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Reitmans Canada Q2 Profit Soars - Update

(RTTNews) - Women's clothing retailer Reitmans Canada (RET.TO) Tuesday reported a nearly 51% surge in second quarter profit, due mainly to reduced cost of merchandise sold on a strengthened Canadian dollar.

Reitmans' second quarter profit jumped 50.9% to C$39.88 million or C$0.59 per share from C$26.43 million or C$0.38 per share last year.

Sales increased 3.3% to C$295.65 million from C$286.07 million a year ago. On a same store basis, sales edged up 1.5%. Reitmans said that geographically, weather conditions continued to impact customer demand.

Gross margin improved to 69% from 63% last year, primarily due to the strengthening of the Canadian dollar vis-? -vis the US dollar.

Since the company purchases a major part of its merchandise with US dollars, a significant fluctuation of the Canadian dollar against the US dollar impacts its earnings. The average rate for a US dollar in the second quarter of fiscal 2011 was $1.04 Canadian versus $1.13 Canadian a year ago.

Updating its current performance, the company said for the month of August, sales fell 2.1% from last year, with same store sales declining 3.2%.

The Board has proposed a quarterly cash dividend of C$0.20 per share on all outstanding Class A non-voting and common shares of the company, payable October 28 to shareholders of record on October 14.

During the quarter, Reitmans opened 7 new stores while it pulled down shutters on 12 stores. At July 31, 977 stores were in operation compared with 971 stores last year. The company said that in the last half of the year, it plans to open 13 new stores, close 6 stores and remodel 12 more.

Moving ahead, the company noted that economic indicators project a favorable view with employment levels picking up. However, the company said that consumer demand will remain weak in fiscal 2011 with modest improvement as consumers remain cautious, but hopes to entrench its market position by offering an expansive merchandise at affordable prices.

RET.TO is currently trading at C$18.15, down C$0.10 or 0.55%, on the TSE.