Reitmans Annual Report 2014

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FY2014 Annual Report · Reitmans

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ReitmAns is
CAnAdA’s leAding
sPeCiAlty RetAileR

We ARe CustOmeR dRiven,

vAlue ORiented And

COmmitted tO exCellenCe.

By PROmOting innOvAtiOn,

gROWth, develOPment

And teAmWORk,

We stRive tO seRve

OuR CustOmeRs the Best

quAlity/vAlue PROPOsitiOn

in the mARketPlACe.

tO OuR
shARehOldeRs

Fiscal 2014 was a most disappointing and challenging year.

sales for fiscal 2014 (52 weeks) were $960,397,000 as compared with $1,000,513,000 for the year ended
February 2, 2013 (53 weeks), a decrease of 4.0%. same store sales decreased by 2.8%. the Company’s
gross margin for fiscal 2014 decreased to 60.7% from 62.8% for fiscal 2013. net earnings for fiscal 2014
decreased 59.1% to $10,788,000 ($0.17 diluted earnings per share) as compared with $26,356,000
($0.40 diluted earnings per share) for fiscal 2013. For fiscal 2014, adjusted eBitdA1 decreased by
$20,140,000 or 22.2% to $70,453,000 as compared with $90,593,000 for fiscal 2013. the reduction in
earnings was primarily attributable to poor performance of the smart set banner and the thyme maternity
shop-in-shop u.s. operations.

the Canadian retail environment continued to present formidable challenges which were difficult to
address and overcome. Weak economic conditions, the influx of foreign entrants into Canada and increased
e-commerce competition have resulted in a highly competitive landscape as retailers aggressively
compete in a limited consumer marketplace. Competitive pressures continued to necessitate increased
promotional pricing adversely impacting sales and margins.

the Company has made significant changes in branding among its banners. the branding strategies
executed in the Reitmans, Addition elle and Penningtons banners have shown positive customer acceptance.
the smart set banner performance was particularly disappointing, despite its efforts to regain acceptance
by consumers through ongoing repositioning and rebranding.

the Company has embarked on initiatives aimed at reducing costs across the organization which included
a review of head office activities and processes targeted at improving efficiencies. to date this initiative
has resulted in a reduction in the number of employees in both head office and field operations. Additional
savings have been achieved through improved cost management in non-wage areas. the Company is
continuing its review aimed at process improvements and anticipates additional savings and further
efficiencies as the Company moves forward with this project.

during the year, the Company opened 25 new stores and closed 58. Accordingly, at February 1, 2014, there
were 878 stores in operation, consisting of 349 Reitmans, 129 smart set, 77 RW & CO., 70 thyme maternity,
152 Penningtons and 101 Addition elle, as compared with a total of 911 stores as at February 2, 2013.
in addition, there were 23 thyme maternity boutiques (“shop-in-shop”) in select Babies“R”us locations in
Canada and 169 thyme maternity boutiques (“shop-in-shop”) in Babies“R”us stores in the united states.
the thyme maternity shop-in-shop boutiques in the u.s. market have underperformed, not achieving
anticipated results. the Company has decided to close its thyme maternity shop-in-shop locations in
the u.s. the closures are anticipated to take place through to June 2014. the costs attributable to these
closures have in large part been incurred during fiscal 2014. in fiscal 2015, we expect to open 8 new stores,
close 44 stores and remodel 40 stores at a capital cost of approximately $20,000,000.

the Company continues to execute its strategy of delivering fashionable clothing at excellent prices to
Canadian consumers. We are proud of our achievements over the past 88 years and most confident of
our future. We believe that we have the very best specialty retailing assets in Canada. Our operations are
led and staffed by highly motivated, extremely competent professionals. We extend sincere thanks and
appreciation to all our associates, suppliers, customers and shareholders. these are the people who have
made possible our many years of success and on whom we rely for the renewed growth of the Company.

