Reitmans (Canada) Limited Announces Year-End Results

MONTREAL, April 4, 2018 /CNW Telbec/ -

Year ended February 3, 2018

The fiscal year ended February 3, 2018 ("fiscal 2018") includes 53 weeks instead of the normal 52 weeks. The inclusion of an extra week occurs every fifth or sixth fiscal year due to the Company's floating year-end.

Sales for fiscal 2018 were $964.0 million, an increase of $12.0 million or 1.3% over the year ended January 28, 2017 ("fiscal 2017"), including an additional week of sales of $13.3 million.  The Company had a net reduction of 35 stores as it continued to close underperforming stores to optimize performance in select markets.  Same store sales¹ increased 2.9% with stores sales decreasing 0.7% and e-commerce sales increasing 38.2% as the Company continues to experience strong growth in its e-commerce channel.

Gross profit for fiscal 2018 increased $1.5 million or 0.3% to $523.9 million as compared with $522.4 million for fiscal 2017. Gross margin decreased to 54.3% for fiscal 2018 as compared to 54.9% for fiscal 2017.  The improvement in gross profit was primarily due to the impact of inclusion of a 53rd week of $4.4 million, increased wholesale contribution and lower inventory reserves due to improved inventory management, partially offset by an adverse foreign exchange impact of approximately $10.0 million on U.S. denominated purchases included in cost of goods sold and increased promotional activity.  The Company continues its focus on distribution and sourcing opportunities to mitigate any negative impact of foreign exchange through improved vendor alliances while leveraging design and sourcing costs amongst the Company's banners.

Results from operating activities for fiscal 2018 was a loss of $27.6 million as compared to a profit of $1.0 million for fiscal 2017, a decrease of $28.6 million which includes a goodwill impairment charge of $26.3 million and $4.8 million of expenses associated with the previously announced decision to close Hyba stand-alone stores. Results from operating activities, excluding the impairment of goodwill and expenses associated with the Hyba store closures for fiscal 2018, were $3.5 million as compared to $1.0 million for fiscal 2017.

Net loss for fiscal 2018 was $16.3 million ($0.26 basic and diluted loss per share) as compared with $10.9 million net earnings ($0.17 basic and diluted earnings per share) for fiscal 2017. The change is mainly attributable to a non-tax deductible goodwill impairment expense of $26.3 million and $3.5 million of expenses, after tax, associated with the decision to close Hyba stores.

Excluding the impact of the impairment of goodwill, net earnings for fiscal 2018 were $10.0 million ($0.16 basic and diluted earnings per share) as compared with $10.9 million net earnings ($0.17 basic and diluted earnings per share) for fiscal 2017.

Adjusted EBITDA¹ for fiscal 2018 was $43.3 million as compared with $42.7 million for fiscal 2017, an increase of $0.6 million.

Three months ended February 3, 2018

Sales for the fourth quarter of fiscal 2018 were $263.4 million as compared with $248.4 million for the fourth quarter of fiscal 2017, an increase of 6.0%, including an additional week of sales of $13.3 million.  The Company had a net reduction of 35 stores as it continued to close underperforming stores to optimize performance in select markets.  Same store sales¹ increased 3.2% with store sales decreasing 1.1% and e-commerce sales increasing 34.3% as the Company continues to experience strong growth in its e-commerce channel.

Gross profit for the fourth quarter of fiscal 2018 increased $10.3 million or 8.2% to $136.1 million as compared with $125.8 million for the fourth quarter of fiscal 2017.  Gross margin was 51.7% for the fourth quarter of fiscal 2018 as compared to 50.6% for the fourth quarter of fiscal 2017.  The improvement in gross profit was primarily a result of the impact of inclusion of a 14th week (instead of the normal 13 weeks) of $4.4 million along with a positive foreign exchange impact of approximately $3.2 million on U.S. dollar denominated purchases included in cost of goods sold for the fourth quarter of fiscal 2018.  The Company continues its focus on distribution and sourcing opportunities to mitigate any negative impact of foreign exchange through improved vendor alliances while leveraging design and sourcing costs amongst the Company's banners.

Results from operating activities for the fourth quarter of fiscal 2018 was a loss of $7.1 million as compared with a loss of $5.5 million for the fourth quarter of fiscal 2017.  This increased loss is primarily attributable to recognition of $4.8 million of expenses associated with the previously announced decision to close Hyba stand-alone stores by the end of the year ended February 2, 2019. 

Net loss for the fourth quarter of fiscal 2018 was $2.6 million ($0.04 basic and diluted loss per share) as compared with $0.3 million net earnings ($0.00 basic and diluted earnings per share) for the fourth quarter of fiscal 2017. This $2.9 million reduction is due mainly to $3.5 million of expenses, after tax, associated with the decision to close Hyba stores.

Adjusted EBITDA¹ for the fourth quarter of fiscal 2018 was $4.6 million as compared with $5.5 million for the fourth quarter of fiscal 2017, a decrease of $0.9 million.

Dividends

At the Board of Directors meeting held on April 4, 2018, 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 April 26, 2018 to shareholders of record on April 16, 2018.

About Reitmans (Canada) Limited

The Company is a leading ladieswear specialty apparel retailer with retail outlets throughout Canada. The Company operates 642 stores consisting of 270 Reitmans, 122 Penningtons, 90 Addition Elle, 80 RW & CO., 63 Thyme Maternity and 17 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 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.  Same store sales for fiscal 2018 exclude sales attributable to the 53rd week. Same store sales for the fourth quarter of fiscal 2018 exclude sales attributable to the 14th week. 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 for the three and twelve months ended February 3, 2018 and January 28, 2017:

 

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 fiscal 2018.

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 fiscal 2018 are available online at www.sedar.com.

Montreal, April 4, 2018

Jeremy H. Reitman
Chairman and Chief Executive Officer
Telephone: (514) 385-2630
Corporate Website: www.reitmanscanadalimited.com

 

 

 

 

 

 

SOURCE Reitmans (Canada) Limited