Reitmans Ord Shs V.RET

RE:RE:RE:RE:RE:Management Compensation

[Mephistopheles3]

• Capex forecast is not that bad to do, you can use the $10 million that management gave and which is not super far off the actuals for last year.

• The big issue is with using adjusted EBITDA which is a misrepresentation of operations as I believe (and someone can tell me if I'm wrong) it excludes all lease payments on their stores.  This is because under IFRS, the stores get capitalized and the lease payments flow through the cash flow statement with an implicit interest rate expense and the stores are depreciated . Therefore by using EBITDA, you are ignoring all lease payments which is huge and has a large impact on operations if you add them back.  This is why I also thought adjusted EBITDA looks strong when first investing- but it's really not when you consider the lease payments.

• You also have to account for income taxes which is something that most investors I"m seeing do a P/E multiple or whatever are not considering.  RET currenty has losses carryforrward to last a little while, $100+ million or so based on the notes in the FS since they were showing a deferred tax asset.  But a proper DCF would take into account when they would become taxable which would be a few years in the future (hopefully). 

•   I can't estimate GP right now, but it should be shaved a few points from last year due to the strength of the US dollar and the increase in supply chain costs.  I'll wait until the next results are out and try to see where GP will land.