Reitmans (Canada) Limited Announces Year-End Results

MONTREAL, April 4, 2013 /CNW Telbec/ - The fiscal year ended February 2, 2013 ("fiscal 2013") 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 2013 decreased 1.9% to $1,000,513,000 as compared with $1,019,397,000 for the year ended January 28, 2012 ("fiscal 2012"). This decrease in sales is due primarily to a net reduction of 31 stores in fiscal 2013 and a same stores sales¹ decrease of 2.0% partially offset by an additional week of sales.  The Company experienced lower store traffic in a challenging retail environment and was impacted by a disruption in the planned flow of inventory to stores as described below.  The Company's gross margin for fiscal 2013 decreased to 62.8% from 64.4% for fiscal 2012.  Net earnings for fiscal 2013 decreased 44.0% to $26,619,000 ($0.41 diluted earnings per share) as compared with $47,539,000 ($0.72 diluted earnings per share) for fiscal 2012.  For fiscal 2013, adjusted EBITDA¹ decreased by $35,837,000 or 28.3% to $90,951,000 as compared with $126,788,000 for fiscal 2012.

Sales for the fourth quarter of fiscal 2013 increased 3.0% to $267,659,000 as compared with $259,954,000 for the fourth quarter of fiscal 2012.  This increase in sales is due to an additional week of sales partially offset by a reduction in the number of stores and a same store sales¹ decrease of 1.5%.  The fourth quarter sales of fiscal 2013 were impacted by a difficult retail environment. The Company's gross margin for the fourth quarter of fiscal 2013 decreased to 59.2% from 60.4% for the fourth quarter of fiscal 2012.  The Company recorded a net loss for the fourth quarter of fiscal 2013 of $1,080,000 ($0.01 diluted loss per share) as compared with a profit of $4,674,000 ($0.07 diluted earnings per share) for the fourth quarter of fiscal 2012. This loss reflects operational losses of approximately $1,200,000, including start-up expenses, directly relating to the new Thyme Maternity boutiques initiative in the Babies"R"Us stores in the United States. Adjusted EBITDA¹ decreased by $8,881,000 or 40.3% to $13,140,000 as compared with $22,021,000 for the fourth quarter of fiscal 2012.

In June 2012, the Company installed a new warehouse management system.  As previously announced on August 15, 2012, complications associated with the system resulted in a disruption in the flow of inventory to stores in the third quarter of fiscal 2013.  The disruption resulted in estimated loss of sales and a corresponding decline in gross margin, earnings before income taxes and adjusted EBITDA¹ between $7,000,000 and $15,000,000 in the third quarter of fiscal 2013.  There was no significant impact in the fourth quarter of fiscal 2013.  The Company has addressed the issues related to the warehouse management system and continues to improve the flow of goods to the stores and optimize system performance.

Management is disappointed with the results for fiscal 2013 and has taken action in the merchandising and marketing efforts of each of its banners to improve sales and profitability.  Additionally, the Company has undertaken an initiative to improve efficiencies and reduce overhead across head office and field activities.

During the year, the Company opened 54 new stores and closed 85.  Accordingly, at February 2, 2013, there were 911 stores in operation, consisting of 361 Reitmans, 146 Smart Set, 73 RW & CO., 72 Thyme Maternity, 153 Penningtons, and 106 Addition Elle, as compared with a total of 942 stores as at January 28, 2012. In addition, there were 20 Thyme Maternity boutiques ("shop-in-shop") in select Babies"R"Us locations in Canada and 154 boutiques in Babies"R"Us stores in the United States.

At the Board of Directors meeting held on April 4, 2013, 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 April 25, 2013 to shareholders of record on April 12, 2013. With regard to dividend policy, the Board of Directors considered the Company's earnings per share, cash flow from operations, the level of planned capital expenditures and its cash and marketable securities. The Board of Directors decided to maintain its quarterly dividend on the basis of a targeted payout ratio of approximately 50% to 80% of sustainable earnings per share, 50% to 75% of cash flow from operations and the ability to augment the dividend from the approximately $170,000,000 of liquidity on the Company's balance sheet, if these targets are missed in a given year. The Board of Directors will review these guidelines again at the end of its current fiscal year.