On behalf of the Board of directors,

(signed)

Jeremy h. Reitman
Chairman and Chief executive Officer

montreal, April 2, 2014

1 Please refer to the note on non-gAAP measures included in management’s discussion & Analysis.

5-yeAR
highlights

FOR the yeARs ended:
(in thOusAnds exCePt PeR shARe AmOunts)
(unAudited)

SALES

1st quarter
2nd quarter
3rd quarter
4th quarter
Total

RESULTS FROM OPERATING ACTIVITIES

1st quarter
2nd quarter
3rd quarter
4th quarter
Total

NET EARNINGS (LOSS)

1st quarter
2nd quarter
3rd quarter
4th quarter
Total

BASIC EARNINGS (LOSS) PER SHARE

1st quarter
2nd quarter
3rd quarter
4th quarter
Total

NET EARNINGS

BASIC EARNINGS PER SHARE

SHAREHOLDERS’ EQUITY

PER SHARE

NUMBER OF STORES

DIVIDENDS PAID

SHARE PRICE AT YEAR-END
CLASS A NON-VOTING
COMMON

2014

2013 2

2012

2011

2010 1

$ 216,861
253,445
249,414
240,677
$ 960,397

$ 217,094
279,513
236,247
267,659
$ 1,000,513

$ 219,296
286,075
254,072
259,954
$ 1,019,397

$
$

(4,073)
10,280
5,322
(20,878)
(9,349)

(2,586)
10,182
5,763
(2,571)
10,788

(0.04)
0.16
0.09
(0.04)
0.17

10,788
0.17

$
$

(199)
34,377
(983)
(2,711)
30,484

(119)
27,649
(29)
(1,145)
26,356

0.00
0.42
0.00
(0.02)
0.40

26,356
0.40

$
$

5,018
40,968
10,609
5,224
61,819

624
31,680
10,561
4,674
47,539

0.01
0.48
0.16
0.07
0.72

47,539
0.72

$ 235,745
292,026
262,515
268,714
$ 1,059,000

22,825
53,612
27,819
19,886
$ 124,142

$
$

15,770
38,706
20,692
13,817
88,985

0.23
0.58
0.31
0.21
1.33

88,985
1.33

$ 231,652
286,071
270,684
268,120
$ 1,056,527

$
$

10,814
38,100
27,076
21,879
97,869

7,801
26,426
18,921
14,088
67,236

0.11
0.38
0.28
0.21
0.98

67,236
0.98

$ 423,431
6.56
$

$ 454,893
7.04
$

$ 492,852
7.51
$

$ 512,800
7.73
$

$ 510,166
7.55
$

878

911

942

968

977

41,981

52,068

52,654

51,895

49,351

$
$

5.56
5.61

$
$

12.39
11.85

$
$

14.64
14.98

$
$

17.81
18.18

$
$

16.14
15.00

1 the year ended 2010 is presented in accordance with previous Canadian generally accepted accounting principles before
the adoption of international Financial Reporting standards (“iFRs”) and accordingly has not been restated to iFRs.

2 Adjusted to reflect the impact from the implementation of the amendments to iAs 19, Employee Benefits.

sAles 1

1080

1060

1040

1020

1000

980

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960

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Results FROm
OPeRAting
ACtivities 1, 2

net
eARnings 1, 2

130
120
110
100
90
80
70
60
50
40
30
20
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(10)

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shARehOldeRs’
equity 1, 2

RetuRn
On equity 1, 2

dividends

600

500

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400

300

200

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16.0

14.0

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0
1
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1
1
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2
1
0
2

3
1
0
2

4
1
0
2

1 the year ended 2010 is presented in accordance with previous Canadian generally accepted accounting principles before the adoption of

international Financial Reporting standards (“iFRs”) and accordingly has not been restated to iFRs.

