Reitmans (Canada) Limited Announces Year-End Results

MONTRÉAL, April 1, 2015 /CNW Telbec/ -

Twelve months ended January 31, 2015

Sales for the twelve months ended January 31, 2015 were $939.4 million as compared with $960.4 million for the twelve months ended February 1, 2014, a decrease of 2.2%, impacted by a net reduction of 55 stores as the Company closes underperforming locations and converts or closes Smart Set stores. Same store sales increased 1.2% with mall and power centre stores decreasing 0.2% and e-commerce sales increasing 63.5%.  Mall and power centre stores were impacted by e-commerce alternatives, a highly competitive environment and consumers with near record high debt levels.  The initiative to close the Smart Set banner negatively impacted sales, despite same store sales for the Smart Set banner showing positive results.  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 twelve months ended January 31, 2015 was 60.4% compared with 61.9% for the twelve months ended February 1, 2014.  The Company's gross margin includes gains on foreign exchange contracts previously reported in finance income (gain of $10,921 for the twelve months ended January 31, 2015 and $12,455 for the twelve months ended February 1, 2014).

Net earnings for the twelve months ended January 31, 2015 were $13.4 million ($0.21 diluted earnings per share) as compared with net earnings of $10.8 million ($0.17 diluted earnings per share) for the twelve months ended February 1, 2014.  The increase in net earnings was primarily attributable to the closure of non-performing stores and previously reported initiatives aimed at reducing costs across the organization.  For the twelve months ended January 31, 2015, adjusted EBITDA¹ was $64.8 million as compared with $70.5 million in the twelve months ended February 1, 2014, a decrease of $5.7 million or 8.0% largely attributable to lower sales and margins.

On November 25, 2014 the Company announced its plan to close all Smart Set stores.  Management determined that its optimum strategy to improve operating results was to refocus its sales and merchandising efforts either through conversion of Smart Set stores to other Company banners or through store closures.  The majority of the stores that will be converted will occur by October 31, 2015 while the remaining stores are anticipated to close by the year ending January 28, 2017.

The Smart Set banner sales for the twelve months ended January 31, 2015 were $88.9 million as compared to $95.8 million for the twelve months ended February 1, 2014, while losses from operating activities for the twelve months ended January 31, 2015 were $10.0 million as compared to $29.5 million for the twelve months ended February 1, 2014 (including an allocation of general overhead costs).  The Smart Set banner non-cash asset write-offs amounted to $3.1 million for the twelve months ended January 31, 2015.  The Company does not anticipate inventory write-downs or material employee severance costs.

Three months ended January 31, 2015

Sales for the three months ended January 31, 2015 were $236.3 million as compared with $240.7 million for the three months ended February 1, 2014, a decrease of 1.8%, impacted by a net reduction of 55 stores as the Company closes underperforming locations and converts or closes Smart Set stores.  Same store sales increased by 2.1% with mall and power centre stores decreasing 0.6% and e-commerce sales increasing 84.9%. 

The Company's gross margin for the three months ended January 31, 2015 increased to 61.0% from 58.7% for the three months ended February 1, 2014, largely due to improved margins in the plus-size banners and e-commerce. The Company's gross margin includes gains on foreign exchange contracts previously reported in finance income (gain of $10,041 for the three months ended January 31, 2015 and $9,505 for the three months ended February 1, 2014).

Net earnings for the three months ended January 31, 2015 were $4.4 million ($0.07 diluted earnings per share) as compared with a net loss of $2.6 million ($0.04 diluted loss per share) for the three months ended February 1, 2014.  Adjusted EBITDA¹ for the three months ended January 31, 2015 was $14.1 million as compared with $8.1 million for the three months ended February 1, 2014, an increase of $6.0 million or 73.8%.  The increase in net earnings and adjusted EBITDA¹ was primarily attributable to improved gross margins in the fourth quarter of fiscal 2015 combined with reduced operating costs both at store level and head office. 

Dividends

At the Board of Directors meeting held on April 1, 2015, 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 April 30, 2015 to shareholders of record on April 16, 2015.

About Reitmans (Canada) Limited

The Company is a leading ladieswear specialty apparel retailer with retail outlets throughout Canada.  The Company operates 823 stores consisting of 341 Reitmans, 139 Penningtons, 105 Addition Elle, 76 RW & CO., 68 Thyme Maternity and 94 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 are defined as sales generated by stores that have been continuously open during both of the periods being compared and include 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 (loss) to adjusted EBITDA for the three months and fiscal year ended January 31, 2015 and February 1, 2014:

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 year ended January 31, 2015 are available online at www.sedar.com.

Montreal, April 1, 2015

Jeremy H. Reitman
Chairman and Chief Executive Officer

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

SOURCE Reitmans (Canada) Limited