Reitmans (Canada) Limited (RTMAF) Earnings Call Transcript & Summary

[Foreign Language] Now as the annual General Meeting of Shareholders of Reitmans Canada Limited come to order. I would like to welcome all of our shareholders and guests for joining us today. [Foreign Language] My name is Samuel Minzberg, Chairman of the Board of Directors. In attendance are Ms. Andrea Limbardi, President and Chief Executive Officer; Ms. Caroline Goulian, Chief Financial Officer; and Mr. Alan Murad, Vice President, Legal and Secretary, who will act as secretary of the meeting. And before we proceed with the formal part of the meeting, I will now ask the secretary to brief the meeting on certain procedural matters, Mr. Murad.

Thank you, Mr. Chairman. This year's meeting will be a virtual only meeting conducted by live webcast. In response to shareholder requests, this format will allow shareholders to have an equal opportunity to attend and participate in the meeting regardless of their geographic location. In order to manage our time efficiently when conducting the business of the meeting, the Chairman will move resolutions, which are on this meeting's agenda. Subsequent to the completion of the formal part of this meeting, we will have a short period to answer questions on any matters relating to the formal resolutions before this meeting, after which the President and Chief Executive Officer and the Chief Financial Officer, will be making a presentation on the corporation's business operations and financial results. Following their presentations, we will answer any questions about financial or business nature that you may have. [Foreign Language] Instructions on how to ask questions and vote at this meeting will be displayed on your screen. As is the case with the use of any technology-based platform, unexpected issues may arise that our platform provider, Lumi, has extensive experience organizing virtual-only meetings and should be able to provide support. Please note that only registered shareholders and duly appointed and registered proxy holders are entitled to ask questions. You may ask your questions during the meeting by typing your question into the Questions tab. Instructions on how to ask questions are available on the home tab of the Lumi platform. Questions will be moderated before being sent to the panel and will be responded to during the allotted question period. Please indicate to whom your question is addressed. To allow us to answer as many questions as possible, registered shareholders and duly appointed and registered proxy holders should keep questions brief, clear and limited to one topic. Questions on the same topic may be grouped and answered together. We will not answer questions that are repetitive, irrelevant to the corporation's business activities or meeting agenda, or that relate to nonpublic information, personal grievances or are otherwise offensive. We will now take a moment to review the voting procedures for this meeting. Only registered shareholders and their duly appointed and registered proxy holders are entitled to vote or to address the Chair in respect of any motion on the basis of 1 vote for each common share held. To cast your vote during the meeting, you must be logged into the live webcast platform using the 15-digit control number appearing on the front of your proxy form, or the 4 alpha character code provided by Computershare to duly registered proxy holders and follow the instructions displayed on your screen. Although management holds proxies representing a majority of the votes in favor of all matters to be voted on at this meeting, which would otherwise permit voting by a show of hands, all voting at this virtual meeting will be conducted by ballot. Preliminary results for each resolution will be announced before the close of the meeting, and final results will be filed on SEDAR+ as soon as practicable thereafter. We now declare the polls open. If you are a registered shareholder who has already submitted a proxy, it will be voted in accordance with your instructions, and you are not required to vote again during this meeting. However, if you wish to revoke or change your previously submitted vote, or if you have not yet voted, you may do so through the Lumi website for this meeting. The polls for all items of business will remain open throughout the meeting so that you may vote on each item as it is considered or, if you prefer, at any time before the polls are closed. We will now proceed with the formal business of the meeting. Mr. Chairman, I now turn the meeting over to you.

Thank you, Mr. Secretary. There are 3 formal items of business to be dealt with today. To receive and consider the corporation's audited consolidated financial statements for the fiscal year ended January 31, 2026, and the auditors report thereon; to appoint KPMG LLP Chartered Professional Council as auditor of the corporation, to authorize the directors to fix its remuneration; and to elect each of the 9 nominees for election as director to the corporation for the ensuing year. These items are described in detail in the corporation's Management Information Circular dated May 18, 2026. [Foreign Language] I hereby appoint Mr. Steve Gilbert and Mr. Vlad Telbasa of Computershare Investor Services, Inc. As scrutineers report on the number of shareholders present or represented by proxy and the number of common shares represented thereby. I would now ask that the scrutineers to present the report.