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 (loss) 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 earnings (loss) before income taxes to adjusted EBITDA for the years and three months ended February 2, 2013 and January 28, 2012:

		For the years ended					For the three months ended
		February 2, 2013		January 28, 2012			February 2, 2013		January 28, 2012
Earnings (loss) before income taxes		$	35,136,000	$	65,872,000		$	(1,449,000)	$	6,700,000
Dividend income			(3,526,000)		(3,462,000)			(911,000)		(864,000)
Interest income			(1,062,000)		(1,367,000)			(203,000)		(419,000)
Impairment losses on available-for-sale financial assets			156,000		73,000			50,000		-
Interest expense			592,000		682,000			139,000		162,000
Depreciation, amortization and net impairment losses			59,655,000		64,990,000			15,514,000		16,442,000
ADJUSTED EBITDA		$	90,951,000	$	126,788,000		$	13,140,000	$	22,021,000

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 complete financial statements including notes and Management's Discussion and Analysis for the year ended February 2, 2013 are available online at www.sedar.com.

Montreal, April 4, 2013

Jeremy H. Reitman
Chairman and Chief Executive Officer

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

REITMANS (CANADA) LIMITED
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands of Canadian dollars except per share amounts)

			For the years ended					For the three months ended
			February 2, 2013		January 28, 2012			February 2, 2013		January 28, 2012
Sales			$	1,000,513	$	1,019,397		$	267,659	$	259,954
Cost of goods sold				372,135		363,333			109,332		102,959
Gross profit				628,378		656,064			158,327		156,995
Selling and distribution expenses				550,165		547,367			147,396		138,420
Administrative expenses				47,371		46,878			13,552		13,351
Results from operating activities				30,842		61,819			(2,621)		5,224
Finance income				5,624		5,562			1,361		2,392
Finance costs				1,330		1,509			189		916
Earnings (loss) before income taxes				35,136		65,872			(1,449)		6,700
Income tax expense (recovery)				8,517		18,333			(369)		2,026
Net earnings (loss)			$	26,619	$	47,539		$	(1,080)	$	4,674
Earnings (loss) per share:
	Basic		$	0.41	$	0.72		$	(0.01)	$	0.07
	Diluted			0.41		0.72			(0.01)		0.07

REITMANS (CANADA) LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in thousands of Canadian dollars)

			For the years ended					For the three months ended
			February 2, 2013		January 28, 2012			February 2, 2013		January 28, 2012
Net earnings (loss)			$	26,619	$	47,539		$	(1,080)	$	4,674
Other comprehensive income (loss)
Items that are or may be reclassified subsequently to net earnings:
	Reclassification of impairment loss on available-for-sale financial assets to net earnings (net of tax of $21 for the year ended February 2, 2013; $12 for the three months ended February 2, 2013 and $9 for the year ended January 28, 2012)			135		64			43		-
	Net change in fair value of available-for-sale financial assets (net of tax of $25 for the year ended February 2, 2013 and $96 for the three months ended February 2, 2013; $79 for the year ended January 28, 2012 and $200 for the three months ended January 28, 2012)			(207)		530			497		1,338
				(72)		594			540		1,338
Items that will not be reclassified to net earnings:
	Actuarial losses on defined benefit plans (net of tax of $410 for the year and three months ended February 2, 2013; $1,041 for the year and three months ended January 28, 2012)			(1,061)		(2,965)			(1,061)		(2,965)
Total other comprehensive loss				(1,133)		(2,371)			(521)		(1,627)
Total comprehensive income (loss)			$	25,486	$	45,168		$	(1,601)	$	3,047

REITMANS (CANADA) LIMITED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands of Canadian dollars)

