Reitmans (Canada) Limited announces its results for the six months ended July 28, 2012

MONTREAL, Aug. 29, 2012 /CNW Telbec/ - Sales for the six months ended July 28, 2012 decreased 1.7% to $496,607,000 as compared with $505,371,000 for the six months ended July 30, 2011. Same store sales¹ decreased 1.3%.  Sales continued to be impacted by a difficult retail environment as high fuel and food prices and an increased level of consumer personal debt contributed to a reduction in consumer disposable income for apparel.  The Company's gross margin decreased to 64.7% from 65.7%.  Net earnings decreased 14.4% to $27,661,000 or $0.42 diluted earnings per share as compared with $32,304,000 or $0.48 diluted earnings per share.  Adjusted EBITDA¹ decreased 12.6% to $63,720,000 as compared with $72,922,000.

Sales for the second quarter ended July 28, 2012 decreased 2.3% to $279,513,000 as compared with $286,075,000 for the second quarter ended July 30, 2011.  Same store sales¹ decreased 1.7%.  The Company's gross margin decreased to 64.7% from 65.6%.  The Company recorded net earnings of $27,714,000 ($0.42 diluted earnings per share) as compared with $31,680,000 ($0.48 diluted earnings per share).  Adjusted EBITDA¹ decreased by 12.6% to $51,180,000 as compared with $58,553,000.

During the second quarter, the Company opened 11 new stores, comprised of 1 Reitmans, 2 RW & CO., 5 Penningtons and 3 Addition Elle.  Eighteen stores were closed, comprised of 5 Reitmans, 1 Smart Set, 5 Penningtons and 7 Addition Elle.  At July 28, 2012, there were 918 stores in operation, consisting of 360 Reitmans, 152 Smart Set, 68 RW & CO., 74 Thyme Maternity, 154 Penningtons and 110 Addition Elle, as compared with a total of 965 stores as at July 30, 2011.

In addition to its individual retail outlets the Company operates 18 Thyme Maternity boutiques ("shop-in-shop") in select Babies"R"Us locations in Canada.  In June 2012, the Company announced a partnership with Babies"R"Us to sell Thyme Maternity apparel and accessories in the U.S. Thyme Maternity products will be available in approximately 160 U.S. Babies"R"Us stores later this year.

Sales for the month of August (the four weeks ended August 25, 2012) decreased 10.9% with same store sales decreasing 8.1%. On August 15, 2012, the Company announced that it encountered problems with its newly-installed warehouse management systems at its distribution centre, which caused temporary disruptions in the receiving and shipping of merchandise to stores.  The issues adversely impacted sales in August and will have an adverse impact on sales and margins for the third quarter.  The amount of such impact is not known at this time and is difficult to quantify as sales are affected by a number of factors. The situation has now been resolved and the distribution centre is operating properly at this time.

At the Board of Directors meeting held on August 29, 2012, a quarterly cash dividend (constituting eligible dividends) of $0.20 per share on all outstanding Class A non-voting and Common shares of the Company was declared, payable October 25, 2012 to shareholders of record on October 11, 2012.

¹Non-GAAP Financial Measures

In addition to discussing earnings in accordance with IFRS, this press release provides adjusted EBITDA as a supplementary earnings measure, which is defined as earnings before income taxes, dividend income, interest income, realized gains or losses on disposal of available-for-sale financial assets, impairment losses on available-for-sale financial assets, interest expense, depreciation, amortization and net impairment losses related to property and equipment. The Company also discloses same store sales, which are defined as sales generated by stores that have been open for at least one year.  The Company believes these measures provide meaningful information on the Company's performance and operating results. However, readers should know that these non-GAAP financial measures have no standardized meaning as prescribed by IFRS and may not be comparable to similar measures presented by other companies.  Accordingly, they should not be considered in isolation.

The following table reconciles adjusted EBITDA to earnings before income taxes for the three and six months ended July 28, 2012 and July 30, 2011:

	For the six months ended					For the three months ended
	July 28, 2012		July 30, 2011			July 28, 2012		July 30, 2011
Earnings before income taxes	$	36,688,000	$	44,716,000		$	36,898,000	$	43,847,000
Dividend income		(1,741,000)		(1,748,000)			(867,000)		(868,000)
Interest income		(661,000)		(612,000)			(331,000)		(328,000)
Impairment losses on available-for-sale financial assets		106,000		-			106,000		-
Interest expense		308,000		352,000			151,000		173,000
Depreciation, amortization and net impairment losses		29,020,000		30,214,000			15,223,000		15,729,000
ADJUSTED EBITDA	$	63,720,000	$	72,922,000		$	51,180,000	$	58,553,000

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. Such risks include but are not limited to: the impact of general economic conditions, general conditions in the retail industry, seasonality, weather and other risks included in public filings of the Company. Consequently, actual future results may differ materially from the anticipated results expressed in forward-looking statements. The reader should not place undue reliance on the 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 unaudited interim condensed financial statements including notes and Management's Discussion and Analysis for the second quarter ended July 28, 2012 are available online at www.sedar.com.

