ANNUAL
REPORT
2015
We are customer driven, value oriented
and committed to excellence. By promoting
innovation, growth, development and teamwork,
REITMANS IS
CANADA’S LEADING
SPECIALTY RETAILER
we strive to serve our customers the best
quality/value proposition in the marketplace.
Fiscal 2015 was a challenging year.
Sales for fiscal 2015 were $939,376,000 as compared with $960,397,000 for fiscal 2014, a decrease of
2.2%, impacted by a net reduction of 55 stores as the Company closes underperforming locations.
Same store sales1 increased 1.2% with mall and power centre stores decreasing 0.2% and e-commerce
sales increasing 63.5%. Mall and power centre stores were impacted by e-commerce alternatives,
a highly competitive environment and consumers with near record high debt levels. Sales through the
various banners’ e-commerce channels continued to show strong growth, although representing a small
proportion of total Company sales.
The Company’s gross margin for fiscal 2015 was 60.4% compared with 61.9% for fiscal 2014. The Company’s
gross margin includes gains on foreign exchange contracts previously reported in finance income (gain of
$10,921,000 for fiscal 2015 and $12,455,000 for fiscal 2014).
Net earnings for fiscal 2015 were $13,415,000 ($0.21 diluted earnings per share) as compared with net
earnings of $10,788,000 ($0.17 diluted earnings per share) for fiscal 2014. The increase in net earnings
was primarily attributable to the closure of non-performing stores and previously reported initiatives
to reduce costs across the organization. For fiscal 2015, adjusted EBITDA1 was $64,805,000 as compared
with $70,453,000 in fiscal 2014, a decrease of $5,648,000 or 8.0% largely attributable to lower sales
and margins.
On November 25, 2014 the Company announced its plan to close all Smart Set stores. In fiscal 2015,
35 Smart Set stores were closed. The Company will convert 74 stores to other banners by October 31, 2015
while 20 stores will be closed upon expiry of their leases.
During the year, the Company opened 12 new stores and closed 67. Accordingly, at January 31, 2015, there
were 823 stores in operation, consisting of 341 Reitmans, 139 Penningtons, 105 Addition Elle, 76 RW & CO.,
68 Thyme Maternity and 94 Smart Set, as compared with a total of 878 stores as at February 1, 2014.
In addition, there were 21 Thyme Maternity shop-in-shop boutiques in select Babies“R”Us locations in
Canada. We expect to open 6 new stores, close 51 stores, remodel 45 stores and convert 74 Smart Set
stores at a capital cost of approximately $20,000,000.
TO OUR
SHAREHOLDERS
The Company continues to execute its strategy of delivering fashionable clothing at excellent prices to
Canadian consumers. We are proud of our achievements over the past 89 years and most confident of
our future. We believe that we have the very best specialty retailing assets in Canada. Our operations are
led and staffed by highly motivated, extremely competent professionals. We extend sincere thanks and
appreciation to all our associates, suppliers, customers and shareholders. These are the people who have
made possible our many years of success and on whom we rely for the growth of the Company.
On behalf of the Board of Directors,
(signed)
Jeremy H. Reitman
Chairman and Chief Executive Officer
Montreal, April 1, 2015
1
Please refer to the note on non-GAAP
financial measures included in the
Management’s Discussion & Analysis.
