MONTREAL, QUÉBEC--(Marketwired - May 1, 2015) -
Editors Note: There is a photo associated with this Press Release.
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 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 Château 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 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 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 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 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:
| (Unaudited) | For the three months ended |
For the year ended |
|||||||||||
| (In thousands of Canadian dollars) | January 31, 2015 | January 25, 2014 | January 31, 2015 | January 25, 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 | ||||
| (Unaudited) (In thousands of Canadian dollars) |
As at January 31, 2015 |
As at January 25 2014 |
||
| 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 | ||
| Total current assets | 120,275 | 137,173 | ||
| Property and equipment | 58,091 | 69,870 | ||
| Intangible assets | 2,961 | 3,815 | ||
| $ | 181,327 | $ | 210,858 | |
| 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 | ||
| 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 | ||
| Total liabilities | 89,344 | 85,759 | ||
| 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 | ||
| Total shareholders' equity | 91,983 | 125,099 | ||
| $ | 181,327 | $ | 210,858 | |
| CONSOLIDATED STATEMENTS OF LOSS | ||||||||||||||
| (Unaudited) | For the three months ended |
For the year ended |
||||||||||||
| (In thousands of Canadian dollars, except per share information) | January 31, 2015 | January 25, 2014 | January 31, 2015 | January 25, 2014 | ||||||||||
| Sales | $ | 70,467 | $ | 76,918 | $ | 250,210 | $ | 274,840 | ||||||
| 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 | ||||||||||
| 81,348 | 81,269 | 287,720 | 293,847 | |||||||||||
| 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 | ) | ||||||
| Loss before income taxes | (11,609 | ) | (5,012 | ) | (40,392 | ) | (21,708 | ) | ||||||
| Income tax recovery | - | (1,152 | ) | (1,716 | ) | (5,722 | ) | |||||||
| Net Loss | $ | (11,609 | ) | $ | (3,860 | ) | $ | (38,676 | ) | $ | (15,986 | ) | ||
| 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 | |||||||||||||
| (Unaudited) | For the three months ended |
For the year ended |
|||||||||||
| (In thousands of Canadian dollars) | January 31, 2015 | January 25, 2014 | January 31, 2015 | January 25, 2014 | |||||||||
| Net loss | $ | (11,609 | ) | $ | (3,860 | ) | $ | (38,676 | ) | $ | (15,986 | ) | |
| 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 | ) | |||||||
| - | 261 | (267 | ) | 363 | |||||||||
| Realized forward exchange contracts reclassified to net loss | (104 | ) | (75 | ) | (151 | ) | (294 | ) | |||||
| Income tax recovery | - | 20 | 113 | 81 | |||||||||
| (104 | ) | (55 | ) | (38 | ) | (213 | ) | ||||||
| Total other comprehensive income (loss) | (104 | ) | 206 | (305 | ) | 150 | |||||||
| Comprehensive loss | $ | (11,713 | ) | $ | (3,654 | ) | $ | (38,981 | ) | $ | (15,836 | ) | |
| CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY | |||||||||||||
| (Unaudited) | For the three months ended |
For the year ended |
|||||||||||
| (In thousands of Canadian dollars) | January 31, 2015 | January 25, 2014 | January 31, 2015 | January 25, 2014 | |||||||||
| 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 | |||||||||
| Balance, end of period | $ | 47,967 | $ | 42,960 | $ | 47,967 | $ | 42,960 | |||||
| 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 | ) | ||||||
| Balance, end of period | $ | 4,439 | $ | 3,581 | $ | 4,439 | $ | 3,581 | |||||
| RETAINED EARNINGS | |||||||||||||
| Balance, beginning of period | $ | 51,186 | $ | 82,113 | $ | 78,253 | $ | 94,239 | |||||
| Net loss | (11,609 | ) | (3,860 | ) | (38,676 | ) | (15,986 | ) | |||||
| Balance, end of period | $ | 39,577 | $ | 78,253 | $ | 39,577 | $ | 78,253 | |||||
| ACCUMULATED OTHER COMPREHENSIVE INCOME | |||||||||||||
| Balance, beginning of period | $ | 104 | $ | 99 | $ | 305 | $ | 155 | |||||
| Other comprehensive income (loss) for the period | (104 | ) | 206 | (305 | ) | 150 | |||||||
| Balance, end of period | - | $ | 305 | - | $ | 305 | |||||||
| Total shareholders' equity | $ | 91,983 | $ | 125,099 | $ | 91,983 | $ | 125,099 | |||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||
| (Unaudited) | For the three months ended |
For the year ended |
||||||||||||
| (In thousands of Canadian dollars) | January 31, 2015 | January 25, 2014 | January 31, 2015 | January 25, 2014 | ||||||||||
| 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 | ) | |||||||
| (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 | |||||||||
| Cash flows related to operating activities | 7,579 | 11,386 | (6,824 | ) | (3,356 | ) | ||||||||
| 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 | ||||||||||
| Cash flows related to financing activities | (8,581 | ) | (11,067 | ) | 14,320 | 9,337 | ||||||||
| 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 | - | ||||||||||
| Cash flows related to investing activities | (158 | ) | (652 | ) | (7,747 | ) | (6,318 | ) | ||||||
| Decrease in cash | (1,160 | ) | (333 | ) | (251 | ) | (337 | ) | ||||||
| Cash, beginning of period | 2,355 | 1,779 | 1,446 | 1,783 | ||||||||||
| Cash, end of period | $ | 1,195 | $ | 1,446 | $ | 1,195 | $ | 1,446 | ||||||
To view the photo associated with this press release, please visit the following link: http://media3.marketwire.com/docs/chateau0429.jpg
Contact Information:
President
(514) 738-7000
Johnny Del Ciancio, CPA, CA
Vice-President, Finance
(514) 738-7000
MaisonBrison:
Pierre Boucher
(514) 731-0000
