MONTRÉAL, QUÉBEC–(Marketwired – June 10, 2016) – Le Château Inc. (TSX:CTU.A) today reported that sales for the first quarter ended April 30, 2016 amounted to $48.6 million as compared with $50.7 million for the first quarter ended May 2, 2015, a decrease of 4.2%, with 16 fewer stores in operation. Comparable store sales decreased 1.9% for the first quarter as compared to last year (see non-GAAP measures below). Included in comparable store sales are online sales which increased 53.9% for the first quarter. The continued success with our online sales is consistent with the shift in consumer shopping habits over the last few years and continues to reinforce our strategy of rightsizing our retail network of stores.
Earnings (loss) before interest, income taxes, depreciation, amortization, write-off and/or impairment of property and equipment (“Adjusted EBITDA”) (see non-GAAP measures below) for the first quarter of 2016 amounted to $(9.1) million, compared to $(7.1) million for the same period last year. The decrease of $2.0 million in adjusted EBITDA for the first quarter was primarily attributable to the decrease of $2.2 million in gross margin dollars offset by the reduction of $194,000 in selling, general and administrative (“SG&A”) expenses. The decrease of $2.2 million gross margin dollars was the result of the decline in gross margin percentage to 62.6% from 64.3% in 2015 due to increased promotional activity primarily in the outlet stores where prior season discounted merchandise is being offered, combined with the 4.2% overall sales decline for the first quarter. As for the regular stores, the gross margin percentage remained relatively stable when compared with the same period last year, despite the pressure of the weaker Canadian dollar on merchandise purchased.
Net loss for the first quarter ended April 30, 2016 amounted to $14.3 million or $(0.48) per share compared to a net loss of $12.4 million or $(0.41) per share for the same period last year.
During the first quarter of 2016, the Company renovated one existing location and, as planned, closed five underperforming stores. As at April 30, 2016, the Company operated 206 stores (including 62 fashion outlet stores) compared to 222 stores (including 42 fashion outlet stores) as at May 2, 2015. Total square footage for the Le Château network as at April 30, 2016 amounted to 1,136,000 square feet (including 478,000 square feet for fashion outlet stores), compared to 1,216,000 square feet (including 465,000 square feet for fashion outlet stores) as at May 2, 2015.
Second Quarter of 2016
For the first five weeks ended June 4, 2016, total retail sales decreased 4.7%, with 16 fewer stores in operation, and comparable store sales decreased 0.4% compared to the same period last year. Included in comparable store sales are online sales which increased 69.0%.
Profile
Le 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 203 retail stores 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 4 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 57-year tradition of vertical integration, emphasizing a design and manufacturing approach to retailing, Le Château is unique among Canadian fashion merchants.
Non-GAAP Measures
In addition to discussing earnings measures in accordance with IFRS, this press release provides adjusted EBITDA as a supplementary earnings measure, which is defined as earnings (loss) before interest, income taxes, depreciation, amortization, write-off and/or impairment of property and equipment. Adjusted 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 following table reconciles adjusted EBITDA to loss before income tax recovery for the first quarters ended April 30, 2016 and May 2, 2015:
| (Unaudited) | For the three months ended | |||||
| (In thousands of Canadian dollars) | April 30, 2016 | May 2, 2015 | ||||
| Loss before income tax recovery | $ | (14,273 | ) | $ | (12,358 | ) |
| Depreciation and amortization | 3,717 | 4,398 | ||||
| Write-off and impairment of property and equipment | 178 | 20 | ||||
| Finance costs | 1,247 | 806 | ||||
| Finance income | (2 | ) | (2 | ) | ||
| Adjusted EBITDA | $ | (9,133 | ) | $ | (7,136 | ) |
The Company also discloses comparable store sales which are defined as sales generated by stores that have been open for at least one year on a comparable week basis. Comparable store sales exclude sales from stores converted to outlet or clearance stores during the year of conversion.
