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Press release from CNW Group

Reitmans (Canada) Limited Announces Year-End Results

Thursday, April 04, 2013

Reitmans (Canada) Limited Announces Year-End Results

21:10 EDT Thursday, April 04, 2013

MONTREAL, April 4, 2013 /CNW Telbec/ - The fiscal year ended February 2, 2013 ("fiscal 2013") includes 53 weeks instead of the normal 52 weeks. The inclusion of an extra week occurs every fifth or sixth fiscal year due to the Company's floating year-end.

Sales for fiscal 2013 decreased 1.9% to $1,000,513,000 as compared with $1,019,397,000 for the year ended January 28, 2012 ("fiscal 2012"). This decrease in sales is due primarily to a net reduction of 31 stores in fiscal 2013 and a same stores sales1 decrease of 2.0% partially offset by an additional week of sales.  The Company experienced lower store traffic in a challenging retail environment and was impacted by a disruption in the planned flow of inventory to stores as described below.  The Company's gross margin for fiscal 2013 decreased to 62.8% from 64.4% for fiscal 2012.  Net earnings for fiscal 2013 decreased 44.0% to $26,619,000 ($0.41 diluted earnings per share) as compared with $47,539,000 ($0.72 diluted earnings per share) for fiscal 2012.  For fiscal 2013, adjusted EBITDA1 decreased by $35,837,000 or 28.3% to $90,951,000 as compared with $126,788,000 for fiscal 2012.

Sales for the fourth quarter of fiscal 2013 increased 3.0% to $267,659,000 as compared with $259,954,000 for the fourth quarter of fiscal 2012.  This increase in sales is due to an additional week of sales partially offset by a reduction in the number of stores and a same store sales1 decrease of 1.5%.  The fourth quarter sales of fiscal 2013 were impacted by a difficult retail environment. The Company's gross margin for the fourth quarter of fiscal 2013 decreased to 59.2% from 60.4% for the fourth quarter of fiscal 2012.  The Company recorded a net loss for the fourth quarter of fiscal 2013 of $1,080,000 ($0.01 diluted loss per share) as compared with a profit of $4,674,000 ($0.07 diluted earnings per share) for the fourth quarter of fiscal 2012. This loss reflects operational losses of approximately $1,200,000, including start-up expenses, directly relating to the new Thyme Maternity boutiques initiative in the Babies"R"Us stores in the United States. Adjusted EBITDA1 decreased by $8,881,000 or 40.3% to $13,140,000 as compared with $22,021,000 for the fourth quarter of fiscal 2012.

In June 2012, the Company installed a new warehouse management system.  As previously announced on August 15, 2012, complications associated with the system resulted in a disruption in the flow of inventory to stores in the third quarter of fiscal 2013.  The disruption resulted in estimated loss of sales and a corresponding decline in gross margin, earnings before income taxes and adjusted EBITDA1 between $7,000,000 and $15,000,000 in the third quarter of fiscal 2013.  There was no significant impact in the fourth quarter of fiscal 2013.  The Company has addressed the issues related to the warehouse management system and continues to improve the flow of goods to the stores and optimize system performance.

Management is disappointed with the results for fiscal 2013 and has taken action in the merchandising and marketing efforts of each of its banners to improve sales and profitability.  Additionally, the Company has undertaken an initiative to improve efficiencies and reduce overhead across head office and field activities.

During the year, the Company opened 54 new stores and closed 85.  Accordingly, at February 2, 2013, there were 911 stores in operation, consisting of 361 Reitmans, 146 Smart Set, 73 RW & CO., 72 Thyme Maternity, 153 Penningtons, and 106 Addition Elle, as compared with a total of 942 stores as at January 28, 2012. In addition, there were 20 Thyme Maternity boutiques ("shop-in-shop") in select Babies"R"Us locations in Canada and 154 boutiques in Babies"R"Us stores in the United States.

At the Board of Directors meeting held on April 4, 2013, 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 April 25, 2013 to shareholders of record on April 12, 2013. With regard to dividend policy, the Board of Directors considered the Company's earnings per share, cash flow from operations, the level of planned capital expenditures and its cash and marketable securities. The Board of Directors decided to maintain its quarterly dividend on the basis of a targeted payout ratio of approximately 50% to 80% of sustainable earnings per share, 50% to 75% of cash flow from operations and the ability to augment the dividend from the approximately $170,000,000 of liquidity on the Company's balance sheet, if these targets are missed in a given year. The Board of Directors will review these guidelines again at the end of its current fiscal year.

