Reitmans (Canada) Limited announces its results for the 13 weeks ended May 4, 2019

Jun 3, 2019
5:23pm

MONTRÉAL, June 3, 2019 /CNW Telbec/ - Unless otherwise indicated, the Company's results for the 13 weeks ended May 4, 2019 ("first quarter of 2020") reflect the impact of the implementation of IFRS 16, as described below under "Adoption of IFRS 16 – Leases".

Sales for the first quarter of 2020 were $185.2 million, as compared with $207.6 million for the 13 weeks ended May 5, 2018 ("first quarter of 2019"). The decrease of $22.4 million is primarily attributable to a net reduction of 43 stores and unseasonable weather conditions that were prevalent during the first quarter of 2020. The Company continues to execute against a plan adapting to the new retail environment by reducing its store presence in select markets while enhancing its e-commerce capabilities. Comparable sales¹, which include e-commerce sales, decreased 5.7%. The decrease was primarily due to store traffic being down 5.4% for the first quarter of 2020. The Company continues to experience strong growth through its online channel.

Gross profit for the first quarter of 2020 decreased $14.5 million or 12.5%, to $101.8 million as compared with $116.3 million for the first quarter of 2019. The decrease is primarily attributable to a net reduction of 43 stores. Gross profit as a percentage of sales for the first quarter of 2020 decreased to 55.0% from 56.0% for the first quarter of 2019.

Results from operating activities for the first quarter of 2020 were a loss of $13.1 million as compared with a loss of $4.3 million for the first quarter of 2019, a decrease of $8.8 million. This decrease is primarily attributable to the decrease in gross profit of $14.5 million, partially offset by a reduction in selling, distribution and administrative costs of $5.7 million.

Net loss for the first quarter of 2020 was $12.6 million ($0.20 basic and diluted loss per share) as compared with a net loss of $3.2 million ($0.05 basic and diluted loss per share) for the first quarter of 2019. The increase in net loss of $9.4 million included an unfavourable impact of IFRS 16 of $1.3 million. Excluding this $1.3 million impact of IFRS 16, the increase in net loss of $8.1 million is primarily attributable to the decrease in gross profit and the increase in net finance costs partially offset by reduced store operating costs and an increase in income tax recovery.

Adjusted EBITDA¹ for the first quarter of 2020 was $13.5 million, as compared with $6.9 million for the first quarter of 2019, an increase of $6.6 million. The increase in adjusted EBITDA includes a favourable impact of IFRS 16 of $18.2 million. Excluding this $18.2 million impact of IFRS 16, adjusted EBITDA for the first quarter of 2020 was ($4.7) million as compared with $6.9 million for the first quarter of 2019, a decrease of $11.6 million. The decrease is primarily attributable to the decrease in gross profit.

Adoption of IFRS 16 - Leases

The Company adopted IFRS 16 – Leases, replacing IAS 17 – Leases and related interpretations, using the modified retrospective approach, effective for the annual reporting period beginning on February 3, 2019. As a result, the Company's results for the first quarter of 2020 reflect lease accounting under IFRS 16. Comparative figures for the first quarter of 2019 have not been restated and continue to be reported under IAS 17, Leases. Refer to Note 3 of the unaudited condensed consolidated interim financial statements for the first quarter of 2020 for additional details on the implementation of IFRS 16.

Dividends

At the Board of Directors meeting held on June 3, 2019, 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 July 25, 2019 to shareholders of record on July 11, 2019.

Sales for the four weeks ended June 1, 2019

Sales for the month of May (the four weeks ended June 1, 2019) decreased 13.3%. Comparable sales¹ decreased 9.6%, primarily due to store traffic being down 7.9% as unseasonable weather conditions continued to be prevalent during the month of May.

About Reitmans (Canada) Limited

The Company is a leading ladieswear specialty apparel retailer with retail outlets throughout Canada. The Company operates 594 stores consisting of 259 Reitmans, 115 Penningtons, 80 Addition Elle, 82 RW & CO. and 58 Thyme Maternity.

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, realized gains or losses on disposal 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, the net change in fair value of marketable securities eliminates the impact on earnings derived from non-operational activities. The exclusion of 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 uses a key performance indicator ("KPI"), comparable sales, to assess store performance and sales growth. The Company has embarked on an omnichannel approach to engaging with customers. Due to the cross-channel behaviour of consumers, the Company has launched its initiative aimed at appealing to its customers' shopping habits through either online or store channels. This approach allows customers to shop online for home delivery, pickup in-store, purchase in any of our store locations or ship to home from our stores when products are unavailable. Due to customer cross-channel behaviour, the Company reports a single comparable sales metric, inclusive of store and e-commerce channels. Comparable 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. Comparable sales exclude sales from wholesale accounts. The comparable 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 comparable 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. 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.

