Reitmans (Canada) Limited

Thank you. Good morning, everyone.

Joining me this morning is Caroline Goulian, RCL's Chief Financial Officer. Yesterday afternoon, we reported our Q1 results.

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

If you'd like to follow along with that presentation, we'll get started on Slide 4. RCL has 3 distinct brands, each with its own unique value proposition.

At the end of the first quarter, we had 225 Reitmans branded stores, 83 RW&CO stores and 86 PENN. Pennington location.

With our strong network of stores and robust e-commerce platform, we serve Canadians from coast to coast to coast. On Slide 5, with the subject of tariffs still being top of mind, we'd like to remind everyone that while we're proudly Canadian, we source from around the world.

Our strong and diversified supply chain helps us mitigate against risks posed by geopolitical tensions, natural disasters and other unexpected events. We had a rough start to the first quarter, near record snowfall accumulations in some regions, limited in-store traffic in the month of February.

While conditions improved once the weather cleared, consumer spending remained cautious due to the ongoing economic uncertainty due largely to the heightened tariff environment. On the plus side, we did achieve a 1% increase in e-commerce revenue, and our Reitmans brand performed well in the quarter.

Much like always, our Reitmans brands, great style and quality at accessible price points resonated with customers during these challenging economic times. But these successes weren't enough to counteract the overall decline in in-store traffic or consumers' heightened focus on finding deals.

As a result, total net revenues fell by 4.1% to $158.9 million. We proactively moved our merchandise with selective and strategic promotional activity, ending the quarter with healthy inventory levels, as Caroline will discuss later.

However, these actions had a negative year-over-year impact on margins. We had an adjusted EBITDA loss of $10.6 million, and our net loss for the quarter widened to $10 million.

These disappointing results underscore the importance of implementing our 5-year strategic plan aimed at fostering sustainable long-term growth and strengthening the resilience of our business. I'll take a few moments to provide a brief update on 2 elements of the new 5-year strategy we announced on our last call.

First, under our focus to drive accelerated brand growth, we strategically opened 6 new stores during the quarter as follows: 3 new Reitmans stores, including Fairview Pointe-Claire in Quebec, Vaughan Mills Shopping Center just north of Toronto and Ontario and Cornwall Centre in Regina, Saskatchewan, 1 new RW&CO store at the Edmonton International Airport in Alberta, and 2 PENN relocations to new store spaces in Winnipeg Manitoba in Calgary, Alberta. Ultimately, our goal is to ensure that each store is in the ideal location and generating the right amount of money.

Next, on Slide 8, under our strategic pillar to fuel growth with modernization, we commenced the first phase of our digital strategic road map. Our objective in this first phase is to enhance our digital experience to provide a seamless journey across all of our touch points.

And while e-commerce already makes up a strong part of our business, we have room for a much improved customer experience. This phase will include newly redesigned front-end e-commerce storefronts for all 3 of our brands, along with the migration to the Shopify platform.

We expect to complete the migration and launch of our enhanced e-commerce offering later this fiscal year. As a reminder, by executing our multiyear strategy designed for our future, our ambition is to reach $1 billion in annual revenues by the end of fiscal 2030.

Over that same time, we plan to grow adjusted EBITDA to between $60 million and $70 million. largely by driving efficiencies and improving product speed to market while maintaining our inventory discipline.

We expect to reinvest approximately $100 million in growth initiatives over the next 5 years to reach these targets. On Slide 10, you can see that 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 believe our strategy will enhance RCL's competitive position in the retail landscape and set the company on a strong trajectory for profitable organic growth.

With that, I will now turn things over to Caroline to discuss our financial results for the quarter in more detail and provide an update on our normal-course issuer bid. Caroline?

Thank you, Andrea, and good morning, everyone. Please note that all comparisons I will be discussing are for the first quarter ended May 3, 2025, against results for the first quarter a year ago, which ended May 4, 2024.

As usual, all dollar amounts discussed are in Canadian currency. As Andrea said earlier, our first quarter net revenues were down 4.1% to $158.9 million compared to $165.7 million in the prior year.

The decrease was due to lower in-store traffic in February as we saw near-record snowfall in certain regions and customers being more cautious in their spending due to concerns over the economy. Our comparable sales, which include e-commerce net revenues decreased 4.5%.

However, as Andrea said, e-commerce revenues grew 1% in the quarter. Our gross profit decreased by $5.4 million to $88.5 million, while our gross profit margin was down 100 basis points to 55.7%.

We were fairly selective and strategic when it comes to promotional activity as we continued our disciplined approach to markdowns, but our customers were more price conscious, and we had a lower proportion of regular priced sales. Our adjusted EBITDA for the quarter was a loss of $10.6 million compared to positive $900,000 in the prior year.

The largest driver of that decrease was the lower gross profit, while SG&A expenses were also up 4.2% in the quarter with the largest drivers being a $1.9 million increase in occupancy cost and an $800,000 increase in-store personnel costs. We had a net loss of $10 million or $0.20 per share for the quarter compared to a loss of $1.5 million or $0.03 per share a year ago.

We finished the quarter with working capital of $134.8 million, including a cash position of $85.4 million and inventory of $135 million. We also had no long-term debt other than lease liabilities and no amounts were drawn under the company's bank credit facilities.

This morning, we announced our intention to renew our normal-course issuer bids. Our existing NCIB began on August 5 of last year and expires on August 4 this year.

We are looking to extend it for an additional 12 months past the expiry date. As of May 3, since the existing NCIB commenced, we have purchased 318,200 of our Class A shares, returning $800,000 to shareholders.

This includes 136,300 shares purchased for an aggregate cash consideration of $300,000 during the first quarter. With that, we would now like to open the call to questions.

Operator?

No doubt, it's a little bit of a disappointing update. But with the adverse weather conditions, it was stacked against the company, but we have faith in the brand.

So I have 2 questions for me. Firstly, what makes you think store growth is the answer?

The SG&A line in comparison to peers would suggest that it's quite bloated from a cost perspective, costs up 4%, sales down 5.5% and is there a potential issue around being cost conscious, which might be evidenced by the Chairman's $100,000 car allowance. So that's my first question.

Second question, as you know, there's 35% of the shareholders supporting change at Board level and change in your listing structure. So your Chair and the Board haven't yet shown willingness to engage in dialogue, which is a little confusing and I suppose, disappointing.

Why do you think that might be? And our shareholders' view is not material unless they hold voting shares as opposed to nonvoting?

So they are my 2 questions.

Thank you for your question, Eddie. I'll start with your first one.

So why do we think store growth is the answer and what about our SG&A and the impact to our bottom line. So from a store growth perspective, we mentioned we had a few openings this past quarter, and they've been very successful.

We're seeing very strong growth and performance quite a bit above the rest of the fleet. So our new store openings are working well.

Our renovations are working exceptionally well. So the proof is in the pudding directly after a new store opening.

Having said that, our SG&A, we acknowledge is an area of opportunity. We're currently in a very significant deep dive on our SG&A to ensure that we can operate as optimally as possible, look for productivity as much as possible, and that is part of our strategic plan as well.

So it's something we will continue to update on as we aim to reduce some of those lines. On your second question around shareholders and engaging with shareholders is a priority for us.

We've spoken many times. I think you've spoken to other Board members.

I think we will continue to do so. As you all know, we engaged MBC a year ago that today marks a year of our earnings calls after not having done them before, and we will continue to invest in better and richer shareholder communications as we go.

Thank you, everyone, for joining us this morning. We look forward to speaking with you again for our Q2 results.

Have a good day.