CTU Le Chateau Inc

Le Château Inc. (TSX VENTURE:CTU), today reported that sales for the first quarter ended April 28, 2018 amounted to $41.1 million as compared with $44.4 million for the first quarter ended April 29, 2017, a decrease of 7.4%, with 29 fewer stores in operation. Comparable store sales decreased 0.3% for the first quarter as compared to last year, with comparable regular store sales decreasing 0.7% and comparable outlet store sales increasing 1.9% (see non-GAAP measures below). Included in comparable store sales are online sales which increased 32.7% for the first quarter.

Adjusted EBITDA (see non-GAAP measures below) for the first quarter of 2018 amounted to $(6.2) million, compared to $(8.3) million for the same period last year. The improvement of $2.1 million in adjusted EBITDA for the first quarter was primarily attributable to the reduction of $3.4 million in selling, general and administrative (“SG&A”) expenses, partially offset by the decrease of $1.3 million in gross margin dollars. The decrease in SG&A expenses resulted primarily from the reduction in store operating expenses due mainly to store closures. The decrease of $1.3 million gross margin dollars was the result of the 7.4% overall sales decline for the first quarter, partially offset by the increase in gross margin percentage to 63.0% from 61.1% in 2017. The gross margin benefited from the closure of non-performing stores in recent quarters and improved inventory levels and quality, partially offset by the short-term liquidation process of store merchandise during the closing period of stores. As for the comparable regular stores, the gross margin dollar contribution remained relatively stable when compared with the same period last year.

Net loss for the first quarter ended April 28, 2018 amounted to $10.8 million or $(0.36) per share compared to a net loss of $12.9 million or $(0.43) per share for the same period last year.

During the first quarter of 2018, the Company renovated one existing location and, as planned, closed nine underperforming stores. As at April 28, 2018, the Company operated 151 stores (including 31 fashion outlet stores) compared to 180 stores (including 50 fashion outlet stores) as at April 29, 2017. Total square footage for the Le Château network as at April 28, 2018 amounted to 850,000 square feet (including 247,000 square feet for fashion outlet stores), compared to 994,000 square feet (including 354,000 square feet for fashion outlet stores) as at April 29, 2017. The Company is planning to close 11 additional stores for the remainder of 2018.

ProfileLe Château de Montréal is a leading Canadian specialty retailer and manufacturer of exclusively designed apparel, footwear and accessories for contemporary and style-conscious women and men, with an extensive network of 150 prime locations across Canada and an e-com platform servicing Canada and the U.S. Le Château, committed to research, design and product development, manufactures approximately 30% of the Company’s apparel in its own Canadian production facilities.

Non-GAAP MeasuresIn addition to discussing earnings measures in accordance with IFRS, this press release provides adjusted EBITDA as a supplementary earnings measure, which is defined as earnings (loss) before interest, income taxes, depreciation, amortization, write-off and/or impairment of property and equipment and intangible assets and accretion of First Preferred shares series 1 (“Adjusted EBITDA”). Adjusted EBITDA is provided to assist readers in determining the ability of the Company to generate cash from operations and to cover financial charges. It is also widely used for valuation purposes for public companies in our industry.

The following table reconciles adjusted EBITDA to loss before income taxes for the first quarters ended April 28, 2018 and April 29, 2017:

(Unaudited)	For the three months ended
(In thousands of Canadian dollars)	April 28, 2018		April 29, 2017
Loss before income taxes	$	(10,777)	$	(12,853)
Depreciation and amortization		2,285		2,873
Write-off and net impairment of property and equipment  and intangible assets		63		227
Finance costs		1,588		1,440
Accretion of First Preferred shares series 1		663		-
Adjusted EBITDA	$	(6,178)	$	(8,313)

The Company also discloses comparable store sales which are defined as sales generated by stores that have been open for at least one year on a comparable week basis. Comparable store sales exclude sales from stores converted to outlet or clearance stores during the year of conversion.

The following table reconciles comparable store sales to total sales disclosed in the unaudited interim condensed consolidated statements of loss for the first quarters ended April 28, 2018 and April 29, 2017:

(Unaudited)	For the three months ended
(In thousands of Canadian dollars)	April 28, 2018		April 29, 2017
Comparable store sales – Regular stores	$	33,629	$	33,865
Comparable store sales – Outlet stores		6,197		6,081
Total comparable store sales		39,826		39,946
Non-comparable store sales		1,258		4,467
Total sales	$	41,084	$	44,413

The above measures do not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies.

Forward-Looking StatementsThis news release may contain forward-looking statements relating to the Company and/or the environment in which it operates that are based on the Company's expectations, estimates and forecasts. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict and/or are beyond the Company's control. A number of factors may cause actual outcomes and results to differ materially from those expressed. These factors also include those set forth in other public filings of the Company. Therefore, readers should not place undue reliance on these forward-looking statements. In addition, these forward-looking statements speak only as of the date made and the Company disavows any intention or obligation to update or revise any such statements as a result of any event, circumstance or otherwise except to the extent required under applicable securities law.

Factors which could cause actual results or events to differ materially from current expectations include, among other things: the ability of the Company to successfully implement its business initiatives and whether such business initiatives will yield the expected benefits; liquidity risks; competitive conditions in the businesses in which the Company participates; changes in consumer spending; general economic conditions and normal business uncertainty; seasonality and weather patterns; changes in the Company's relationship with its suppliers; lease renewals; information technology security and loss of customer data; fluctuations in foreign currency exchange rates; interest rate fluctuations and changes in laws, rules and regulations applicable to the Company. There can be no assurance that borrowings will be available to the Company, or available on acceptable terms, in an amount sufficient to fund the Company's needs or that additional financing will be provided by any of the controlling shareholders of the Company. The foregoing list of risk factors is not exhaustive and other factors could also adversely affect our results.