Mr. Chairman, we, the undersigned scrutineers from Computershare Investor Services, Inc. hereby report that there are at least 3 shareholders and/or proxy holders present at this meeting, representing in person or by proxy, 10,218,452 shares being 76.03% of the total 13,440,000 outstanding shares of Reitmans Canada Limited, and I will hand into reports then by myself, Steve Gilbert and by [indiscernible].

Thank you, Mr. Gilbert. I react to the copy of the scrutineer report be annexed to the minutes of this meeting. Based on the scrutineer's report, I declare that a quorum of the shareholders is present by proxy, and accordingly, this meeting is properly constituted. The Secretary has provided me with proof of the notice of this meeting and the accompanying management information circular, proxies and the audited consolidated financial statements of the corporation for the fiscal year ended January 31, 2026, were mailed to the corporation's shareholders on May 18, 2026. I direct that proof be anexed to the minutes of the meeting. I now move to the secondary place before this meeting the corporation's audited consolidated financial statements for the fiscal year ended January 31, 2026, together with the auditor's report thereon.

Mr. Chairman, the corporation's audited financial statements for the fiscal year ended January 31, 2026, together with the auditor's report thereon are placed before this meeting.

Thank you, Mr. Secretary. A copy of the corporation's audited financial statements for the fiscal year ended January 31, 2026, together with the auditor's report thereon have been mailed to shareholders who requested a paper copy. Copies are available under the corporation's profile on SEDAR+ at www.cedarplus.ca. The next item of formal business is the appointment of the corporation's auditor. [Foreign Language] I now move that KPMG LLP Chartered Professional Counting, be appointed as auditor of the corporation until the close of the corporation's next Shareholders' Annual General Meeting and the directors be authorized to fix their remuneration. I am informed that a majority of the total number of votes cast at this meeting have been voted in favor of the appointment of KPMG LLP Charter Professional Accountants as auditor of the corporation. As a result, the motion is carried. The next item of formal business is the election of the corporation's directors for the ensuing year. The corporation is nominating the following 9 individuals to hold office until the close of the corporation's next Shareholders' Annual General Meeting, or until their successes are elected or appointed. Bruce J. Gerrera; David J. Cassi; Andrea Lombardi; Samuel Minsberg; Jillian Reitman; Steve F. Reitman; Mark at Thibodeau; and Terry Nanovsky. All such nominees are currently directors of the corporation, and details about each of them are contained in this year's management information circular. Each of these nominees has accepted his or her nomination and is eligible to act as a director of the corporation pursuant to the Canada Business Corporations Act. I am informed at least 81% of the total number of votes cast at this meeting have voted in favor of the election of directors of each of the foregoing nominees. In an uncontested election of directors, any nominee who receives a greater number of votes against and votes for shall be considered not to be elected as a director of the corporation. As I am advised that the proxies received indicated that each of the nominees for election as director received more votes for than against. I now move and declare that the foregoing nominees have been duly elected as directly to the corporation. Congratulations to all. At this point, I would like to acknowledge the tremendous contribution made by Mr. Daniel [indiscernible] over the course of almost 14 years with the corporation. Thank you, Daniel, for your exceptional contribution over the years. [Foreign Language]. A contribution exception of D&A. Before we proceed with the management presentations, I would now like to address the matter of the TSX uplifting. As you know, over the past year, the corporation's Board of Directors carefully considered a possible uplisting of the corporation shares from the TSX Venture Exchange to the Toronto Stock Exchange. For details on the uplisting process and the formation of the special committee of independent directors, please refer to Pages 14 and following of the corporation's management information circular. At this point, before we proceed to the management portion of the presentation, we will now open the floor to any questions you may have relating to the preceding formal resolutions. I now invite Mr. Trevor Heisler of MVC Capital Markets Advisors to read any questions submitted.

Please wait a moment while I gather any questions submitted to the Q&A feature of the portal. I see no questions, submit it for the Q&A feature. Please go ahead, Sam.

Well, thank you, Mr. [indiscernible]. Since there are no further questions from shareholders or proxy holders, we will keep the polls open for 1 additional minute before I declare the polls closed. [Voting]

The polls are now closed. I now ask that the scrutineers confirm the preliminary results of the votes. Mr. Gilbert.

So Chairman, a scrutineers, we can report that the appointment of auditors, over 99% of the votes cast are for the appointment of auditors. And concerning the election of the 9 nominees as directors, everyone received at least 81% of the votes cast in favor of their appointment. Thank you.

