REITMANS (CANADA) LTD. $8.45 Toronto symbol RET.A

REITMANS (CANADA) LTD. $8.45 (Toronto symbol RET.A; TSINetwork Rating: Extra Risk) (514-384- 1140; www.reitmans.com; Shares outstanding: 64.6 million; Market cap: $544.7 million; Dividend yield: 9.5%) owns 909 women’s clothing stores across Canada.

The chain consists of 359 Reitmans, 145 Smart Set, 157 Penningtons, 103 Addition Elle, 72 Thyme Maternity and 73 RW & Co. stores. In addition, it has 20 Thyme Maternity boutiques in some Canadian Babies “R” Us locations, as well as 154 in U.S. Babies “R” Us stores.

In the three months ended May 4, 2013, Reitmans’ sales fell slightly, to $216.9 million from $217.1 million a year earlier. However, same-store sales declined 3.5%.

Reitmans lost $2.6 million, or $0.04 a share. That was partly because unseasonable weather kept some customers away from its stores. A year earlier, Reitmans earned $119,000, or nil per share. The latest results included $1 million in severance costs related to a number of recent layoffs. However, Reitmans expects these moves to save it $3 million a year.

The company faces new competition from U.S.- based retailer Target, 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 Reitmans’ stores. Moreover, the company’s upgraded warehousemanagement software should lower its costs and help it compete.

The retailer’s balance sheet remains strong: Reitmans holds cash of $139.2 million, or $2.15 a share. Its long-term debt is just $6.6 million. The company continues to pay quarterly dividends of $0.20 a share. The annual rate of $0.80 yields a high 9.5%.

Reitmans is still a buy.

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