Le Chateau Inc.
TSX : CTU.A

Le Chateau Inc.

June 16, 2015 17:46 ET

Le Chateau Reports First Quarter Results

MONTREAL, QUEBEC--(Marketwired - June 16, 2015) - Le Château Inc. (TSX:CTU.A), a leading Canadian brand in specialty retailing, offering a broad array of contemporary fashion apparel, accessories and footwear for style-conscious women and men, today reported its results for the first quarter ended May 2, 2015. The 2015 year refers to the 13-week period ended May 2, 2015 while the 2014 year refers to the 13-week period ended April 26, 2014.

Sales for the first quarter ended May 2, 2015 amounted to $50.8 million, a decrease of 4.8% from $53.3 million for the first quarter ended April 26, 2014. Sales were negatively impacted in the first quarter of 2015 by soft store traffic and a competitive retail environment. Comparable store sales decreased 6.2% for the first quarter versus the same period a year ago. Included in comparable store sales are online sales which increased 24.7% for the first quarter.

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 amounted to $(7.1) million, compared to $(9.3) million last year. The improvement of $2.2 million in adjusted EBITDA for the first quarter of 2015 was primarily attributable to the increase of $263,000 in gross margin dollars and the decrease of $1.9 million in selling, general and administrative expenses. The increase of $263,000 in gross margin dollars was the result of the increase in gross margin percentage to 64.3% from 60.7% in 2014, offset by the 4.8% decline in sales for the first quarter of 2015. The gross margin improvement in the first quarter of 2015 resulted from reduced promotional activity.

Net loss for the first quarter amounted to $12.4 million or $(0.41) per share compared to a net loss of $13.0 million or $(0.48) per share the previous year. In addition, tax benefits amounting to $3.4 million attributed to losses generated during the first quarter of 2015 have not been recognized.

During the first quarter of 2015, the Company renovated two existing locations. Total square footage for the Le Château network as at May 2, 2015 amounted to 1,216,000 square feet, compared to 1,245,000 square feet as at April 26, 2014.

Although still negative, comparable stores sales performance during the first quarter marked an improvement over most recent quarters. Our stores in top-tier malls continue to do well and outperform stores in our other locations. The gross margin for the quarter increased significantly reflecting greater traction of our brand message from new early-adopting customers, particularly in new concept stores and online. We continue to execute our business plan and remain optimistic about the opportunity to grow our business and improve our margins.

Second Quarter of 2015

For the first six weeks ended June 13, 2015, total retail sales decreased 5.6% and comparable store sales decreased 4.8% compared to the same period last year. Included in comparable store sales are online sales which increased 36.5%.

For the year-to-date, the Company introduced two new concept stores: Scarborough Town Centre in Ontario on April 1, 2015 and Fairview Pointe Claire in Quebec on May 21, 2015. The Company plans to launch another three new concept stores over the next few months which include: Yorkdale Shopping Centre, Ontario in July 2015, St. Laurent Shopping Centre in Ottawa, Ontario in August 2015 and Mayfair Shopping Centre, British Columbia in August 2015. With the above-mentioned stores, a total of 20 stores will have been converted to new concept stores since the fall of 2011.

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 220 retail locations, of which 119 are 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 55-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 May 2, 2015 and April 26, 2014:

(Unaudited) For the three months ended
(In thousands of Canadian dollars) May 2, 2015 April 26, 2014
Loss before income tax recovery $ (12,358 ) $ (14,761 )
Depreciation and amortization 4,398 4,591
Write-off and impairment of property and equipment 20 180
Finance costs 806 687
Finance income (2 ) (3 )
Adjusted EBITDA $ (7,136 ) $ (9,306 )

The Company also discloses comparable store sales which are defined as sales generated by stores that have been open for at least one year.

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 financial statements and Management's Discussion and Analysis for the first quarter ended May 2, 2015 are available online at www.sedar.com.

CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands of Canadian dollars)
As at
May 2, 2015
As at
April 26, 2014
As at
January 31, 2015
ASSETS
Current assets
Cash $ - $ 2,334 $ 1,195
Accounts receivable 1,447 1,433 2,025
Income taxes refundable 694 5,894 619
Inventories 119,844 130,288 115,357
Prepaid expenses 8,145 2,740 1,079
Total current assets 130,130 142,689 120,275
Property and equipment 55,493 70,354 58,091
Intangible assets 2,616 3,681 2,961
$ 188,239 $ 216,724 $ 181,327
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness $ 1,145 $ - $ -
Current portion of credit facility 29,397 50,437 14,737
Trade and other payables 13,287 18,774 16,133
Deferred revenue 3,031 3,316 3,452
Current portion of provisions 629 286 678
Derivative financial instruments - 28 -
Current portion of long-term debt 1,411 6,814 2,007
Total current liabilities 48,900 79,655 37,007
Credit facility 36,788 - 33,674
Long-term debt 10,154 11,963 5,836
Provisions 1,444 383 1,473
Deferred lease credits 10,752 12,702 11,354
Total liabilities 108,038 104,703 89,344
Shareholders' equity
Share capital 47,967 42,962 47,967
Contributed surplus 5,015 3,871 4,439
Retained earnings 27,219 65,208 39,577
Accumulated other comprehensive loss - (20 ) -
Total shareholders' equity 80,201 112,021 91,983
$ 188,239 $ 216,724 $ 181,327
CONSOLIDATED STATEMENTS OF LOSS
(Unaudited) For the three months ended
(In thousands of Canadian dollars,
except per share information)
May 2,
2015
April 26,
2014
Sales $ 50,746 $ 53,305
Cost of sales and expenses
Cost of sales 18,131 20,953
Selling 35,702 37,187
General and administrative 8,467 9,242
62,300 67,382
Results from operating activities (11,554 ) (14,077 )
Finance costs 806 687
Finance income (2 ) (3 )
Loss before income taxes (12,358 ) (14,761 )
Income tax recovery - (1,716 )
Net loss $ (12,358 ) $ (13,045 )
Net loss per share
Basic $ (0.41 ) $ (0.48 )
Diluted (0.41 ) (0.48 )
Weighted average number of shares outstanding ('000) 29,964 27,343
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited) For the three months ended
(In thousands of Canadian dollars) May 2, 2015 April 26, 2014
Net loss $ (12,358 ) $ (13,045 )
Other comprehensive loss to be reclassified to profit or loss in subsequent periods
Change in fair value of forward exchange contracts - (28 )
Income tax recovery - 8
- (20 )
Realized forward exchange contracts reclassified to net loss - (418 )
Income tax recovery - 113
- (305 )
Total other comprehensive loss - (325 )
Comprehensive loss $ (12,358 ) $ (13,370 )
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited) For the three months ended
(In thousands of Canadian dollars) May 2, 2015 April 26, 2014
SHARE CAPITAL
Balance, beginning of period $ 47,967 $ 42,960
Issuance of subordinate voting shares upon exercise of options - 2
Balance, end of period $ 47,967 $ 42,962
CONTRIBUTED SURPLUS
Balance, beginning of period $ 4,439 $ 3,581
Fair value adjustment for long-term debt 403 -
Stock-based compensation expense 173 290
Balance, end of period $ 5,015 $ 3,871
RETAINED EARNINGS
Balance, beginning of period $ 39,577 $ 78,253
Net loss (12,358 ) (13,045 )
Balance, end of period $ 27,219 $ 65,208
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of period $ - $ 305
Other comprehensive income (loss) for the period - (325 )
Balance, end of period $ - $ (20 )
Total shareholders' equity $ 80,201 $ 112,021
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) For the three months ended
(In thousands of Canadian dollars) May 2, 2015 April 26, 2014
OPERATING ACTIVITIES
Net loss $ (12,358 ) $ (13,045 )
Adjustments to determine net cash from operating activities
Depreciation and amortization 4,398 4591
Write-off and impairment of property and equipment 20 180
Amortization of deferred lease credits (602 ) (584 )
Deferred lease credits - (126 )
Stock-based compensation 173 290
Provisions (78 ) 13
Finance costs 806 687
Interest paid (711 ) (575 )
Income tax recovery - (1,716 )
(8,352 ) (10,285 )
Net change in non-cash working capital items related to operations (14,315 ) (7,160 )
Income taxes refunded - 898
Cash flows related to operating activities (22,667 ) (16,547 )
FINANCING ACTIVITIES
Increase in credit facility 17,708 19,607
Financing costs (31 ) -
Proceeds of long-term debt 5,000 5,000
Repayment of long-term debt (875 ) (2,053 )
Issue of share capital upon exercise of options - 2
Cash flows related to financing activities 21,802 22,556
INVESTING ACTIVITIES
Additions to property and equipment and intangible assets (1,475 ) (5,121 )
Cash flows related to investing activities (1,475 ) (5,121 )
Increase (decrease) in cash (2,340 ) 888
Cash, beginning of period 1,195 1,446
Cash (bank indebtedness), end of period $ (1,145 ) $ 2,334

Contact Information

  • Emilia Di Raddo, CPA, CA,
    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.