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

Aug 29, 2012
5:14pm

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

For further information:

Jeremy H. Reitman
Chairman and Chief Executive Officer

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