MONTREAL, QUEBEC -- (Marketwired) -- 05/01/15 -- Editors Note: There is a photo associated with this Press Release.
Le Chateau 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 fourth quarter ended January 31, 2015. The 2014 year refers to the 53-week period ended January 31, 2015 while the 2013 year refers to the 52-week period ended January 25, 2014.
Sales for the 14-week period ended January 31, 2015 amounted to $70.5 million, a decrease of 8.4% from $76.9 million for the 13-week period January 25, 2014. Sales were negatively impacted in the fourth quarter of 2014 by reduced store traffic and increased promotional activity throughout the quarter. Comparable store sales decreased 11.3% for the fourth quarter. Included in comparable store sales are online sales which increased 4.5% for the quarter.
Loss before interest, income taxes, depreciation, amortization, write-off and/or impairment of property and equipment and intangible assets, and gain on disposal of property and equipment ("Adjusted EBITDA") (see non-GAAP measures below) for the fourth quarter amounted to $5.8 million, compared to earnings before interest, income taxes, depreciation, amortization, write-off and/or impairment of property and equipment and intangible assets, and gain on disposal of property and equipment of $385,000 last year. The decrease of $6.2 million in adjusted EBITDA for the fourth quarter was primarily attributable to the decrease of $4.4 million in gross margin dollars and the increase of $1.8 million in selling, general and administrative expenses, with the latter due to the extra week in the fourth quarter of 2014 vs. 2013. The decrease of $4.4 million in gross margin dollars was the result of the 8.4% decline in sales for the fourth quarter, combined with the decrease in gross margin percentage to 56.1% from 57.1% in 2013. The gross margin for the fourth quarter was impacted by the $3.9 million (2013 - $4.5 million) of net inventory write-downs recorded and the increased promotional activity.
Net loss for the fourth quarter amounted to $11.6 million or $(0.39) per share (diluted) compared to $3.9 million or $(0.15) per share (diluted) the previous year, mainly as a result of the decrease in the gross margin dollars as mentioned above. Included in the net loss for the fourth quarter is $1.4 million relating to the write-off and net impairment of property and equipment compared to $207,000 for the same period last year. In addition, tax benefits amounting to $2.6 million attributed to losses generated during the fourth quarter ended January 31, 2015 have not been recognized.
Despite some of the on-ongoing challenges of the retail industry, we remain confident in our business plan and strategy going into 2015 and for the future. New concept stores are performing well and the roll out will continue at a measured pace. Over the past few years, the retail landscape has evolved and consumer shopping habits have also changed significantly with e-commerce. Consequently, in light of these changes, our strategy remains to reassess the configuration of our retail network which will lead to the closure of approximately 10 more stores during the year ending January 30, 2016. We remain committed to invest in our e-commerce platform which represents an important growth vector in upcoming years.
The Company remains focused on improving margins, cost containment, the roll out of the new concept stores and to better communicate its brand and product offering market repositioning. Recently, we engaged Sid Lee, as a partner, to enhance and accelerate the communication of our current market positioning. Sid Lee is a world renowned agency that offers marketing communication strategies.
Year-end Results
Sales for the 53-week period ended January 31, 2015 decreased 9.0% to $250.2 million from $274.8 million for the 52-week period ended January 25, 2014. Comparable store sales decreased 9.0% versus the same period a year ago. Included in comparable store sales are online sales which increased 10.7% for the year ended January 31, 2015.
Loss before interest, income taxes, depreciation, amortization, write-off and/or impairment of property and equipment and intangible assets, and gain on disposal of property and equipment for the year ended January 31, 2015 amounted to $17.1 million, compared to earnings before interest, income taxes, depreciation, amortization, write-off and/or impairment of property and equipment and intangible assets, and gain on disposal of property and equipment of $1.6 million last year. The decrease of $18.7 million in adjusted EBITDA for the year was primarily attributable to a decline of $21.5 million in gross margin dollars, partially offset by cost control initiatives resulting in a decrease of $2.8 million in selling, general and administrative expenses. The decrease in gross margin dollars was the result of the 9.0% decline in sales for the year, combined with the decrease in gross margin percentage to 60.6% from 63.0% in 2013. The latter was impacted by the $5.3 million (2013 - $4.8 million) of net inventory write-downs recorded for the year ended January 31, 2015 and the increased promotional activity.
Net loss for the year ended January 31, 2015 amounted to $38.7 million or $(1.34) per share (diluted) compared to $16.0 million or $(0.59) per share (diluted) the previous year, mainly as a result of the decrease in the gross margin dollars as mentioned above. In addition, tax benefits amounting to $8.2 million attributed to losses generated during the year ended January 31, 2015 have not been recognized.