Montreal, August 29, 2012

Jeremy H. Reitman
Chairman and Chief Executive Officer

Telephone:		(514) 385-2630
Corporate Website:		www.reitmans.ca

REITMANS (CANADA) LIMITED CONDENSED STATEMENTS OF EARNINGS (Unaudited) (in thousands of Canadian dollars except per share amounts)
		For the six months ended					For the three months ended
		July 28, 2012		July 30, 2011			July 28, 2012		July 30, 2011
Sales		$	496,607	$	505,371		$	279,513	$	286,075
Cost of goods sold			175,386		173,392			98,608		98,451
Gross profit			321,221		331,979			180,905		187,624
Selling and distribution expenses			264,493		264,822			135,025		135,597
Administrative expenses			22,372		21,171			11,414		11,059
Results from operating activities			34,356		45,986			34,466		40,968
Finance income			2,868		2,360			2,689		3,052
Finance costs			536		3,630			257		173
Earnings before income taxes			36,688		44,716			36,898		43,847
Income taxes			9,027		12,412			9,184		12,167
Net earnings		$	27,661	$	32,304		$	27,714	$	31,680
Earnings per share:
	Basic	$	0.42	$	0.49		$	0.42	$	0.48
	Diluted		0.42		0.48			0.42		0.48

 

REITMANS (CANADA) LIMITED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (in thousands of Canadian dollars)
		For the six months ended					For the three months ended
		July 28, 2012		July 30, 2011			July 28, 2012		July 30, 2011
Net earnings		$	27,661	$	32,304		$	27,714	$	31,680
Other comprehensive income:
	Net change in fair value of available-for-sale financial assets arising during the period (net of tax of $129 for the six months and $100 for the three months ended July 28, 2012; $125 for the six months and $65 for the three months ended July 30, 2011)		(888)		839			(691)		438
	Reclassification of impairment loss on available-for-sale financial assets (net of tax of $14)		92		-			92		-
Total comprehensive income		$	26,865	$	33,143		$	27,115	$	32,118

REITMANS (CANADA) LIMITED CONDENSED BALANCE SHEETS (Unaudited) (in thousands of Canadian dollars)
			July 28, 2012		July 30, 2011		January 28, 2012
ASSETS
CURRENT ASSETS
	Cash and cash equivalents		$	160,132	$	207,492	$	196,835
	Marketable securities			70,637		71,587		71,442
	Trade and other receivables			2,926		2,723		3,033
	Derivative financial asset			268		-		751
	Income taxes recoverable			6,755		9,377		4,735
	Inventories			80,371		81,477		78,285
	Prepaid expenses			15,272		14,264		11,902
		Total Current Assets		336,361		386,920		366,983
NON-CURRENT ASSETS
	Property and equipment			194,251		184,905		184,221
	Intangible assets			18,026		14,705		17,057
	Goodwill			42,426		42,426		42,426
	Deferred income taxes			25,213		20,624		23,174
		Total Non-Current Assets		279,916		262,660		266,878
TOTAL ASSETS			$	616,277	$	649,580	$	633,861
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Trade and other payables		$	59,260	$	58,111	$	63,875
	Derivative financial liability			556		-		1,505
	Deferred revenue			9,959		14,364		22,278
	Current portion of long-term debt			1,521		1,428		1,474
		Total Current Liabilities		71,296		73,903		89,132
NON-CURRENT LIABILITIES
	Other payables			11,264		10,729		11,110
	Deferred revenue			-		2,304		-
	Deferred lease credits			16,599		17,515		17,317
	Long-term debt			7,801		9,323		8,573
	Pension liability			15,298		14,027		14,877
		Total Non-Current Liabilities		50,962		53,898		51,877
SHAREHOLDERS' EQUITY
	Share capital			39,890		31,518		39,890
	Contributed surplus			5,694		6,772		5,158
	Retained earnings			440,494		474,507		439,067
	Accumulated other comprehensive income			7,941		8,982		8,737
		Total Shareholders' Equity		494,019		521,779		492,852
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$	616,277	$	649,580	$	633,861

