Reitmans (Canada) Limited ("RCL") announces its results for the 13 weeks ended April 29, 2023

Jun 14, 2023
4:15pm

First Quarter Highlights

Net sales increased by $11.1 million, or 7.2%, to $165.0 million
Gross margin increased by $4.1 million from $84.0 million to $ 88.1 million
Adjusted ROA¹ decreased by $2.6 million
Adjusted EBITDA¹ decreased by $4.3 million
Subsequent to quarter end, Andrea Limbardi appointed as President & CEO effective September 2023

MONTREAL, June 14, 2023 /CNW/ - Reitmans (Canada) Limited ("RCL" or the "Company") (TSXV: RET), Canada's leading specialty apparel retailer, is pleased to announce its results for the first quarter of fiscal 2024. Unless otherwise indicated, all comparisons of results for the 13 weeks ended April 29, 2023 ("first quarter of 2024") are against results for the 13 weeks ended April 30, 2022 ("first quarter of 2023").

"I am very pleased with the start to fiscal 2024, against a background of higher interest rates and inflation impacting customers' shopping behaviours, and the foreign exchange impact on RCL's U.S. dollar-denominated purchases," said Stephen F. Reitman, President and Chief Executive Officer of RCL. "With supply chain conditions considerably improved in comparison to the first quarter of 2023, we benefitted from lower supply chain costs in the first quarter of 2024. We believe our ability to provide customers fashion merchandise at affordable prices through shopping in our stores or online, where orders are fulfilled from our network of stores or from our distribution centre, is an important contributor to our success."

"We would also like to welcome Andrea Limbardi, who will become the President and CEO of RCL," Mr. Reitman added. "We are confident that Andrea's deep experience in the retail industry and expertise at applying digital strategies will positively contribute in delivering on our long-term growth aspirations".

Select Financial Information

(in millions of dollars, except for gross profit %)	First Quarter of
	2024	2023	Change
Net Sales	165.0	153.9	7.2 %
Gross Profit	88.1	84.0	4.9 %
Gross Profit %	53.4 %	54.6 %	-120 bps
Selling, distribution and administrative expenses	91.7	84.4²	8.6 %
Net Loss	(3.8)	(1.7)	n/a
Adjusted EBITDA¹	(1.2)	3.1	n/a
Adjusted ROA¹	(3.6)	(1.0)	n/a

¹This is a Non-GAAP Financial Measure. See "Non-GAAP Financial Measures & Supplementary Financial Measures" for reconciliations of these measures.

²Includes $0.6 million of restructuring costs for the first quarter of 2023.

13 weeks ended April 29, 2023

Net sales for the first quarter of 2024 increased by $11.1 million, or 7.2%, to $165.0 million. The increase was primarily due to the growth in comparable sales, mainly driven by increased in-store traffic and improved sales dollars per unit. Comparable sales¹, which includes e-commerce net sales, increased 6.4% during the first quarter of 2024.

Gross profit for the first quarter of 2024 increased by $4.1 million to $88.1 million as compared with $84.0 million for the first quarter of 2023. The increase in gross profit is primarily attributable to the increase in net sales during the first quarter of 2024. Gross profit as a percentage of net sales for the first quarter of 2024 decreased to 53.4% from 54.6% for the first quarter of 2023, primarily attributable to higher promotional activity combined with an unfavourable foreign exchange impact on U.S. dollar-denominated purchases included in cost of goods sold, partially offset by lower supply chain costs.

Net loss for the first quarter of 2024 was $3.8 million ($0.08 basic and diluted loss per share) as compared with a net loss of $1.7 million ($0.04 basic and diluted loss per share) for the first quarter of 2023. The increase in the net loss of $2.1 million is primarily attributable to an increase in store and corporate personnel costs, higher rent as a result of previous preferential lease arrangements being renewed at closer to market lease rates, partially offset by an increase in gross profits and an increase in the income tax recovery.

Adjusted results from operating activities ("Adjusted ROA") for the first quarter of 2024 was ($3.6) million as compared with ($1.0) million for the first quarter of 2023. The decrease of $2.6 million in Adjusted ROA is primarily attributable to an increase in operating costs, partially offset by the increase in gross profit.

Adjusted EBITDA for the first quarter of 2024 was $(1.2) million as compared to $3.1 million for the first quarter of 2023. The decrease of $4.3 million is primarily attributable to an increase in operating costs, partially offset by the increase in gross profits.