2 the year ended 2013 has been adjusted to reflect the impact from the implementation of the amendments to iAs 19, Employee Benefits.

stORes
ACROss
CAnAdA

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14
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19
13
83
112
13
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41
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43
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18
29
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878 stORes

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24
7
34
29
219
302
29
27
112
93
1
1

neWFOundlAnd
PRinCe edWARd islAnd
nOvA sCOtiA
neW BRunsWiCk
quéBeC
OntARiO
mAnitOBA
sAskAtCheWAn
AlBeRtA
BRitish COlumBiA
nORthWest teRRitORies
yukOn

349 129

70 152 101

878

ReitmAns offers a unique combination of superior fit, fashion, quality and value. With 349 stores
across Canada averaging 4,600 sq. ft., Reitmans is the preferred destination for women looking to
update their wardrobe with the latest styles and colours for an affordable price. While Reitmans enjoys
a strong reputation for service and benefits from a broad and loyal customer base, we will continue to
strive to create an engaging customer experience by being there for her whenever she chooses to shop.
Reitmans’ fashions can also be purchased online at reitmans.com.

With 129 stores, averaging 3,400 sq. ft., smARt set is a style destination where young
women come together to inspire and be inspired. From wear-to-work separates, denim, essentials and
accessories, smart set offers the latest styles in women’s fashions to mix, match and innovate. smart set
fashions can also be purchased online at smartset.ca.

RW & CO. is an aspirational lifestyle brand which caters to men and women with an urban
mindset. Whether for work or for weekend, RW & CO. offers fashion that blends the latest trends with
style, quality and a unique attention to detail. RW & CO. operates 77 stores averaging 4,500 sq. ft. in
premium locations in major shopping malls across Canada, as well as an e-commerce site at rw-co.com.

878 stORes

349

129

thyme mAteRnity, Canada’s leading fashion brand for modern moms-to-be, offers
current styles for every aspect of life, from casual to work, including a complete line of nursing fashion
and accessories. thyme brings future moms valuable advice, fashion tips and product knowledge to
help them on their incredible journey during and after pregnancy. thyme operates 70 stores averaging
2,300 sq. ft. in major malls and power centres nationwide, as well as 23 thyme shop-in-shops in
select Babies“R”us locations in Canada. thyme maternity fashions can also be purchased online at
thymematernity.com.

152

101

Canadian leader of the plus size apparel market, PenningtOns consistently offers
unparalleled value to our customers by providing fit expertise, quality and a unique inspiring shopping
experience. Penningtons is the “art of affordable fashion”! the plus size fashion destination for
sizes 14–32, Penningtons operates 152 stores across Canada averaging 6,000 sq. ft. and is available
24 hours/day at penningtons.com. From head-to-toe, our customers will find the best fitted clothing
from intimate apparel, basic to fashion denim, work to weekend outfits, footwear and activewear.

AdditiOn elle is Canada’s leading fashion destination for plus size women. Addition elle’s
vision of offering “Fashion democracy” delivers the latest “must-have” trends to updated fashion
essentials in an inspiring shopping environment. From casual daywear to amazing dresses,
contemporary career, sexy intimates, accessories, footwear, high performance activewear and the
largest assortment of premium denim labels – it’s all here. Addition elle’s fashion for plus size women
comprises a phenomenal range of fashions for all – always with a focus on fashion, quality and fit.
Addition elle operates 101 stores averaging 6,000 sq. ft. in major malls and power centres nationwide
and an e-commerce site at additionelle.com.

mAnAgement’s disCussiOn And
AnAlysis OF FinAnCiAl COnditiOn
And Results OF OPeRAtiOns

FOR the FisCAl yeAR ended FeBRuARy 1, 2014

the following management’s discussion and Analysis of Financial Condition and Results of Operations (“md&A”) of Reitmans (Canada) limited and its
subsidiaries (“Reitmans” or the “Company”) should be read in conjunction with the audited consolidated financial statements of Reitmans as at and for
the fiscal year ended February 1, 2014 (“fiscal 2014”) and February 2, 2013 (“fiscal 2013”) and the notes thereto which are available at www.sedar.com.
this md&A is dated April 2, 2014.

All financial information contained in this md&A and Reitmans’ audited consolidated financial statements have been prepared in accordance with
international Financial Reporting standards (“iFRs”), also referred to as generally Accepted Accounting Principles (“gAAP”), as issued by the international
Accounting standards Board (“iAsB”). All monetary amounts in this report are in thousands of Canadian dollars, except per share amounts. the audited
consolidated financial statements and this md&A were reviewed by Reitmans’ Audit Committee and were approved by its Board of directors on April 2, 2014.

