Reitmans (Canada) Limited announces its results for the 13 weeks ended April 30, 2022
Jun 21, 2022
MONTREAL, June 21, 2022 /CNW/ - Unless otherwise indicated, all comparisons of results for the 13 weeks ended April 30, 2022 ("first quarter of 2023") are against results for the 13 weeks ended May 1, 2021 ("first quarter of 2022").
On January 12, 2022, the Company emerged from the Companies' Creditors Arrangement Act ("CCAA") proceedings. The first quarter of fiscal 2023 is the beginning of the Company's transition into a post CCAA operational environment coupled with store openings returning to a more normal operating scenario (see section entitled "COVID-19"). The Company is encouraged with its results of operating activities for the first quarter of fiscal 2023 as the first quarter in a fiscal year is historically the weakest quarter. Results from operating activities for the first quarter of fiscal 2023 are the strongest in the last nine comparative quarters other than the comparative quarter of fiscal 2022, which included Federal subsidies of $10.3 million. The Company believes that the efforts made during the CCAA proceedings to restructure the Company were successful and will benefit the Company into the future.
13 weeks ended April 30, 2022
Sales for the first quarter of 2023 increased by $32.6 million, or 26.9%, to $153.9 million, primarily due to the Company experiencing no government imposed temporary retail location lockdowns during the first quarter of 2023 as compared to a partial lockdown of the Company's stores network during the first quarter of 2022 (see section entitled "COVID-19") and despite an overall net reduction of 9 stores.
Gross profit for the first quarter of 2023 increased $24.1 million to $84.0 million as compared with $59.9 million for the first quarter of 2022. Gross profit as a percentage of sales for the first quarter of 2023 increased to 54.6% from 49.4% for the first quarter of 2022. The increase both in gross profit and as a percentage of sales is primarily attributable to lower markdowns and promotional activity in the first quarter of 2023 combined with a favourable foreign exchange impact on U.S. dollar denominated purchases included in cost of goods sold, partially offset by higher merchandise freight costs as global shipping industry disruptions required the increased usage of air freight shipments to meet customer demand.
Net loss for the first quarter of 2023 was $1.7 million ($0.04 basic and diluted loss per share) as compared with a $2 thousand net loss ($0.00 basic and diluted loss per share) for the first quarter of 2022. The increase in net loss of $1.7 million is primarily attributable to the increase in overall operating costs, the reduction of Federal subsidies and restructuring recoveries and an increase in net finance costs, partially offset by an increase in gross profits.
Adjusted results from operating activities ("Adjusted ROA")1 for the first quarter of 2023 was a loss of $1.0 million as compared with a loss of $16.5 million for the first quarter of 2022. The increase of $15.5 million in Adjusted ROA is primarily attributable to the increase of $24.1 million in gross profit, partially offset by an increase of $8.6 million in overall operating costs (excluding Federal subsidies and restructuring costs and recoveries) which is primarily due to an increase in store personnel wages, higher spending in digital media and higher rent expenditures as a result of lease arrangements tied to percentage of sales performance.
Adjusted EBITDA1 for the first quarter of 2023 was $9.9 million as compared to $(3.6) million for the first quarter of 2022. The increase of $13.5 million is primarily attributable to the increase of $24.1 million in gross profit, partially offset by a decrease of $0.7 million in foreign exchange gain and an increase in operating costs (excluding Federal subsidies, restructuring costs and recoveries, depreciation, amortization and net impairment of non-financial assets) of $9.9 million, as noted above.
At the beginning of the first quarter of 2022, the Company had 240 out of its 415 stores (58% of its store network) closed as a consequence of governmental lockdown directives. This partial lockdown of the Company's retail store network continued into the first quarter of 2022. At the beginning of the first quarter of 2023, while all of the Company's stores were open, store capacity restrictions were still in effect by most provincial authorities. All of the provincially imposed store capacity restrictions were lifted during the first quarter of 2023 and the Company's store network has been operating at full capacity since the restrictions were lifted.
