Reitmans (Canada) Limited announces its results for the 13 and 26 weeks ended August 3, 2019

MONTREAL, Sept. 3, 2019 /CNW Telbec/ - Unless otherwise indicated, the Company's results for the 13 weeks ended August 3, 2019 ("second quarter of 2020") and the results for the 26 weeks ended August 3, 2019 ("year to date fiscal 2020") reflect the impact of the implementation of IFRS 16, as described below under "Adoption of IFRS 16 – Leases".

13 weeks ended August 3, 2019

Sales for the second quarter of 2020 were $232.8 million, as compared with $248.8 million for the 13 weeks ended August 4, 2018 ("second quarter of 2019"). The decrease of $16.0 million is primarily attributable to a net reduction of 45 stores, lower than anticipated sales and unseasonable weather conditions that were prevalent during the early portion of the second quarter of 2020. The Company continues to execute against a plan adapting to the new retail environment by reducing its store presence in select markets while enhancing its e-commerce capabilities. Comparable sales¹, which include e-commerce sales, decreased 1.9%. The decrease was primarily due to store traffic being down 3.2% for the second quarter of 2020. The Company continues to experience strong growth through its online channel.

Gross profit for the second quarter of 2020 decreased $14.9 million or 10.8%, to $122.7 million as compared with $137.6 million for the second quarter of 2019, primarily attributable to a net reduction of 45 stores and lower than anticipated sales. Gross profit as a percentage of sales for the second quarter of 2020 decreased to 52.7% from 55.3% for the second quarter of 2019.

Results from operating activities for the second quarter of 2020 were $1.9 million as compared with $10.2 million for the second quarter of 2019, a decrease of $8.3 million. This decrease is primarily attributable to the decrease in gross profit of $14.9 million, partially offset by a reduction in selling, distribution and administrative costs of $6.6 million.

Net loss for the second quarter of 2020 was $0.1 million ($0.00 basic and diluted loss per share) as compared with $10.0 million net earnings ($0.16 basic and diluted earnings per share) for the second quarter of 2019. The unfavourable change of $10.1 million included an unfavourable impact of IFRS 16 of $1.0 million. Excluding this $1.0 million impact of IFRS 16, the deterioration in net earnings of $9.1 million is primarily attributable to lower sales, the decrease in gross profit and the increase in net finance costs partially offset by reduced store operating costs and an increase in income tax recovery.

Adjusted EBITDA¹ for the second quarter of 2020 was $27.4 million, as compared with $21.4 million for the second quarter of 2019, an increase of $6.0 million. The increase in adjusted EBITDA includes a favourable impact from the adoption of IFRS 16 of $18.1 million. Excluding this $18.1 million impact of IFRS 16, adjusted EBITDA for the second quarter of 2020 was $9.3 million as compared with $21.4 million for the second quarter of 2019, a decrease of $12.1 million. The decrease is primarily attributable to the decrease in gross profit.  

26 weeks ended August 3, 2019

Sales for the year to date fiscal 2020 were $418.0 million, as compared with $456.4 million for the 26 weeks ended August 4, 2018 ("year to date fiscal 2019"). The decrease of $38.4 million is primarily attributable to a net reduction of 45 stores, lower than anticipated sales and unseasonable weather conditions that were prevalent during the earlier portion of year to date fiscal 2020. The Company continues to execute against a plan adapting to the new retail environment by reducing its store presence in select markets while enhancing its e-commerce capabilities. Comparable sales¹, which include e-commerce sales, decreased 3.6%. The decrease was primarily due to store traffic being down 4.2% for the year to date fiscal 2020. The Company continues to experience strong growth through its online channel.

Gross profit for the year to date fiscal 2020 decreased $29.4 million or 11.6%, to $224.5 million as compared with $253.9 million for the year to date fiscal 2019. The decrease is primarily attributable to a net reduction of 45 stores and lower than anticipated sales. Gross profit as a percentage of sales for the year to date fiscal 2020 decreased to 53.7% from 55.6% for the year to date fiscal 2019.

Results from operating activities for the year to date fiscal 2020 were a loss of $11.2 million as compared with earnings of $5.9 million for the year to date fiscal 2019, a decrease of $17.1 million. This decrease is primarily attributable to the decrease in gross profit of $29.4 million, partially offset by a reduction in selling, distribution and administrative costs of $12.3 million.

Net loss for the year to date fiscal 2020 was $12.7 million ($0.20 basic and diluted loss per share) as compared with $6.8 million net earnings ($0.11 basic and diluted earnings per share) for the year to date fiscal 2019. The unfavourable change of $19.5 million included an unfavourable impact of IFRS 16 of $2.3 million. Excluding this $2.3 million impact of IFRS 16, the deterioration in net earnings of $17.2 million is primarily attributable to lower sales, the decrease in gross profit and the increase in net finance costs partially offset by reduced store operating costs and an increase in income tax recovery.

Adjusted EBITDA¹ for the year to date fiscal 2020 was $40.9 million, as compared with $28.3 million for the year to date fiscal 2019, an increase of $12.6 million. The increase in adjusted EBITDA includes a favourable impact of IFRS 16 of $36.3 million. Excluding this $36.3 million impact of IFRS 16, adjusted EBITDA for the year to date fiscal 2020 was $4.6 million as compared with $28.3 million for the year to date fiscal 2019, a decrease of $23.7 million. The decrease is primarily attributable to the decrease in gross profit. 