FOR THE YEARS ENDED:
(IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
(UNAUDITED)
SALES
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
TOTAL
RESULTS FROM
OPERATING ACTIVITIES 2
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
TOTAL
2
5-YEAR
HIGHLIGHTS
2014
2015
NET EARNINGS (LOSS)
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
TOTAL
$
$ 206,478
258,326
238,295
236,277
$ 939,376
$
$
$
$
$
$
BASIC EARNINGS
(LOSS) PER SHARE
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
TOTAL
$
NET EARNINGS
BASIC EARNINGS PER SHARE
$
$
SHAREHOLDERS’ EQUITY
PER SHARE
(16,629)
10,904
14,078
4,143
12,496
$
$
(13,415)
9,557
12,866
4,407
13,415
$
235,745
292,026
262,515
268,714
$ 1,059,000
(5,117)
13,463
6,133
(11,373)
3,106
$
$
$
$
13,415
0.21
$
$
$ 421,123
$
6.52
$
$
NUMBER OF STORES
$
219,296
286,075
254,072
259,954
$ 1,019,397
(0.21)
0.15
0.20
0.07
0.21
$
$
$
$
(119)
27,649
(29)
(1,145)
26,356
$
0.00
0.42
0.00
(0.02)
0.40
10,788
0.17
$
$
423,431
6.56
$
$
878
823
(736)
35,211
(1,135)
(2,538)
30,802
$
2011
217,094
279,513
236,247
267,659
$ 1,000,513
(2,586)
10,182
5,763
(2,571)
10,788
$
2012
216,861
253,445
249,414
240,677
960,397
(0.04)
0.16
0.09
(0.04)
0.17
$
2013 1
$
$
$
$
5,018
40,968
10,609
4,493
61,088
624
31,680
10,561
4,674
47,539
$
$
$
$
15,770
38,706
20,692
13,817
88,985
$
0.01
0.48
0.16
0.07
0.72
$
0.23
0.58
0.31
0.21
1.33
26,356
0.40
$
$
47,539
0.72
$
$
88,985
1.33
454,893
7.04
$
$
492,852
7.51
$
$
512,800
7.73
911
$
22,825
53,612
27,819
19,886
124,142
942
968
DIVIDENDS PAID
$
12,917
$
41,981
$
52,068
$
52,654
$
51,895
SHARE PRICE AT YEAR-END
CLASS A NON-VOTING
COMMON
$
$
8.10
7.11
$
$
5.56
5.61
$
$
12.39
11.85
$
$
14.64
14.98
$
$
17.81
18.18
1
Adjusted to reflect the impact from the implementation of the amendments
to IAS 19, Employee Benefits.
2
Adjusted to reflect the reclassification of realized and unrealized gains and
losses on foreign exchange contracts not eligible for hedge accounting to
conform with presentation in the current year. Gains and losses on these
foreign exchange contracts were previously reported in finance income and
finance costs as described in the Management’s Discussion and Analysis.
120
1080
1060
100
1040
1020
IN MILLIONS OF DOLLARS
IN MILLIONS OF DOLLARS
980
960
940
920
900
880
60
40
20
2011
2012
2013
2014
2015
0
2011
2012
2013
2014
2015
860
RESULTS FROM
OPERATING
ACTIVITIES 1, 2
80
SALES
1000
100
600
90
500
80
70
NET
EARNINGS 1
IN MILLIONS OF DOLLARS
50
40
30
20
10
3
300
200
100
0
2011
2012
2013
2014
2015
0
SHAREHOLDERS’
EQUITY 1
400
2011
2012
2013
2014
2015
IN MILLIONS OF DOLLARS
60
60
20.0
18.0
50
16.0
RETURN
ON EQUITY 1
12.0
IN MILLIONS OF DOLLARS
10.0
8.0
6.0
4.0
2.0
0
2011
2012
2013
2014
2015
PERCENTAGE
40
DIVIDENDS
30
20
1
The year ended 2013 has been adjusted to reflect
the impact from the implementation of the
amendments to IAS 19, Employee Benefits.
10
2
Adjusted to reflect the reclassification of realized
and unrealized gains and losses on foreign exchange
contracts not eligible for hedge accounting to
conform with presentation in the current year.
Gains and losses on these foreign exchange
contracts were previously reported in finance
income and finance costs as described in the
Management’s Discussion and Analysis.
0
2011
2012
2013
2014
2015
14.0
REITMANS
PENNINGTONS
ADDITION ELLE
RW & CO.