1 Non-GAAP Financial Measures

In addition to discussing earnings in accordance with IFRS, this press release provides adjusted EBITDA as a supplementary earnings measure, which is defined as earnings (loss) 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 earnings (loss) before income taxes to adjusted EBITDA for the years and three months ended February 2, 2013 and January 28, 2012:

   
    For the years ended   For the three months ended
    February 2, 2013 January 28, 2012   February 2, 2013 January 28, 2012
Earnings (loss) before income taxes   $ 35,136,000 $ 65,872,000   $ (1,449,000) $ 6,700,000
Dividend income     (3,526,000)   (3,462,000)     (911,000)   (864,000)
Interest income     (1,062,000)   (1,367,000)     (203,000)   (419,000)
Impairment losses on available-for-sale financial assets     156,000   73,000     50,000   -
Interest expense     592,000   682,000     139,000   162,000
Depreciation, amortization and net impairment losses     59,655,000   64,990,000     15,514,000   16,442,000
ADJUSTED EBITDA   $ 90,951,000 $ 126,788,000   $ 13,140,000 $ 22,021,000

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. 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 complete financial statements including notes and Management's Discussion and Analysis for the year ended February 2, 2013 are available online at www.sedar.com.

Montreal, April 4, 2013

Jeremy H. Reitman
Chairman and Chief Executive Officer

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

REITMANS (CANADA) LIMITED
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands of Canadian dollars except per share amounts)

   
  For the years ended   For the three months ended
    February 2, 2013 January 28, 2012   February 2, 2013 January 28, 2012
                     
Sales   $ 1,000,513 $ 1,019,397   $ 267,659 $ 259,954
Cost of goods sold     372,135   363,333     109,332   102,959
Gross profit     628,378   656,064     158,327   156,995
Selling and distribution expenses     550,165   547,367     147,396   138,420
Administrative expenses     47,371   46,878     13,552   13,351
Results from operating activities     30,842   61,819     (2,621)   5,224
                     
Finance income     5,624   5,562     1,361   2,392
Finance costs     1,330   1,509     189   916
Earnings (loss) before income taxes     35,136   65,872     (1,449)   6,700
                     
Income tax expense (recovery)     8,517   18,333     (369)   2,026
                     
Net earnings (loss)   $ 26,619 $ 47,539   $ (1,080) $ 4,674
                     
Earnings (loss) per share:                    
  Basic   $ 0.41 $ 0.72   $ (0.01) $ 0.07
  Diluted     0.41   0.72     (0.01)   0.07

REITMANS (CANADA) LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in thousands of Canadian dollars)

   
    For the years ended   For the three months ended
    February 2, 2013 January 28, 2012   February 2, 2013 January 28, 2012
                     
Net earnings (loss)   $ 26,619 $ 47,539   $ (1,080) $ 4,674
Other comprehensive income (loss)                    
Items that are or may be reclassified subsequently to net earnings:                    
  Reclassification of impairment loss on available-for-sale financial assets to net earnings (net of tax of $21 for the year ended February 2, 2013; $12 for the three months ended February 2, 2013 and $9 for the year ended January 28, 2012)     135   64     43   -
  Net change in fair value of available-for-sale financial assets (net of tax of $25 for the year ended February 2, 2013 and $96 for the three months ended February 2, 2013; $79 for the year ended January 28, 2012 and $200 for the three months ended January 28, 2012)     (207)   530     497   1,338
      (72)   594     540   1,338
Items that will not be reclassified to net earnings:                    
  Actuarial losses on defined benefit plans (net of tax of $410 for the year and three months ended February 2, 2013; $1,041 for the year and three months ended January 28, 2012)     (1,061)   (2,965)     (1,061)   (2,965)
Total other comprehensive loss     (1,133)   (2,371)     (521)   (1,627)
                     
Total comprehensive income (loss)   $ 25,486 $ 45,168   $ (1,601) $ 3,047

REITMANS (CANADA) LIMITED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands of Canadian dollars)


