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Press release from CNW Group

Le Château reports third quarter results

Friday, December 07, 2012

Le Château reports third quarter results17:15 EST Friday, December 07, 2012MONTREAL, Dec. 7, 2012 /CNW Telbec/ - Le Château Inc. (TSX: CTU.A), a leading Canadian brand in specialty retailing, offering a broad array of contemporary fashion apparel, accessories and footwear for style-conscious women and men, today reported its results for the third quarter ended October 27, 2012.Sales for the third quarter amounted to $63.7 million, a decrease of 9.5% from $70.4 million for the third quarter ended October 29, 2011. Comparable store sales decreased 9.3% for the third quarter versus the same period a year ago and continue to be impacted by the emphasis on our inventory reduction strategy resulting in lower average selling prices. In addition, store traffic continued to be impacted by consumers remaining cautious with discretionary spending.Included in comparable store sales are online sales which increased 92% for the third quarter. While the contribution from online sales remains a small percentage of overall sales, the e-commerce business continues to gain traction and is expanding customer reach.Net loss for the third quarter amounted to $3.6 million or $(0.14) per share (diluted) compared to a net loss of $4.1 million or $(0.17) per share the previous year. Earnings before interest, income taxes, depreciation and amortization ("EBITDA") for the third quarter amounted to $252,000 or 0.4% of sales, compared to a negative amount of $104,000 last year. The increase of $356,000 in EBITDA for the third quarter was primarily attributable to cost reduction initiatives resulting in a decline of $6.4 million in selling, general and administrative expenses offset by a $6.0 million decrease in gross margin.Nine-month ResultsNet loss for the nine-month period ended October 27, 2012 amounted to $8.9 million or $(0.35) per share (diluted) compared to a net loss of $3.5 million or $(0.15) per share the previous year. EBITDA for the first nine months amounted to $5.5 million or 2.9% of sales, compared to $11.4 million or 5.2% of sales last year.Sales for the nine months ended October 27, 2012 decreased 11.9% to $194.0 million from $220.2 million last year. Comparable store sales decreased 12.4% versus the same period a year ago for the reasons stated above.During the first nine months of the year, the Company opened two new stores and, as planned, closed ten stores. Total square footage for the Le Château network at the end of the third quarter ended October 27, 2012 amounted to 1,282,000 square feet.Fourth Quarter of Fiscal 2012For the first five weeks ended December 1, 2012, total retail sales decreased 5.8% and comparable store sales decreased 4.8% compared to the same period last year.Appointment of new directorsThe Company also announced that Andrew M. Cohen and Michael Pesner have been appointed to the Board of Directors. Mr. Cohen and Mr. Pesner are replacing Neil Kravitz and Max Mendelsohn who have left the Board.Mr. Cohen has more than 25 years of experience as a lawyer and is a partner at Heenan Blaikie. He is a member of the Bars of the Provinces of Quebec and Ontario. He has acted as an officer or director of several subsidiaries of multinational companies doing business in Canada.Michael Pesner, CPA, CA, has been President of Hermitage Canada Finance Inc. since 2002, a firm specializing in financial advisory services. He was previously a senior partner in financial advisory services at KPMG LLP, Chartered Accountants. Mr. Pesner is also a director of several public companies.ProfileLe Château is a leading Canadian brand in specialty retailing, offering a broad array of contemporary fashion apparel, accessories and footwear for style-conscious women and men. The Le Château brand is sold exclusively through the Company's 235 retail locations, of which 234 are located in Canada. The Company's retail locations are primarily found in major urban shopping malls, as well as street-front locations with high pedestrian traffic. In addition, the Company has 10 stores under license in the Middle East. Le Château's web-based marketing is further broadening the Company's customer base among internet shoppers in both Canada and the United States. With its 53-year tradition of vertical integration, emphasizing a design and