THYME
SMART SET
TOTAL
STORES
4
STORES
ACROSS
CANADA
14
3
2
1
–
–
3
1
–
–
–
2
19
6
2
1
1
1
13
4
3
3
1
3
82
25
30
16
21
36
110
51
39
29
25
33
12
5
3
3
2
3
11
6
3
2
2
2
40
20
17
11
10
8
35
18
6
10
6
6
1
–
–
–
–
–
1
–
–
–
–
–
20
6
30
27
210
287
28
26
106
81
1
1
341 139 105 76 68 94
823
NEWFOUNDLAND
PRINCE EDWARD ISLAND
NOVA SCOTIA
NEW BRUNSWICK
QUÉBEC
ONTARIO
MANITOBA
SASKATCHEWAN
ALBERTA
BRITISH COLUMBIA
NORTHWEST TERRITORIES
YUKON
REITMANS offers a unique combination of superior fit, fashion, quality and value. With 341 STORES
across Canada averaging 4,600 sq. ft., Reitmans is the preferred destination for women looking to update
their wardrobe with the latest styles and colours for an affordable price. While Reitmans enjoys a strong
reputation for service and benefits from a broad and loyal customer base, it will continue to strive to
create an engaging customer experience by being there for her whenever she chooses to shop. Reitmans’
fashions can also be purchased online at reitmans.com.
Canadian leader of plus-size apparel,
PENNINGTONS offers unparalleled value to our customers
by providing fit expertise, quality and a unique inspiring shopping experience. Penningtons is the “Art of
Affordable Fashion!” The plus-size fashion destination for sizes 14–32, Penningtons operates 139 STORES
across Canada averaging 6,000 sq. ft. and is available online at penningtons.com.
ADDITION ELLE is Canada’s leading fashion destination for plus-size women. Addition Elle’s vision
of “Fashion Democracy” delivers the latest trends to updated fashion essentials in an inspiring shopping
environment, offering casual daywear, dresses, contemporary career, sexy intimates, accessories, footwear,
high performance activewear and a large assortment of premium denim labels. Addition Elle operates
105 STORES averaging 6,000 sq. ft. in major malls and power centres nationwide and an e-commerce
site at additionelle.com.
RW & CO. is an aspirational lifestyle brand which caters to men and women with an urban mindset.
Whether for work or for weekend, RW & CO. offers fashion that blends the latest trends with style,
quality and a unique attention to detail. RW & CO. operates
76 STORES averaging 4,500 sq. ft. in
premium locations in major shopping malls across Canada, as well as an e-commerce site at rw-co.com.
THYME MATERNITY, Canada’s leading fashion brand for modern moms-to-be, offers current styles
for every aspect of life, from casual to work, including a complete line of nursing fashion and accessories.
Thyme brings future moms valuable advice, fashion tips and product knowledge to help them on their
incredible journey during and after pregnancy. Thyme operates
68 STORES averaging 2,300 sq. ft.
in major malls and power centres nationwide, as well as 21 Thyme shop-in-shops in select Babies“R”Us
locations in Canada. Thyme Maternity fashions can also be purchased online at thymematernity.com.
With 94
STORES, averaging 3,400 sq. ft., SMART SET is a style destination offering wear-to-work
separates, denim, essentials and accessories. Smart Set offers the latest styles in women’s fashions to mix,
match and innovate. Smart Set fashions can also be purchased online at smartset.ca.
5
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
of Reitmans (Canada) Limited and its subsidiaries (“Reitmans” or the “Company”) should be read in
conjunction with the audited consolidated financial statements of Reitmans as at and for the fiscal year ended
January 31, 2015 (“fiscal 2015”) and February 1, 2014 (“fiscal 2014”) and the notes thereto which are available
at www.sedar.com. This MD&A is dated April 1, 2015.
All financial information contained in this MD&A and Reitmans’ audited consolidated financial statements
have been prepared in accordance with International Financial Reporting Standards (“IFRS”), also referred to as
Generally Accepted Accounting Principles (“GAAP”), as issued by the International Accounting Standards Board
(“IASB”). All monetary amounts in this report are in thousands of Canadian dollars, except per share amounts.
The audited consolidated financial statements and this MD&A were reviewed by Reitmans’ Audit Committee and
were approved by its Board of Directors on April 1, 2015.
Additional information about Reitmans is available on the Company’s website at www.reitmans.ca or on the
SEDAR website at www.sedar.com.