About Reitmans (Canada) Limited

The Company is a leading women's specialty apparel retailer with retail outlets throughout Canada. As at April 29, 2023, the Company operated 406 stores consisting of 235 Reitmans, 91 Penningtons and 80 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 the following non-GAAP financial measures: adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), and adjusted results from operating activities ("Adjusted ROA"). This press announcement also indicates Adjusted EBITDA as a percentage of net sales and is considered a non-GAAP financial ratio. Net sales represent the sale of merchandise less discounts and returns. The intent of presenting Adjusted EBITDA and Adjusted ROA is to provide additional useful information to investors and analysts. Adjusted EBITDA is defined as net earnings before income tax expense/recovery, interest income, interest expense, loss on foreign currency translation differences reclassified to net earnings, depreciation, amortization, net 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 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 this metric for this purpose. Management believes that Adjusted EBITDA as a percentage of net sales indicates how much liquidity is generated for each dollar of net 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 net 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 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, 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. 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-IFRS Measures

The tables below provide a reconciliation of net loss to Adjusted EBITDA and results from operating activities to Adjusted ROA:

(in millions of dollars, except %)	For the first quarter of
	2024	2023
Net loss	$ (3.8)	$ (1.7)
Depreciation, amortization and net impairment losses on property and equipment, and intangible assets	3.6	5.1
Depreciation on right-of-use assets	7.8	5.8
Interest income	(0.9)	-
Interest expense on lease liabilities	1.6	1.0
Interest expense on revolving credit facility	-	0.3
Loss on foreign currency translation differences reclassified to net earnings	1.0	-
Income tax recovery	(1.1)	-
Rent impact from IFRS 16, Leases¹	(9.4)	(6.8)
Federal subsidies	-	(1.2)
Restructuring costs	-	0.6
Adjusted EBITDA²	$ (1.2)	$ 3.1
Adjusted EBITDA as % of Net sales	(0.7) %	2.0 %

¹Rent Impact from IFRS 16, Leases is comprised as follows;

(in millions of dollars)	For the first quarter of
	2024	2023
Depreciation on right-of use assets	$ 7.8	$ 5.8
Interest expense on lease liabilities	1.6	1.0
Rent impact from IFRS 16, Leases	$ 9.4	$ 6.8

²As a result of the current definition of Adjusted EBITDA, the comparative figure has been restated to include the rent impact from IFRS 16, Leases of $6.8 million for the first quarter of 2023. Management believes that the current definition of Adjusted EBITDA better reflects the operational cash flow of the Company.

(in millions of dollars)	For the first quarter of
	2024	2023
Results from operating activities	$ (3.6)	$ (0.4)
Federal subsidies	-	(1.2)
Restructuring costs	-	0.6
Adjusted ROA	$ (3.6)	$ (1.0)

Supplementary Financial Measures

The Company uses a key performance indicator ("KPI"), comparable sales, to assess store performance and sales growth. The Company engages in an omnichannel approach in connecting with its customers by appealing to their shopping habits through either online or store channels. This approach allows customers to shop online for home delivery or to pick up in store, purchase in any of our store locations or ship to home from another store when the products are unavailable in a particular store. Due to customer cross-channel behavior, the Company reports a single comparable sales metric, inclusive of store and e-commerce channels. Comparable sales are defined as net sales generated by stores that have been continuously open during both of the periods being compared and include e-commerce net sales. The comparable sales metric compares the same calendar days for each period. Although this KPI is expressed as a ratio, it is a supplementary 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 net sales and considers it useful in helping to determine what portion of new net 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.

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 on the Company's 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 first quarter of 2024.

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 first quarter of 2024 are available online at www.sedar.com.

Montreal, June 14, 2023

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 LOSS (Unaudited) (in thousands of Canadian dollars except per share amounts)
	For the 13 weeks ended
	April 29, 2023	April 30, 2022

Net sales	$ 165,018	$ 153,859
Cost of goods sold	76,917	69,896
Gross profit	88,101	83,963
Selling and distribution expenses	80,269	73,257
Administrative expenses	11,408	10,482
Restructuring	-	620
Results from operating activities	(3,576)	(396)

Finance income	1,292	80
Finance costs	(2,630)	(1,361)
Loss before income taxes	(4,914)	(1,677)

Income tax recovery (expense)	1,074	(40)

Net loss	$ (3,840)	$ (1,717)

Loss per share:
Basic	$ (0.08)	$ (0.04)
Diluted	(0.08)	(0.04)

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (in thousands of Canadian dollars)
	For the 13 weeks ended
	April 29, 2023	April 30, 2022

Net loss	$ (3,840)	$ (1,717)
Other comprehensive income (loss)
Items that are or may be reclassified subsequently to net earnings:
Loss on foreign currency translation differences reclassified to net earnings	1,044	-
Foreign currency translation differences	-	(7)

Items that will not be reclassified to net earnings:
Actuarial gain on defined benefit plan (net of tax of $346 for the 13 weeks ended April 29, 2023; nil for the 13 weeks ended April 30, 2022)	958	911

Total other comprehensive income	2,002	904

Total comprehensive loss	$ (1,838)	$ (813)