During the year, the Company opened one store, closed eight stores and renovated six existing locations. Total square footage for the Le Chateau network as January 31, 2015 amounted to 1,219,000 square feet, compared to 1,250,000 square feet as at January 25, 2014.
First Quarter of 2015
For the first quarter to date (up to April 28, 2015), total retail sales decreased 4.8% and comparable store sales decreased 6.2% compared to the same period last year. Included in comparable store sales are online sales which increased 24.4%.
A new concept store was opened in the first quarter (on April 1, 2015) at the Scarborough Town Centre in Ontario and the Company plans to launch another 4 new concept stores over the next few months which include: Fairview Pointe Claire, Quebec in May 2015, 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 the new concept stores since the fall of 2011.
Profile
Le Chateau 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 Chateau brand is sold exclusively through the Company's 222 retail locations, of which 221 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 Chateau'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 Chateau 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 and intangible assets, and gain on disposal 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 fourth quarters and years ended January 31, 2015 and January 25, 2014:
For the three months For the year (Unaudited) ended ended (In thousands of Canadian January January January 31, January 25, dollars) 31, 2015 25, 2014 2015 2014 ---------------------------------------------------------------------------- Loss before income tax recovery $(11,609) $ (5,012) $ (40,392) $ (21,708) Depreciation and amortization 4,210 4,529 17,707 18,723 Write-off and net impairment of property and equipment and intangible assets 1,416 207 3,263 1,897 Gain on disposal of property and equipment (590) - (590) - Finance costs 730 664 2,900 2,714 Finance income (2) (3) (18) (13) ---------------------------------------------------------------------------- Adjusted EBITDA $ (5,845) $ 385 $ (17,130) $ 1,613 ----------------------------------------------------------------------------
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 consolidated financial statements and Management's Discussion and Analysis for the year ended January 31, 2015 are available online at www.sedar.com.
CONSOLIDATED BALANCE SHEETS
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(Unaudited) As at As at
(In thousands of Canadian dollars) January 31, January 25
2015 2014
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ASSETS
Current assets
Cash $ 1,195 $ 1,446
Accounts receivable 2,025 1,476
Income taxes refundable 619 6,663
Derivative financial instruments - 418
Inventories 115,357 124,878
Prepaid expenses 1,079 2,292
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Total current assets 120,275 137,173
Property and equipment 58,091 69,870
Intangible assets 2,961 3,815
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$ 181,327 $ 210,858
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of credit facility $ 14,737 $ 30,767
Trade and other payables 16,133 19,553
Deferred revenue 3,452 3,712
Current portion of provisions 678 265
Current portion of long-term debt 2,007 7,987
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Total current liabilities 37,007 62,284
Credit facility 33,674 -
Long-term debt 5,836 7,843
Provisions 1,473 391
Deferred income taxes - 1,829
Deferred lease credits 11,354 13,412
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Total liabilities 89,344 85,759
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Shareholders' equity
Share capital 47,967 42,960
Contributed surplus 4,439 3,581
Retained earnings 39,577 78,253
Accumulated other comprehensive income - 305
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Total shareholders' equity 91,983 125,099
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$ 181,327 $ 210,858
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CONSOLIDATED STATEMENTS OF LOSS
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For the three months For the year
(Unaudited) ended ended
(In thousands of Canadian
dollars, except per share January January January January
information) 31, 2015 25, 2014 31, 2015 25, 2014
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Sales $ 70,467 $ 76,918 $ 250,210 $ 274,840
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Cost of sales and expenses
Cost of sales 30,921 32,986 98,665 101,770
Selling 41,602 39,148 153,853 155,859
General and administrative 8,825 9,135 35,202 36,218
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81,348 81,269 287,720 293,847
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Results from operating
activities (10,881) (4,351) (37,510) (19,007)
Finance costs 730 664 2,900 2,714
Finance income (2) (3) (18) (13)
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Loss before income taxes (11,609) (5,012) (40,392) (21,708)
Income tax recovery - (1,152) (1,716) (5,722)
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Net Loss $ (11,609) $ (3,860) $ (38,676) $ (15,986)
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Net loss per share
Basic $ (0.39) $ (0.15) $ (1.34) $ (0.59)
Diluted (0.39) (0.15) (1.34) (0.59)
Weighted average number of
shares outstanding ('000) 29,964 27,334 28,968 27,289
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
