13 weeks ended
Sales for the second quarter of 2021 decreased by
Gross profit for the second quarter of 2021 decreased
Results from operating activities from continuing operations for the second quarter of 2021 were a loss of
Net loss from continuing operations for the second quarter of 2021 was
Adjusted EBITDA1 from continuing operations for the second quarter of 2021 was
As described below under "Discontinued Operations", the Company, as part of its restructuring plan, closed the Thyme Maternity and Addition Elle banners. Net loss from discontinued operations for the second quarter of 2021 was
26 weeks ended
Sales for the year to date fiscal 2021 decreased by
Gross profit for the year to date fiscal 2021 decreased
Results from operating activities from continuing operations for the year to date fiscal 2021 were a loss of
Net loss from continuing operations for the year to date fiscal 2021 was
Adjusted EBITDA1 from continuing operations for the year to date fiscal 2021 was a loss of
Net loss from discontinued operations for the year to date fiscal 2021 was
Current Developments and Subsequent Events
Since the coronavirus disease (COVID-19) was declared a pandemic on
The extent to which COVID-19 will continue to impact the Company's business, including its supply chain, consumer shopping behavior and consumer demand, including online shopping, will depend on future developments, which are highly uncertain and cannot be predicted at this time. As the Company navigates through challenges caused by COVID-19, its focus will be to closely monitor its cash position and control its spending, while managing its inventory levels in line with the unprecedented change in demand behavior since COVID-19 started. Current financial information may not necessarily be indicative of future operating results.
The Company had taken many measures to protect its financial position during this challenging situation. Such measures included:
- Furloughing a substantial number of store and head office employees;
- All other employees collectively contributing to on-going cost-cutting initiatives through temporary salary reductions;
- Cancelling or delaying significant investments in capital expenditures for the remainder of fiscal 2021;
- Adjusting inventory levels by cancelling or delaying many orders;
- Reducing all non-payroll discretionary expenses, including marketing and travel; and
- Extending payment terms and asking for temporary price concessions for both merchandise and non-merchandise vendor invoices.
Such measures partially mitigated the impact of COVID-19 on the Company's business. However, with the deterioration in the Company's financial performance and its financial position since the end of the fiscal 2020, the continued uncertainty surrounding the pandemic, and after evaluating all its strategic options, on
Subsequent to period end, the Monitor commenced the claims process for creditor amounts owing that existed as at
In accordance with the policies of the
For the year to date fiscal 2021, the Company incurred a net loss of
These factors and conditions, combined with the unpredictability of the outcome of the matters arising from the CCAA proceedings, indicate that a material uncertainty exists that may cast significant doubt about the Company's ability to continue as a going concern and, therefore, realize its assets and discharge its liabilities in the normal course of business.
The unaudited condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes the Company will continue its operations for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. In assessing whether the going concern assumption is appropriate and whether there are material uncertainties that may cast significant doubt about the Company's ability to continue as a going concern, management must take into account all available information about the future, including estimated future cash flows, for a period of at least twelve months following the end of the reporting period. The unaudited condensed consolidated interim financial statements as at
Discontinued Operations
As part of its restructuring plan, the Company closed the Thyme Maternity and Addition Elle banners and, as a result, their results and cash flows have now been classified as discontinued operations. IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, requires that the comparative statements of earnings and comprehensive income (loss) are re–presented as if the operations were discontinued from the start of the comparative year. As a result, discontinued operations are excluded from the loss from continuing operations and are presented as income (loss) from discontinued operations, net of tax, as a separate line item in the consolidated statements of earnings (loss).
Dividends
At the Board of Directors meeting held on September 24, 2020, to conserve cash to finance its ongoing operations, the Board decided to continue to suspend the quarterly cash dividend. The Company will continue to assess potential future dividend levels on a quarterly basis.
About
The Company is a leading women's specialty apparel retailer with retail outlets throughout Canada. As at
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 and loss on disposal of marketable securities, interest expense, depreciation, amortization, impairment of non-financial assets and restructuring costs. The Company updated its definition of Adjusted EBITDA to exclude the restructuring costs which have been incurred as a result of the restructuring plan. Subsequent to the classification of the Addition Elle and Thyme Maternity businesses as discontinued operations, Adjusted EBITDA has also been modified to exclude discontinued operations.
The following table reconciles the most comparable GAAP measure, net earnings or loss from continuing operations, 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 and loss on disposal 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 and the exclusion of restructuring costs and discontinued operations presents the results of the on-going businesses. 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 engages in an omnichannel approach in connecting with its customers by appealing to their shopping habits through either online or store channels. This approach allows customers to shop online for home delivery, purchase in any of our store locations or ship to home from another store when the products are unavailable in a particular store. Due to customer cross-channel behavior, 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.