     
    February 2, 2013   January 28, 2012
ASSETS            
CURRENT ASSETS            
  Cash and cash equivalents   $ 97,626   $ 196,835
  Marketable securities     71,630     71,442
  Trade and other receivables     3,600     3,033
  Derivative financial asset     548     751
  Income taxes recoverable     8,709     4,735
  Inventories     93,317     93,188
  Prepaid expenses     25,944     11,902
    Total Current Assets     301,374     381,886
             
NON-CURRENT ASSETS            
  Property and equipment     205,131     184,221
  Intangible assets     19,224     17,057
  Goodwill     42,426     42,426
  Deferred income taxes     26,400     23,174
    Total Non-Current Assets     293,181     266,878
             
TOTAL ASSETS   $ 594,555   $ 648,764
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
CURRENT LIABILITIES            
  Trade and other payables   $ 68,781   $ 78,778
  Derivative financial liability     266     1,505
  Deferred revenue     16,297     22,278
  Current portion of long-term debt     1,570     1,474
    Total Current Liabilities     86,914     104,035
             
NON-CURRENT LIABILITIES            
  Other payables     11,425     11,110
  Deferred lease credits     16,805     17,317
  Long-term debt     7,003     8,573
  Pension liability     17,390     14,877
    Total Non-Current Liabilities     52,623     51,877
             
SHAREHOLDERS' EQUITY            
  Share capital     39,227     39,890
  Contributed surplus     6,521     5,158
  Retained earnings     400,605     439,067
  Accumulated other comprehensive income     8,665     8,737
    Total Shareholders' Equity     455,018     492,852
             
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 594,555   $ 648,764

REITMANS (CANADA) LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(in thousands of Canadian dollars)


    Share Capital Contributed
Surplus
  Retained
Earnings
Accumulated Other
Comprehensive
Income
Total
Shareholders'
Equity
                         
Balance as at January 29, 2012   $  39,890 $ 5,158   $ 439,067 $ 8,737 $ 492,852
                         
Total comprehensive income for the year                        
  Net earnings               26,619       26,619
  Total other comprehensive loss               (1,061)   (72)   (1,133)
Total comprehensive income for the year     -   -     25,558   (72)   25,486
                         
Contributions by and distributions to owners of the Company                        
  Cancellation of shares pursuant to share repurchase program     (663)                 (663)
  Share-based compensation costs         1,363             1,363
  Dividends               (52,068)       (52,068)
  Premium on repurchases of Class A non-voting shares               (11,952)       (11,952)
Total contributions by and distributions to owners of the Company     (663)   1,363     (64,020)   -   (63,320)
                         
Balance as at February 2, 2013   $ 39,227 $ 6,521   $ 400,605 $ 8,665 $ 455,018
                         
                         
                         
Balance as at January 30, 2011   $ 29,614 $ 6,266   $ 468,777 $ 8,143 $ 512,800
                         
Total comprehensive income for the year                        
  Net earnings               47,539       47,539
  Total other comprehensive loss               (2,965)   594   (2,371)
Total comprehensive income for the year     -   -     44,574   594   45,168
                         
Contributions by and distributions to owners of the Company                        
  Cash consideration on exercise of share options     8,828                 8,828
  Ascribed value credited to share capital from exercise of share options     2,228   (2,228)                         -
  Cancellation of shares pursuant to share repurchase program     (780)                 (780)
  Share-based compensation costs         1,120             1,120
  Dividends               (52,654)       (52,654)
  Premium on repurchases of Class A non-voting shares               (21,630)       (21,630)
Total contributions by and distributions to owners of the Company     10,276   (1,108)     (74,284)   -   (65,116)
                         
Balance as at January 28, 2012   $ 39,890 $ 5,158   $ 439,067 $ 8,737 $ 492,852

REITMANS (CANADA) LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(in thousands of Canadian dollars)

    Share Capital Contributed
Surplus
  Retained
Earnings
Accumulated Other
Comprehensive
Income
Total
Shareholders'
Equity
                         
Balance as at October 28, 2012   $ 39,227 $ 5,979   $ 415,663 $ 8,125 $ 468,994
                         
Total comprehensive income for the year                        
  Net loss               (1,080)       (1,080)
  Total other comprehensive loss               (1,061)   540   (521)
Total comprehensive loss for the year     -   -     (2,141)   540   (1,601)
                         
Contributions by and distributions to owners of the Company                        
  Share-based compensation costs         542                         542
  Dividends               (12,917)       (12,917)
Total contributions by and distributions to owners of the Company     -   542     (12,917)   -   (12,375)
                         
