Reitmans (Canada) Limited announces its results for the three months ended May 3, 2014

MONTREAL, June 10, 2014 /CNW Telbec/ - Sales for the first quarter ended May 3, 2014 were $206,478,000 as compared with $216,861,000 for the first quarter ended May 4, 2013, a decrease of 4.8%.  Same store sales¹ decreased by 3.6%.  Poor weather in the first quarter ended May 3, 2014 contributed to weak demand for spring and summer apparel.  A net reduction of 47 stores contributed to a sales reduction of approximately $5,000,000 in the quarter, as the Company continued to rationalize underperforming locations.  The Company's gross margin for the first quarter ended May 3, 2014 decreased to 59.4% from 64.6% for the first quarter ended May 4, 2013, negatively impacted by the weaker Canadian dollar against the U.S. dollar and increased promotional activity in a highly competitive market.  Net loss for the first quarter ended May 3, 2014 increased to $13,415,000 ($0.21 diluted loss per share) as compared with a net loss of $2,586,000 ($0.04 diluted loss per share) for the first quarter ended May 4, 2013. For the first quarter ended May 3, 2014, adjusted EBITDA¹ was $(4,061,000) as compared with $10,683,000 for the first quarter ended May 4, 2013, a decrease of $14,744,000.

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 of approximately $2,000,000 in the first quarter ended May 3, 2014.  These reductions are anticipated to exceed earlier projected annualized wage and benefit savings of approximately $6,000,000.  Additional savings have been achieved through improved cost management in non-wage areas.

During the quarter, the Company opened 3 new stores and closed 19.  Accordingly, at May 3, 2014, there were 862 stores in operation, consisting of 345 Reitmans, 146 Penningtons, 102 Addition Elle, 77 RW & CO., 68 Thyme Maternity and 124 Smart Set, as compared with a total of 909 stores as at May 4, 2013. The Company operates 23 Thyme Maternity shop-in-shop boutiques in select Babies"R"Us locations in Canada. At May 3, 2014, the Company operated 67 Thyme Maternity shop-in-shop boutiques in the United States which were closed at June 2, 2014.

Sales for the month of May (the four weeks ended May 31, 2014) decreased 1.5% with same store sales¹ increasing 1.2%.

At the Board of Directors meeting held on June 10, 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 July 31, 2014 to shareholders of record on July 17, 2014.

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 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 impairment charges.  The following table reconciles the most comparable GAAP measure, net earnings (loss), 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 loss to adjusted EBITDA for the three months ended May 3, 2014 and May 4, 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 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 first quarter ended May 3, 2014 are available online at www.sedar.com.

Montreal, June 10, 2014

Jeremy H. Reitman
Chairman and Chief Executive Officer

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

REITMANS (CANADA) LIMITED
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SOURCE Reitmans (Canada) Limited