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Reitmans (Canada) Limited announces its results for the 13 weeks ended April 30, 2022

Jun 21, 2022
5:10pm

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.

COVID-19

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.

Financial Measures

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:


For the first quarter of


2023

2022

Net loss

$       (1.7)

$            -

Depreciation, amortization and net impairment losses

10.9

12.3

Interest income

-

(0.1)

Interest expense on lease liabilities

1.0

1.1

Interest expense on revolving credit facility

0.3

-

Federal subsidies 

(1.2)

(10.3)

Restructuring costs (recoveries), net

0.6

(6.6)

Adjusted EBITDA1 

$        9.9

$       (3.6)

Adjusted EBITDA as % of Sales

6.4 %

(3.0) %


1 The comparative figure has been restated to exclude Federal subsidies of $10.3 million recognized during the first quarter of 2022, as a result of the current definition of Adjusted EBITDA.

 


For the first quarter of


2023

2022

Results from operating activities

$       (0.4)

$        0.4

Federal subsidies

(1.2)

(10.3)

Restructuring costs (recoveries), net

0.6

(6.6)

Adjusted ROA

$       (1.0)

$     (16.5)

 

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, 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
President and Chief Executive Officer
Telephone:                  (514) 384-1140
Corporate Website:    www.reitmanscanadalimited.com

 

REITMANS (CANADA) LIMITED

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF LOSS

(Unaudited)

(in thousands of Canadian dollars except per share amounts)

 




For the 13 weeks ended



April 30, 2022

May 1, 2021





Sales


$   153,859

$   121,250

Cost of goods sold


69,896

61,389

Gross profit


83,963

59,861

Selling and distribution expenses


73,257

57,153

Administrative expenses


10,482

8,874

Restructuring


620

(6,562)

Results from operating activities


(396)

396





Finance income


80

763

Finance costs


1,361

1,137

(Loss) earnings before income taxes


(1,677)

22





Income tax expense


40

24





Net loss


$      (1,717)

$             (2)





Loss per share:




        Basic


$       (0.04)

$       (0.00)

        Diluted


(0.04)

(0.00)






 

 

REITMANS (CANADA) LIMITED

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

(in thousands of Canadian dollars)



For the 13 weeks ended




April 30, 2022

May 1, 2021







Net loss


$    (1,717)

$           (2)


Other comprehensive (loss) income





Items that are or may be reclassified subsequently to net earnings:





Foreign currency translation differences


(7)

198




(7)

198


Items that will not be reclassified to net earnings:





Actuarial gain on defined benefit plan (net of tax of $nil for the 13 weeks ended April 30, 2022)


911

-







Total other comprehensive income


904

198







Total comprehensive (loss) income


$       (813)

$         196


 

REITMANS (CANADA) LIMITED

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(Unaudited)

(in thousands of Canadian dollars)




April 30, 2022

May 1, 2021(1)

January 29, 2022


ASSETS






CURRENT ASSETS






   Cash


$    40,210

$    67,091

$    25,502


   Trade and other receivables


4,923

9,528

7,606


   Inventories


137,505

101,918

118,972


   Prepaid expenses and other assets


36,678

33,788

42,590


           Total Current Assets


219,316

212,325

194,670








NON-CURRENT ASSETS






   Restricted cash


2,759

2,754

2,757


   Property and equipment


63,572

63,928

65,970


   Intangible assets


4,095

9,048

5,613


   Right-of-use assets


51,583

53,174

44,978


   Pension asset


418

-

100


   Deferred income taxes


190

151

186


           Total Non-Current Assets


122,617

129,055

119,604








TOTAL ASSETS


$  341,933

$  341,380

$  314,274








LIABILITIES AND SHAREHOLDERS' EQUITY






CURRENT LIABILITIES






   Revolving credit facility


$    34,439

$             -

$    29,634


   Trade and other payables


53,427

33,731

34,478


   Deferred revenue


12,150

11,315

13,490


   Income taxes payable


535

318

537


   Current portion of lease liabilities


21,954

30,532

20,888


   Liabilities subject to compromise


-

202,170

-


           Total Current Liabilities


122,505

278,066

99,027








NON-CURRENT LIABILITIES






   Lease liabilities


36,413

38,155

31,419


   Pension liability


-

3,278

-


           Total Non-Current Liabilities


36,413

41,433

31,419








SHAREHOLDERS' EQUITY






   Share capital


27,406

27,406

27,406


   Contributed surplus


10,295

10,295

10,295


   Retained earnings (deficit)


