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Press release from CNW Group

Reitmans (Canada) Limited announces its results for the six months ended July 28, 2012

Wednesday, August 29, 2012

Reitmans (Canada) Limited announces its results for the six months ended July 28, 201217:14 EDT Wednesday, August 29, 2012MONTREAL, Aug. 29, 2012 /CNW Telbec/ - Sales for the six months ended July 28, 2012 decreased 1.7% to $496,607,000 as compared with $505,371,000 for the six months ended July 30, 2011. Same store sales1 decreased 1.3%.  Sales continued to be impacted by a difficult retail environment as high fuel and food prices and an increased level of consumer personal debt contributed to a reduction in consumer disposable income for apparel.  The Company's gross margin decreased to 64.7% from 65.7%.  Net earnings decreased 14.4% to $27,661,000 or $0.42 diluted earnings per share as compared with $32,304,000 or $0.48 diluted earnings per share.  Adjusted EBITDA1 decreased 12.6% to $63,720,000 as compared with $72,922,000.Sales for the second quarter ended July 28, 2012 decreased 2.3% to $279,513,000 as compared with $286,075,000 for the second quarter ended July 30, 2011.  Same store sales1 decreased 1.7%.  The Company's gross margin decreased to 64.7% from 65.6%.  The Company recorded net earnings of $27,714,000 ($0.42 diluted earnings per share) as compared with $31,680,000 ($0.48 diluted earnings per share).  Adjusted EBITDA1 decreased by 12.6% to $51,180,000 as compared with $58,553,000.During the second quarter, the Company opened 11 new stores, comprised of 1 Reitmans, 2 RW & CO., 5 Penningtons and 3 Addition Elle.  Eighteen stores were closed, comprised of 5 Reitmans, 1 Smart Set, 5 Penningtons and 7 Addition Elle.  At July 28, 2012, there were 918 stores in operation, consisting of 360 Reitmans, 152 Smart Set, 68 RW & CO., 74 Thyme Maternity, 154 Penningtons and 110 Addition Elle, as compared with a total of 965 stores as at July 30, 2011.In addition to its individual retail outlets the Company operates 18 Thyme Maternity boutiques ("shop-in-shop") in select Babies"R"Us locations in Canada.  In June 2012, the Company announced a partnership with Babies"R"Us to sell Thyme Maternity apparel and accessories in the U.S. Thyme Maternity products will be available in approximately 160 U.S. Babies"R"Us stores later this year.Sales for the month of August (the four weeks ended August 25, 2012) decreased 10.9% with same store sales decreasing 8.1%. On August 15, 2012, the Company announced that it encountered problems with its newly-installed warehouse management systems at its distribution centre, which caused temporary disruptions in the receiving and shipping of merchandise to stores.  The issues adversely impacted sales in August and will have an adverse impact on sales and margins for the third quarter.  The amount of such impact is not known at this time and is difficult to quantify as sales are affected by a number of factors. The situation has now been resolved and the distribution centre is operating properly at this time.At the Board of Directors meeting held on August 29, 2012, 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 October 25, 2012 to shareholders of record on October 11, 2012.1Non-GAAP Financial MeasuresIn addition to discussing earnings in accordance with IFRS, this press release provides adjusted EBITDA as a supplementary earnings measure, which is defined as earnings before income taxes, dividend income, interest income, realized gains or losses on disposal of available-for-sale financial assets, impairment losses on available-for-sale financial assets, interest expense, depreciation, amortization and net 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.The following table reconciles adjusted EBITDA to earnings before income taxes for the three and six months ended July 28, 2012 and July 30, 2011:           For the six months ended For the three months ended July 28, 2012July 30, 2011 July 28, 2012July 30, 2011Earnings before income taxes $36,688,000$44,716,000 $36,898,000$43,847,000Dividend income (1,741,000) (1,748,000)  (867,000) (868,000)Interest income (661,000) (612,000)  (331,000) (328,000)Impairment losses on available-for-sale financial assets 106,000 -  106,000 -Interest expense 308,000 352,000  151,000 173,000Depreciation, amortization and net impairment losses 29,020,000 