REITMANS (CANADA) LIMITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (in thousands of Canadian dollars)
		Share Capital		Contributed Surplus		Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders' Equity
Balance as at January 29, 2012		$	39,890	$	5,158	$	439,067	$	8,737	$	492,852
Share-based compensation costs			-		536		-		-		536
Net earnings			-		-		27,661		-		27,661
Dividends			-		-		(26,234)		-		(26,234)
Net change in fair value of available-for-sale financial assets (net of tax of $129)			-		-		-		(888)		(888)
Reclassification of impairment loss on available-for-sale financial assets to net earnings (net of tax of $14)			-		-		-		92		92
Balance as at July 28, 2012		$	39,890	$	5,694	$	440,494	$	7,941	$	494,019
Balance as at April 29, 2012		$	39,890	$	5,348	$	425,897	$	8,540	$	479,675
Share-based compensation costs			-		346		-		-		346
Net earnings			-		-		27,714		-		27,714
Dividends			-		-		(13,117)		-		(13,117)
Net change in fair value of available-for-sale financial assets (net of tax of $100)			-		-		-		(691)		(691)
Reclassification of impairment loss on available-for-sale financial assets to net earnings (net of tax of $14)			-		-		-		92		92
Balance as at July 28, 2012		$	39,890	$	5,694	$	440,494	$	7,941	$	494,019
Balance as at January 30, 2011		$	29,614	$	6,266	$	468,777	$	8,143	$	512,800
Cash consideration on exercise of share options			1,516		-		-		-		1,516
Ascribed value credited to share capital from exercise of share options			388		(388)		-		-		-
Share-based compensation costs			-		894		-		-		894
Net earnings			-		-		32,304		-		32,304
Dividends			-		-		(26,574)		-		(26,574)
Net change in fair value of available-for-sale financial assets (net of tax of $125)			-		-		-		839		839
Balance as at July 30, 2011		$	31,518	$	6,772	$	474,507	$	8,982	$	521,779
Balance as at May 1, 2011		$	31,426	$	6,291	$	456,113	$	8,544	$	502,374
Cash consideration on exercise of share options			73		-		-		-		73
Ascribed value credited to share capital from exercise of share options			19		(19)		-		-		-
Share-based compensation costs			-		500		-		-		500
Net earnings			-		-		31,680		-		31,680
Dividends			-		-		(13,286)		-		(13,286)
Net change in fair value of available-for-sale financial assets (net of tax of $65)			-		-		-		438		438
Balance as at July 30, 2011		$	31,518	$	6,772	$	474,507	$	8,982	$	521,779

REITMANS (CANADA) LIMITED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of Canadian dollars)
			For the six months ended				For the three months ended
			July 28, 2012		July 30, 2011		July 28, 2012		July 30, 2011
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
	Net earnings		$	27,661	$	32,304	$	27,714	$	31,680
	Adjustments for:
		Depreciation, amortization and impairment losses		29,020		30,214		15,223		15,729
		Share-based compensation costs		536		894		346		500
		Amortization of deferred lease credits		(2,258)		(2,320)		(1,064)		(1,106)
		Deferred lease credits		1,540		824		895		509
		Pension contribution		(239)		(357)		(76)		(228)
		Pension expense		660		758		330		379
		Impairment loss on available-for-sale financial assets		106		-		106		-
		Net change in fair value of derivatives		(466)		-		(552)		-
		Foreign exchange loss (gain)		854		2,451		231		(480)
		Interest and dividend income, net		(2,094)		(2,008)		(1,047)		(1,023)
		Interest paid		(308)		(352)		(151)		(173)
		Interest received		727		633		359		311
		Dividends received		1,738		1,726		870		864
		Income tax expense		9,027		12,412		9,184		12,167
				66,504		77,179		52,368		59,129
	Changes in:
		Trade and other receivables		42		144		824		1,512
		Inventories		(2,086)		(8,276)		22,254		17,589
		Prepaid expenses		(3,370)		(1,773)		(2,942)		(1,549)
		Trade and other payables		(2,981)		(3,734)		(9,527)		(9,877)
		Deferred revenue		(12,319)		(5,550)		(3,598)		403
	Cash from operating activities			45,790		57,990		59,379		67,207
	Income taxes received			4,475		-		4,475		-
	Income taxes paid			(17,446)		(27,514)		(6,836)		(11,948)
	Net cash flows from operating activities			32,819		30,476		57,018		55,259
CASH FLOWS USED IN INVESTING ACTIVITIES
	Purchases of marketable securities			(210)		(210)		(105)		(105)
	Additions to property and equipment and intangible assets			(41,499)		(24,619)		(21,254)		(11,457)
	Cash flows used in investing activities			(41,709)		(24,829)		(21,359)		(11,562)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
	Dividends paid			(26,234)		(26,574)		(13,117)		(13,286)
	Repayment of long-term debt			(725)		(680)		(366)		(343)
	Proceeds from exercise of share options			-		1,516		-		73
	Cash flows used in financing activities			(26,959)		(25,738)		(13,483)		(13,556)
FOREIGN EXCHANGE (LOSS) GAIN ON CASH HELD IN FOREIGN CURRENCY				(854)		(2,451)		(231)		480
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS				(36,703)		(22,542)		21,945		30,621
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD				196,835		230,034		138,187		176,871
CASH AND CASH EQUIVALENTS, END OF THE PERIOD			$	160,132	$	207,492	$	160,132	$	207,492

 

 

SOURCE: Reitmans (Canada) Limited