Well, thank you, Mr. Gilbert. Since there is no further business for this meeting, I will now move to terminate this part of the meeting so that we may reserve the remainder of our time for a presentation and discussion of the financial and business matters affecting the corporation. I declare this part of the meeting terminated. I will now ask Ms. Andrea Limbardi, our President and Chief Executive Officer; and Ms. Caroline Goulian, our Chief Financial Officer, to present on the corporation's business operations and financial results. Questions will be addressed at the conclusion of the presentations during the allocated question period, we will begin with Ms. Goulian.

Thank you, Sam, and welcome, everyone. [Foreign Language] I will be going over some operational and financial highlights for the past fiscal year and the first quarter of fiscal 2026. Following that, I will turn things over to Andrea to discuss our go-forward strategy, and then we will open the floor to questions. But first, I would like to direct you to our disclaimer indicating that today's presentation contains forward-looking statements within the meaning of applicable securities laws. And as usual, all dollar amounts discussed are in Canadian currency. Taking a look back at fiscal 2026, we had a strong second half of the year with our momentum, helping us overcome a slow start in the first quarter. For the year, our net revenues increased by $3 million or 0.4% to $776.8 million, driven by stronger sales dollars per transaction for both retail stores and e-commerce despite having 2 fewer stores. Our gross profit held steady as FX headwinds on U.S. dollar inventory purchases offset top line growth. As part of advancing our multiyear strategy, we undertook restructuring efforts to evolve our operating structure. As such, we incurred strategic transformation expenses of $7 million for fiscal 2026 related to employee termination benefits and consulting fees. Adjusted EBITDA for the year was $18.7 million, and we had a net loss of $0.9 million. To put things into context, after a soft first quarter in fiscal 2026, we made good progress turning things around through the rest of the year, especially in the third and fourth quarters. Our adjusted EBITDA moved from a significant decline in Q1 to a slight year-over-year dip in Q2 before achieving year-over-year increases of $1.8 million and $4.8 million in the third and fourth quarter, respectively. Looking briefly at our first quarter results, net revenues grew 0.8% to $160.1 million, with comparable sales, which includes e-commerce, increasing 0.3%. Our investments in the store fleet are beginning to pay off as evidenced by net revenues from our retail stores increasing by 2.9% driven largely by noncomparable locations. Gross profit margin held steady at 55.7%. Meanwhile, on the cost side, our transformation is beginning to show up in the numbers. SG&A decreased by 2.2%, driven largely by the workforce reduction and a leaner operating model. Combined with stronger store performance, this helped drive a $5.2 million improvement in adjusted EBITDA to a loss of $5.4 million, while our net loss narrowed to $6.3 million. A quick update on our normal-course issuer bid. In fiscal 2026, we repurchased 327,700 of our Class A shares, returning $0.7 million to shareholders. In the first quarter of fiscal 2027, we bought back 235,600 shares, returning $0.5 million to shareholders. From the inception of the NCIB on August 5, 2024, to the end of the first quarter, we've repurchased a total of 745,200 shares. Our balance sheet remains strong. We ended the first quarter with working capital of $126 million, including a cash position of $101.9 million and inventory of $125.1 million. We continue to operate with no long-term debt other than lease liabilities, and we ended the quarter with no borrowings under our credit facilities. That concludes my financial review. I'll now turn things over to Andrea, who will provide an update on our multiyear strategy. Andrea?