FORWARD-LOOKING STATEMENTS
MANAGEMENT’S
DISCUSSION
AND ANALYSIS
6
OF FINANCIAL
CONDITION
AND RESULTS
OF OPERATIONS
FOR THE FISCAL YEAR ENDED
JANUARY 31, 2015
REITMANS
(CANADA)
LIMITED
All of the statements contained herein, other than statements of fact that are independently verifiable
at the date hereof, are forward-looking statements. Such statements, based as they are on the current
expectations of management, inherently involve numerous risks and uncertainties, known and unknown,
many of which are beyond the Company’s control. Such risks include but are not limited to: the impact of
general economic conditions, general conditions in the retail industry, seasonality, weather and other risks
included in public filings of the Company, including those described in the “Operating Risk Management” and
“Financial Risk Management” sections of this MD&A. Consequently, actual future results may differ materially
from the anticipated results expressed in forward-looking statements, which reflect the Company’s expectations
only as of the date of this MD&A. Forward-looking statements are based upon the Company’s current
estimates, beliefs and assumptions, which are based on management’s perception of historical trends, current
conditions and currently expected future developments, as well as other factors it believes are appropriate
in the circumstances. Specific forward-looking statements in this MD&A include, but are not limited to,
statements with respect to the Company’s anticipated future results and events, future liquidity, planned
capital expenditures, amount of pension plan contributions, status and impact of systems implementation, the
ability of the Company to successfully implement its strategic initiatives and cost reduction and productivity
improvement initiatives as well as the impact of such initiatives. The reader should not place undue reliance
on any forward-looking statements included herein. These statements speak only as of the date made and the
Company is under no obligation and disavows any intention to update or revise such statements as a result of
any event, circumstances or otherwise, except to the extent required under applicable securities law.
MANAGEMENT’S
DISCUSSION
AND ANALYSIS
NON-GAAP FINANCIAL MEASURES
In addition to discussing earnings in accordance with IFRS, this MD&A provides adjusted earnings before interest, taxes, depreciation and amortization
(“adjusted EBITDA”) as a non-GAAP financial measure. Adjusted EBITDA is defined as net earnings before income tax expense, other income, dividend
income, interest income, realized gains or losses on disposal of available-for-sale financial assets, interest expense, depreciation, amortization and net
impairment losses. The following table reconciles the most comparable GAAP measure, net earnings, to adjusted EBITDA. Management believes that
adjusted EBITDA is an important indicator of the Company’s ability to generate liquidity through operating cash flow to fund working capital needs and
fund capital expenditures and uses the metric for this purpose. The exclusion of dividend and interest income eliminates the impact of revenue derived
from non-operational activities. The exclusion of depreciation, amortization and impairment charges eliminates the non-cash impact. The intent of
adjusted EBITDA is to provide additional useful information to investors and analysts and the measure does not have any standardized meaning under IFRS.
Adjusted EBITDA should therefore not be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS.
Other companies may calculate adjusted EBITDA differently. From time to time, the Company may exclude additional items if it believes doing so would
result in a more effective analysis of underlying operating performance. The exclusion of certain items does not imply that they are non-recurring.
The Company uses a key performance indicator (“KPI”), same store sales, to assess store performance (including each banner’s e-commerce store) and
sales growth. Same store sales are defined as sales generated by stores that have been continuously open during both of the periods being compared and
include e-commerce sales. The same store sales metric compares the same calendar days for each period. Although this KPI is expressed as a ratio, it is
a non-GAAP financial measure that does not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures used by
other companies. Management uses same store sales in evaluating the performance of stores and considers it useful in helping to determine what portion
of new sales has come from sales growth and what portion can be attributed to the opening of new stores. Same store sales is a measure widely used
amongst retailers and is considered useful information for both investors and analysts. Same store sales should therefore not be considered in isolation
or used in substitute for measures of performance prepared in accordance with IFRS.