As highlighted in the section entitled "Current Developments and Subsequent Events", on
The following table reconciles net loss to Adjusted EBITDA:
For the second quarter of | Year to date fiscal | |||||||
2021 | 20201 | 2021 | 20201 | |||||
Net loss from continuing operations | $ | (27.4) | $ | (2.4) | $ | (74.1) | $ | (16.6) |
Depreciation and amortization | 5.6 | 20.8 | 25.1 | 41.4 | ||||
Impairment of non-financial assets | 2.2 | 0.8 | 8.3 | 2.1 | ||||
Dividend income | - | (0.6) | - | (1.3) | ||||
Interest income | (0.1) | (0.5) | (0.2) | (0.9) | ||||
Net change in fair value of marketable securities | - | 1.8 | - | 3.9 | ||||
Interest expense on lease liabilities | 1.4 | 1.6 | 3.0 | 3.1 | ||||
Income tax expense (recovery) | 0.1 | (1.9) | 0.4 | (5.9) | ||||
Restructuring costs | 23.5 | - | 23.5 | - | ||||
Adjusted EBITDA from continuing operations | $ | 5.3 | $ | 19.6 | $ | (14.0) | $ | 25.8 |
Adjusted EBITDA from continuing operations as % of Sales | 3.7% | 10.4% | (6.2)% | 7.6% |
1Comparative figures have been restated to conform to the current definition, which excludes the effect of discontinued operations. |
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, including statements regarding the impact of COVID-19 on the Company's business, financial position and operations, and are based on several assumptions which give rise to the possibility that actual results could differ materially from the Company's expectations expressed in or implied by such forward-looking statements and that the objectives, plans, strategic priorities and business outlook may not be achieved. Consequently, the Company cannot guarantee that any forward-looking statement will materialize, or if any of them do, what benefits the Company will derive from them. Forward-looking statements are provided in this press announcement for the purpose of giving information about management's current expectations and plans as of the date of this press announcement, and allowing investors and others to get a better understanding of the Company's operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose. 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, expectations, 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 belief in its strategies and its brands and their capacity to generate long-term profitable growth, 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 Risk Management" and "Financial Risk Management" sections of the 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 2021.
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 2021 are available online at www.sedar.com.
President and Chief Executive Officer
Telephone: (514) 384-1140
Corporate Website: www.reitmanscanadalimited.com
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF EARNINGS (Unaudited) (in thousands of Canadian dollars except per share amounts) | |||||||||
For the 13 weeks ended | For the 26 weeks ended | ||||||||
Sales | $ | 143,987 | $ | 188,166 | $ | 225,313 | $ | 337,455 | |
Cost of goods sold | 72,757 | 89,156 | 125,497 | 158,450 | |||||
Gross profit | 71,230 | 99,010 | 99,816 | 179,005 | |||||
Selling and distribution expenses | 65,002 | 88,449 | 134,076 | 171,771 | |||||
Administrative expenses | 7,215 | 11,382 | 16,611 | 22,450 | |||||
Impairment of non-financial assets | 2,208 | 804 | 8,243 | 2,056 | |||||
Restructuring costs | 23,545 | - | 23,545 | - | |||||
Results from operating activities | (26,740) | (1,625) | (82,659) | (17,272) | |||||
Finance income | 805 | 1,114 | 11,911 | 2,234 | |||||
Finance costs | 1,418 | 3,775 | 2,967 | 7,450 | |||||
Loss before income taxes | (27,353) | (4,286) | (73,715) | (22,488) | |||||
Income tax expense (recovery) | 131 | (1,924) | 443 | (5,926) | |||||
Net loss from continuing operations | (27,484) | (2,362) | (74,158) | (16,562) | |||||
(Loss) income from discontinued operations, net of tax |
(44,559) |
2,307 |
(72,564) |
3,893 | |||||
Net loss | $ | (72,043) | $ | (55) | $ | (146,722) | $ | (12,669) | |