The following table reconciles comparable store sales to total sales disclosed in the unaudited interim condensed consolidated statements of loss for the first quarters ended April 30, 2016 and May 2, 2015:
| (Unaudited) | For the three months ended | |||
| (In thousands of Canadian dollars) | April 30, 2016 | May 2, 2015 | ||
| Comparable store sales – Regular stores | $ | 36,059 | $ | 36,384 |
| Comparable store sales – Outlet stores | 9,699 | 10,251 | ||
| Total comparable store sales | 45,758 | 46,635 | ||
| Non-comparable store sales | 2,871 | 4,111 | ||
| Total sales | $ | 48,629 | $ | 50,746 |
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 Statements
This 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 also 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; seasonality and weather patterns; changes in the Company’s relationship with its suppliers; lease renewals; information technology security and loss of customer data; fluctuations in foreign currency exchange rates; interest rate fluctuations; liquidity risk and changes in laws, rules and regulations applicable to the Company. The foregoing list of risk factors is not exhaustive and other factors could also adversely affect our results.
The Company’s unaudited interim condensed consolidated financial statements and Management’s Discussion and Analysis for the first quarter ended April 30, 2016 are available online at www.sedar.com.
| CONSOLIDATED BALANCE SHEETS | |||||||
| (Unaudited) (In thousands of Canadian dollars) |
As at April 30, 2016 |
As at May 2, 2015 |
As at January 30, 2016 |
||||
| ASSETS | |||||||
| Current assets | |||||||
| Cash | $ | 402 | $ | – | $ | – | |
| Accounts receivable | 1,298 | 1,447 | 1,180 | ||||
| Income taxes refundable | 344 | 694 | 569 | ||||
| Inventories | 116,133 | 119,844 | 113,590 | ||||
| Prepaid expenses | 1,549 | 8,145 | 1,385 | ||||
| Total current assets | 119,726 | 130,130 | 116,724 | ||||
| Deposits | 621 | – | 621 | ||||
| Property and equipment | 45,900 | 55,493 | 48,332 | ||||
| Intangible assets | 2,977 | 2,616 | 2,813 | ||||
| $ | 169,224 | $ | 188,239 | $ | 168,490 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
| Current liabilities | |||||||
| Bank indebtedness | $ | – | $ | 1,145 | $ | 545 | |
| Current portion of credit facility | 22,506 | 29,397 | 12,944 | ||||
| Trade and other payables | 14,562 | 13,287 | 17,865 | ||||
| Deferred revenue | 2,950 | 3,031 | 3,216 | ||||
| Current portion of provision for onerous leases | 643 | 629 | 620 | ||||
| Current portion of long-term debt | 568 | 1,411 | 848 | ||||
| Total current liabilities | 41,229 | 48,900 | 36,038 | ||||
| Credit facility | 39,411 | 36,788 | 31,962 | ||||
| Long-term debt | 31,513 | 10,154 | 29,170 | ||||
| Provision for onerous leases | 1,350 | 1,444 | 1,453 | ||||
| Deferred lease credits | 9,190 | 10,752 | 9,513 | ||||
| Total liabilities | 122,693 | 108,038 | 108,136 | ||||
| Shareholders’ equity | |||||||
| Share capital | 47,967 | 47,967 | 47,967 | ||||
| Contributed surplus | 9,005 | 5,015 | 8,555 | ||||
| Retained earnings (deficit) | (10,441 | ) | 27,219 | 3,832 | |||
| Total shareholders’ equity | 46,531 | 80,201 | 60,354 | ||||
| $ | 169,224 | $ | 188,239 | $ | 168,490 | ||
| CONSOLIDATED STATEMENTS OF LOSS | |||||||
| (Unaudited) | For the three months ended | ||||||
| (In thousands of Canadian dollars, except per share information) | April 30, 2016 | May 2, 2015 | |||||
