President's Report

To our shareholders,

Sales for the nine months ended October 29, 2011 decreased 3.9% to $759,443,000 as compared with $790,286,000 for the nine months ended October 30, 2010. Same store sales decreased 5.2%.  The Company's gross margin decreased from 67.7% to 65.7% for the nine months ended October 29, 2011.  While the strength of the Canadian dollar in the nine months ended October 29, 2011 was favourable to the gross margin, this improvement was offset by a more promotional environment which negatively impacted gross margin.  EBITDA for the nine months ended October 29, 2011 decreased 29.7% to $104,767,000 as compared with $148,975,000 last year.  Net earnings decreased 43.0% to $42,865,000 or $0.65 diluted earnings per share as compared with $75,168,000 or $1.11 diluted earnings per share last year.

Sales for the third quarter ended October 29, 2011 decreased 3.2% to $254,072,000 as compared with $262,515,000 for the third quarter ended October 30, 2010.  Same store sales decreased by 5.8%.  The Company's gross margin decreased from 66.2% to 65.8% for the third quarter ended October 29, 2011. While the strength of the Canadian dollar in the third quarter ended October 29, 2011 was favourable to the gross margin, this improvement was offset by a more promotional environment which negatively impacted gross margin.  EBITDA for the third quarter ended October 29, 2011 decreased by $11,566,000 or 26.6% to $31,845,000 as compared with $43,411,000 last year.  Net earnings decreased 49.0% to $10,561,000 or $0.16 diluted earnings per share as compared to $20,692,000 or $0.31 diluted earnings per share for the same period last year.

On October 19, 2011 the Company announced its plan to close its 25 Cassis stores, primarily through conversion to other Company banners.  In the third quarter ended October 29, 2011 the Company has recorded costs associated with store conversions and closures, primarily related to fixed asset impairment losses and employee severance costs, of $5,100,000 ($3,700,000 after tax).

During the third quarter, the Company opened 14 new stores, comprised of 5 Reitmans, 1 Smart Set, 1 RW & CO., 3 Thyme Maternity, 1 Cassis, 1 Penningtons and 2 Addition Elle.  Four stores were closed, comprised of 2 Reitmans and 2 Penningtons.  At October 29, 2011, there were 975 stores in operation, consisting of 366 Reitmans, 158 Smart Set, 68 RW & CO., 77 Thyme Maternity, 25 Cassis, 158 Penningtons and 123 Addition Elle, as compared with a total of 979 stores as at October 30, 2010.

Sales for the month of November (the four weeks ended November 26, 2011) decreased 2.2% with same store sales decreasing 2.3%.

At the Board of Directors meeting held on November 30, 2011, a quarterly cash dividend (constituting eligible dividends) of $0.20 per share on all outstanding Class A non-voting and Common shares of the Company was declared, payable January 26, 2012 to shareholders of record on January 6, 2012.

As previously reported, the Company received approval from the Toronto Stock Exchange to proceed with a normal course issuer bid, under which the Company may purchase up to 2,579,895 Class A non-voting shares, representing 5% of the issued and outstanding Class A non-voting shares as at November 14, 2011. The bid commenced on November 28, 2011 and may continue to November 27, 2012.

On behalf of the Board of Directors,

Jeremy H. Reitman
Chairman and Chief Executive Officer

Montreal, November 30, 2011