Additional information about Reitmans is available on the Company’s website at www.reitmans.ca or on the sedAR website at www.sedar.com.

FORWARd-lOOking stAtements
All of the statements contained herein, other than statements of fact that are independently verifiable at the date hereof, are forward-looking statements.
such statements, based as they are on the current expectations of management, inherently involve numerous risks and uncertainties, known and unknown,
many of which are beyond the Company’s control. such risks include but are not limited to: the impact of general economic conditions, general conditions in the
retail industry, seasonality, weather and other risks included in public filings of the Company, including those described in the “Operating Risk management”
and “Financial Risk management” sections of this md&A. Consequently, actual future results may differ materially from the anticipated results expressed in
forward-looking statements, which reflect the Company’s expectations only as of the date of this md&A. Forward-looking statements are based upon the
Company’s current estimates, beliefs and assumptions, which are based on management’s perception of historical trends, current conditions and currently
expected future developments, as well as other factors it believes are appropriate in the circumstances. specific forward-looking statements in this md&A include,
but are not limited to, statements with respect to the Company’s anticipated future results and events, future liquidity, planned capital expenditures,
amount of pension plan contributions, status and impact of systems implementation, the ability of the Company to successfully implement its strategic
initiatives and cost reduction and productivity improvement initiatives as well as the impact of such initiatives. the reader should not place undue reliance
on any forward-looking statements included herein. these statements speak only as of the date made and the Company is under no obligation and disavows
any intention to update or revise such statements as a result of any event, circumstances or otherwise, except to the extent required under applicable
securities law.

nOn-gAAP FinAnCiAl meAsuRes
in addition to discussing earnings in accordance with iFRs, this md&A provides adjusted earnings before interest, taxes, depreciation and amortization
(“adjusted eBitdA”) as a non-gAAP financial measure. Adjusted eBitdA is defined as earnings before income tax expense, other income, dividend income,
interest income, realized gains or losses on disposal of available-for-sale financial assets, interest expense, depreciation and amortization and impairment
charges. the following table reconciles the most comparable gAAP measure, net earnings (loss), to adjusted eBitdA. management believes that adjusted
eBitdA is an important indicator of the Company’s ability to generate liquidity through operating cash flow to fund future working capital needs and
fund future capital expenditures and uses the metric for this purpose. the exclusion of other income, dividend and interest income eliminates the impact
of revenue derived from non-operational activities. the exclusion of depreciation, amortization and impairment charges eliminates the non-cash impact.
the intent of adjusted eBitdA is to provide additional useful information to investors and analysts and the measure does not have any standardized meaning
under iFRs. Adjusted eBitdA should therefore not be considered in isolation or used in substitute for measures of performance prepared in accordance
with iFRs. Other companies may calculate adjusted eBitdA differently. From time to time, the Company may exclude additional items if it believes doing
so would result in a more effective analysis of underlying operating performance. the exclusion of certain items does not imply that they are non-recurring.

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ManageMent’s Discussion anD analysis

the Company uses a key performance indicator (“kPi”), same store sales, to assess store performance (including each banner’s e-commerce store) and
sales growth. same store sales is defined as sales generated by stores that have been continuously open during both of the periods being compared and
includes e-commerce sales. the same store sales metric compares the same calendar days for each period. Although this kPi is expressed as a ratio, it is a
non-gAAP financial measure that does not have a standardized meaning prescribed by iFRs and may not be comparable to similar measures used by other
companies. management uses same store sales in evaluating the performance of stores and considers it useful in helping to determine what portion of new
sales has come from sales growth and what portion can be attributed to the opening of new stores. same store sales is a measure widely used amongst
retailers and is considered useful information for both investors and analysts. same store sales should therefore not be considered in isolation or used in
substitute for measures of performance prepared in accordance with iFRs.

the Company’s fiscal year ends on the saturday closest to the end of January. the fiscal year ended February 2, 2013 included 53 weeks instead of 52 weeks.
the inclusion of an extra week occurs every fifth or sixth fiscal year due to the Company’s floating year-end.