The following table reconciles net loss to adjusted EBITDA:

	For the first quarter of
	2020		2020 Excluding impact of IFRS 16 ⁽¹⁾		2019
Net loss	$	(12.6)	$	(11.3)	$	(3.2)
Depreciation, amortization and net impairment losses	26.6		8.5		9.9
Dividend income	(0.6)		(0.6)		(0.6)
Interest income	(0.5)		(0.5)		(0.4)
Net change in fair value of marketable securities	2.1		2.1		1.8
Interest expense	1.9		-		-
Income tax recovery	(3.4)		(2.9)		(0.6)
Adjusted EBITDA	$	13.5	$	(4.7)	$	6.9
Adjusted EBITDA as % of Sales	7.3%		(2.5%)		3.3%

¹Adjusted EBITDA for the first quarter of 2020 excluding impact of IFRS 16 assumes the Company continued to report under IAS 17, Leases and did not adopt IFRS 16. Under IFRS 16, the nature and timing of expenses related to operating leases have changed as the straight-line operating lease expenses have been replaced with a depreciation charge for right-of use assets and interest expense on lease liabilities. Accordingly, IFRS 16 had a favourable impact of approximately $18.2 million on adjusted EBITDA for the first quarter of 2020 as operating leases expenses have been replaced with depreciation and interest expenses, which are not included in the calculation of adjusted EBITDA.

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 first quarter of 2020.

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 2020 are available online at www.sedar.com.

Montreal, June 3, 2019

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 13 weeks ended
	May 4, 2019		May 5, 2018 ⁽¹⁾

Sales	$	185,194	$	207,621
Cost of goods sold	83,383		91,308
Gross profit	101,811		116,313
Selling and distribution expenses	103,841		109,946
Administrative expenses	11,068		10,678
Results from operating activities	(13,098)		(4,311)

Finance income	1,120		2,290
Finance costs	4,056		1,805
Loss before income taxes	(16,034)		(3,826)

Income tax recovery	(3,420)		(618)

Net loss	$	(12,614)	$	(3,208)

Loss per share:
Basic	$	(0.20)	$	(0.05)
Diluted	(0.20)		(0.05)

¹The Company has initially applied IFRS 16 as at February 3, 2019. Under the transition method chosen, comparative information is not restated.

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (in thousands of Canadian dollars)
	For the 13 weeks ended
	May 4, 2019		May 5, 2018 ⁽¹⁾

Net loss	$	(12,614)	$	(3,208)
Other comprehensive income
Items that are or may be reclassified subsequently to net earnings:
Cash flow hedges (net of tax of $742; 2018 - $2,542)	2,023		6,925
Foreign currency translation differences	(97)		(187)

Total other comprehensive income	1,926		6,738

Total comprehensive (loss) income	$	(10,688)	$	3,530

¹The Company has initially applied IFRS 16 as at February 3, 2019. Under the transition method chosen, comparative information is not restated.

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (Unaudited) (in thousands of Canadian dollars)
	May 4, 2019		May 5, 2018 ⁽¹⁾		February 2, 2019 ⁽¹⁾
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	74,653	$	95,566	$	112,518
Marketable securities	47,627		60,220		49,690
Trade and other receivables	8,681		8,656		7,897
Derivative financial asset	3,699		2,810		1,900
Inventories	159,330		147,389		146,809
Prepaid expenses	15,270		20,047		19,771
Total Current Assets	309,260		334,688		338,585

NON-CURRENT ASSETS
Trade and other receivables	375		-		-
Property and equipment	94,209		104,945		95,921
Intangible assets	21,285		18,935		21,639
Right-of-use assets	216,771		-		-
Goodwill	11,843		11,843		11,843
Deferred income taxes	25,291		26,345		24,829
Total Non-Current Assets	369,774		162,068		154,232

TOTAL ASSETS	$	679,034	$	496,756	$	492,817

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade and other payables	$	90,409	$	102,491	$	98,842
Derivative financial liability	-		1,607		966
Deferred revenue	13,799		16,100		15,209
Income taxes payable	852		233		4,201
Current portion of lease liabilities	65,193		-		-
Total Current Liabilities	170,253		120,431		119,218

NON-CURRENT LIABILITIES
Trade and other payables	488		8,104		5,170
Deferred lease credits	-		6,474		7,789
Lease liabilities	160,603		-		-
Pension liability	21,165		19,353		21,043
Total Non-Current Liabilities	182,256		33,931		34,002

SHAREHOLDERS' EQUITY
Share capital	38,397		38,397		38,397
Contributed surplus	10,261		10,163		10,245
Retained earnings	277,225		292,677		292,239
Accumulated other comprehensive income (loss)	642		1,157		(1,284)
Total Shareholders' Equity	326,525		342,394		339,597

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	679,034	$	496,756	$	492,817

¹The Company has initially applied IFRS 16 as at February 3, 2019. Under the transition method chosen, comparative information is not restated.