Balance as at February 2, 2013   $ 39,227 $ 6,521   $ 400,605 $ 8,665 $ 455,018
                         
                         
Balance as at October 30, 2011   $ 31,512 $ 6,462   $ 450,431 $ 7,399 $ 495,804
                         
Total comprehensive income for the year                        
  Net earnings               4,674       4,674
  Total other comprehensive loss               (2,965)   1,338   (1,627)
Total comprehensive income for the year     -   -     1,709   1,338   3,047
                         
Contributions by and distributions to owners of the Company                        
  Cash consideration on exercise of share options     6,695                 6,695
  Ascribed value credited to share capital from exercise of share options     1,683   (1,683)             -
  Share-based compensation costs         379             379
  Dividends               (13,073)       (13,073)
Total contributions by and distributions to owners of the Company     8,378   (1,304)     (13,073)   -   (5,999)
                         
Balance as at January 28, 2012   $  39,890 $ 5,158   $ 439,067 $ 8,737 $ 492,852

REITMANS (CANADA) LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of Canadian dollars)

   
  For the years ended   For the three months ended
    February 2, 2013 January 28, 2012   February 2, 2013 January 28, 2012
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES                    
  Net earnings   $ 26,619 $ 47,539   $ (1,080) $ 4,674
  Adjustments for:                    
    Depreciation, amortization and impairment losses     59,655   64,990     15,514   16,442
    Share-based compensation costs     1,363   1,120     542   379
    Amortization of deferred lease credits     (4,485)   (4,635)     (1,104)   (1,167)
    Deferred lease credits     3,973   2,941     190   (29)
    Pension contribution     (303)   (4,245)     (32)   (3,429)
    Pension expense     1,345   1,490     355   352
    Impairment loss on available-for-sale financial assets     156   73     50   -
    Net change in fair value of derivatives     (1,036)   754     (178)   754
    Foreign exchange (gain) loss on cash and cash equivalents     (4)   2,942     (207)   149
    Interest and dividend income, net     (3,996)   (4,147)     (975)   (1,123)
    Interest paid     (592)   (682)     (139)   (160)
    Interest received     1,184   1,316     207   347
    Dividends received     3,871   3,460     1,261   868
    Income taxes expense (recovery)     8,517   18,333     (369)   2,026
       96,267   131,249     14,035   20,083
  Changes in:                    
    Trade and other receivables     (1,034)   (114)     51   551
    Inventories     (129)              (5)     24,478   23,906
    Prepaid expenses     (14,042)   589     (14,155)   2,062
    Trade and other payables     (7,981)   (4,575)     (11,978)   2,373
    Deferred revenue     (5,981)   60     8,144   10,676
  Cash generated from operating activities     67,100   127,204     20,575   59,651
  Income taxes received     4,497   793     -   793
  Income taxes paid     (19,800)   (31,060)     -   -
  Net cash flows from operating activities     51,797   96,937     20,575   60,444
                     
CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES                    
  Purchases of marketable securities     (420)   (420)     (105)   (105)
  Additions to property and equipment and intangible assets     (84,433)   (59,154)     (18,691)   (15,931)
  Cash flows used in investing activities     (84,853)   (59,574)     (18,796)   (16,036)
                     
CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES                    
  Dividends paid     (52,068)   (52,654)     (12,917)   (13,073)
  Purchase of Class A non-voting shares for cancellation     (12,615)   (22,410)     -   -
  Repayment of long-term debt     (1,474)   (1,384)     (378)   (355)
  Proceeds from exercise of share options     -   8,828     -   6,695
  Cash flows used in financing activities     (66,157)   (67,620)     (13,295)   (6,733)
                     
FOREIGN EXCHANGE GAIN (LOSS) ON CASH HELD IN FOREIGN CURRENCY     4   (2,942)     207   (149)
                     
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS     (99,209)   (33,199)     (11,309)   37,526
                     
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD     196,835   230,034     108,935   159,309
                     
CASH AND CASH EQUIVALENTS, END OF THE PERIOD   $ 97,626 $ 196,835   $ 97,626 $ 196,835

 

 

SOURCE: Reitmans (Canada) Limited

For further information:

Jeremy H. Reitman
Chairman and Chief Executive Officer

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

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