Adoption of IFRS 16 - Leases

The Company adopted IFRS 16 – Leases, replacing IAS 17 – Leases and related interpretations, using the modified retrospective approach, effective for the annual reporting period beginning on February 3, 2019. As a result, the Company's results for the second quarter of 2020 and year to date fiscal 2020 reflect lease accounting under IFRS 16. Comparative figures for the second quarter of 2019 and year to date fiscal 2019 have not been restated and continue to be reported under IAS 17, Leases. Refer to Note 3 of the unaudited condensed consolidated interim financial statements for the second quarter of 2020 for additional details on the implementation of IFRS 16.

Dividends

At the Board of Directors meeting held on September 3, 2019, a quarterly cash dividend (constituting eligible dividends) of $0.05 per share on all outstanding Class A non-voting and Common shares of the Company was declared, payable October 24, 2019 to shareholders of record on October 10, 2019.

Sales for the four weeks ended August 31, 2019

Sales for the month of August (the four weeks ended August 31, 2019) decreased 7.1%. Comparable sales¹ decreased 3.6%.

About Reitmans (Canada) Limited

The Company is a leading ladieswear specialty apparel retailer with retail outlets throughout Canada. The Company operates 591 stores consisting of 258 Reitmans, 114 Penningtons, 80 Addition Elle, 81 RW & CO. and 58 Thyme Maternity.

¹Non-GAAP Financial Measures

The Company has identified several key operating performance measures and non-GAAP financial measures which management believes are useful in assessing the performance of the Company; however, readers are cautioned that some of these measures may not have standardized meanings under IFRS and, therefore, may not be comparable to similar terms used by other companies.

In addition to discussing earnings in accordance with IFRS, this press announcement provides adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA") as a non-GAAP financial measure. Adjusted EBITDA is defined as net earnings before income tax expense/recovery, dividend income, interest income, net change in fair value of marketable securities, realized gains or losses on disposal of marketable securities, interest expense, impairment of goodwill, depreciation, amortization and net impairment charges. The following table reconciles the most comparable GAAP measure, net earnings or loss, to adjusted EBITDA. Management believes that adjusted EBITDA 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. The exclusion of dividend income, interest income and expense and the net change in fair value of marketable securities eliminates the impact on earnings derived from non-operational activities. The exclusion of depreciation, amortization and impairment charges eliminates the non-cash impact. The intent of adjusted EBITDA is to provide additional useful information to investors and analysts. The measure does not have any standardized meaning under IFRS. Although depreciation, amortization and impairment charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, as such, adjusted EBITDA does not reflect any cash requirements for these replacements. Adjusted EBITDA should not be considered either as discretionary cash available to invest in the growth of the business or as a measure of cash that will be available to meet the Company's obligations. Other companies may calculate adjusted EBITDA differently. From time to time, the Company may exclude additional items if it believes doing so would result in a more effective analysis of underlying operating performance. The exclusion of certain items does not imply that they are non-recurring. Adjusted EBITDA should not be used in substitute for measures of performance prepared in accordance with IFRS or as an alternative to net earnings, net cash provided by operating, investing or financing activities or any other financial statement data presented as indicators of financial performance or liquidity, each as presented in accordance with IFRS. Although adjusted EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, it has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of the Company's results as reported under IFRS.

The Company uses a key performance indicator ("KPI"), comparable sales, to assess store performance and sales growth. The Company has embarked on an omnichannel approach to engaging with customers. Due to the cross-channel behaviour of consumers, the Company has launched its initiative aimed at appealing to its customers' shopping habits through either online or store channels. This approach allows customers to shop online for home delivery, pickup in-store, purchase in any of our store locations or ship to home from our stores when products are unavailable. Due to customer cross-channel behaviour, the Company reports a single comparable sales metric, inclusive of store and e-commerce channels. Comparable sales are defined as sales generated by stores that have been continuously open during both of the periods being compared and include e-commerce sales. Comparable sales exclude sales from wholesale accounts. The comparable sales metric compares the same calendar days for each period. Although this KPI is expressed as a ratio, it is a non-GAAP financial measure that does not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures used by other companies. Management uses comparable sales in evaluating the performance of stores and online sales and considers it useful in helping to determine what portion of new sales has come from sales growth and what portion can be attributed to the opening of new stores. Comparable sales is a measure widely used amongst retailers and is considered useful information for both investors and analysts. Comparable sales should not be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS.

The following table reconciles net (loss) earnings to adjusted EBITDA:

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. Consequently, actual future results may differ materially from the anticipated results expressed in forward-looking statements, which reflect the Company's expectations only as of the date of this Press Announcement. 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, 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 anticipated future results and events, 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 and Financial Risk Management" section of the Company's 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 2020.

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 2020 are available online at www.sedar.com.

Montreal, September 3, 2019

Jeremy H. Reitman
Chairman and Chief Executive Officer
Telephone: (514) 385-2630
Corporate Website: www.reitmanscanadalimited.com

SOURCE Reitmans (Canada) Limited