The Company’s unaudited interim condensed consolidated financial statements and Management’s Discussion and Analysis for the first quarter ended April 28, 2018 are available online at www.sedar.com.

For further informationEmilia Di Raddo, CPA, CA, President (514) 738-7000Johnny Del Ciancio, CPA, CA, Vice-President, Finance, (514) 738-7000MaisonBrison:  Pierre Boucher, (514) 731-0000Source:  Le Château Inc.

CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands of Canadian dollars)	As at April 28, 2018			As at April 29, 2017			As at January 27, 2018
ASSETS
Current assets
Cash	$	2,002		$	1,168		$	-
Accounts receivable		971			1,033			957
Income taxes refundable		269			519			449
Inventories		91,288			99,320			89,911
Prepaid expenses		2,031			1,907			1,747
Total current assets		96,561			103,947			93,064
Deposits		485			621			485
Property and equipment		25,579			34,282			27,052
Intangible assets		2,234			2,755			2,434
	$	124,859		$	141,605		$	123,035
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
Bank indebtedness	$	-		$	-		$	261
Current portion of credit facility		15,617			63,401			6,322
Trade and other payables		16,467			16,087			17,342
Deferred revenue		2,954			2,736			2,842
Current portion of provision for onerous leases		512			832			576
Current portion of long-term debt		-			6,123			-
Total current liabilities		35,550			89,179			27,343
Credit facility		36,474			-			32,221
Long-term debt		29,101			32,322			30,518
Provision for onerous leases		851			1,214			924
Deferred lease credits		6,813			7,711			7,111
First Preferred shares series 1		23,500			-			24,718
Total liabilities		132,289			130,426			122,835
Shareholders' equity (deficiency)
Share capital		47,967			47,967			47,967
Contributed surplus		14,114			9,459			9,600
Deficit		(69,511)			(46,247)			(57,367)
Total shareholders' equity (deficiency)		(7,430)			11,179			200
	$	124,859		$	141,605		$	123,035

NOTICEThe Company’s independent auditors have not performed a review of the accompanying interim condensed consolidated financial statements.

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Unaudited)	For the three months ended
(In thousands of Canadian dollars, except per share information)	April 28, 2018		April 29, 2017
Sales	$	41,084	$	44,413
Cost of sales and expenses
Cost of sales		15,189		17,258
Selling		27,581		30,278
General and administrative		6,840		8,290
		49,610		55,826
Results from operating activities		(8,526)		(11,413)
Finance costs		1,588		1,440
Accretion of First Preferred shares series 1		663		-
Loss before income taxes		(10,777)		(12,853)
Income tax recovery		-		-
Net loss and comprehensive loss	$	(10,777)	$	(12,853)
Net loss per share
Basic	$	(0.36)	$	(0.43)
Diluted		(0.36)		(0.43)
Weighted average number of shares outstanding ('000)		29,964		29,964

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIENCY)
(Unaudited)	For the three months ended
(In thousands of Canadian dollars)	April 28, 2018		April 29, 2017
SHARE CAPITAL	$	47,967	$	47,967
CONTRIBUTED SURPLUS
Balance, beginning of period	$	9,600	$	9,287
Transitional adjustments on adoption of new accounting standards		4,502		-
Adjusted balance, beginning of period		14,102		9,287
Fair value adjustment of long-term debt		-		99
Stock-based compensation expense		12		73
Balance, end of period	$	14,114	$	9,459
DEFICIT
Balance, beginning of period	$	(57,367)	$	(33,394)
Transitional adjustments on adoption of new accounting standards		(1,367)		-
Adjusted balance, beginning of period		(58,734)		(33,394)
Net loss		(10,777)		(12,853)
Balance, end of period	$	(69,511)	$	(46,247)
Total shareholders’ equity (deficiency)	$	(7,430)	$	11,179

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)	For the three months ended
(In thousands of Canadian dollars)	April 28, 2018		April 29, 2017
OPERATING ACTIVITIES
Net loss	$	(10,777)	$		(12,853)
Adjustments to determine net cash from operating activities
Depreciation and amortization		2,285			2,873
Write-off and net impairment of property and equipment and intangible assets		63			227
Amortization of deferred lease credits		(367)			(681)
Deferred lease credits		69			200
Stock-based compensation		12			73
Provision for onerous leases		(137)			(164)
Finance costs		1,588			1,440
Accretion of First Preferred shares series 1		663			-
Interest paid		(996)			(531)
		(7,597)			(9,416)
Net change in non-cash working capital items related to operations		(3,161)			(2,691)
Income taxes refunded		240			-
Cash flows related to operating activities		(10,518)			(12,107)
FINANCING ACTIVITIES
Net increase in credit facility		13,456			8,777
Proceeds of long-term debt		-			4,500
Cash flows related to financing activities		13,456			13,277
INVESTING ACTIVITIES
Additions to property and equipment and intangible assets		(675)			(868)
Proceeds from disposal of property and equipment		-			600
Cash flows related to investing activities		(675)			(268)
Increase in cash		2,263			902
Cash (bank indebtedness), beginning of period		(261)			266
Cash, end of period	$	2,002	$		1,168