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Press release from CNW Group

Reitmans (Canada) Limited announces its results for the nine months ended October 29, 2011

Wednesday, November 30, 2011

Reitmans (Canada) Limited announces its results for the nine months ended October 29, 201117:16 EST Wednesday, November 30, 2011MONTREAL, Nov. 30, 2011 /CNW Telbec/ - Sales for the nine months ended October 29, 2011 decreased 3.9% to $759,443,000 as compared with $790,286,000 for the nine months ended October 30, 2010. Same store sales1 decreased 5.2%.  Sales for the nine months ended October 29, 2011 as compared to the nine months ended October 30, 2010 were impacted by weaker customer traffic as consumers were faced with higher personal debt levels, high commodity costs and concern over economic conditions.  The Company's gross margin decreased from 67.7% to 65.7% for the nine months ended October 29, 2011.  While the strength of the Canadian dollar in the nine months ended October 29, 2011 was favourable to the gross margin, this improvement was offset by a more promotional environment which negatively impacted gross margin.  The average rate for a US dollar in the first nine months of fiscal 2012 was $0.98 Canadian as compared to $1.03 Canadian in the first nine months of fiscal 2011.  EBITDA1 for the nine months ended October 29, 2011 decreased 29.7% to $104,767,000 as compared with $148,975,000 last year.  Net earnings decreased 43.0% to $42,865,000 or $0.65 diluted earnings per share as compared with $75,168,000 or $1.11 diluted earnings per share last year.Sales for the third quarter ended October 29, 2011 decreased 3.2% to $254,072,000 as compared with $262,515,000 for the third quarter ended October 30, 2010. Same store sales decreased by 5.8%. The Company's gross margin decreased from 66.2% to 65.8% for the third quarter ended October 29, 2011. While the strength of the Canadian dollar in the third quarter ended October 29, 2011 was favourable to the gross margin, this improvement was offset by a more promotional environment which negatively impacted gross margin.  The average rate for a US dollar in the third quarter ended October 29, 2011 was $1.00 Canadian as compared to $1.03 Canadian in the third quarter ended October 30, 2010. EBITDA for the third quarter ended October 29, 2011 decreased by $11,566,000 or 26.6% to $31,845,000 as compared with $43,411,000 last year.  Net earnings decreased 49.0% to $10,561,000 or $0.16 diluted earnings per share as compared to $20,692,000 or $0.31 diluted earnings per share for the same period last year.On October 19, 2011 the Company announced its plan to close its 25 Cassis stores, primarily through conversion to other Company banners.  In the third quarter ended October 29, 2011 the Company has recorded costs associated with store conversions and closures, primarily related to fixed asset impairment losses and employee severance costs, of $5,100,000 ($3,700,000 after tax).During the third quarter, the Company opened 14 new stores, comprised of 5 Reitmans, 1 Smart Set, 1 RW & CO., 3 Thyme Maternity, 1 Cassis, 1 Penningtons and 2 Addition Elle.  Four stores were closed, comprised of 2 Reitmans and 2 Penningtons.  At October 29, 2011, there were 975 stores in operation, consisting of 366 Reitmans, 158 Smart Set, 68 RW & CO., 77 Thyme Maternity, 25 Cassis, 158 Penningtons and 123 Addition Elle, as compared with a total of 979 stores as at October 30, 2010.Sales for the month of November (the four weeks ended November 26, 2011) decreased 2.2% with same store sales decreasing 2.3%.At the Board of Directors meeting held on November 30, 2011, a quarterly cash dividend (constituting eligible dividends) of $0.20 per share on all outstanding Class A non-voting and Common shares of the Company was declared, payable January 26, 2012 to shareholders of record on January 6, 2012.As reported in the November 24, 2011 press release, the Company received approval from the Toronto Stock Exchange to proceed with a normal course issuer bid, under which the Company may purchase up to 2,579,895 Class A non-voting shares, representing 5% of the issued and outstanding Class A non-voting shares as at November 14, 2011. The bid commenced on November 28, 2011 and may continue to November 27, 2012.Effective for the first quarter ended April 30, 2011, Reitmans began reporting its financial results in accordance with International Financial Reporting Standards ("IFRS"), including comparative information.  Previously reported financial results prepared in accordance with Canadian generally accepted accounting principles have been presented to conform to the new standards adopted.1Non-GAAP Financial MeasuresIn addition to discussing earnings in accordance with IFRS, this press release provides EBITDA as a supplementary earnings measure, which is defined as earnings before income taxes, dividend income, interest income, impairment losses on available-for-sale financial assets, interest expense and depreciation, amortization and impairment losses related to property and equipment.  