				February 2, 2013			January 28, 2012
ASSETS
CURRENT ASSETS
	Cash and cash equivalents			$	97,626		$	196,835
	Marketable securities				71,630			71,442
	Trade and other receivables				3,600			3,033
	Derivative financial asset				548			751
	Income taxes recoverable				8,709			4,735
	Inventories				93,317			93,188
	Prepaid expenses				25,944			11,902
		Total Current Assets			301,374			381,886
NON-CURRENT ASSETS
	Property and equipment				205,131			184,221
	Intangible assets				19,224			17,057
	Goodwill				42,426			42,426
	Deferred income taxes				26,400			23,174
		Total Non-Current Assets			293,181			266,878
TOTAL ASSETS				$	594,555		$	648,764
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Trade and other payables			$	68,781		$	78,778
	Derivative financial liability				266			1,505
	Deferred revenue				16,297			22,278
	Current portion of long-term debt				1,570			1,474
		Total Current Liabilities			86,914			104,035
NON-CURRENT LIABILITIES
	Other payables				11,425			11,110
	Deferred lease credits				16,805			17,317
	Long-term debt				7,003			8,573
	Pension liability				17,390			14,877
		Total Non-Current Liabilities			52,623			51,877
SHAREHOLDERS' EQUITY
	Share capital				39,227			39,890
	Contributed surplus				6,521			5,158
	Retained earnings				400,605			439,067
	Accumulated other comprehensive income				8,665			8,737
		Total Shareholders' Equity			455,018			492,852
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY				$	594,555		$	648,764

REITMANS (CANADA) LIMITED
CONSOLIDATED 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
Total comprehensive income for the year
	Net earnings								26,619				26,619
	Total other comprehensive loss								(1,061)		(72)		(1,133)
Total comprehensive income for the year				-		-			25,558		(72)		25,486
Contributions by and distributions to owners of the Company
	Cancellation of shares pursuant to share repurchase program			(663)									(663)
	Share-based compensation costs					1,363							1,363
	Dividends								(52,068)				(52,068)
	Premium on repurchases of Class A non-voting shares								(11,952)				(11,952)
Total contributions by and distributions to owners of the Company				(663)		1,363			(64,020)		-		(63,320)
Balance as at February 2, 2013			$	39,227	$	6,521		$	400,605	$	8,665	$	455,018
Balance as at January 30, 2011			$	29,614	$	6,266		$	468,777	$	8,143	$	512,800
Total comprehensive income for the year
	Net earnings								47,539				47,539
	Total other comprehensive loss								(2,965)		594		(2,371)
Total comprehensive income for the year				-		-			44,574		594		45,168
Contributions by and distributions to owners of the Company
	Cash consideration on exercise of share options			8,828									8,828
	Ascribed value credited to share capital from exercise of share options			2,228		(2,228)							-
	Cancellation of shares pursuant to share repurchase program			(780)									(780)
	Share-based compensation costs					1,120							1,120
	Dividends								(52,654)				(52,654)
	Premium on repurchases of Class A non-voting shares								(21,630)				(21,630)
Total contributions by and distributions to owners of the Company				10,276		(1,108)			(74,284)		-		(65,116)
Balance as at January 28, 2012			$	39,890	$	5,158		$	439,067	$	8,737	$	492,852