The following table reconciles net earnings (loss) to adjusted EBITDA for the three months and fiscal year ended January 31, 2015 and February 1, 2014:
FOR THE THREE MONTHS ENDED
JANUARY 31, 2015
FEBRUARY 1, 2014
Net earnings (loss)
Depreciation, amortization and net impairment losses
Other income 1
Dividend income
Interest income
Realized (gains) losses on disposal of available-for-sale financial assets
Impairment losses on available-for-sale financial assets
Interest expense
Income tax expense (recovery)
Adjusted EBITDA
Adjusted EBITDA as % of sales
1
$
$
4,407
12,265
–
(409)
(377)
(4,045)
384
88
1,829
14,142
5.99%
$
$
(2,571)
17,312
(6,054)
(873)
(184)
248
2,007
114
(1,863)
8,136
3.38%
FOR THE FISCAL YEAR ENDED
JANUARY 31, 2015
FEBRUARY 1, 2014
$
$
13,415
54,038
–
(2,298)
(994)
(4,820)
958
394
4,112
64,805
6.90%
$
$
10,788
63,724
(6,054)
(3,481)
(621)
248
2,699
496
2,654
70,453
7.34%
Other income comprises a gain on sale of intellectual property rights and proceeds from the settlement of a trademark dispute.
REITMANS
(CANADA)
LIMITED
7
MANAGEMENT’S
DISCUSSION
AND ANALYSIS
CORPORATE OVERVIEW
The Company has a single reportable segment which derives its revenue from the sale of ladies’ specialty apparel to consumers through its six retail banners.
The Company’s stores are primarily located in malls and retail power centres across Canada. The Company currently operates under the following banners:
The Reitmans banner, operating 341 stores averaging 4,600 sq. ft., is Canada’s largest women’s apparel specialty
chain and leading fashion brand. Reitmans has developed strong customer loyalty through superior service,
insightful marketing and quality merchandise.
Penningtons is a leader in the Canadian plus-size market, offering trend-right styles and affordable quality
for plus-size fashion sizes 14–32. Penningtons operates 139 stores in power centres across Canada averaging
6,000 sq. ft.
Addition Elle is a fashion destination for plus-size women with a focus on fashion, quality and fit delivering the
latest “must-have” trends to updated fashion essentials in an inspiring shopping environment. Addition Elle
operates 105 stores averaging 6,000 sq. ft. in major malls and power centres nationwide.
RW & CO. operates 76 stores averaging 4,500 sq. ft. in premium locations in major shopping malls, catering to
a customer with an urban mindset by offering fashions for men and women.
8
Thyme Maternity is a leading fashion brand for moms-to-be, offering current styles for every aspect of life, from
casual to work, plus a complete line of nursing fashions and accessories. Thyme operates 68 stores averaging
2,300 sq. ft. in major malls and power centres across Canada. In addition, the Company operates 21 Thyme
Maternity shop-in-shop boutiques in select Babies“R”Us locations in Canada. In June 2014 the Company closed
its remaining Thyme Maternity shop-in-shop boutiques in the U.S.
With 94 stores, averaging 3,400 sq. ft., Smart Set is a style destination offering the latest styles in women’s
fashions to mix, match and innovate from wear-to-work separates, denim, essentials and accessories.
On November 25, 2014 the Company announced its plan to close all Smart Set stores. Management determined that its optimum strategy to improve
operating results was to refocus its sales and merchandising efforts either through conversion of Smart Set stores to other Company banners or through
store closures. The majority of the stores that will be converted will occur by October 31, 2015 while the remaining stores are anticipated to close by the
year ending January 28, 2017.
The Smart Set banner sales for fiscal 2015 were $88,856 as compared to $95,764 for fiscal 2014, while losses from operating activities for fiscal 2015 were
$10,030 as compared to $29,499 for fiscal 2014 (including an allocation of general overhead costs). The Smart Set banner non-cash asset write-offs
amounted to $3,085 for fiscal 2015. The Company does not anticipate inventory write-downs or material employee severance costs.
E-COMMERCE
The Company also offers e-commerce website shopping for all of its banners. These online channels offer customers convenience, selection and ease of
purchase, while enhancing customer loyalty and continuing to build the brands.
REITMANS
(CANADA)
LIMITED
MANAGEMENT’S
DISCUSSION
AND ANALYSIS
RETAIL BANNERS
NUMBER OF
STORES AT
FEBRUARY 1,
2014
Q1
OPENINGS
349
152
101
77
70
129
878
1
1
1
–
–
–
3
Reitmans
Penningtons
Addition Elle
RW & CO.