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (Unaudited) (in thousands of Canadian dollars)
	April 29, 2023	April 30, 2022	January 28, 2023
ASSETS
CURRENT ASSETS
Cash	$ 69,394	$ 40,210	$ 103,004
Restricted cash	2,838	-	2,808
Trade and other receivables	3,857	4,923	3,241
Inventories	139,053	137,505	142,302
Prepaid expenses and other assets	18,565	36,678	14,502
Total Current Assets	233,707	219,316	265,857

NON-CURRENT ASSETS
Restricted cash	-	2,759	-
Property and equipment	63,483	63,572	63,833
Intangible assets	2,240	4,095	2,638
Right-of-use assets	88,355	51,583	79,894
Pension asset	1,290	418	-
Deferred income taxes	33,067	190	32,308
Total Non-Current Assets	188,435	122,617	178,673

TOTAL ASSETS	$ 422,142	$ 341,933	$ 444,530

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving credit facility	$ -	$ 34,439	$ -
Trade and other payables	53,684	53,427	81,087
Deferred revenue	12,223	12,150	14,100
Income taxes payable	457	535	1,018
Current portion of lease liabilities	27,622	21,954	26,741
Total Current Liabilities	93,986	122,505	122,946

NON-CURRENT LIABILITIES
Lease liabilities	68,859	36,413	60,758
Total Non-Current Liabilities	68,859	36,413	60,758

SHAREHOLDERS' EQUITY
Share capital	27,406	27,406	27,406
Contributed surplus	11,180	10,295	10,871
Retained earnings	220,711	146,174	223,593
Accumulated other comprehensive loss	-	(860)	(1,044)
Total Shareholders' Equity	259,297	183,015	260,826

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 422,142	$ 341,933	$ 444,530

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	Total Shareholders' Equity

Balance as at January 29, 2023	$ 27,406	$ 10,871	$ 223,593	$ (1,044)	$ 260,826

Net loss	-	-	(3,840)	-	(3,840)
Total other comprehensive income	-	-	958	1,044	2,002
Total comprehensive loss (income) for the period	-	-	(2,882)	1,044	(1,838)

Share based compensation costs	-	309	-	-	309
Total contributions by owners of the Company	-	309	-	-	309

Balance as at April 29, 2023	$ 27,406	$ 11,180	$ 220,711	$ -	$ 259,297



Balance as at January 30, 2022	$ 27,406	$ 10,295	$ 146,980	$ (853)	$ 183,828

Net loss	-	-	(1,717)	-	(1,717)
Total other comprehensive income (loss)	-	-	911	(7)	904
Total comprehensive loss for the period	-	-	(806)	(7)	(813)

Balance as at April 30, 2022	$ 27,406	$ 10,295	$ 146,174	$ (860)	$ 183,015

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of Canadian dollars)
	For the 13 weeks ended
	April 29, 2023	April 30, 2022
CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES
Net loss	$ (3,840)	$ (1,717)
Adjustments for:
Depreciation, amortization and net impairment losses on property and equipment, and intangible assets	3,575	5,080
Depreciation on right-of-use assets	7,774	5,811
Share-based compensation costs	309	-
Foreign exchange gain	(308)	(1,847)
Loss on foreign currency translation differences reclassified to net earnings	1,044	-
Interest on lease liabilities	1,586	1,015
Interest on revolving credit	-	346
Interest income	(921)	(34)
Income tax (recovery) expense	(1,074)	40
	8,145	8,694
Changes in:
Trade and other receivables	(666)	2,666
Inventories	3,249	(18,533)
Prepaid expenses and other assets	(4,063)	5,912
Trade and other payables	(26,769)	20,231
Pension asset	14	593
Deferred revenue	(1,877)	(1,340)
Cash (used in) from operating activities	(21,967)	18,223
Interest paid	-	(316)
Interest received	971	51
Income taxes paid	(592)	(46)
Net cash flows (used in) from operating activities	(21,588)	17,912

CASH FLOWS USED IN INVESTING ACTIVITIES
Additions to property and equipment and intangible assets	(3,462)	(2,476)
Cash flows used in investing activities	(3,462)	(2,476)

CASH FLOWS USED IN FINANCING ACTIVITIES
Restricted cash	(30)	(2)
Net proceeds from revolving credit facility	-	4,805
Payment of lease liabilities	(8,873)	(7,364)
Cash flows used in financing activities	(8,903)	(2,561)

FOREIGN EXCHANGE GAIN ON CASH HELD IN FOREIGN CURRENCY	343	1,833

NET (DECREASE) INCREASE IN CASH	(33,610)	14,708

CASH, BEGINNING OF THE PERIOD	103,004	25,502

CASH, END OF THE PERIOD	$ 69,394	$ 40,210

SOURCE Reitmans (Canada) Limited

For further information: Stephen F. Reitman, President and Chief Executive Officer, Telephone: (514) 384-1140, Corporate Website: www.reitmanscanadalimited.com