REITMANS (CANADA) LIMITED
CONSOLIDATED 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 October 28, 2012			$	39,227	$	5,979		$	415,663	$	8,125	$	468,994
Total comprehensive income for the year
	Net loss								(1,080)				(1,080)
	Total other comprehensive loss								(1,061)		540		(521)
Total comprehensive loss for the year				-		-			(2,141)		540		(1,601)
Contributions by and distributions to owners of the Company
	Share-based compensation costs					542							542
	Dividends								(12,917)				(12,917)
Total contributions by and distributions to owners of the Company				-		542			(12,917)		-		(12,375)
Balance as at February 2, 2013			$	39,227	$	6,521		$	400,605	$	8,665	$	455,018
Balance as at October 30, 2011			$	31,512	$	6,462		$	450,431	$	7,399	$	495,804
Total comprehensive income for the year
	Net earnings								4,674				4,674
	Total other comprehensive loss								(2,965)		1,338		(1,627)
Total comprehensive income for the year				-		-			1,709		1,338		3,047
Contributions by and distributions to owners of the Company
	Cash consideration on exercise of share options			6,695									6,695
	Ascribed value credited to share capital from exercise of share options			1,683		(1,683)							-
	Share-based compensation costs					379							379
	Dividends								(13,073)				(13,073)
Total contributions by and distributions to owners of the Company				8,378		(1,304)			(13,073)		-		(5,999)
Balance as at January 28, 2012			$	39,890	$	5,158		$	439,067	$	8,737	$	492,852

REITMANS (CANADA) LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of Canadian dollars)

				For the years ended					For the three months ended
				February 2, 2013		January 28, 2012			February 2, 2013		January 28, 2012
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
	Net earnings			$	26,619	$	47,539		$	(1,080)	$	4,674
	Adjustments for:
		Depreciation, amortization and impairment losses			59,655		64,990			15,514		16,442
		Share-based compensation costs			1,363		1,120			542		379
		Amortization of deferred lease credits			(4,485)		(4,635)			(1,104)		(1,167)
		Deferred lease credits			3,973		2,941			190		(29)
		Pension contribution			(303)		(4,245)			(32)		(3,429)
		Pension expense			1,345		1,490			355		352
		Impairment loss on available-for-sale financial assets			156		73			50		-
		Net change in fair value of derivatives			(1,036)		754			(178)		754
		Foreign exchange (gain) loss on cash and cash equivalents			(4)		2,942			(207)		149
		Interest and dividend income, net			(3,996)		(4,147)			(975)		(1,123)
		Interest paid			(592)		(682)			(139)		(160)
		Interest received			1,184		1,316			207		347
		Dividends received			3,871		3,460			1,261		868
		Income taxes expense (recovery)			8,517		18,333			(369)		2,026
					96,267		131,249			14,035		20,083
	Changes in:
		Trade and other receivables			(1,034)		(114)			51		551
		Inventories			(129)		(5)			24,478		23,906
		Prepaid expenses			(14,042)		589			(14,155)		2,062
		Trade and other payables			(7,981)		(4,575)			(11,978)		2,373
		Deferred revenue			(5,981)		60			8,144		10,676
	Cash generated from operating activities				67,100		127,204			20,575		59,651
	Income taxes received				4,497		793			-		793
	Income taxes paid				(19,800)		(31,060)			-		-
	Net cash flows from operating activities				51,797		96,937			20,575		60,444
CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES
	Purchases of marketable securities				(420)		(420)			(105)		(105)
	Additions to property and equipment and intangible assets				(84,433)		(59,154)			(18,691)		(15,931)
	Cash flows used in investing activities				(84,853)		(59,574)			(18,796)		(16,036)
CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES
	Dividends paid				(52,068)		(52,654)			(12,917)		(13,073)
	Purchase of Class A non-voting shares for cancellation				(12,615)		(22,410)			-		-
	Repayment of long-term debt				(1,474)		(1,384)			(378)		(355)
	Proceeds from exercise of share options				-		8,828			-		6,695
	Cash flows used in financing activities				(66,157)		(67,620)			(13,295)		(6,733)
FOREIGN EXCHANGE GAIN (LOSS) ON CASH HELD IN FOREIGN CURRENCY					4		(2,942)			207		(149)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS					(99,209)		(33,199)			(11,309)		37,526
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD					196,835		230,034			108,935		159,309
CASH AND CASH EQUIVALENTS, END OF THE PERIOD				$	97,626	$	196,835		$	97,626	$	196,835

 

 

SOURCE: Reitmans (Canada) Limited