manufacturing approach to retailing, Le Château is unique among Canadian fashion merchants. Non-GAAP MeasuresIn addition to discussing earnings measures in accordance with IFRS, this press release provides EBITDA as a supplementary earnings measure. Depreciation and amortization includes the write-off and impairment of property and equipment. EBITDA is provided to assist readers in determining the ability of the Company to generate cash from operations and to cover financial charges. It is also widely used for valuation purposes for public companies in our industry.The Company also discloses comparable store sales which are defined as sales generated by stores that have been open for at least one year.The above measures do not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies.Forward-Looking StatementsThis news release may contain forward-looking statements relating to the Company and/or the environment in which it operates that are based on the Company's expectations, estimates and forecasts. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict and/or are beyond the Company's control. A number of factors may cause actual outcomes and results to differ materially from those expressed. These factors include those set forth in other public filings of the Company. Therefore, readers should not place undue reliance on these forward-looking statements. In addition, these forward-looking statements speak only as of the date made and the Company disavows any intention or obligation to update or revise any such statements as a result of any event, circumstance or otherwise except to the extent required under applicable securities law.Factors which could cause actual results or events to differ materially from current expectations include, among other things: the ability of the Company to successfully implement its business initiatives and whether such business initiatives will yield the expected benefits; competitive conditions in the businesses in which the Company participates; changes in consumer spending; general economic conditions and normal business uncertainty; customer preferences towards product offerings; seasonal weather patterns; fluctuations in foreign currency exchange rates; changes in the Company's relationship with its suppliers; interest rate fluctuations and other changes in borrowing costs; and changes in laws, rules and regulations applicable to the Company.The Company's unaudited interim condensed financial statements and Management's Discussion and Analysis for the third quarter ended October 27, 2012 are available online at www.sedar.comCONSOLIDATED BALANCE SHEETS      (Unaudited)(In thousands of Canadian dollars) As at October 27, 2012 As atOctober 29, 2011 As atJanuary 28, 2012ASSETS      Current assets      Cash and cash equivalents$3,269$-$7,193Accounts receivable 2,259 2,127 2,358Income taxes refundable 4,504 6,230 2,137Derivative financial instruments 188 444 129Inventories 134,190 118,972 119,325Prepaid expenses 1,746 2,283 1,564Total current assets 146,156 130,056 132,706Property and equipment 88,570 97,460 95,744Intangible assets 5,030 5,470 5,344 $239,756$232,986$233,794       LIABILITIES AND SHAREHOLDERS' EQUITY      Current liabilities      Bank indebtedness$29,814$5,213$-Trade and other payables 20,065 28,090 21,820Dividend payable - 1,983 -Deferred revenue 3,209 3,169 3,918Current portion of provisions 128 701 300Current portion of long-term debt  10,823 16,445 16,323Total current liabilities 64,039 55,601 42,361Long-term debt 16,711 16,545 29,145Provisions 359 76 120Deferred income taxes 2,970 3,011 2,954Deferred lease credits 16,177 15,607 16,109Total liabilities 100,256 90,840 90,689       Shareholders' equity      Share capital 42,740 37,729 37,729Contributed surplus 2,544  2,287 2,328Retained earnings 94,081 101,814 102,956Accumulated other comprehensive income 135 316 92Total shareholders' equity 139,500 142,146 143,105 $239,756$232,986$233,794CONSOLIDATED STATEMENTS OF LOSS(Unaudited)For the three months endedFor the nine months ended(In thousands of Canadian dollars, except per share information)October 27, 2012October 29, 2011October 27, 2012October 29, 2011Sales$63,736$70,412$194,027$220,181Cost of sales and expenses        Cost of sales 21,311 21,949 61,832  70,464Selling 38,157 43,557 115,021 123,866General and administrative 9,014 10,311 27,390 29,587  68,482 75,817 204,243 223,917         Results from operating