Reitmans (Canada) Limited ($RTMAF)

Good morning, everyone, and welcome to the Reitmans Canada Limited's Fiscal 2026 Fourth Quarter Earnings Call. [Operator Instructions] Before turning the call over to management, listeners are reminded that today's call may contain forward-looking statements within the meaning of applicable securities laws. Forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. For additional information, please refer to the disclaimers in the Forward-Looking Statements section of the company's press release and MD&A for the quarter. Reitmans Canada Limited does not undertake to update any forward-looking statements. Such statements speak only as of the date made. I would now like to turn the meeting over to Andrea Limbardi, President and CEO of Reitmans Canada Limited. Please go ahead, Ms. Limbardi.

Thank you. Good morning, everyone. Joining me on the call today is Caroline Goulian, RCL's Chief Financial Officer. Yesterday afternoon, we reported our financial results for the fourth quarter and the year ended January 31, 2026. Our news release, financial statements and MD&A are available on our website and have been filed on SEDAR+. A slide presentation for today's call is available on the Events & Presentations page of our website under the Financials & News heading. If you have that presentation open, we'll begin on Slide 4. RCL operates 3 distinct brands with their own unique value propositions. At the end of the fourth quarter, our footprint included 218 Reitmans stores, 85 RW&CO stores and 85 PENN., Penningtons, locations. Combined with our refreshed e-commerce platform, our national network of stores allows us to serve Canadians from coast to coast. We had a solid fourth quarter with net revenues increasing 1.2% to $207.2 million, thanks to strong sales during the peak holiday moments and higher sales dollars per transaction. Our gross margin was up 300 basis points as we were able to avoid larger markdowns and engage in less promotional activity. Our SG&A expenses were relatively flat when excluding the $5.5 million in strategic transformation costs incurred in the quarter. And our adjusted EBITDA improved by $4.8 million to $2.2 million. We had a net loss of $4.9 million in the quarter, compared to a loss of $4.2 million in the fourth quarter of the prior year. Looking at our Reitmans brand, our customers responded positively to our continued shift towards modernizing our brand perception and the infusion of on-trend collections throughout the year and quarter. By focusing on our core product categories and rationalizing assortments, we were able to operate with lower promotional intensity and still drive demand with higher prices per unit, resulting in gross margin expansion. In PENN., we continued to execute our strategic plan. We modernized the brand, introduced on-trend products and elevated the in-store experience. In fact, I'd share that this past quarter marked our best in-store experience to date. PENN.'s Net Promoter Score was higher as customers responded enthusiastically to our strengthened brand position and exceptional service. Meanwhile, RW&CO continued to make meaningful progress toward becoming a more profitable, focused, strategically positioned brand. In the fourth quarter, the brand introduced its first men's-only pop-up concept store at Yorkdale Shopping Centre in Toronto. The strong customer response continues to fuel the momentum of our men's business as we deliver the best men's experience and assortment in Canada for the urban professional. During our third quarter earnings call, we discussed the formation of our Strategic Transformation Office, tasked with driving the execution of transformation initiatives and ensuring they are aligned with our 5-year plan and fiscal 2030 ambitions. In the fourth quarter, near the end of the fiscal year, we realigned our workforce to support our multiyear growth strategy. This difficult but necessary decision resulted in approximately 9% reduction in our head office staff and 5% in our distribution center roles. We expect our transformation initiatives to begin driving improved productivity in fiscal 2027. It's been 1 year since we announced our 5-year strategy called Designed for the Future, and I wanted to take some time to update you on our progress. The plan is anchored around 3 pillars, which include: drive accelerated brand growth; fuel growth with modernization; and ignite high performance. I will start with the Drive Accelerated Brand Growth pillar. Fiscal 2026 was a year of meaningful investment across our brand and store footprint. We completed 13 new store openings, 2 relocations, 5 expansions and 17 store refreshes. We also took disciplined action to close 15 stores, sharpening our focus on markets and locations with the greatest potential. Under our Fuel Growth with Modernization pillar, we made further investments in our distribution center, including a major upgrade with a new Sortrak material handling system and other infrastructure improvements that enhance speed, accuracy and capacity. We advanced digital product creation and inventory flow initiatives that improve our ability to react to demand in real time. Additionally, we completed the rollout of the Jumpmind POS system across every store, giving us a more flexible and future-ready platform. We also completed the migration and launch of our enhanced e-commerce offering to Shopify by year-end, elevating our digital experience and delivering a more seamless journey across all customer touch points. Next, within the Ignite High Performance pillar, we advanced renewed total rewards and benefit strategy. We also launched a global whistleblower program across factory partners, and optimized our global operations including the relocation of our Hong Kong office. As we communicated previously, our multiyear strategy has us aiming to reach $1 billion in revenues and $60 million to $70 million in adjusted EBITDA on an annualized basis by the end of fiscal 2030. To accomplish this, we announced last year that we would be reinvesting over $100 million in the business over 5 years, with approximately 75% of that earmarked for stores and 25% for modernization initiatives. In fiscal 2026, we had capital expenditures on a cash basis of $37 million. As expected, year 1 capital expenditures were primarily allocated to investments in our stores. Other key spends were for the migration to the Shopify e-commerce storefront for all 3 brands and the continued modernization of our distribution center. I will discuss our fiscal 2027 or year 2 priorities later in the call, but for now, I will turn things over to Caroline to discuss our financial results for the quarter in more detail. Caroline?

