REITMANS (CANADA) LTD. $6.90 (Toronto symbol RET.A; TSINetwork Rating: Extra Risk) (514-384- 1140; www.reitmans.com; Shares outstanding: 64.6 million; Market cap: $446.6 million; Dividend yield: 11.6%) owns 900 women’s clothing stores across Canada.
The chain consists of 357 Reitmans, 141 Smart Set, 153 Penningtons, 103 Addition Elle, 72 Thyme Maternity and 74 RW & Co. stores. It also has 21 Thyme Maternity boutiques in some Canadian Babies “R” Us locations, as well as 158 in U.S. Babies “R” Us stores.
In the three months ended August 3, 2013, Reitmans’ sales fell 9.3%, to $253.4 million from $279.5 million a year earlier. Same-store sales declined 6.8%.
Consumers are putting off buying discretionary items, like clothing, which has lowered Reitmans’ customer traffic. However, online sales are improving.
Earnings fell 63.2%, to $10.2 million, or $0.16 a share. A year earlier, Reitmans earned $27.6 million, or $0.42.
The company faces new competition from U.S.- based retailer Target Corp., which is opening 125 stores in Canada this year.
However, big retailers like Target and Wal-Mart can also help Reitmans by drawing more shoppers to malls that also contain its stores. Moreover, the company’s new warehouse-management software should lower its costs and help it compete.
The retailer’s balance sheet remains strong: Reitmans holds cash of $147.0 million, or $2.28 a share. Its long-term debt is just $6.2 million. The company continues to pay quarterly dividends of $0.20 a share, which give the shares a very high 11.6% yield.
Reitmans is still a buy.