During fiscal 2022, the Company obtained financial assistance from federal programs ("Federal subsidies"), such as the Canada Emergency Wage Subsidy ("CEWS"), the Canada Emergency Rent Subsidy program ("CERS") and the Tourism and Hospitality Recovery Program ("THRP"), under which the subsidies were consolidated starting from October 24, 2021. Such measures and financial assistance mitigated the financial impact of COVID-19 on the Company's business.
The extent to which COVID-19 and its variants will continue to impact the Company's business, including its supply chain, consumer shopping behavior and consumer demand, including online shopping, will depend on future developments, which are highly uncertain and cannot be predicted at this time. These future developments include emergence of new variants of COVID-19 resulting in a resurgence of positive COVID-19 cases, measures taken by various government authorities to contain the virus and its variants spread for potential future waves, future customer shopping behavior including online sales and the impact of shipping delays to the supply chain. As the Company navigates through the challenges caused by COVID-19 and its variants, its focus is to adapt to customers' changing product preferences, closely monitor its cash position and control its spending, while managing its inventory levels in line with the change in demand behavior since COVID-19 started. Current financial information may not necessarily be indicative of future operating results.
About Reitmans (Canada) Limited
The Company is a leading women's specialty apparel retailer with retail outlets throughout Canada. As at April 30, 2022, the Company operated 406 stores consisting of 237 Reitmans, 92 Penningtons and 77 RW&CO.
1NON-GAAP Financial Measures
This press announcement makes reference to certain non-IFRS measures. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS. They are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement IFRS measures by providing further understanding of the Company's results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for the Company's analysis of its financial information reported under IFRS.
This press announcement discusses adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") and adjusted results from operating activities ("Adjusted ROA") and both are considered non-GAAP financial measures. This press announcement also indicates Adjusted EBITDA as a percentage of sales and is considered a non-GAAP financial ratio. The intent of presenting Adjusted EBITDA and Adjusted ROA is to provide additional useful information to investors and analysts. Adjusted EBITDA is defined as net earnings (loss) before income tax expense/recovery, interest income, interest expense, depreciation, amortization, impairment of non-financial assets, Federal subsidies and restructuring costs and recoveries. 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. Management believes that Adjusted EBITDA as a percentage of sales indicates how much liquidity is generated for each dollar of sales. The exclusion of interest income and expenses eliminate the impact on earnings derived from non-operational activities. The exclusion of depreciation, amortization and impairment charges eliminates the non-cash impact, and the exclusion of restructuring items and Federal subsidies presents the results of the on-going business.
Adjusted ROA is defined as results from operating activities excluding Federal subsidies and restructuring costs and recoveries. Management believes that Adjusted ROA provides a more relevant indicator in assessing current operational performance. The exclusion of restructuring items and Federal subsidies presents the on-going operational performance of the business.
Reconciliation of NON-IFRS Measures
The tables below provide a reconciliation of net loss to Adjusted EBITDA and results from operating activities to Adjusted ROA:
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, including statements regarding the impact of COVID-19 on the Company's business, financial position and operations, and are based on several assumptions which give rise to the possibility that actual results could differ materially from the Company's expectations expressed in or implied by such forward-looking statements and that the objectives, plans, strategic priorities and business outlook may not be achieved. Consequently, the Company cannot guarantee that any forward-looking statement will materialize, or if any of them do, what benefits the Company will derive from them. Forward-looking statements are provided in this press announcement for the purpose of giving information about management's current expectations and plans as of the date of this press announcement, and allowing investors and others to get a better understanding of the Company's operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose. 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, expectations, 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 belief in its strategies and its brands and their capacity to generate long-term profitable growth, 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 Risk Management" and "Financial Risk Management" sections of the 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 2023.
This is not an exhaustive list of the factors that may affect the Company's forward-looking statements. 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 2023 are available online at www.sedar.com.
Montreal, June 21, 2022
Stephen F. Reitman
SOURCE Reitmans (Canada) Limited
For further information: Stephen F. Reitman, President and Chief Executive Officer, Telephone: (514) 384-1140, Corporate Website: www.reitmanscanadalimited.com