Thank you, Andrea, and good morning, everyone. Please note that all comparisons I'll be discussing are for the fourth quarter ended January 31, 2026, against results for the fourth quarter a year ago which ended February 1, 2025. As usual, all dollar amounts discussed are in Canadian currency. I'll start with our top line. As you can see on Slide 14, net revenues for the fourth quarter rose by $2.4 million or 1.2% to $207.2 million compared to the same period in fiscal 2025. Comparable sales, including e-commerce, increased 0.4% in the quarter. The growth in net revenues and comparable sales was largely the result of reduced markdowns and promotional activity, which lifted our average sales dollars per transaction. Gross profit for the quarter increased by $7.6 million to $113.8 million, compared to $106.2 million a year earlier, while gross margin increased 300 basis points to 54.9%. These improvements were also driven by lower markdowns and reduced promotional activity as well as a favorable foreign exchange impact of $0.4 million on U.S. dollar denominated purchases relative to fiscal 2025. Adjusted EBITDA swung to a positive $2.2 million, which was an improvement of $4.8 million, driven primarily by our stronger gross profit in the quarter. Looking at our bottom line, we had a net loss of $4.9 million or $0.10 per share, compared to a net loss of $4.2 million or $0.08 per share a year earlier. However, in the fourth quarter of fiscal 2026, we incurred $5.5 million in strategic transformation expenses, where we had no such expenses in the fourth quarter of fiscal 2025. The strategic transformation expenses reflect transition-related personnel costs and consulting fees tied to our ongoing strategic transformation initiatives. On Slide 16, you can see our net revenues for each quarter of fiscal 2026 compared to fiscal 2025. The slide really highlights the slow start we had in fiscal 2026 and then the progress we made in turning things around throughout the rest of the year. In Q1, our net revenues were down $6.8 million year-on-year. Net revenues were up slightly in Q2. They were up $7.2 million in Q3, and increased by $2.4 million in Q4. Again, each quarter being compared to the same quarter in the prior year. Similarly, on Slide 17, you can see that our adjusted EBITDA fell by $11.5 million in the first quarter and was down slightly in the second quarter, before growth of $1.8 million in the third quarter and the $4.8 million positive swing in the fourth quarter. Turning to the balance sheet. We ended fiscal 2026 with $137.2 million in working capital, including a strong cash position of $151 million, an inventory of $110.2 million, reflecting our very disciplined approach to inventory management. We continue to carry no long-term debt other than lease liabilities, and we had no borrowings outstanding under our bank credit facilities. That concludes my financial review. I will now hand it back to Andrea to discuss our year 2 priorities.

Thank you, Caroline. As we move forward, now in the second year of our strategy, we remain focused on initiatives that strengthen brand relevance and position the business for sustained profitable growth. On Slide 20, we have our store activity targets for the year. These include 4 to 6 new store openings, 5 to 7 relocations, 2 to 4 targeted refreshes or renovations, and 3 to 4 expansions. At the same time, we'll continue to rationalize the fleet where appropriate to ensure we have the right store at the right place. At RW&CO, we look to capitalize on the clear white space in elevated accessible fashion for the urban professional, with our next brand step-ups coming through an expanded, fully renovated Toronto Eaton Centre location. Reitmans will debut a new flagship concept at Carrefour Laval this April, reinforcing the brand's modern evolution. Meanwhile, at PENN., we're sharpening our real estate strategy and elevating the in-store experience to strengthen our leadership in plus-size apparel. Under our Fuel Growth with Modernization pillar, this year we look to reengineer our end-to-end product life cycle, from design through delivery, accelerate speed to market and unlock meaningful operational efficiencies. Finally, within our Ignite High Performance pillar, we will continue investing in the talent and capabilities that drive disciplined execution and long-term value creation. We'll focus on strengthening how we attract, develop and support our people to ensure we remain a top Canadian employer and a more resilient and competitive business. All in, we are budgeting $22 million in capital expenditures in fiscal 2027. With that, we would now like to open the call to questions.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Andrea Limbardi for any closing remarks.

Thank you, everyone, for joining us this morning. Please don't hesitate to reach out if you have any further comments or questions. We wish you a wonderful day and a great start to spring. Talk to you in June. Thank you.

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.