Groupe Bikini Village inc.
TSX : GBV

Groupe Bikini Village inc.

September 12, 2007 17:53 ET

Groupe Bikini Village inc. Announces Second Quarter Results

Results reflect positive impact of management strategies to build shareholder value

BOUCHERVILLE, QUEBEC--(Marketwire - Sept. 12, 2007) - Groupe Bikini Village inc. (TSX:GBV) ("Groupe Bikini Village" or the "Company") today reported the results of its second quarter, which ended August 4, 2007. The results, which lead to a stronger balance sheet and increased shareholders' equity at the end of the quarter, reflect the positive impact of the Company's strategies to build shareholder value.

In the second quarter of 2007, the Company experienced a decrease in sales volume that was largely due to cooler weather in its markets. However, while the Company's revenues were negatively impacted, the proactive purchasing and management strategies as well as the contribution of the new stores it has opened and the existing stores it has renovated under its capital expansion strategy allowed Groupe Bikini Village to complete the quarter with stronger positions in inventory levels, margins, and balance sheet.

"Our capital expansion and management strategies have enabled us to manage through the temporary downturn, delivering stronger results than would otherwise have been possible," said Yves Simard, President and CEO of Groupe Bikini Village inc. "The three new stores we opened, the two non-performing stores we closed and the previously renovated stores helped to mitigate the effect of the decrease in sales."

Net sales for the second quarter and the six month period ended August 4, 2007 were $13.5 million and $21.5 million, respectively, compared to $14.1 million and $22.6 million in the corresponding periods of the previous year, principally due to the unseasonable weather conditions experienced in virtually all markets, which resulted in reduced demand and customer traffic.

Operating income (EBITDA(1)) for the second quarter and six month period totalled $2.3 million and $2.2 million, respectively, compared to operating income of $2.5 million and $2.7 million in the same periods in 2006. The decrease in operating income in the first half of 2007 was due to the decrease in sales volume, as well as a slight increase in operating expenses that resulted from the net growth in the number of stores in the second quarter. However, these results were partially mitigated by stronger gross margin.

Earnings before taxes on continuing operations for the second quarter were $2 million, versus $1.9 million for the same period the previous year. In the first six month period of 2007, the Company registered $1.8 million in earnings before taxes on continuing operations, compared to $1.9 million for the same period in 2006. An unusual, non-recurring item of $0.5 million related to stock-based compensation impacted earnings before taxes on continuing operations in the first half of 2006.

Income taxes in 2007 had a significant impact on the Company's net earnings on continuing operations, since the Company's income tax expenses were close to nil in 2006 because future income tax assets were not recorded on the Company's balance sheet at that time. Accordingly, for the quarter ended August 4, 2007, net earnings on continuing operations were $1.3 million ($0.01 per share, basic and diluted), as compared to $1.8 million ($0.01 per share, basic and diluted) for the same period in the previous year. For the six month period, net earnings on continuing operations totalled $1.2 million ($0.01 per share, basic and diluted), as compared to $1.8 million ($0.02 per share, basic and diluted).

Also in the quarter ended August 4, 2007, Groupe Bikini Village realized a net gain relative to operations discontinued in 2005, of $0.3 million.

Overall, Groupe Bikini Village's net earnings for the second quarter of 2007 totalled $1.6 million ($0.01 per share, basic and diluted) compared to net earnings of $1.8 million in 2006 ($0.01 per share, basic and diluted). For the first six month period of 2007, net earnings totalled $1.5 million ($0.01 per share, basic and diluted) compared to net earnings of $1.8 million in 2006 ($0.02 per share, basic and diluted).

In summary, the negative impact of the weather-related reduction in sales volume was almost entirely mitigated because of an increase in gross margin, because the unusual item related to a stock-based compensation in 2006 was non-recurring, and because the Company experienced a gain on discontinued operations in 2007. The Company's results did, however, reflect the impact of a higher income tax expense in 2007.

