Reitmans (Canada) Limited Reports Second Quarter Fiscal 2023 Financial Results

Q2 revenue increased by 33.0% to $229.2 million
Q2 Adjusted ROA1 increased by 193% to $37.8 million
Q2 Adjusted EBITDA from continuing operations1 increased by 144% to $39.6 million

MONTREAL, Sept. 22, 2022 /CNW/ - The Company is very encouraged with its results of operating activities for the second quarter of fiscal 2023. Results from operating activities for the second quarter of fiscal 2023 are the strongest in the last ten comparative quarters. The Company successfully emerged from the Companies' Creditors Arrangement Act ("CCAA") proceedings in January 2022 with a clear vision and direction. Effective restructuring of the banners, new branding initiatives and a customer-centric product offering all contributed to the success reflected in our year to date fiscal 2023 results. The Company successfully mitigated difficult economic headwinds and supply chain delays by closely managing logistics and inventory levels. In addition, the Company benefited from increased consumer spending and favorable year-over-year exchange rates. Short-term, preferential rent arrangements put in place while under CCAA protection also contributed to the quarter performance.

Unless otherwise indicated, all comparisons of results for the 13 weeks ended July 30, 2022 ("second quarter of 2023") are against results for the 13 weeks ended July 31, 2021 ("second quarter of 2022") and all comparisons of results for the 26 weeks ended July 30, 2022 ("year to date fiscal 2023") are against results for the 26 weeks ended July 31, 2021 ("year to date fiscal 2022").

13 weeks ended July 30, 2022

Sales for the second quarter of 2023 increased by $56.9 million, or 33.0%, to $229.2 million. More of the Company's stores were open as there were no government imposed lockdowns during the second quarter of 2023 as compared to a partial lockdown of the Company's stores network during the second quarter of 2022. Increased customer traffic in stores, higher average transaction value and less markdowns and promotional discounting contributed to the increase in sales, despite an overall net reduction of 7 stores. The Company's e-commerce sales continue to be strong representing approximately 25%1 of the total sales for the second quarter of 2023.

Gross profit for the second quarter of 2023 increased $43.0 million to $138.7 million as compared with $95.7 million for the second quarter of 2022. Gross profit as a percentage of sales for the second quarter of 2023 increased to 60.5% from 55.5% for the second 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 second quarter of 2023, partially offset by higher supply chain costs, including merchandise freight costs as ongoing global shipping industry disruptions required utilizing air and premium-rate ocean freight shipments to meet customer demand.

Net earnings from continuing operations for the second quarter of 2023 was $37.3 million ($0.76 basic and diluted earnings per share) as compared with $23.9 million net earnings ($0.49 basic and diluted earnings per share) for the second quarter of 2022.

Adjusted results from operating activities ("Adjusted ROA") for the second quarter of 2023 was $37.8 million as compared with $12.9 million for the second quarter of 2022, an increase of $24.9 million.

Adjusted EBITDA from continuing operations for the second quarter of 2023 was $39.6 million as compared to $16.2 million for the second quarter of 2022, an increase of $23.4 million.

26 weeks ended July 30, 2022

Sales for the year to date fiscal 2023 increased by $89.6 million, or 30.5%, to $383.1 million. More of the Company's stores were open as there were no government imposed lockdowns during the year to date fiscal 2023 as compared to a partial lockdown of the Company's stores network during the year to date fiscal 2022. Increased customer traffic in stores, higher average transaction value and less markdowns and promotional discounting contributed to the increase in sales, despite an overall net reduction of 7 stores. The Company's e-commerce sales continue to be strong representing approximately 27%1 of the total sales for the year to date fiscal 2023.