30,214,000  15,223,000 15,729,000ADJUSTED EBITDA$63,720,000$72,922,000 $51,180,000$58,553,000Forward-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 second quarter ended July 28, 2012 are available online at www.sedar.com.Montreal, August 29, 2012Jeremy H. ReitmanChairman and Chief Executive OfficerTelephone: (514) 385-2630Corporate Website:       www.reitmans.caREITMANS (CANADA) LIMITEDCONDENSED STATEMENTS OF EARNINGS(Unaudited)(in thousands of Canadian dollars except per share amounts)           For the six months ended For the three months ended July 28, 2012July 30, 2011 July 28, 2012July 30, 2011          Sales$496,607$505,371 $279,513$286,075Cost of goods sold 175,386 173,392  98,608 98,451Gross profit 321,221 331,979  180,905 187,624Selling and distribution expenses 264,493 264,822  135,025 135,597Administrative expenses  22,372 21,171  11,414 11,059Results from operating activities 34,356 45,986  34,466 40,968          Finance income 2,868 2,360  2,689 3,052Finance costs 536 3,630  257 173Earnings before income taxes 36,688 44,716  36,898 43,847          Income taxes 9,027 12,412  9,184 12,167          Net earnings$27,661$32,304 $27,714$31,680          Earnings per share:          Basic$0.42$0.49 $0.42$0.48 Diluted 0.42 0.48  0.42 0.48 REITMANS (CANADA) LIMITEDCONDENSED STATEMENTS OF COMPREHENSIVE INCOME(Unaudited)(in thousands of Canadian dollars)           For the six months ended For the three months ended July 28, 2012July 30, 2011 July 28, 2012July 30, 2011          Net earnings$27,661$32,304 $27,714$31,680Other comprehensive income:          Net change in fair value of available-for-sale financial assets arising during the period (net of tax of $129 for the six months and $100 for the three months ended July 28, 2012; $125 for the six months and $65 for the three months ended July 30, 2011) (888) 839  (691) 438 Reclassification of impairment loss on available-for-sale financial assets (net of tax of $14) 92 -  92 -          Total comprehensive income$26,865$33,143 $27,115$32,118REITMANS (CANADA) LIMITEDCONDENSED BALANCE SHEETS(Unaudited)(in thousands of Canadian dollars)        July 28, 2012 July 30, 2011 January 28, 2012ASSETS      CURRENT ASSETS       Cash and cash equivalents$160,132$207,492$196,835 Marketable securities 70,637 71,587 71,442 Trade and other receivables 2,926 2,723 3,033 Derivative financial asset 268 - 751 Income taxes recoverable 6,755 9,377 4,735 Inventories  80,371 81,477 78,285 Prepaid expenses 15,272 14,264 11,902  Total Current Assets 336,361  386,920 366,983       NON-CURRENT ASSETS       Property and equipment 194,251 184,905 184,221 Intangible assets 18,026 14,705 17,057 Goodwill 42,426 42,426 42,426 Deferred income taxes 25,213 20,624 23,174  Total Non-Current Assets 279,916 262,660 266,878       TOTAL ASSETS$616,277$649,580$633,861       LIABILITIES AND SHAREHOLDERS' EQUITY      CURRENT LIABILITIES       Trade and other payables$59,260$58,111$63,875 Derivative financial liability 556 - 1,505 Deferred revenue 9,959 14,364 22,278 Current portion of long-term debt 1,521 1,428 1,474  Total Current Liabilities 71,296 73,903 89,132       NON-CURRENT LIABILITIES       Other payables 11,264 10,729 11,110 Deferred revenue - 2,304 - Deferred lease credits 16,599 17,515 17,317 Long-term debt 7,801 9,323 8,573 Pension liability 15,298 14,027 14,877  Total Non-Current Liabilities 50,962 53,898 51,877       SHAREHOLDERS' EQUITY       Share capital 39,890 31,518 39,890 Contributed surplus 5,694 6,772 5,158 Retained earnings  440,494 474,507 439,067 Accumulated other comprehensive income 7,941 8,982 8,737  Total Shareholders' Equity 494,019 521,779 492,852       TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $616,277$649,580$633,861 REITMANS (CANADA) LIMITEDCONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY(Unaudited)(in thousands of Canadian dollars)    ShareCapitalContributedSurplusRetainedEarningsAccumulatedOtherComprehensiveIncomeTotalShareholders'EquityBalance as at January 29, 2012 $39,890$5,158$439,067$8,737$492,852            Share-based compensation costs  - 536 - - 536Net earnings  - - 27,661 - 27,661Dividends  - - (26,234) - (26,234)Net change in fair value of available-for-sale financial assets (net of tax of $129)  - - - (888) (888)Reclassification of impairment loss on available-for-sale financial assets to net earnings (net of tax of $14)  - - - 