the following table reconciles net earnings (loss) to adjusted eBitdA for the fiscal year and three months ended February 1, 2014 and February 2, 2013:

FOR THE FISCAL YEAR ENDED

FOR THE THREE MONTHS ENDED

FEBRUARY 1, 2014
(52 wEEkS)

FEBRUARY 2, 2013 1
(53 wEEkS)

FEBRUARY 1, 2014
(13 wEEkS)

FEBRUARY 2, 2013 1
(14 wEEkS)

Net Earnings (loss)
depreciation, amortization and net impairment losses
Other income 2
dividend income
interest income
Realized loss on disposal of available-for-sale
financial assets
impairment losses on available-for-sale financial assets
interest expense
income taxes
Adjusted EBITDA

10,788
63,724
(6,054)
(3,481)
(621)

248
2,699
496
2,654
70,453

26,356
59,655
–
(3,526)
(1,062)

–
156
592
8,422
90,593

(2,571)
17,312
(6,054)
(873)
(184)

248
2,007
114
(1,863)
8,136

(1,145)
15,514
–
(911)
(203)

–
50
139
(394)
13,050

1 Adjusted to reflect the impact from the implementation of the amendments to iAs 19, Employee Benefits as described in note 3 of the February 1, 2014 consolidated financial statements.

2 Other income comprises a gain on sale of intellectual property rights and proceeds from the settlement of a trademark dispute.

ManageMent’s Discussion anD analysis Reitmans (Canada) LimitedMD&ACORPORAte OveRvieW
the Company has a single reportable segment which derives its revenue from the sale of ladies’ specialty apparel to consumers through its six retail banners.
the Company’s stores are located in malls, retail power centres, strip plazas and on major shopping streets across Canada. the Reitmans banner,
operating 349 stores averaging 4,600 sq. ft., is Canada’s largest women’s apparel specialty chain and leading fashion brand. Reitmans has developed
strong customer loyalty through superior service, insightful marketing and quality merchandise. With 129 stores, averaging 3,400 sq. ft., smart set
is a style destination offering the latest styles in women’s fashions to mix, match and innovate from wear-to-work separates, denim, essentials
and accessories. RW & CO. operates 77 stores averaging 4,500 sq. ft. in premium locations in major shopping malls, catering to a customer with an urban
mindset offering fashions for him and her. thyme maternity is a leading fashion brand for moms-to-be, offering current styles for every aspect of life, from
casual to work, plus a complete line of nursing fashions and accessories. thyme operates 70 stores averaging 2,300 sq. ft. in major malls and power centres
across Canada. Penningtons is a leader in the Canadian plus size market, offering trend-right styles and affordable quality for plus size fashion sizes 14–32.
Penningtons operates 152 stores in power centres across Canada averaging 6,000 sq. ft. Addition elle is a fashion destination for plus size women with a
focus on fashion, quality and fit delivering the latest “must-have” trends to updated fashion essentials in an inspiring shopping environment. Addition elle
operates 101 stores averaging 6,000 sq. ft. in major malls and power centres nationwide.

the Company also offers e-commerce website shopping for all of its banners. these online channels offer customers convenience, selection and ease
of purchase, while enhancing customer loyalty and continuing to build the brands.

in addition to its individual retail outlets, the Company operates 23 thyme maternity boutiques (“shop-in-shop”) in select Babies“R”us locations in Canada
and 169 shop-in-shop boutiques in Babies“R”us locations in the united states. the thyme maternity shop-in-shop boutiques in the u.s. market have
underperformed, not achieving anticipated results. the Company has decided to close its thyme maternity shop-in-shop locations in the united states.
the closures are anticipated to take place through to June 2014.

the Company also offers consumers Penningtons plus-size apparel, under a wholesale agreement, in five sears stores in Canada, as well as online
at sears.ca.