Loss per share : | |||||||||
Basic | $ | (1.47) | $ | (0.00) | $ | (3.00) | $ | (0.20) | |
Diluted | (1.47) | (0.00) | (3.00) | (0.20) | |||||
Loss per share from continuing operations : | |||||||||
Basic | $ | (0.56) | $ | (0.04) | $ | (1.52) | $ | (0.26) | |
Diluted | (0.56) | (0.04) | (1.52) | (0.26) | |||||
(1) | Comparative figures have been restated to separately present the results of continuing and discontinued operations. |
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (in thousands of Canadian dollars) | ||||||||
For the 13 weeks ended | For the 26 weeks ended | |||||||
Net loss | $ | (72,043) | $ | (55) | $ | (146,722) | $ | (12,669) |
Other comprehensive income (loss) | ||||||||
Items that are or may be reclassified subsequently to net earnings: | ||||||||
Cash flow hedges (net of tax of | - | (1,981) | (754) | 42 | ||||
Foreign currency translation differences | 195 | 49 | (81) | (48) | ||||
Total other comprehensive income (loss) | 195 | (1,932) | (835) | (6) | ||||
Total comprehensive loss | $ | (71,848) | $ | (1,987) | $ | (147,557) | $ | (12,675) |
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (Unaudited) (in thousands of Canadian dollars) | |||||||||
ASSETS | |||||||||
CURRENT ASSETS | |||||||||
Cash and cash equivalents | $ | 79,345 | $ | 49,562 | $ | 89,410 | |||
Marketable securities | - | 45,834 | - | ||||||
Trade and other receivables | 12,975 | 6,759 | 6,313 | ||||||
Derivative financial asset | - | 423 | 1,124 | ||||||
Income taxes recoverable | - | 294 | - | ||||||
Inventories | 107,929 | 165,510 | 147,428 | ||||||
Prepaid expenses | 21,862 | 16,277 | 9,441 | ||||||
Total Current Assets | 222,111 | 284,659 | 253,716 | ||||||
NON-CURRENT ASSETS | |||||||||
Property and equipment | 75,800 | 91,599 | 88,090 | ||||||
Intangible assets | 13,244 | 20,439 | 20,267 | ||||||
Right-of-use assets | 142,794 | 203,262 | 198,097 | ||||||
- | 11,843 | - | |||||||
Deferred income taxes | - | 28,219 | - | ||||||
Total Non-Current Assets | 231,838 | 355,362 | 306,454 | ||||||
TOTAL ASSETS | $ | 453,949 | $ | 640,021 | $ | 560,170 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||
CURRENT LIABILITIES | |||||||||
Trade and other payables | $ | 35,643 | $ | 115,235 | $ | 109,674 | |||
Derivative financial liability | - | 739 | 348 | ||||||
Deferred revenue | 12,432 | 12,695 | 15,042 | ||||||
Income taxes payable | 1,630 | - | 3,207 | ||||||
Current portion of lease liabilities | 46,161 | 63,539 | 61,618 | ||||||
Liabilities subject to compromise | 185,579 | - | - | ||||||
Total Current Liabilities | 281,445 | 192,208 | 189,889 | ||||||
NON-CURRENT LIABILITIES | |||||||||
Lease liabilities | 122,797 | 148,949 | 152,251 | ||||||
Pension liability | 3,442 | 21,191 | 24,213 | ||||||
Total Non-Current Liabilities | 126,239 | 170,140 | 176,464 | ||||||
SHAREHOLDERS' EQUITY | |||||||||
Share capital | 27,406 | 27,406 | 27,406 | ||||||
Contributed surplus | 10,288 | 10,274 | 10,283 | ||||||
Retained earnings | 9,633 | 241,283 | 156,355 | ||||||
Accumulated other comprehensive loss | (1,062) | (1,290) | (227) | ||||||
Total Shareholders' Equity | 46,265 | 277,673 | 193,817 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 453,949 | $ | 640,021 | $ | 560,170 |
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (in thousands of Canadian dollars) | ||||||||||||
Share Capital | Contributed | Retained | Accumulated Other | Total | ||||||||
Balance as at | $ | 27,406 | $ | 10,283 | $ | 156,355 | $ | (227) | $ | 193,817 | ||
Net loss | - | - | (146,722) | - | (146,722) | |||||||
Total other comprehensive loss | - | - | - | (835) | (835) | |||||||
Total comprehensive loss for the period | - | - | (146,722) | (835) | (147,557) | |||||||
Share-based compensation costs | - | 5 | - | - | 5 | |||||||
Total contributions by owners of the Company | - | 5 | - | - | 5 | |||||||
Balance as at | $ | 27,406 | $ | 10,288 | $ | 9,633 | $ | (1,062) | $ | 46,265 | ||