92 92            Balance as at July 28, 2012 $39,890$5,694$440,494$7,941$494,019                        Balance as at April 29, 2012 $39,890$5,348$425,897$8,540$479,675            Share-based compensation costs  - 346 - - 346Net earnings  - - 27,714 - 27,714Dividends  - - (13,117) - (13,117)Net change in fair value of available-for-sale financial assets (net of tax of $100)  - - - (691) (691)Reclassification of impairment loss on available-for-sale financial assets to net earnings (net of tax of $14)  - - - 92 92            Balance as at July 28, 2012 $ 39,890$ 5,694$440,494$7,941$494,019                        Balance as at January 30, 2011 $29,614$6,266$468,777$8,143$512,800            Cash consideration on exercise of share options  1,516 - - - 1,516Ascribed value credited to share capital from exercise of share options  388 (388) - - -Share-based compensation costs  - 894 - - 894Net earnings  - - 32,304 - 32,304Dividends  - - (26,574) - (26,574)Net change in fair value of available-for-sale financial assets (net of tax of $125)  - - - 839 839            Balance as at July 30, 2011 $31,518$6,772$474,507$8,982$521,779                        Balance as at May 1, 2011 $31,426$6,291$456,113$8,544$502,374            Cash consideration on exercise of share options  73 - - - 73Ascribed value credited to share capital from exercise of share options  19 (19)  - - -Share-based compensation costs  - 500 - - 500Net earnings  - - 31,680 - 31,680Dividends  - - (13,286) - (13,286)Net change in fair value of available-for-sale financial assets (net of tax of $65)  - - - 438 438            Balance as at July 30, 2011 $31,518$6,772$474,507$8,982$521,779REITMANS (CANADA) LIMITEDCONDENSED STATEMENTS OF CASH FLOWS(Unaudited)(in thousands of Canadian dollars)          For the six months endedFor the three months ended July 28, 2012July 30, 2011July 28, 2012 July 30, 2011CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES         Net earnings$27,661$32,304$27,714$31,680 Adjustments for:          Depreciation, amortization and impairment losses 29,020 30,214 15,223 15,729  Share-based compensation costs 536 894 346 500  Amortization of deferred lease credits (2,258) (2,320) (1,064) (1,106)  Deferred lease credits 1,540 824 895 509  Pension contribution (239) (357) (76) (228)  Pension expense 660 758 330 379  Impairment loss on available-for-sale financial assets 106 - 106 -  Net change in fair value of derivatives (466) - (552) -  Foreign exchange loss (gain) 854 2,451 231 (480)  Interest and dividend income, net (2,094) (2,008) (1,047) (1,023)  Interest paid (308) (352) (151) (173)  Interest received 727 633 359 311  Dividends received 1,738 1,726 870 864  Income tax expense 9,027 12,412 9,184 12,167  66,504 77,179 52,368 59,129 Changes in:          Trade and other receivables 42 144 824 1,512  Inventories  (2,086) (8,276) 22,254 17,589  Prepaid expenses (3,370) (1,773) (2,942) (1,549)  Trade and other payables            (2,981)            (3,734)            (9,527) (9,877)  Deferred revenue  (12,319) (5,550) (3,598) 403 Cash from operating activities 45,790 57,990 59,379 67,207 Income taxes received 4,475 - 4,475 - Income taxes paid (17,446) (27,514) (6,836) (11,948) Net cash flows from operating activities 32,819 30,476 57,018 55,259         CASH FLOWS USED IN INVESTING ACTIVITIES         Purchases of marketable securities (210) (210) (105) (105) Additions to property and equipment and intangible assets (41,499) (24,619) (21,254) (11,457) Cash flows used in investing activities (41,709) (24,829) (21,359) (11,562)         CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES         Dividends paid (26,234)  (26,574) (13,117) (13,286) Repayment of long-term debt (725) (680) (366) (343) Proceeds from exercise of share options - 1,516 - 73 Cash flows used in financing activities (26,959) (25,738) (13,483) (13,556)         FOREIGN EXCHANGE (LOSS) GAIN ON CASH HELD IN FOREIGN CURRENCY (854) (2,451) (231) 480NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (36,703) (22,542) 21,945 30,621CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 196,835 230,034 138,187 176,871         CASH AND CASH EQUIVALENTS, END OF THE PERIOD$160,132$207,492$160,132$207,492  SOURCE: Reitmans (Canada) LimitedFor further information: Jeremy H. Reitman Chairman and Chief Executive Officer Telephone: (514) 385-2630 Corporate Website: www.reitmans.ca