Reitmans (Canada) Limited announces its results for the three and nine months ended November 1, 2014

MONTRÉAL, Dec. 4, 2014 /CNW Telbec/ -

Three months ended November 1, 2014

Sales for the three months ended November 1, 2014 decreased 4.5%, impacted by a net reduction of 52 stores, to $238.3 million as compared with $249.4 million for the three months ended November 2, 2013.  Same store sales¹ increased 0.2% with conventional stores decreasing 1.5% and e-commerce sales increasing 76.4%.  The third quarter of fiscal 2015 was challenging in most banners, as store traffic declines contributed to weak sales.  Sales through the various banners' e-commerce channels continued to show strong growth, although representing a small proportion of total Company sales.

The Company's gross margin for the three months ended November 1, 2014 was 61.2% comparable with 61.0% for the three months ended November 2, 2013. The decline in the Canadian dollar against the U.S. dollar negatively impacted margins in the three months ended November 1, 2014, the impact of which has been offset by improved inventory and markdown management.

Net earnings for the three months ended November 1, 2014 were $12.9 million ($0.20 diluted earnings per share) as compared with net earnings of $5.8 million ($0.09 diluted earnings per share) for the three months ended November 2, 2013.  Adjusted EBITDA¹ increased by 48.2% to $31.1 million for the three months ended November 1, 2014 as compared with $21.0 million for the three months ended November 2, 2013.  The increase in earnings before income taxes and improvement in adjusted EBITDA were primarily attributable to the closure of non performing stores and previously reported initiatives aimed at reducing costs across the organization.  A reduction in the number of employees in both head office and field operations in conjunction with a reduction in the number of store locations have resulted in wages and benefit savings.  Additional savings have been achieved through improved cost management in non-wage areas.

Nine months ended November 1, 2014

Sales for the nine months ended November 1, 2014 were $703.1 million as compared with $719.7 million for the nine months ended November 2, 2013, a decrease of 2.3%, impacted by a net reduction of 52 stores. Same store sales¹ increased 0.9% with conventional stores decreasing 0.1% and e-commerce sales increasing 52.3%.  Sales for the year to date fiscal 2015 were impacted by particularly poor weather in the first quarter contributing to weak demand for spring and summer apparel followed by improvement in sales for the second quarter as consumers responded well to the summer fashion offerings.  The third quarter was challenging in most banners, as store traffic declines contributed to weak sales.  Sales through the various banners' e-commerce channels continued to show strong growth, although representing a small proportion of total Company sales.

The Company's gross margin for the nine months ended November 1, 2014 decreased to 60.1% from 62.6% for the nine months ended November 2, 2013, primarily due to the impact of a significant decline in the Canadian dollar vis-à-vis the U.S. dollar resulting in increased cost of goods sold.

Net earnings for the nine months ended November 1, 2014 were $9.0 million ($0.14 diluted earnings per share) as compared with net earnings of $13.4 million ($0.21 diluted earnings per share) for the nine months ended November 2, 2013.  For the nine months ended November 1, 2014, adjusted EBITDA¹ was $50.7 million as compared with $62.3 million for the nine months ended November 2, 2013, a decrease of $11.6 million.  The decrease in earnings before income taxes and reduction in adjusted EBITDA were primarily attributable to a significant decline in the Canadian dollar vis-à-vis the U.S. dollar resulting in increased costs of goods sold and a significant loss on the remeasurement to fair value of foreign currency option contracts somewhat reduced by a foreign exchange gain attributable to foreign currency option contracts expiring at favorable exchange rates.  Previously reported initiatives aimed at reducing costs across the organization have yielded savings.  A reduction in the number of employees in both head office and field operations, in conjunction with a reduction in the number of store locations has resulted in wages and benefit savings.  Additional savings have been achieved through improved cost management in non-wage areas.

On November 25, 2014 the Company announced its plan to close all 107 Smart Set stores over the next twelve to eighteen months. Despite some improvement in the performance of the Smart Set banner, management has determined that its optimum strategy to improve its operating results is to refocus its sales and merchandising efforts by converting approximately 76 Smart Set stores to other Company banners and closing 31 stores.  The Smart Set banner sales for the nine months ended November 1, 2014 were $68.5 million as compared to $72.5 million for the nine months ended November 2, 2013, while losses from operating activities for the nine months ended November 1, 2014 were $10.5 million as compared to $21.5 million for the nine months ended November 2, 2013 (including an allocation of general overhead costs).  The decision to close the Smart Set banner resulted in non-cash asset write-offs of $2.7 million for the three and nine months ended November 1, 2014.

Dividends

At the Board of Directors meeting held on December 4, 2014, 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 January 29, 2015 to shareholders of record on January 19, 2015.

Sales for the four weeks ended November 29, 2014

Sales for the month of November (the four weeks ended November 29, 2014) increased 0.2% with same store sales¹ increasing 4.1%, conventional stores increasing 2.4% and e-commerce sales increasing 60.6%.

About Reitmans (Canada) Limited

The Company is a leading ladieswear specialty apparel retailer with retail outlets throughout Canada.  The Company operates 843 stores consisting of 343 Reitmans, 141 Penningtons, 105 Addition Elle, 79 RW & CO., 68 Thyme Maternity and 107 Smart Set. The Company also operates 21 Thyme Maternity shop-in-shop boutiques in select Babies"R"Us locations in Canada.

¹Non-GAAP Financial Measures

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, other income, dividend income, interest income, realized gains or losses on disposal of available-for-sale financial assets, interest expense, depreciation, amortization and net impairment losses.  The following table reconciles the most comparable GAAP measure, net earnings, 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 and interest income eliminates the impact of revenue 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 and the measure does not have any standardized meaning under IFRS.  Adjusted EBITDA should therefore not be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS.  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.

The Company uses a key performance indicator ("KPI"), same store sales, to assess store performance (including each banner's e-commerce store) and sales growth.  Same store sales is defined as sales generated by stores that have been continuously open during both of the periods being compared and includes e-commerce sales.  The same store 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 same store sales in evaluating the performance of stores 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.  Same store sales is a measure widely used amongst retailers and is considered useful information for both investors and analysts.  Same store sales should therefore not be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS.

The following table reconciles net earnings to adjusted EBITDA for the three and nine months ended November 1, 2014 and November 2, 2013:

 

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, including those described in the Operating Risk Management and Financial Risk Management sections of the Company's Management Discussion and Analysis.  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.  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.  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 nine months ended November 1, 2014 are available online at www.sedar.com.

 

 

 

 

 

 

 

SOURCE Reitmans (Canada) Limited