The Company also discloses same store sales, which are defined as sales generated by stores that have been open for at least one year.  The Company believes these measures provide meaningful information on the Company's performance and operating results. However, readers should know that these non-GAAP financial measures have no standardized meaning as prescribed by IFRS and may not be comparable to similar measures presented by other companies.  Accordingly, they should not be considered in isolation.Forward-Looking StatementsAll 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. Consequently, actual future results may differ materially from the anticipated results expressed in forward-looking statements. The reader should not place undue reliance on the 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 unaudited interim condensed financial statements including notes and Management's Discussion and Analysis for the third quarter ended October 29, 2011 are available online at www.sedar.com.Montreal, November 30, 2011 Jeremy H. ReitmanChairman and Chief Executive Officer Telephone:  Corporate Website:(514) 385-2630www.reitmans.caREITMANS (CANADA)LIMITEDCONDENSED STATEMENTS OF EARNINGS(Unaudited)(in thousands of Canadian dollars except per share amounts)   For the nine months endedFor thethree months ended October 29,2011October 30, 2010October 29, 2011October30, 2010        Sales$759,443$790,286$254,072$262,515Cost of goods sold 260,374 255,458 86,982 88,715Gross profit 499,069 534,828 167,090 173,800Selling and distribution expenses 408,947 391,039  144,125 132,723Administrative expenses 33,527 39,533 12,356 13,258Results from operating activities 56,595 104,256 10,609 27,819         Finance income 3,546 3,511 4,088 1,996Finance costs 969 583  241 189Earnings before income taxes1 59,172 107,184  14,456 29,626         Income taxes 16,307 32,016 3,895 8,934         Net earnings$42,865$75,168$10,561$20,692         Earnings per share:         Basic$0.65$1.12$0.16$0.31 Diluted 0.65 1.11 0.16 0.31 1A reconciliation of earnings before income taxes to earnings before income taxes, dividend income, interest income, impairment loss on available-for-sale financial assets, interest expense and depreciation, amortization and impairment losses ("EBITDA") is as follows: Earnings before income taxes$59,172$107,184$14,456$29,626Dividend income 2,598 1,941 850 655Interest income 948 733 336 375Impairment loss on available-for-sale financial assets 73 - 73 -Interest expense 520 583 168 189Depreciation, amortization and impairment losses 48,548 43,882 18,334 14,626  EBITDA$104,767$148,975$31,845$43,411REITMANS (CANADA) LIMITEDCONDENSED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)(in thousands of Canadian dollars)   For the nine months ended For the three months ended October 29, 2011October 30,2010 October 29, 2011October 30, 2010          Net earnings$42,865$75,168 $10,561$20,692Other comprehensive income:          Net unrealized (loss) gain on available-for-sale financial assets arising during the period (net of tax of $121 for the nine months and $246 for the three months ended October 29, 2011; $394 for the nine months and $250 for the three months ended October 30, 2010) (808) 2,643  (1,647) 1,674 Reclassification of impairment loss on available-for-sale financial assets to net earnings (net of tax of $9)  64 -  64 -          Total comprehensive income$42,121$77,811 $8,978$22,366REITMANS (CANADA) LIMITEDCONDENSED BALANCE SHEETS (Unaudited)(in thousands of Canadian dollars)    October 29, 2011 October 30, 2010 January 29, 2011ASSETS CURRENT ASSETS  Cash and cash equivalents$159,309 $218,944 $230,034 Marketable securities 69,799  51,345  70,413 Trade and other receivables  3,516  3,622  2,866 Income taxes recoverable 7,396  -  - Inventories 107,591  94,078  73,201 Prepaid expenses  13,964  13,095  12,491  Total Current Assets  361,575  381,084  389,005         NON-CURRENT ASSETS         Property and equipment 184,666  202,379  193,064 Intangibles  15,962  11,740  13,841 Goodwill 42,426  42,426  42,426 Deferred income taxes  22,492  20,937  21,021  Total Non-Current Assets 265,546  277,482  270,352  TOTAL ASSETS$627,121 $658,566 $659,357  LIABILITIES ANDSHAREHOLDERS' EQUITY CURRENT LIABILITIES  Trade and other payables$65,830 $68,617 $64,093 Deferred revenue  9,279  14,768  19,834 Income taxes payable -  7,711  5,998 Current portion of long-term debt  1,451  1,363  1,384  Total Current Liabilities 76,560  92,459  91,309  NON-CURRENT LIABILITIES  Other payables 