BMTC sales, earnings slide
MONTREAL – Both sales and earnings were down on a strictly comparable basis for BMTC Group’s newly re-aligned fiscal year as its new chief executive officer cautioned shareholders about the retailer’s immediate prospects in a debt-ridden consumer marketplace.
For the three-month period ending January 31, 2019, BMTC Group revenues were $174.1 million, compared to $245.1 million for the four-month period ending January 31, 2018.
The company reported for the strictly comparable three months (November, December and January), revenue fell 4.3% although same store sales were up 4.6%. The company shifted its fiscal year end from December 31 to January 31 last year.
Net earnings for the three-month period ending January 31, 2019 amounted to $11.8 million or 34 cents per share, compared to net earnings of $17.7 million or 50 cents per share for the four-month period ending January 31, 2018.
For the 12-month fiscal year ending January 31, 2019, revenues were $740.0 million compared to $810.1 million for the 13-month fiscal year ending January 31, 2018.
BMTC reported for the strictly comparable 12-month period, revenues were down 1.8% but same store sales gained1.2%.
Net earnings for the 12-month fiscal year ending January 31, 2019 were $45.2 million or $1.29 per share, compared to $49.3 million or $1.36 per share recorded for the 13-month year ending January 31, 2018.
The contribution to net earnings for the thirteenth month of the previous year was $167,000, which had no impact on net earnings per share for either the fourth quarter or the fiscal year.
During its most recent fiscal year, the company sold its store in the Montreal suburb of Repentigny for $9.0 million, resulting in an after-tax gain of $4.5 million or 13 cents per basic share. The share repurchase program contributed an additional six cents per share to net earnings for the year.
In her report to shareholders, BMTC president and chief executive officer Marie-Berthe Des Groseillers said the opening of the new St-Therese store has been delayed to May 2019.
“This store will become the new prototype for the Brault & Martineau banner,” she said, adding the company is evaluating existing stores for remodeling to the new design as well as looking at new sites for additional locations.
While the Quebec economy – the only province in which BMTC operates – has experienced exceptional growth over the past two years, Des Groseillers sees turbulence on the horizon.
She told shareholders that while consumer spending gained 3% in Quebec over the course of 2018, it began to fall significantly during the last quarter.
“In fact, the retail sales of our southern neighbors recorded their biggest monthly drop in ten years, with a decline of 1.2% in December 2018 compared to November 2018,” she said. “Since the beginning of 2019, all retail sales sectors are down. The results for February 2019 and March 2019 have not yet experienced the expected rebound, and retail sales continue to record significant declines.”
Des Groseillers noted that for many analysts, the risk of a recession is particularly high. “They have announced a significant slowing down of the economy due to uncertainty about the continued rise in interest rates, the slowdown in the real estate market due to tightening mortgage financing rules and rising interest rates, labour shortages, the estimated 3.5% increase in the average grocery basket and a level of inflation that remains at 2.4% despite a slowdown in wage growth,” she said.
However, job creation in the province has remained strong and unemployment is at its lowest level in almost 40 years.
“On the other hand, despite a full-employment economy in Quebec, more than a third of Quebeckers live from one paycheck to the next due to record highs in household debt levels,” she said. “Quebeckers are more indebted than ever. The debt ratio of Quebec households is now close to 170%, a rate similar to what was recorded in the United States before the 2008 financial crisis.”
This means for every dollar of disposable household income, Quebeckers owe $1.70. “For the last six years, the average debt of Quebec consumers, excluding mortgages, has increased by 73%,” Des Groseillers said. “In 2018, more than 46,000 consumers and businesses in Quebec declared bankruptcy or submitted a payment agreement to their creditors, which is a record high.”
Increasing debt will lead to a significant drop in household consumption, which she believes has already impacted BMTC’s results. If this trend continues, she warned the company could see revenues fall by as much as 3% in the first half of its 2020 fiscal year.
The largest retailer of furniture, mattress and major appliances in Quebec, BMTC operates some 32 stores under three banners including Ameublements Tanguay, Brault & Martineau and EconoMax.