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For the three months For the year
(Unaudited) ended ended
(In thousands of Canadian January January January January
dollars) 31, 2015 25, 2014 31, 2015 25, 2014
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Net loss $ (11,609) $ (3,860) $ (38,676) $ (15,986)
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Other comprehensive income
(loss) to be reclassified to
profit or loss in subsequent
periods
Change in fair value of forward
exchange contracts - 357 (267) 497
Income tax expense - (96) - (134)
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- 261 (267) 363
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Realized forward exchange
contracts reclassified to net
loss (104) (75) (151) (294)
Income tax recovery - 20 113 81
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(104) (55) (38) (213)
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Total other comprehensive
income (loss) (104) 206 (305) 150
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Comprehensive loss $ (11,713) $ (3,654) $ (38,981) $ (15,836)
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
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For the three months For the year
(Unaudited) ended ended
(In thousands of Canadian January January January January
dollars) 31, 2015 25, 2014 31, 2015 25, 2014
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SHARE CAPITAL
Balance, beginning of period $ 47,967 $ 42,939 $ 42,960 $ 42,740
Issuance of subordinate
voting shares upon
conversion of long-term debt - - 5,000 -
Issuance of subordinate
voting shares upon exercise
of options - 15 5 159
Reclassification from
contributed surplus due to
exercise of share options - 6 2 61
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Balance, end of period $ 47,967 $ 42,960 $ 47,967 $ 42,960
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CONTRIBUTED SURPLUS
Balance, beginning of period $ 4,274 $ 3,302 $ 3,581 $ 2,664
Stock-based compensation
expense 165 285 860 978
Exercise of share options - (6) (2) (61)
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Balance, end of period $ 4,439 $ 3,581 $ 4,439 $ 3,581
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RETAINED EARNINGS
Balance, beginning of period $ 51,186 $ 82,113 $ 78,253 $ 94,239
Net loss (11,609) (3,860) (38,676) (15,986)
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Balance, end of period $ 39,577 $ 78,253 $ 39,577 $ 78,253
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ACCUMULATED OTHER
COMPREHENSIVE INCOME
Balance, beginning of period $ 104 $ 99 $ 305 $ 155
Other comprehensive income
(loss) for the period (104) 206 (305) 150
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Balance, end of period - $ 305 - $ 305
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Total shareholders' equity $ 91,983 $ 125,099 $ 91,983 $ 125,099
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the three months For the year
(Unaudited) ended ended
(In thousands of Canadian January January January January
dollars) 31, 2015 25, 2014 31, 2015 25, 2014
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OPERATING ACTIVITIES
Net loss $ (11,609) $ (3,860) $ (38,676) $ (15,986)
Adjustments to determine net
cash from operating activities
Depreciation and amortization 4,210 4,529 17,707 18,723
Write-off and net impairment
of property and equipment
and intangible assets 1,416 207 3,263 1,897
Gain on disposal of property
and equipment (590) - (590) -
Amortization of deferred
lease credits (484) (656) (2,227) (2,539)
Deferred lease credits - - 169 39
Stock-based compensation 165 285 860 978
Provisions 1,444 (7) 1,495 (102)
Finance costs 730 664 2,900 2,714
Interest paid (744) (611) (2,612) (2,436)
Income tax recovery - (1,152) (1,716) (5,722)
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(5,462) (601) (19,427) (2,434)
Net change in non-cash working
capital items related to
operations 13,046 11,987 6,155 (3,030)
Income taxes refunded (5) - 6,448 2,108
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Cash flows related to operating
activities 7,579 11,386 (6,824) (3,356)
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FINANCING ACTIVITIES
Increase (decrease) in credit
facility (6,806) (9,057) 17,712 17,482
Financing costs - - (410) -
Proceeds of long-term debt - - 5,000 -
Repayment of long-term debt (1,775) (2,025) (7,987) (8,304)
Issue of capital stock upon
exercise of options - 15 5 159
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Cash flows related to financing
activities (8,581) (11,067) 14,320 9,337
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INVESTING ACTIVITIES
Additions to property and
equipment and intangible
assets (938) (652) (8,527) (6,318)
Proceeds from disposal of
property and equipment 780 - 780 -
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Cash flows related to investing
activities (158) (652) (7,747) (6,318)
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Decrease in cash (1,160) (333) (251) (337)
Cash, beginning of period 2,355 1,779 1,446 1,783
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Cash, end of period $ 1,195 $ 1,446 $ 1,195 $ 1,446
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To view the photo associated with this press release, please visit the following link: http://media3.marketwire.com/docs/chateau0429.jpg
Contacts:
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