11,022  9,929  10,180 Deferred revenue 2,323  2,677  2,384 Deferred lease credits 18,513  19,591  19,011 Long-term debt 8,951  10,402  10,047 Pension liability 13,948  12,414  13,626  Total Non-Current Liabilities 54,757  55,013  55,248  SHAREHOLDERS' EQUITY  Share capital 31,512  27,985  29,614 Contributed surplus 6,462  6,134  6,266 Retained earnings 451,208  468,977  469,554 Accumulated other comprehensive income 6,622  7,998  7,366  Total Shareholders' Equity 495,804  511,094  512,800  TOTAL LIABILITIES ANDSHAREHOLDERS' EQUITY$627,121 $658,566 $659,357REITMANS (CANADA) LIMITEDCONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY(Unaudited)(in thousands of Canadian dollars)    For the nine months ended  October 29, 2011 October30, 2010      SHARE CAPITAL     Balance, beginning of the period$29,614 $25,888 Cash consideration on exercise of share options 2,133  2,273 Ascribed value credited to share capital from exercise of share options 545  555 Cancellation of shares pursuant to share repurchase program (780)  (731)Balance, end of the period 31,512  27,985      CONTRIBUTED SURPLUS     Balance, beginning of the period 6,266  5,164 Share-based compensation costs 741  1,525 Ascribed value credited to share capital from exercise of share options (545)  (555)Balance, end of the period 6,462  6,134      RETAINED EARNINGS     Balance, beginning of the period 469,554  461,845 Net earnings 42,865  75,168 Dividends (39,581)  (38,655) Premium on repurchase of Class A non-voting shares (21,630)  (29,381)Balance, end of the period 451,208  468,977      ACCUMULATED OTHER COMPREHENSIVE INCOME     Balance, beginning of the period 7,366  5,355 Net unrealized (loss) gain on available-for-sale financial assets arising during the period (net of tax of $121; $394 for the nine months ended October 30, 2010) (808)  2,643 Reclassification of impairment loss on available-for-sale financial assets to net earnings (net of tax of $9) 64  -Balance, end of the period 6,622  7,998      Total Shareholders' Equity$495,804 $511,094REITMANS (CANADA) LIMITEDCONDENSED STATEMENTS OF CASH FLOWS (Unaudited)(in thousands of Canadian dollars)   For the nine months endedFor the three months ended October 29, 2011October 30, 2010October 29, 2011October 30, 2010CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES         Net earnings$42,865$75,168$10,561$20,692 Adjustments for:          Depreciation, amortization and impairment losses 48,548 43,882  18,334 14,626  Share-based compensation costs 741 1,525  (153) 522  Amortization of deferred lease credits  (3,468) (3,731)  (1,148) (1,236)  Deferred lease credits 2,970 2,713  2,146 1,549  Pension contribution (816) (465)  (459) (155)  Pension expense 1,138 1,014  380 338  Impairment loss on available-for-sale financial assets  73  -  73 -  Foreign exchange loss 2,793 358 342 198  Interest and dividend income, net  (3,024) (2,091) (1,016) (841)  Interest paid (522) (583)  (170) (189)  Interest received  969 770 336 344  Dividends received 2,592 1,817 866 651  Income taxes  16,307 32,016 3,895 8,934    111,166 152,393  33,987 45,433 Changes in:            Trade and other receivables  (665) (609) (809) (1,005)  Inventories  (34,390) (30,951)  (26,114) (25,649)  Prepaid expenses     (1,473) (2,085)  300 1,121  Trade and other payables 3,531 13,367 7,265 15,271  Deferred revenue  (10,616) (1,191) (5,066) 2,446 Cash generated from operating activities  67,553 130,924 9,563 37,617 Income taxes received  - 5,870  - 5,856 Income taxes paid (31,060) (37,870)  (3,546) (8,529) Net cash flows from operating activities 36,493 98,924 6,017 34,944         CASH FLOWS USED IN INVESTING ACTIVITIES         Purchases of marketable securities (315) (282) (105) (105) Additions to property and equipment and intangibles  (43,223) (40,457) (18,604) (16,514) Cash flows used in investing activities  (43,538) (40,739) (18,709) (16,619)         CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES         Dividends paid (39,581) (38,655)  (13,007) (13,241) Purchase of Class A non-voting shares for cancellation  (22,410) (30,112)  (22,410) - Repayment of long-term debt  (1,029) (966)  (349) (327) Proceeds from exercise of share options  2,133 2,273 617 849 Cash flows used in financing activities (60,887)  (67,460)  (35,149) (12,719)         FOREIGN EXCHANGE LOSS ON CASH HELD IN FOREIGN CURRENCY (2,793) (358) (342) (198)         NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS  (70,725) (9,633) (48,183) 5,408         CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 230,034 228,577 207,492 213,536         CASH AND CASH EQUIVALENTS, END OF THE PERIOD$159,309$218,944      $ 159,309      $218,944For further information: Jeremy H. Reitman Chairman and Chief Executive Officer   Telephone:   (514) 385-2630 Corporate Website: www.reitmans.ca