Reitmans Canada 10q1 results

Overview
Reitmans is a Canadian ladies' wear specialty apparel retailer. The Company has seven banners: Reitmans, Smart Set, RW & CO., Thyme Maternity, Penningtons, Addition Elle and Cassis. Each banner is focused on a particular niche in the retail marketplace. As of May 2, 09, Reitmans has a total of 974 stores across Canada.

1q10 Results (vs 1q09)
1. Revenue: 1q10 Sales up 1.5% to $231.7M

• As per MD&A, management believe sales down mainly due to weaken Canadian economy & the cut on consumer spending;
• During fiscal 2009, RET’s net opened stores are1 stores
• 1q10 same store sales down 0.8%
• 2q10 sales should improve as summer approaching

2. Earnings: 1q10 reported EPS down 58% to $0.11

• Gross margin dropped to 11.0% from 17.2% due to higher transportation cost and the rise in US dollar;
• Investment income down 67% to $727 due to interest rate drop;
• As US dollar fall significantly in 2q10, let's see how the gross margin will improve back to normal

3. Balance Sheet:

• Total equity sightly down 0.3% to $478.2M. Price to Book Value is 1.78 as of Jun 3, 09.
• Long term debt equity ratio is 0.02. That is RET’s strength for future growth & resist financial crisis;
• Cash & cash equivalents down 29.7% to $150M from 4q09, looks consistent to 1q09;

Risk

• Clothing & accessories stores sector is a highly competitive sector. RET’s products do not have an economic moat in terms of design, material and cutting. (They do have a wide moat in certain niche retail markets.)
• Canada economy go weaker as consumer spending and consumer confidence continue to go down and unemployment rate rise to 8.0%
• RET’s cost of good sales will remain high if US$ remain strong;

Bilibala with Reitmans

• n/a

Comments
Change from BUY to HOLD, fair value CA$14.8. It go up 61% to $13.05. I think there is better opportunity to BUY where else.