activities (4,746) (5,405) (10,216) (3,736)Finance costs 823 455 2,391 1,442Finance income (4) (27) (12) (210)Loss before income taxes (5,565) (5,833) (12,595) (4,968)Income tax recovery (1,940) (1,690) (3,720) (1,440)Net loss$(3,625)$(4,143)$(8,875)$(3,528)         Net loss per share        Basic$(0.14)$(0.17)$(0.35)$(0.15)Diluted (0.14) (0.17) (0.35)     (0.15)         Weighted average number of shares outstanding ('000) 25,814 24,789 25,130 24,789  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(Unaudited) For the three months ended For the nine months ended(In thousands of Canadian dollars)October 27, 2012October 29, 2011October 27, 2012October 29, 2011Net loss$(3,625)$(4,143)$(8,875)$(3,528)         Other comprehensive income        Change in fair value of forward exchange contracts 188 527 90 (932)Income tax (expense) recovery (53) (153) (25) 270  135 374 65 (662)Realized forward exchange contracts reclassified to net loss (69) 496 (31) 1,494Income tax (expense) recovery 19 (144) 9 (433)  (50) 352 (22) 1,061Total other comprehensive income 85 726 43 399Comprehensive loss$(3,540)$(3,417)$(8,832)$(3,129)                  CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY        (Unaudited)For the three months endedFor the nine months ended(In thousands of Canadian dollars)October 27, 2012October 29, 2011October 27, 2012October 29, 2011         SHARE CAPITAL$37,729$37,729$37,729$37,729Balance, beginning of period         Issuance of subordinate voting shares upon conversion of long-term debt 5,011 - 5,011 -Balance, end of period$42,740$37,729$42,740 $37,729         CONTRIBUTED SURPLUS        Balance, beginning of period$2,426$2,216$2,328$2,006Stock-based compensation expense 118 71 216  281Balance, end of period$2,544$2,287$2,544 $2,287         RETAINED EARNINGS        Balance, beginning of period$97,706$107,940$102,956$116,001Net loss (3,625) (4,143) (8,875) (3,528)Dividends declared - (1,983) - (10,659)Balance, end of period$94,081$101,814$94,081 $101,814         ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)        Balance, beginning of period$50$(410)$92$(83)Other comprehensive income for the period 85 726 43 399Balance, end of period$135$316$135$316         Total shareholders' equity$139,500$142,146$139,500$142,146                  CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)For the three months endedFor the nine months ended(In thousands of Canadian dollars)October 27, 2012October 29, 2011October 27, 2012October 29, 2011OPERATING ACTIVITIES        Net loss$(3,625)$(4,143)$(8,875)$(3,528)Adjustments to determine net cash from operating activities         Depreciation and amortization 4,849 4,834 14,768 14,405 Write-off and impairment of property and equipment 149 467 985 722 Amortization of deferred lease credits (338) (376) (914) (855) Deferred lease credits 482 178 982 526 Stock-based compensation 118 71 216 281 Provisions 56 (140) 67 (697) Finance costs 823 455 2,391 1,442 Finance income (4) (27) (12) (210) Interest paid (820) (461) (2,253) (1,460) Interest received 5 133 17 512 Income tax recovery (1,940) (1,690) (3,720) (1,440)  (245) (699) 3,652 9,698Net change in non-cash working capital items related to operations (6,136) (15,642) (17,820) (26,180)  (6,381) (16,341) (14,168) (16,482)Income taxes refunded (paid) 625 338 1,618 (1,161)Cash flows related to operating activities (5,756) (16,003) (12,550) (17,643)         FINANCING ACTIVITIES        Proceeds of long-term debt -  - - 10,024Repayment of long-term debt (4,258) (4,591) (12,923) (13,214)Dividends paid -  (4,338) - (13,014)Cash flows related to financing activities (4,258) (8,929) (12,923) (16,204)         INVESTING ACTIVITIES        Decrease in short-term investments - 18,580 - 30,300Additions to property and equipment and intangible assets (1,292) (6,166) (8,265) (19,327)Cash flows related to investing activities (1,292) 12,414 (8,265)  10,973         Decrease in cash and cash equivalents, net of bank indebtedness (11,306) (12,518) (33,738) (22,874)Cash and cash equivalents, net of bank indebtedness, beginning of period (15,239) 7,305 7,193  17,661Cash and cash equivalents, net of bank indebtedness, end of period$(26,545)$(5,213)$(26,545)$(5,213)    SOURCE: LE CHATEAU INC.For further information: Emilia Di Raddo, CPA, CA, President (514) 738-7000 Johnny Del Ciancio, CPA, CA, Vice-President, Finance, (514) 738-7000 MaisonBrison:  Pierre Boucher, (514) 731-0000