(1,409)

(1,409)

Total comprehensive loss for the period


-

-

(13,731)

(1,409)

(15,140)








Share-based compensation costs


-

392

-

-

392

Dividends


-

-

(9,501)

-

(9,501)

Total contributions by (distributions to) owners of the Company


-

392

(9,501)

-

(9,109)








Balance as at October 28, 2017


$     38,397

$   10,161

$  303,443

$    (2,736)

$   349,265






















Balance as at January 31, 2016


$     38,397

$     9,007

$  327,370

$     6,394

$   381,168








Net earnings


-

-

10,604

-

10,604

Total other comprehensive loss


-

-

-

(6,284)

(6,284)

Total comprehensive income (loss) for the period


-

-

10,604

(6,284)

4,320








Share-based compensation costs


-

563

-

-

563

Dividends


-

-

(9,501)

-

(9,501)

Total contributions by (distributions to) owners of the Company


-

563

(9,501)

-

(8,938)








Balance as at October 29, 2016


$     38,397

$     9,570

$  328,473

$         110

$   376,550

 

REITMANS (CANADA) LIMITED

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands of Canadian dollars)





For the three months ended

For the nine months ended



October 28, 2017

October 29, 2016

October 28, 2017

October 29, 2016

CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES







Net (loss) earnings


$  (16,836)

$     7,615

$  (13,731)

$   10,604


Adjustments for:








Depreciation, amortization and net impairment losses


10,596

11,235

32,311

32,302



Impairment of goodwill


26,340

-

26,340

-



Share-based compensation costs


(643)

430

(123)

908



Net change in fair value of marketable securities


(2,089)

(498)

(5,276)

(4,081)



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


(282)

1,773

94

4,263



Foreign exchange loss (gain)


2,151

(263)

1,859

(79)



Interest and dividend income, net


(953)

(774)

(2,523)

(2,254)



Income tax expense


1,846

903

1,610

691



20,130

20,421

40,561

42,354








Changes in:








Trade and other receivables


(1,727)

(722)

(2,785)

(1,909)



Inventories


619

(20,513)

(595)

(42,824)



Prepaid expenses


1,411

1,214

(1,092)

1,488



Trade and other payables


(714)

944

(3,147)

22,904



Pension liability


140

108

453

669



Deferred lease credits


(550)

(183)

(1,806)

(1,587)



Deferred revenue


(3,928)

(4,523)

(7,586)

(6,620)


Cash from operating activities


15,381

(3,254)

24,003

14,475


Interest paid


(8)

(39)

(47)

(139)


Interest received


317

215

749

532


Dividends received


611

633

1,818

1,825


Income taxes received


114

2,119

662

2,489


Income taxes paid


-

(7)

(7)

(438)


Net cash flows from operating activities


16,415

(333)

27,178

18,744







CASH FLOWS USED IN INVESTING ACTIVITIES







Additions to property and equipment and intangible assets


(6,816)

(8,885)

(15,596)

(25,244)


Proceeds on disposal of property and equipment and intangibles


-

-

-

416


Cash flows used in investing activities


(6,816)

(8,885)

(15,596)

(24,828)







CASH FLOWS USED IN FINANCING ACTIVITIES







Dividends paid


(3,167)

(3,167)

(9,501)

(9,501)


Repayment of long-term debt


(508)

(477)

(1,502)

(1,410)


Cash flows used in financing activities


(3,675)

(3,644)

(11,003)

(10,911)







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


(2,310)

118

(1,789)

194







NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


3,614

(12,744)

(1,210)

(16,801)







CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD


115,441

114,538

120,265

118,595







CASH AND CASH EQUIVALENTS, END OF THE PERIOD


$ 119,055

$ 101,794

$ 119,055

$ 101,794

 

SOURCE Reitmans (Canada) Limited

View original content: http://www.newswire.ca/en/releases/archive/November2017/30/c8975.html

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