Thank you, Caroline, and good morning, everyone. [Foreign Language] I'm happy to provide an update on the progress we've made with regards to our design for the future strategy. April marked 1 year since we introduced our 5-year plan aimed at driving profitable growth and shareholder value. The plan is built on 3 pillars: drive accelerated brand growth, fuel growth with modernization and ignite high performance. Our first pillar is all about strengthening our 3 exceptional brands and unlocking more value from their highly loyal customer bases. In fiscal 2026, we made significant investments across our brand and store network. We opened 13 new stores, completed 2 relocations, expand 5 locations and refreshed 17 stores. At the same time, we took disciplined action to close 15 underperforming stores, sharpening our focus on markets with the strongest long-term potential. A key highlight was the opening of our RW&Co flagship store and Puma St. Puno outside of Montreal. We introduced the first brand update to RW&CO in a decade. The reception has been strong, both with increased sales and improved customer Net Promoter results. As we communicated last year, by the end of fiscal 2030, we expect to grow total square footage by roughly 10%, while maintaining around 400 stores and driving higher productivity per square foot. The goal is to ensure that each store is optimally positioned generating the right level of profitability. Our expectation is that new store investments reach profitability within 18 to 24 months. We strengthened our operational backbone with further investments in our distribution center, highlighted by the installation of a new store track material handling system, improving speed, accuracy and overall capacity. We also made meaningful progress in our digital capabilities. We completed the Jump Mine POS system rollout across all stores giving us a more agile, future-ready platform. And by year-end, all 3 brands were successfully migrated to our enhanced Shopify e-commence environment and a Ceneo product information system, delivering a more elevated and seamless experience across every customer touch point. We continue to strengthen our people and governance foundations. We advanced our total rewards and benefit strategy, launched a global whistleblower program across our factory partners and optimized our global operations, including the relocation of our Hong Kong office. As previously communicated, our multiyear strategy targets $1 billion in revenue generating between $60 million and $70 million in adjusted EBITDA on an annualized basis by the end of fiscal 2030. To support this, we committed to reinvesting more than $100 million over the 5 years with approximately 75% earmarked for our store network and 25% towards modernization initiatives. In fiscal 2026, capital expenditures totaled $37 million on a cash basis. As expected, the first year of investment was weighted toward our store portfolio alongside key spending on the Shopify migration and continued modernization of our distribution center. We are now in the second year of our strategy. Our focus remains squarely on initiatives that strengthen brand relevance and position the business for sustained profitable growth. For year 2, our store activity plan includes 4 to 6 new openings, 5 to 7 relocations, 2 to 4 targeted refreshes or renovations and 3 to 4 expansions. At the same time, we will continue to rationalize the fleet where appropriate to ensure we have the right stores in the right locations. RW&CO is positioned to capture meaningful white space and elevated accessible fashion for the urban professional, with our next brand step-up delivered through the expanded and fully renovated Toronto Eaton Center location that opened on May 29. This 7,000 square foot flagship store immediately saw a strong increase in sales and customer satisfaction. In April, we unveiled our new Reitmans flagship store at Carrefour Laval outside of Montreal. In partnership with renowned Canadian design firm, Birdie Felix, have brought to life a stunning shopping experience for our Reitman's customers, giving her a beautiful place to find the best fashion she needs every day. This flagship location is a bold evolution that reflects a stronger point of view on style, expression and customer connection while staying true to the [indiscernible] core. Meanwhile, at PENN., we are advancing a more disciplined real estate strategy and elevating the in-store experience to reinforce our leadership in plus size apparel, including exploring mall-based locations and an improved design experience. Under our fuel growth with modernization pillar, we are reengineering our end-to-end product life cycle from design through delivery to accelerate speed to market and unlock meaningful operational efficiencies. Within our Ignite high-performance pillar, we will continue investing in the talent and capabilities that drive disciplined execution and long-term value creation. Strengthening how we attract, develop and support our people remain central to ensuring we are a top Canadian employer and a more resilient competitive business. All in, we are planning capital expenditures of $22 million to $24 million in fiscal 2027. As we move forward in the second year of our strategy, the economic and geopolitical environment remains complex with inflationary pressures hitting everyday Canadians like never before. We remain focused on being a destination for Canadians during these uncertain times to find the best quality fashion at the best value in Canada. Additionally, while geopolitical tensions can disrupt even the most efficient supply chains, our strong and diversified supply chain helps us mitigate these risks as best possible to ensure a reliable flow of products to our distribution center, our stores and ultimately to our customers. Before we open up for questions, I want to take a moment to acknowledge the people who make our progress possible. To our employees across our stores, our distribution center and our home offices thank you for your hard work and commitment to executing with excellence every day. To our Board, we appreciate your counsel, your oversight and your steady support. Last but not least, to our shareholders, thank you for your continued confidence and support. We are still in the early days of our strategic plan. It will take time for the full benefits to show through in our results, but we are confident that we are making the right moves to profitably drive our brands forward. We will now open the floor to any questions you may have related to our financial results or growth strategy. I now invite Trevor Heisler of MBC Capital Markets advisor to read any questions submitted.

Good morning, Andrea. Please wait a moment while I gather any questions submitted through the Q&A feature of the portal. I see no questions submitted for the Q&A feature. Please go ahead, Andrea.

Thank you, everyone, for joining us this morning. We look forward to updating you throughout the year as our strategy continues to progress. I will now hand the meeting back to Sam.

Thank you, Andrea. And I'd like to thank you all once again for attending, and I look forward to having the pleasure of seeing you all again next year. This Annual General Meeting is now concluded. [Foreign Language]