Gross profit for the year to date fiscal 2023 increased $67.1 million to $222.7 million as compared with $155.6 million for the year to date fiscal 2022. Gross profit as a percentage of sales for the year to date fiscal 2023 increased to 58.1% from 53.0% for the year to date fiscal 2022. The increase both in gross profit and as a percentage of sales is primarily attributable to lower markdowns and promotional activity in the year to date fiscal 2023 combined with a favourable foreign exchange impact on U.S. dollar denominated purchases included in cost of goods sold, partially offset by higher supply chain costs, including merchandise freight costs as ongoing global shipping industry disruptions required utilizing air and premium-rate ocean freight shipments to meet customer demand.

Net earnings from continuing operations for the year to date fiscal 2023 was $35.6 million ($0.73 basic and diluted earnings per share) as compared with $23.9 million ($0.49 basic and diluted earnings per share) for the year to date fiscal 2022, an increase of $11.7 million.

Adjusted ROA for the year to date fiscal 2023 was $36.8 million as compared with a loss of $3.5 million for the year to date fiscal 2022, an increase of $40.3 million.

Adjusted EBITDA from continuing operations for the year to date fiscal 2023 was $42.7 million as compared to $4.0 million for the year to date fiscal 2022, an increase of $38.7 million.

About Reitmans (Canada) Limited

The Company is a leading women's specialty apparel retailer with retail outlets throughout Canada. As at July 30, 2022, the Company operated 404 stores consisting of 236 Reitmans, 91 Penningtons and 77 RW&CO.

1Non-GAAP Financial Measures & Supplementary Financial measures

This press announcement makes reference to certain non-GAAP 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.

Non-GAAP Financial Measures

This press announcement discusses adjusted earnings from continuing operations before interest, taxes, depreciation and amortization ("Adjusted EBITDA from continuing operations") and adjusted results from operating activities ("Adjusted ROA") and both are considered non-GAAP financial measures. This press announcement also indicates Adjusted EBITDA from continuing operations as a percentage of sales and is considered a non-GAAP financial ratio. The intent of presenting Adjusted EBITDA from continuing operations and Adjusted ROA is to provide additional useful information to investors and analysts. Adjusted EBITDA from continuing operations is defined as net earnings (loss) before income tax expense/recovery, interest income, interest expense, depreciation, amortization, impairment of non-financial assets, adjusted for the impact of certain items, including a deduction of interest expense and depreciation relating to leases accounted for under IFRS 16, Leases, Federal subsidies and restructuring costs and recoveries. Management believes that Adjusted EBITDA from continuing operations 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 from continuing operations as a percentage of sales indicates how much liquidity is generated for each dollar of sales. The exclusion of interest income and expenses, other than interest expense related to lease liabilities as explained hereafter, eliminates the impact on earnings derived from non-operational activities. The exclusion of depreciation, amortization and impairment charges, other than depreciation related to right-of -use assets as explained hereafter, eliminates the non-cash impact, and the exclusion of restructuring items and Federal subsidies presents the results of the on-going business. Under IFRS 16, Leases, the characteristics of some leases result in lease payments being recognized in net earnings in the period in which the performance or use occurs while other leases are recorded as right-of-use assets with a corresponding lease liability recognized, which results in depreciation of those assets and interest expense from those liabilities. Management is presenting its Adjusted EBITDA from continuing operations to reflect the payments of its store and equipment lease obligations on a consistent basis. As such, the initial add-back of depreciation of right-of-use assets and interest on lease obligations are removed from the calculation of Adjusted EDITDA from continuing operations, as this better reflects the operational cash flow impact of its leases.

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-GAAP Financial Measures

The tables below provide a reconciliation of net earnings from continuing operations to Adjusted EBITDA from continuing operations and results from operating activities to Adjusted ROA:

Supplementary Financial Measures

This press announcement discloses the Company's e-commerce net sales as a percentage of the Company's net sales and is defined as the net sales recognized from its e-commerce in relation to the Company's net sales. This supplementary financial measure does not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures used by other companies. Management uses this measure to analyze trends in the customers' cross-channel behaviour for operating and capital expenditure funding allocation decisions.

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 second 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 second quarter of 2023 are available online at www.sedar.com.

Montreal, September 22, 2022

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

SOURCE Reitmans (Canada) Limited

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