Reitmans (Canada) Limited

Thank you. Good morning, everyone.

Joining me this morning is Caroline Goulian, RCL's Chief Financial Officer. We reported our fourth quarter and full-year results yesterday afternoon post-market.

Our news release, financial statements, and MD&A are available on our website and have been filed on SEDAR+ Plus. We also posted a slide presentation on the events and presentations page of our website under the financials and news heading.

In addition to discussing our financial and operational results this morning, we're excited to present highlights from our new five-year strategy. And so we do urge you to find our slide presentation on our website and follow along.

Slide four of that presentation highlights each of our three brands and provides store count for each brand at year-end with 222 Reitmans branded stores, 82 RW&CO stores, and 86 PENN. Penningtons locations.

RCL is a proudly Canadian company with a strong national presence. Slide five shows you the distribution of our 390 stores at year-end for each of our three brands by province and territory.

Our strong four network across the country and our robust e-commerce platforms makes us well positioned to serve customers from coast to coast to coast. While we are proudly Canadian, as you can see on slide six, we source from around the world.

We have long understood that depending on a single source or region poses inherent risks. Geopolitical tensions, natural disasters, and unexpected events can disrupt even the most efficient supply chains.

With our strong and diversified supply chain, we have mitigated these risks to ensure a reliable flow of products to our distribution center, our stores, and our customers, while maintaining exacting standards and all elements of production. Now taking a look at our fiscal 2025 year, starting with our progress on a couple key initiatives.

As part of our continued focus on advancing and transforming our supply chain operations, in May of last year, we announced the replacement of the existing six orders at our Montreal Distribution Centre with the SORTRAK Inventory Systems. With an objective of optimizing store inventory management, the SORTRAK System improves efficiency by reducing item handling and maximizing space utilization.

We're proud to report that the implementation process was smooth and has been successfully completed. We also made the strategic decision to end our time maternity and RCL market business units in January of 2025.

Ensuring our teams and our resources are laser focused on our three core brands, Reitmans, RW&CO, and PENN is key to executing our ambitious strategy that I'll be sharing later on in this presentation. In fiscal 2025, we had an amazing Black Friday and Cyber Monday events, which were among our best ever.

And these were complimented by a strong lead up to Christmas and Boxing Week. The success of these shopping events helped counter the effects of warmer weather in November and early December, which had otherwise delayed consumers from transitioning to winter apparel.

We ended the year with net revenues of $773.8 million and gross profit of $435 million, which represented a 200 basis point improvement in gross profit margin. For the year growing from 54.2% to 56.2%.

Our adjusted EBITDA for the year was $25.4 million with net earnings of $12.1 million. I will now turn things over to Caroline to discuss our financial results for the fourth quarter before I come back to introduce our new five-year strategy.

Caroline?

Thank you, Andrea, and good morning, everyone. Please note that all comparisons I will be discussing are for the fourth quarter ended February 1, 2025, against results for the fourth quarter a year ago, which ended February 3, 2024, and which included an additional week due to the company's floating year-end.

As usual, all dollar amounts discussed are in Canadian currency. On slide 11, we see that in the fourth quarter, we had net revenues of CAD204.8 million, which was down 2.9%, when excluding the extra week in the prior year period.

The 2.9% decrease was mostly due to a slightly lower store count year-over-year. Our comparable sales, which include e-commerce net revenues, decreased 0.2%, with a slight variance being attributable to unseasonably warm weather in the first-half of the quarter, delaying sales of winter apparel.

Our gross profit decreased by CAD8.7 million to CAD106.2 million, mainly due to one less week, compared to the prior year period. Our gross profit margin of 51.9% was on par with the prior year period as we maintained strong inventory management and continued our disciplined approach to markdowns.

Adjusted EBITDA for the quarter was negative CAD2.6 million versus CAD1.7 million in the prior year. The decrease of CAD4.3 million was due to the decrease in gross profit.

Our SG&A expenses were down 1.6% in the quarter, mainly due to the inclusion of the additional week in the prior year quarter and lower e-commerce shipping costs, partly offset by higher software expenses and pension costs related to the wind-up of the pension plan. We had a net loss of CAD4.2 million, or CAD0.08 per share, for the quarter, compared to breaking even a year ago.

We finished the quarter and the year with working capital of CAD165.7 million, compared to CAD154.4 million a year earlier. At year-end, we had a strong cash position of CAD158.1 million and CAD132.9 million in inventory.