146,174

(15,164)

146,980


    Accumulated other comprehensive loss


(860)

(656)

(853)


           Total Shareholders' Equity


183,015

21,881

183,828








TOTAL LIABILITIES AND

        SHAREHOLDERS' EQUITY


$  341,933

$  341,380

$  314,274














(1)     As at May 1, 2021, restricted cash of $2,754 has be classified as non-current assets to correctly reflect the presentation of this caption.

 

REITMANS (CANADA) LIMITED

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

(in thousands of Canadian dollars)



Share
Capital

Contributed
Surplus

Retained
Earnings
(Deficit)

Accumulated
Other
Comprehensive
Loss

Total
Shareholders'
Equity










Balance as at January 30, 2022


$     27,406

$   10,295

$   146,980

$       (853)

$   183,828










Net loss


-

-

(1,717)

-

(1,717)


Total other comprehensive income (loss)


-

-

911

(7)

904


Total comprehensive loss for the period


-

-

(806)

(7)

(813)










Balance as at April 30, 2022


$     27,406

$   10,295

$   146,174

$       (860)

$   183,015


























Balance as at January 31, 2021


$     27,406

$   10,295

$    (15,162)

$       (854)

$     21,685










Net loss


-

-

(2)

-

(2)


Total other comprehensive income


-

-

-

198

198


Total comprehensive (loss) income for the period


-

-

(2)

198

196










Balance as at May 1, 2021


$     27,406

$   10,295

$    (15,164)

$       (656)

$     21,881



























REITMANS (CANADA) LIMITED

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands of Canadian dollars)




For the 13 weeks ended



April 30, 2022

May 1, 2021

CASH FLOWS FROM OPERATING ACTIVITIES




Net loss


$      (1,717)

$            (2)

Adjustments for:




Depreciation, amortization and net impairment losses


10,891

12,298

Foreign exchange (gain) loss


(1,847)

2,024

Gain on lease re-measurements due to restructuring


-

(3,449)

Interest on lease liabilities


1,015

1,137

Interest on revolving credit facility


346

-

Interest income


(34)

(50)

Income tax expense


40

24



8,694

11,982

Changes in:




Trade and other receivables


2,666

1,127

Inventories


(18,533)

(5,796)

Prepaid expenses and other assets


5,912

(1,688)

Pension asset


593

186

Trade and other payables


20,231

2,046

Liabilities subject to compromise


-

(1,624)

Deferred revenue


(1,340)

(1,147)

Cash from operating activities


18,223

5,086

Interest received


51

63

Interest paid


(316)

-

Income taxes paid


(46)

(1,164)

Net cash flows from operating activities


17,912

3,985





CASH FLOWS USED IN INVESTING ACTIVITIES




Additions to property and equipment and intangible assets, net


(2,476)

(936)

Cash flows used in investing activities


(2,476)

(936)





CASH FLOWS USED IN FINANCING ACTIVITIES




Restricted cash


(2)

(1)

Net proceeds from revolving credit facility


4,805

-

Payment of lease liabilities


(7,364)

(9,489)

Cash flows used in financing activities


(2,561)

(9,490)





FOREIGN EXCHANGE GAIN (LOSS) ON CASH HELD IN FOREIGN CURRENCY


1,833

(1,630)





NET INCREASE (DECREASE) IN CASH


14,708

(8,071)





CASH, BEGINNING OF THE PERIOD


25,502

75,162





CASH, END OF THE PERIOD


$     40,210

$     67,091






 

SOURCE Reitmans (Canada) Limited

For further information: Stephen F. Reitman, President and Chief Executive Officer, Telephone: (514) 384-1140, Corporate Website: www.reitmanscanadalimited.com