Since the beginning of the year, shareholders' equity has increased by $2.5 million including the $1 million equity component of the convertible debentures issued to the Solidarity Fund QFL; the Company's cash situation has improved by $2.5 million; and it managed its inventory in such a way as to have decreased stock on-hand despite the increased number of stores in operation - ensuring that it will be well-positioned to maintain a fresh flow of inventory for the upcoming cruise season. In addition, Groupe Bikini Village's expansion and renovation strategy is well underway - and the positive impacts of its increased reach helped to mitigate the effects of the weather-related sales decline in the first half of 2007.

The Company's short-term cash is conservatively invested in a Canadian Chartered bank and the Company does not hold any asset backed commercial paper.

We are optimistic about the balance of 2007. While the second quarter - which includes the spring and summer months that are most popular for swimsuit purchases in Canada - was at one time the key to the year's performance, Groupe Bikini Village's strategy has enabled it to spread its business volume more evenly throughout the year, appealing to its clientele through the fall and winter months with the latest products for cruises and spring break. Even though the third quarter remains challenging, for the second half of 2007, we are optimistic given the strength of the Canadian dollar and how that tends to encourage winter travel for our Canadian customers - as well as the Company's strong position with fresh inventory.

"Groupe Bikini Village continues to focus on a number of growth and value-creation strategies that, we believe, will allow us to deliver growing shareholder value," said Simard. "We have a strong cash position, which will allow us to continue increasing our penetration of the swimwear market, by growing the number of stores in our chosen markets. We will work with our store managers to improve the sales results of our current stores - and to support this goal, will accelerate the schedule for renovations in existing stores, making them even more attractive and inviting to our clientele. We will expand our business into new territories - like, for example, Halifax, where we are opening a new store in October. Finally, with support from our financial partners, we will consider opportunities to grow our business through strategic acquisitions."

About Groupe Bikini Village

Groupe Bikini Village, serving Canadians for almost a quarter-century, is one of Central Canada's most popular swimwear retailers, with 57 boutiques in Quebec and Ontario operating under the Bikini Village and Ocean Bikini Village banners. Groupe Bikini Village sells brands and styles to suit every figure and lifestyle; no other retailer offers as vast a selection of swimsuits, beach accessories, and cruisewear. Headquartered in Boucherville, Quebec, Groupe Bikini Village employs approximately 500 people; its securities trade on the Toronto Stock Exchange under the stock symbol GBV.

Notes

(1) The term EBITDA (earnings before interest, taxes, depreciation, amortization and reorganization fees and unusual items) does not have any standardized meaning prescribed by Canadian Generally Accepted Accounting Principles (GAAP) and may not be comparable to similar measures presented by other companies. Please refer to the section of Groupe Bikini Village inc.'s Annual MD&A dated April 16, 2007, entitled "Non-GAAP Financial Measures," available on SEDAR at www.sedar.com.

Forward looking statements

This news release contains certain forward-looking statements concerning our future operations, economic performances, financial conditions and financing plans. These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate in the circumstances. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks, uncertainties and assumptions. Consequently, all of the forward-looking statements made in news release are qualified by these cautionary statements, and there can be no assurance that the results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us. We undertake no obligation and do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable law.



GROUPE BIKINI VILLAGE INC.
STATEMENT OF OPERATIONS
(in thousands of dollars except per share amounts, unaudited)

Three months ended Six months ended
August 4, July 29, August 4, July 29,
2007 2006 2007 2006
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Operating revenue $13,492 $14,069 $21,501 $22,562

Cost of goods sold,
operating and
administrative
expenses 11,228 11,567 19,263 19,907
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Operating income
(EBITDA(1)) 2,264 2,502 2,238 2,655

Interest 33 6 (2) 16

Amortization 225 174 425 334
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Earnings before income
taxes and the
undernoted items 2,006 2,322 1,815 2,305
Unusual items - stock
based compensation - 448 - 448
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Earnings before income
taxes from continuing
operations 2,006 1,874 1,815 1,857

Income taxes 680 98 618 98
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Earnings from
continuing
operations 1,326 1,776 1,197 1,759

Discontinued operations,
net of related income
taxes 317 - 317 -
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NET EARNINGS $1,643 $1,776 $1,514 $1,759
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EARNINGS PER SHARE,
basic and diluted 0.01 0.01 0.01 0.02
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Weighted average number
of shares
outstanding 172,677,515 172,438,297 172,677,515 84,566,257

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