| Sales | $ | 48,629 | $ | 50,746 | |||
| Cost of sales and expenses | |||||||
| Cost of sales | 18,205 | 18,131 | |||||
| Selling | 34,902 | 35,702 | |||||
| General and administrative | 8,550 | 8,467 | |||||
| 61,657 | 62,300 | ||||||
| Results from operating activities | (13,028 | ) | (11,554 | ) | |||
| Finance costs | 1,247 | 806 | |||||
| Finance income | (2 | ) | (2 | ) | |||
| Loss before income taxes | (14,273 | ) | (12,358 | ) | |||
| Income tax recovery | – | – | |||||
| Net loss | $ | (14,273 | ) | $ | (12,358 | ) | |
| Net loss per share | |||||||
| Basic | $ | (0.48 | ) | $ | (0.41 | ) | |
| Diluted | (0.48 | ) | (0.41 | ) | |||
| Weighted average number of shares outstanding (‘000) | 29,964 | 29,964 | |||||
| CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY | ||||||
| (Unaudited) | For the three months ended | |||||
| (In thousands of Canadian dollars) | April 30, 2016 | May 2, 2015 | ||||
| SHARE CAPITAL | $ | 47,967 | $ | 47,967 | ||
| CONTRIBUTED SURPLUS | ||||||
| Balance, beginning of period | $ | 8,555 | $ | 4,439 | ||
| Fair value adjustment for long-term debt | 347 | 403 | ||||
| Stock-based compensation expense | 103 | 173 | ||||
| Balance, end of period | $ | 9,005 | $ | 5,015 | ||
| RETAINED EARNINGS (DEFICIT) | ||||||
| Balance, beginning of period | $ | 3,832 | $ | 39,577 | ||
| Net loss | (14,273 | ) | (12,358 | ) | ||
| Balance, end of period | $ | (10,441 | ) | $ | 27,219 | |
| Total shareholders’ equity | $ | 46,531 | $ | 80,201 | ||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
| (Unaudited) | For the three months ended | ||||||
| (In thousands of Canadian dollars) | April 30, 2016 | May 2, 2015 | |||||
| OPERATING ACTIVITIES | |||||||
| Net loss | $ | (14,273 | ) | $ | (12,358 | ) | |
| Adjustments to determine net cash from operating activities | |||||||
| Depreciation and amortization | 3,717 | 4,398 | |||||
| Write-off and impairment of property and equipment | 178 | 20 | |||||
| Amortization of deferred lease credits | (323 | ) | (602 | ) | |||
| Stock-based compensation | 103 | 173 | |||||
| Provision for onerous leases | (80 | ) | (78 | ) | |||
| Finance costs | 1,247 | 806 | |||||
| Interest paid | (917 | ) | (711 | ) | |||
| (10,348 | ) | (8,352 | ) | ||||
| Net change in non-cash working capital items related to operations | (6,550 | ) | (14,315 | ) | |||
| Income taxes refunded | 300 | – | |||||
| Cash flows related to operating activities | (16,598 | ) | (22,667 | ) | |||
| FINANCING ACTIVITIES | |||||||
| Increase in credit facility | 16,952 | 17,708 | |||||
| Financing costs | – | (31 | ) | ||||
| Proceeds of long-term debt | 2,500 | 5,000 | |||||
| Repayment of long-term debt | (280 | ) | (875 | ) | |||
| Cash flows related to financing activities | 19,172 | 21,802 | |||||
| INVESTING ACTIVITIES | |||||||
| Additions to property and equipment and intangible assets | (1,627 | ) | (1,475 | ) | |||
| Cash flows related to investing activities | (1,627 | ) | (1,475 | ) | |||
| Increase (decrease) in cash | 947 | (2,340 | ) | ||||
| Cash (bank indebtedness), beginning of period | (545 | ) | 1,195 | ||||
| Cash (bank indebtedness), end of period | $ | 402 | $ | (1,145 | ) | ||
President
(514) 738-7000
Johnny Del Ciancio, CPA, CA
Vice-President, Finance
(514) 738-7000
MaisonBrison:
Pierre Boucher
(514) 731-0000
Source:
Le Chateau Inc.