Thyme Maternity1
Smart Set
Total
1
Q1
CLOSINGS
Q2
OPENINGS
Q2
CLOSINGS
Q3
OPENINGS
Q3
CLOSINGS
Q4
OPENINGS
NUMBER OF
STORES AT
JANUARY 31,
2015
Q4
CLOSINGS
(5)
(7)
–
–
(2)
(5)
(19)
–
–
1
–
–
–
1
(2)
(3)
(1)
(1)
–
(11)
(18)
2
–
3
3
–
–
8
(2)
(2)
–
–
–
(6)
(10)
–
–
–
–
–
–
–
(2)
(2)
–
(3)
–
(13)
(20)
341
139
105
76
68
94
823
–
(102)
(102)
–
–
–
(2)
(67)
(69)
–
–
–
–
–
–
–
–
–
–
–
–
21
–
21
Excludes boutiques in Babies“R”Us shop-in-shop locations.
Thyme Maternity shop-in-shop locations:
Babies“R”Us – Canada
Babies“R”Us – U.S.
Babies“R”Us – Total
23
169
192
–
–
–
Store closings take place for a variety of reasons as the viability of each store and its location is constantly monitored and assessed for continuing
profitability. In most cases when a store is closed, merchandise at that location is sold off in the normal course of business and any unsold merchandise
remaining at the closing date is generally transferred to other stores operating under the same banner for sale in the normal course of business.
9
THREE-YEAR REVIEW OF SELECTED FINANCIAL INFORMATION
FOR THE FISCAL YEARS ENDED
JANUARY 31, 2015
FEBRUARY 1, 2014
FEBRUARY 2, 20131
(52 WEEKS)
(52 WEEKS)
(53 WEEKS)
Total of stores at end of fiscal year 2
Sales
Earnings before income taxes
Net earnings
Earnings per share (“EPS”)
Basic
Diluted
Total assets
Total non-current liabilities
Dividends per share
823
$ 939,376
17,527
13,415
0.21
0.21
584,391
48,600
$
0.20
$
$
878
960,397
13,442
10,788
911
$ 1,000,513
34,778
26,356
0.17
0.17
589,939
51,039
0.65
0.40
0.40
594,968
52,792
0.80
$
1
Certain figures have been adjusted to reflect the impact from the implementation of the amendments to IAS 19 – Employee Benefits and adjusted to reflect a reclassification of certain items to conform with
presentation in the current year.
2
Excludes boutiques in Babies“R”Us shop-in-shop locations.
REITMANS
(CANADA)
LIMITED
MANAGEMENT’S
DISCUSSION
AND ANALYSIS
Sales over the last three years were impacted by a challenging retail environment. Weak economic conditions, the influx of foreign entrants into Canada and
increased e-commerce competition have resulted in a highly competitive landscape as retailers aggressively compete in a limited consumer marketplace.
Additionally, as the Company looked to close underperforming stores, it has decreased its store count, with a net reduction of 88 stores over two years.
Fiscal 2013 sales included an additional week, due to the Company’s retail calendar, resulting in an increase of approximately $13,600 in sales.
Despite this increase, sales in fiscal 2013 were significantly impacted by a disruption in the flow of inventory to stores as a result of difficulties experienced
with the deployment of a new warehouse management system.
Sales for fiscal 2014 were weak, with particularly poor performance in the Smart Set banner, despite its efforts to regain acceptance by consumers
through repositioning and rebranding.
In fiscal 2015 the net reduction of stores contributed to lower sales in a highly competitive environment and greater e-commerce alternatives.
The Smart Set banner continued to perform poorly in fiscal 2015 in a highly competitive niche and was impacted by significant discounting as it competed
with many retailers targeting the same customer demographics. In fiscal 2015 the Company announced its plan to close all Smart Set stores.
The Company’s gross profit, and ultimately net earnings, have been significantly impacted by fluctuations in the Canadian dollar in relation to the U.S. dollar.
In the last three years, the Canadian dollar has seen a significant weakening vis-à-vis the U.S. dollar. This has resulted in increased merchandise costs as
virtually all merchandise payments are settled in U.S. dollars.
In fiscal 2013, the Canadian dollar traded close to par with the U.S. dollar. As consumer demand weakened due to economic conditions higher promotional
activity resulted. Fiscal 2013 margins were also impacted by a disruption in the fl…