Balance as at | $ | 38,397 | $ | 10,245 | $ | 292,239 | $ | (1,284) | $ | 339,597 | ||
IFRS 16 adoption adjustment (net of tax) | - | - | 767 | - | 767 | |||||||
Restated balance as at | 38,397 | 10,245 | 293,006 | (1,284) | 340,364 | |||||||
Net loss | - | - | (12,669) | - | (12,669) | |||||||
Total other comprehensive loss | - | - | - | (6) | (6) | |||||||
Total comprehensive loss for the period | - | - | (12,669) | (6) | (12,675) | |||||||
Share-based compensation costs | - | 29 | - | - | 29 | |||||||
Dividends | - | - | (6,334) | - | (6,334) | |||||||
Purchase of Class A non-voting shares pursuant to substantial issuer bid | (10,991) | - | - | - | (10,991) | |||||||
Excess of purchase price of Class A non-voting shares over carrying amount | - | - | (32,720) | - | (32,720) | |||||||
Total (distributions to) contributions by owners of the Company | (10,991) | 29 | (39,054) | - | (50,016) | |||||||
Balance as at | $ | 27,406 | $ | 10,274 | $ | 241,283 | $ | (1,290) | $ | 277,673 |
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of Canadian dollars) | ||||||||
For the 13 weeks ended | For the 26 weeks ended | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (72,043) | $ | (55) | $ | (146,722) | $ | (12,669) |
Adjustments for: | ||||||||
Depreciation and amortization | 8,801 | 25,060 | 32,494 | 50,187 | ||||
Impairment of non-financial assets | 8,948 | 804 | 29,559 | 2,288 | ||||
Share-based compensation costs | 3 | (69) | 5 | 67 | ||||
Net change in fair value of marketable securities | - | 1,792 | - | 3,855 | ||||
Net change in transfer of realized loss (gain) on cash flow hedges to inventory | - | 1,307 | (250) | 1,307 | ||||
Foreign exchange loss (gain) | 14,200 | (1,127) | 805 | (4,095) | ||||
Gain on lease re-measurements due to restructuring | (2,881) | - | (2,881) | - | ||||
Interest on lease liabilities | 1,546 | 1,943 | 3,423 | 3,864 | ||||
Interest and dividend income, net | (68) | (1,114) | (226) | (2,234) | ||||
Income tax expense (recovery) | 131 | (1,079) | 523 | (4,499) | ||||
(41,363) | 27,462 | (83,270) | 38,071 | |||||
Changes in: | ||||||||
Trade and other receivables | (2,006) | 2,345 | (6,796) | 1,587 | ||||
Inventories | 43,164 | (6,180) | 39,499 | (18,701) | ||||
Prepaid expenses | (10,653) | (1,157) | (12,421) | (2,699) | ||||
Trade and other payables | (94,133) | 25,416 | (75,173) | 18,387 | ||||
Liabilities subject to compromise | 185,579 | - | 185,579 | - | ||||
Pension liability | (20,719) | 26 | (20,771) | 147 | ||||
Deferred revenue | (2,299) | (1,104) | (2,610) | (2,514) | ||||
Cash from operating activities | 57,570 | 46,808 | 24,037 | 34,278 | ||||
Interest received | 44 | 418 | 360 | 1,066 | ||||
Dividends received | - | 648 | - | 1,294 | ||||
Income taxes received | - | - | 112 | 12 | ||||
Income taxes paid | - | (2,268) | (1,941) | (3,697) | ||||
Net cash flows from operating activities | 57,614 | 45,606 | 22,568 | 32,953 | ||||
CASH FLOWS USED IN INVESTING ACTIVITIES | ||||||||
Additions to property and equipment and intangible assets, net | (2,029) | (5,970) | (3,387) | (12,141) | ||||
Cash flows used in investing activities | (2,029) | (5,970) | (3,387) | (12,141) | ||||
CASH FLOWS USED IN FINANCING ACTIVITIES | ||||||||
Dividends paid | - | (3,167) | - | (6,334) | ||||
Payment of lease liabilities | (16,566) | (19,028) | (28,441) | (37,773) | ||||
Purchases of Class A non-voting shares pursuant to substantial issuer bid | - | (43,711) | - | (43,711) | ||||
Cash flows used in financing activities | (16,566) | (65,906) | (28,441) | (87,818) | ||||
FOREIGN EXCHANGE (LOSS) GAIN ON CASH HELD IN FOREIGN CURRENCY | (2,371) | 1,179 | (805) | 4,050 | ||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 36,648 | (25,091) | (10,065) | (62,956) | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD | 42,697 | 74,653 | 89,410 | 112,518 | ||||
CASH AND CASH EQUIVALENTS, END OF THE PERIOD | $ | 79,345 | $ | 49,562 | $ | 79,345 | $ | 49,562 |
SOURCE
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