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 Income (Loss)		Total Shareholders' Equity

Balance as at February 3, 2019	$	38,397	$	10,245	$	292,239	$	(1,284)	$	339,597
IFRS 16 adoption adjustment (net of tax)	-		-		767		-		767
Restated balance as at February 3, 2019	38,397		10,245		293,006		(1,284)		340,364

Net loss	-		-		(12,614)		-		(12,614)
Total other comprehensive income	-		-		-		1,926		1,926
Total comprehensive (loss) income for the period	-		-		(12,614)		1,926		(10,688)

Share-based compensation costs	-		16		-		-		16
Dividends	-		-		(3,167)		-		(3,167)
Total contributions by (distributions to) owners of the Company	-		16		(3,167)		-		(3,151)

Balance as at May 4, 2019	$	38,397	$	10,261	$	277,225	$	642	$	326,525


Balance as at February 4, 2018 ⁽¹⁾	$	38,397	$	10,119	$	297,895	$	(5,581)	$	340,830
IFRS 15 adoption adjustment (net of tax)	-		-		1,157		-		1,157
Restated balance as at February 4, 2018	38,397		10,119		299,052		(5,581)		341,987

Net loss	-		-		(3,208)		-		(3,208)
Total other comprehensive income	-		-		-		6,738		6,738
Total comprehensive (loss) income for the period	-		-		(3,208)		6,738		3,530

Share-based compensation costs	-		44		-		-		44
Dividends	-		-		(3,167)		-		(3,167)
Total contributions by (distributions to) owners of the Company	-		44		(3,167)		-		(3,123)

Balance as at May 5, 2018⁽¹⁾	$	38,397	$	10,163	$	292,677	$	1,157	$	342,394

¹ The Company has initially applied IFRS 16 as at February 3, 2019. Under the transition method chosen, comparative information is not restated.

REITMANS (CANADA) LIMITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of Canadian dollars)
	For the 13 weeks ended
	May 4, 2019		May 5, 2018 ⁽¹⁾
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net loss	$	(12,614)	$	(3,208)
Adjustments for:
Depreciation, amortization and net impairment losses	26,611		9,869
Share-based compensation costs	136		44
Net change in fair value of marketable securities	2,063		1,805
Net change in transfer of realized gain on cash flow hedges to inventory	-		(1,445)
Foreign exchange (gain) loss	(2,968)		1,190
Interest on lease liabilities	1,921		-
Interest and dividend income, net	(1,120)		(986)
Income tax recovery	(3,420)		(618)
	10,609		6,651
Changes in:
Trade and other receivables	(758)		(3,776)
Inventories	(12,521)		(10,284)
Prepaid expenses	(1,542)		(860)
Trade and other payables	(7,029)		8,950
Pension liability	121		117
Deferred lease credits	-		24
Deferred revenue	(1,410)		(3,894)
Cash used in operating activities	(12,530)		(3,072)
Interest received	648		360
Dividends received	646		626
Income taxes received	12		2,230
Income taxes paid	(1,429)		(3)
Net cash flows (used in) from operating activities	(12,653)		141

CASH FLOWS USED IN INVESTING ACTIVITIES
Additions to property and equipment and intangible assets, net	(6,171)		(4,688)
Cash flows used in investing activities	(6,171)		(4,688)

CASH FLOWS USED IN FINANCING ACTIVITIES
Dividends paid	(3,167)		(3,167)
Payment of lease liabilities	(18,745)		-
Cash flows used in financing activities	(21,912)		(3,167)

FOREIGN EXCHANGE GAIN (LOSS) ON CASH HELD IN FOREIGN CURRENCY	2,871		(1,376)

NET DECREASE IN CASH AND CASH EQUIVALENTS	(37,865)		(9,090)

CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD	112,518		104,656

CASH AND CASH EQUIVALENTS, END OF THE PERIOD	$	74,653	$	95,566

¹The Company has initially applied IFRS 16 as at February 3, 2019. Under the transition method chosen, comparative information is not restated.

SOURCE Reitmans (Canada) Limited

For further information: Jeremy H. Reitman, Chairman and Chief Executive Officer, Telephone: (514) 385-2630