We also had no long-term debt other than lease liabilities and no amounts were drawn under the company's bank credit facilities. That completes my review of our financials.

I will now turn the call back over to Andrea to introduce our new five-year strategy. Andrea?

Thank you, Caroline. Over the course of the last several months we have thoroughly evaluated our company's strengths, challenges and opportunities.

We developed a multi-year strategy designed for our future. We are now launching our new strategy and I'm pleased to share key highlights with you this morning.

Our ambition is to reach CAD1 billion in annual revenues by the end of fiscal 2030 with an adjusted EBITDA to grow to between CAD60 million and CAD70 million by the end of that same period. We expect to reinvest approximately CAD100 million in growth initiatives over the next five years to reach those targets, reflecting our commitment to creating long-term value for our shareholders, while enhancing our competitive position in the retail landscape.

As you can see on slide 16, annual revenues of CAD1 billion by the end of fiscal 2030 would represent a compounded annual growth rate of 5.3%. In terms of drivers, RW&CO, represents our largest growth opportunity, while we expect to grow market share at Reitmans.

Meanwhile, at PENN, we plan to own and maintain the plus-size market. Importantly, just by growing our annual revenues to CAD1 billion organically, we expect to be able to grow our adjusted EBITDA from CAD25.4 million today to between CAD60 million and CAD70 million by the end of fiscal 2030, representing a compounded annual growth rate of 20.7%.

In addition to the top line growth, the higher adjusted EBITDA would be achieved through increasing efficiencies and improving our product speed to market, while maintaining our inventory discipline. We are focused on driving long-term profitable growth through our multi-channel growth strategy anchored around three strategic pillars as follows.

One, drive accelerated brand growth. Two, fuel that growth with modernization.

And three, ignite high performance. I will provide a high-level summary of each.

First, we will expand our three great brands and capitalize on their ultra-loyal customer bases. We will be investing significantly in our stores, including store renovations and expansion, as well as selectively and strategically opening new stores.

Overall, we expect to grow our square footage by approximately 10% by the end of fiscal 2030. At the same time, we would look to drive more productivity per square foot, all while operating approximately 400 total stores.

At the end of the day, we want to make sure we have the right store at the right place, making the right amount of money. With regards to RW&CO, we believe there's a white space in the Canadian market for elevated and accessible menswear, as well as an opportunity to further drive our women's offering.

As such, we plan on doubling our men's business, while driving double-digit growth in women's by fiscal 2030. We aim to fuel our brand growth through continued modernization.

While we've already made good progress, we have further investments and initiatives planned to streamline and improve systems and processes for faster customer-centric operations. Our objectives under this pillar include improving our product speed to market, enhancing our digital experience, which will involve a newly designed front-end e-commerce storefront for all three of our brands and continuing to automate processes to drive efficiencies.

Under our third pillar, we look to ignite high performance across our organization and empowering creativity at the heart of our fashion business. We will strengthen our employee value proposition by continuing to build a compelling and rewarding workplace that helps us attract, retain, and empower top talent.

And we will elevate our brand and market position to inspire employees, customers, and other stakeholders, including engaging more with shareholders. To execute this strategy, we plan to reinvest approximately CAD100 million in growth initiatives over the next five years.

Approximately 75% of this spend is earmarked for investing in our stores, including renovations, expansions, and new stores. The other 25% will be invested in modernization of digital technology and overall company infrastructure.

We are confident that this new strategy will set RCL on a strong trajectory for profitable organic growth. By leveraging opportunities within each of our brands and focusing on operational excellence, we strive to not only achieve our financial goals, but also deliver sustainable value to our shareholders.

With that, we would like to now open the call to questions.

Hi, Andrea. Thanks for taking the question.

Main question is just on SG&A expense of percent of revenue and how you and your CFO view that and the trend versus competitors or where that number should be? Thank you.

Thanks, Jesse, and appreciate the question. We see an opportunity with our SG&A.

Our SG&A was essentially a little lower than last year when we look at a 52-week comparable lens. Having said that, one of our focuses this year is to dive in deeper in SG&A and see where we can find more efficiencies.

It's part of our strategy when we talk about automating processes to drive further efficiencies and looking at it in a few other ways as well. So great question and something that's important to us for sure.

Thank you. Thank you, everyone for joining us this morning.

We appreciate your support and look forward to speaking with you again next quarter. Have a great day.