MONTRÉAL, QUÉBEC--(Marketwired - Sept. 8, 2017) - Le Château Inc. (TSX VENTURE:CTU), today reported that sales for the second quarter ended July 29, 2017 amounted to $55.3 million as compared with $59.9 million for the second quarter ended July 30, 2016, a decrease of 7.7%, with 22 fewer stores in operation. Comparable store sales decreased 1.7% for the second quarter as compared to last year, with comparable regular store sales increasing 0.1% and comparable outlet store sales decreasing 8.4% (see non-GAAP measures below). Included in comparable store sales are online sales which increased 20.3% for the second quarter.

Adjusted EBITDA (see non-GAAP measures below) for the second quarter of 2017 amounted to $3.8 million, compared to $(1.1) million for the same period last year. The improvement of $4.9 million in adjusted EBITDA for the second quarter was attributable to a corresponding reduction in selling, general and administrative ("SG&A") expenses. The decrease in SG&A expenses resulted primarily from the reduction in store operating expenses due mainly to store closures. Despite the overall sales decline of 7.7% for the second quarter, the gross margin dollars remained flat due primarily to the improvement in the gross margin percentage to 68.9% from 63.5% for the same period last year.

The improvements in adjusted EBITDA and cash flow from operating activities for the second quarter as well as a significant reduction in total inventories are attributable to the implementation of the Company's strategy to recalibrate its retail network, close underperforming stores and further strengthen its rapidly growing e-commerce platform. Furthermore, by the end of the current fiscal year, the Company will have achieved approximately 90% of its objective of reducing its store network to approximately 150 stores.

Net loss for the second quarter ended July 29, 2017 amounted to $987,000 or $(0.03) per share compared to a net loss of $6.2 million or $(0.21) per share for the same period last year.

Six-month Results

Sales for the six months ended July 29, 2017 amounted to $99.7 million as compared with $108.5 million last year, a decrease of 8.1%, with 22 fewer stores in operation. Comparable store sales decreased 1.6% versus the same period a year ago, with comparable regular store sales increasing 0.4% and comparable outlet store sales decreasing 9.1%. Included in comparable store sales are online sales which increased 21.1% for the six months ended July 29, 2017.

Adjusted EBITDA for the six months ended July 29, 2017 amounted to $(4.6) million, compared to $(10.2) million last year. The improvement of $5.6 million in adjusted EBITDA for the first six months of 2017 was primarily attributable to the reduction of $8.8 million in selling, general and administrative expenses, offset by the decrease in gross margin dollars of $3.2 million. The decrease in SG&A expenses resulted primarily from the reduction in store operating expenses due mainly to store closures. The decrease of $3.2 million in gross margin dollars was the result of the 8.1% overall sales decline for the first half of 2017, offset by the increase in the gross margin percentage to 65.5% from 63.1% in 2016.

Net loss for the six-month period ended July 29, 2017 amounted to $13.8 million or $(0.46) per share compared to a net loss of $20.5 million or $(0.68) per share the previous year.

During the first six months of 2017, the Company renovated one existing location and, as planned, closed nine underperforming stores. As at July 29, 2017, the Company operated 178 stores (including 53 fashion outlet stores) compared to 200 stores (including 66 fashion outlet stores) as at July 30, 2016. Total square footage for the Le Château network as at July 29, 2017 amounted to 985,000 square feet (including 365,000 square feet for fashion outlet stores), compared to 1,097,000 square feet (including 439,000 square feet for fashion outlet stores) as at July 30, 2016. The Company is planning to close 12 additional stores during the remainder of 2017.

Profile

Le Château de Montréal is a leading Canadian specialty retailer and manufacturer of exclusively designed apparel, footwear and accessories for contemporary and style-conscious women and men, with an extensive network of 175 prime locations across Canada and a rapidly growing e-com platform servicing Canada and the U.S. Le Château, committed to research, design and product development, manufactures approximately 30% of the Company's apparel in its own Canadian production facilities.

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 accretion of First Preferred shares series 1 ("Adjusted EBITDA"). 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 taxes for the three and six-month periods ended July 29, 2017 and July 30, 2016:

(Unaudited)	For the three months ended						For the six months ended
(In thousands of Canadian dollars)	July 29, 2017			July 30, 2016			July 29, 2017			July 30, 2016
Loss before income taxes	$	(987	)	$	(6,209	)	$	(13,840	)	$	(20,482	)
Depreciation and amortization		2,777			3,590			5,650			7,307
Write-offs and impairment of property and equipment		257			294			484			472
Finance costs		1,346			1,275			2,786			2,520
Accretion of First Preferred shares series 1		375			-			375			-
Adjusted EBITDA	$	3,768		$	(1,050	)	$	(4,545	)	$	(10,183	)

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 three and six-month periods ended July 29, 2017 and July 30, 2016:

(Unaudited)	For the three months ended					For the six months ended
(In thousands of Canadian dollars)	July 29, 2017		July 30, 2016			July 29, 2017		July 30, 2016
Comparable store sales - Regular stores	$	42,263	$	42,226		$	76,231	$	75,947
Comparable store sales - Outlet stores		10,080		11,001			18,189		20,001
Total comparable store sales		52,343		53,227			94,420		95,948
Non-comparable store sales		2,965		6,690			5,301		12,598
Total sales	$	55,308	$	59,917		$	99,721	$	108,546

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; liquidity risks; 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 and changes in laws, rules and regulations applicable to the Company. There can be no assurance that borrowings will be available to the Company, or available on acceptable terms, in an amount sufficient to fund the Company's needs or that additional financing will be provided by any of the controlling shareholders of 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 second quarter ended July 29, 2017 are available online at www.sedar.com.

CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands of Canadian dollars)	As at July 29, 2017			As at July 30, 2016			As at January 28, 2017
ASSETS
Current assets
Cash	$	515		$	1,709		$	266
Accounts receivable		975			1,186			992
Income taxes refundable		329			339			459
Inventories		95,560			112,392			101,128
Prepaid expenses		1,737			1,657			1,604
Total current assets		99,116			117,283			104,449
Deposits		621			621			621
Property and equipment		31,998			42,820			36,969
Intangible assets		2,642			3,101			2,900
	$	134,377		$	163,825		$	144,939
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of credit facility	$	13,901		$	60,681		$	54,564
Trade and other payables		18,796			16,862			19,335
Deferred revenue		2,584			2,699			3,022
Current portion of provision for onerous leases		800			737			846
Current portion of long-term debt		-			286			1,643
Total current liabilities		36,081			81,265			79,410
Credit facility		25,347			-			-
Long-term debt		30,409			31,708			32,113
Provision for onerous leases		1,099			1,606			1,364
Deferred lease credits		7,622			8,841			8,192
First Preferred shares series 1		23,557			-			-
Total liabilities		124,115			123,420			121,079
Shareholders' equity
Share capital		47,967			47,967			47,967
Contributed surplus		9,529			9,088			9,287
Deficit		(47,234	)		(16,650	)		(33,394	)
Total shareholders' equity		10,262			40,405			23,860
	$	134,377		$	163,825		$	144,939

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Unaudited)
(In thousands of Canadian dollars,		For the three months ended						For the six months ended
except per share information)		July 29, 2017			July 30, 2016			July 29, 2017			July 30, 2016
Sales		$ 55,308			$ 59,917			$ 99,721			$ 108,546
Cost of sales and expenses
Cost of sales			17,188			21,867			34,446			40,072
Selling			29,975			35,420			60,253			70,322
General and administrative			7,411			7,564			15,701			16,114
			54,574			64,851			110,400			126,508
Results from operating activities			734			(4,934	)		(10,679	)		(17,962	)
Finance costs			1,346			1,275			2,786			2,520
Accretion of First Preferred shares series 1			375			-			375			-
Loss before income taxes			(987	)		(6,209	)		(13,840	)		(20,482	)
Income tax recovery			-			-			-			-
Net loss and comprehensive loss		$	(987	)	$	(6,209	)	$	(13,840	)	$	(20,482	)
Net loss per share
	Basic	$	(0.03	)	$	(0.21	)	$	(0.46	)	$	(0.68	)
	Diluted		(0.03	)		(0.21	)		(0.46	)		(0.68	)
Weighted average number of shares outstanding ('000)			29,964			29,964			29,964			29,964

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)		For the three months ended					For the six months ended
(In thousands of Canadian dollars)		July 29, 2017		July 30, 2016			July 29, 2017			July 30, 2016
SHARE CAPITAL	$	47,967		$	47,967		$	47,967		$	47,967
CONTRIBUTED SURPLUS
Balance, beginning of period	$	9,459		$	9,005		$	9,287		$	8,555
Fair value adjustment of long-term debt		-			-			99			347
Stock-based compensation expense		70			83			143			186
Balance, end of period	$	9,529		$	9,088		$	9,529		$	9,088
DEFICIT
Balance, beginning of period	$	(46,247	)	$	(10,441	)	$	(33,394	)	$	3,832
Net loss		(987	)		(6,209	)		(13,840	)		(20,482	)
Balance, end of period	$	(47,234	)	$	(16,650	)	$	(47,234	)	$	(16,650	)
Total shareholders' equity	$	10,262		$	40,405		$	10,262		$	40,405

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)		For the three months ended						For the six months ended
(In thousands of Canadian dollars)		July 29, 2017			July 30, 2016			July 29, 2017			July 30, 2016
OPERATING ACTIVITIES
Net loss		$	(987	)	$	(6,209	)	$	(13,840	)	$	(20,482	)
Adjustments to determine net cash from operating activities
	Depreciation and amortization		2,777			3,590			5,650			7,307
	Write-offs and impairment of property and equipment		257			294			484			472
	Amortization of deferred lease credits		(292	)		(349	)		(973	)		(672	)
	Deferred lease credits		203			-			403			-
	Stock-based compensation		70			83			143			186
	Provision for onerous leases		(147	)		350			(311	)		270
	Finance costs		1,346			1,275			2,786			2,520
	Accretion of First Preferred shares series 1		375			-			375			-
	Interest paid		(736	)		(793	)		(1,267	)		(1,708	)
			2,866			(1,759	)		(6,550	)		(12,107	)
Net change in non-cash working capital items related to operations			6,101			5,573			3,410			(977	)
Income taxes refunded			250			-			250			300
Cash flows related to operating activities			9,217			3,814			(2,890	)		(12,784	)
FINANCING ACTIVITIES
Increase (decrease) in credit facility			(23,227	)		(1,297	)		(14,450	)		15,655
Financing costs			(1,006	)		-			(1,006	)		-
Proceeds from long-term debt			15,000			-			19,500			2,500
Repayment of long-term debt			-			(282	)		-			(562	)
Cash flows related to financing activities			(9,233	)		(1,579	)		4,044			17,593
INVESTING ACTIVITIES
Additions to property and equipment and intangible assets			(637	)		(928	)		(1,505	)		(2,555	)
Proceeds from disposal of property and equipment			-			-			600			-
Cash flows related to investing activities			(637	)		(928	)		(905	)		(2,555	)
Increase (decrease) in cash			(653	)		1,307			249			2,254
Cash (bank indebtedness), beginning of period			1,168			402			266			(545	)
Cash, end of period		$	515		$	1,709		$	515		$	1,709