Le Château Reports First Quarter Results

27
Jun '18

MONTREAL, June 26, 2018 (GLOBE NEWSWIRE) Le Château Inc. (TSX VENTURE:CTU), today reported that sales for the first quarter ended April 28, 2018 amounted to $41.1 million as compared with $44.4 million for the first quarter ended April 29, 2017, a decrease of 7.4%, with 29 fewer stores in operation. Comparable store sales decreased 0.3% for the first quarter as compared to last year, with comparable regular store sales decreasing 0.7% and comparable outlet store sales increasing 1.9% (see non-GAAP measures below). Included in comparable store sales are online sales which increased 32.7% for the first quarter.

Adjusted EBITDA (see non-GAAP measures below) for the first quarter of 2018 amounted to $(6.2) million, compared to $(8.3) million for the same period last year. The improvement of $2.1 million in adjusted EBITDA for the first quarter was primarily attributable to the reduction of $3.4 million in selling, general and administrative (“SG&A”) expenses, partially offset by the decrease of $1.3 million in gross margin dollars. The decrease in SG&A expenses resulted primarily from the reduction in store operating expenses due mainly to store closures. The decrease of $1.3 million gross margin dollars was the result of the 7.4% overall sales decline for the first quarter, partially offset by the increase in gross margin percentage to 63.0% from 61.1% in 2017. The gross margin benefited from the closure of non-performing stores in recent quarters and improved inventory levels and quality, partially offset by the short-term liquidation process of store merchandise during the closing period of stores. As for the comparable regular stores, the gross margin dollar contribution remained relatively stable when compared with the same period last year.

Net loss for the first quarter ended April 28, 2018 amounted to $10.8 million or $(0.36) per share compared to a net loss of $12.9 million or $(0.43) per share for the same period last year.

During the first quarter of 2018, the Company renovated one existing location and, as planned, closed nine underperforming stores. As at April 28, 2018, the Company operated 151 stores (including 31 fashion outlet stores) compared to 180 stores (including 50 fashion outlet stores) as at April 29, 2017. Total square footage for the Le Château network as at April 28, 2018 amounted to 850,000 square feet (including 247,000 square feet for fashion outlet stores), compared to 994,000 square feet (including 354,000 square feet for fashion outlet stores) as at April 29, 2017. The Company is planning to close 11 additional stores for the remainder of 2018.

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 150 prime locations across Canada and an 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 first quarters ended April 28, 2018 and April 29, 2017:

(Unaudited)	For the three months ended
(In thousands of Canadian dollars)	April 28, 2018		April 29, 2017
Loss before income taxes	$	(10,777)	$	(12,853)
Depreciation and amortization		2,285		2,873
Write-off and net impairment of property and equipment and intangible assets		63		227
Finance costs		1,588		1,440
Accretion of First Preferred shares series 1		663		-
Adjusted EBITDA	$	(6,178)	$	(8,313)

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 first quarters ended April 28, 2018 and April 29, 2017:

(Unaudited)	For the three months ended
(In thousands of Canadian dollars)	April 28, 2018		April 29, 2017
Comparable store sales – Regular stores	$	33,629	$	33,865
Comparable store sales – Outlet stores		6,197		6,081
Total comparable store sales		39,826		39,946
Non-comparable store sales		1,258		4,467
Total sales	$	41,084	$	44,413

The above measures do not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies.


CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands of Canadian dollars)	As at April 28, 2018		As at April 29, 2017		As at January 27, 2018
ASSETS
Current assets
Cash	$	2,002	$	1,168	$	-
Accounts receivable		971		1,033		957
Income taxes refundable		269		519		449
Inventories		91,288		99,320		89,911
Prepaid expenses		2,031		1,907		1,747
Total current assets		96,561		103,947		93,064
Deposits		485		621		485
Property and equipment		25,579		34,282		27,052
Intangible assets		2,234		2,755		2,434
	$	124,859	$	141,605	$	123,035

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
Bank indebtedness	$	-	$	-	$	261
Current portion of credit facility		15,617		63,401		6,322
Trade and other payables		16,467		16,087		17,342
Deferred revenue		2,954		2,736		2,842
Current portion of provision for onerous leases		512		832		576
Current portion of long-term debt		-		6,123		-
Total current liabilities		35,550		89,179		27,343
Credit facility		36,474		-		32,221
Long-term debt		29,101		32,322		30,518
Provision for onerous leases		851		1,214		924
Deferred lease credits		6,813		7,711		7,111
First Preferred shares series 1		23,500		-		24,718
Total liabilities		132,289		130,426		122,835

Shareholders' equity (deficiency)
Share capital		47,967		47,967		47,967
Contributed surplus		14,114		9,459		9,600
Deficit		(69,511)		(46,247)		(57,367)
Total shareholders' equity (deficiency)		(7,430)		11,179		200
	$	124,859	$	141,605	$	123,035

NOTICE
The Company’s independent auditors have not performed a review of the accompanying interim condensed consolidated financial statements.


CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Unaudited)	For the three months ended
(In thousands of Canadian dollars, except per share information)	April 28, 2018		April 29, 2017
Sales	$	41,084	$	44,413
Cost of sales and expenses
Cost of sales		15,189		17,258
Selling		27,581		30,278
General and administrative		6,840		8,290
		49,610		55,826

Results from operating activities		(8,526)		(11,413)
Finance costs		1,588		1,440
Accretion of First Preferred shares series 1		663		-
Loss before income taxes		(10,777)		(12,853)
Income tax recovery		-		-
Net loss and comprehensive loss	$	(10,777)	$	(12,853)

Net loss per share
Basic	$	(0.36)	$	(0.43)
Diluted		(0.36)		(0.43)

Weighted average number of shares outstanding ('000)		29,964		29,964