RetAil BAnneRs

NUMBER OF
STORES AT
FEBRUARY 2,
2013

Q1
OPENINGS

Q1
CLOSINGS

Q2
OPENINGS

Q2
CLOSINGS

Q3
OPENINGS

Q3
CLOSINGS

Q4
OPENINGS

Q4
CLOSINGS

Reitmans
smart set
RW & CO.
thyme maternity1
Penningtons
Addition elle
Total

361
146
73
72
153
106
911

2
1
–
–
9
1
13

1 excludes boutiques in Babies“R”us shop-in-shop locations.

thyme maternity shop-in-shop locations:

Babies“R”us – Canada
Babies“R”us – u.s.
Babies“R”us – total

20
154
174

–
–
–

(4)
(2)
–
–
(5)
(4)
(15)

–
–
–

1
–
1
–
1
–
3

1
4
5

(3)
(4)
–
–
(5)
–
(12)

–
–
–

2
–
4
–
1
1
8

1
8
9

(4)
(3)
(1)
(1)
(3)
(1)
(13)

–
–
–

–
–
–
–
1
–
1

1
3
4

(6)
(9)
–
(1)
–
(2)
(18)

–
–
–

NUMBER OF
STORES AT
FEBRUARY 1,
2014

349
129
77
70
152
101
878

23
169
192

store closings take place for a variety of reasons as the viability of each store and its location is constantly monitored and assessed for continuing profitability.
in most cases when a store is closed, merchandise at that location is sold off in the normal course of business and any unsold merchandise remaining at the
closing date is generally transferred to other stores operating under the same banner for sale in the normal course of business.

ManageMent’s Discussion anD analysis ManageMent’s Discussion anD analysis Reitmans (Canada) LimitedMD&AthRee-yeAR RevieW OF seleCted FinAnCiAl inFORmAtiOn

total of stores at end of fiscal year 2
sales
earnings before income taxes
net earnings
earnings per share (“ePs”)

Basic
diluted
total assets
total non-current liabilities
dividends per share

FEBRUARY 1, 2014
(52 wEEkS)

FOR THE FISCAL YEARS ENDED
FEBRUARY 2, 2013 1
(53 wEEkS)

JANUARY 28, 2012
(52 wEEkS)

878
$ 960,397
13,442
10,788

0.17
0.17
589,939
51,039
0.65

911
$ 1,000,513
34,778
26,356

0.40
0.40
594,968
52,792
0.80

942
$ 1,019,397
65,872
47,539

0.72
0.72
648,764
51,877
0.80

1 Certain figures have been adjusted to reflect the impact from the implementation of the amendments to iAs 19, Employee Benefits as described in the section “new Accounting Policies Adopted in Fiscal 2014”

and adjusted to reflect a reclassification of certain items to conform with presentation in the current year.

2 excludes boutiques in Babies“R”us shop-in-shop locations.

sales over the last three years were impacted by a challenging retail environment as well as by increased promotional activity. Weak economic conditions,
the influx of foreign entrants into Canada and increased e-commerce competition have resulted in a highly competitive landscape as retailers aggressively
compete in a limited consumer marketplace. Additionally, as the Company looks to rationalize underperforming stores, it has decreased its store count,
with a net reduction of 64 stores over two years. Fiscal 2013 sales included an additional week, due to the Company’s retail calendar, resulting in an increase
of approximately $13,600 in sales. despite this increase, sales in fiscal 2013 were significantly impacted by a disruption in the flow of inventory to stores
as a result of difficulties experienced with the deployment of a new warehouse management system. sales for fiscal 2014 were weak, with particularly
poor performance in the smart set banner, despite its efforts to regain acceptance by consumers through repositioning and rebranding. the smart set
banner operates in a highly competitive niche and has been impacted by significant discounting as it competes with many retailers targeting the same
customer demographics.

the Company’s gross profit, and ultimately net earnings, can be significantly impacted by fluctuations in the Canadian dollar in relation to the u.s. dollar.
in the last three years, the Canadian dollar has seen a significant weakening vis-à-vis the u.s. dollar. this has resulted in increased merchandise costs
as virtually all merchandise payments are settled in u.s. dollars. in the year ended January 28, 2012 (“fiscal 2012”) the Canadian dollar started a
downward trend. Additionally, in fiscal 2012 the Company incurred costs related to the closure of the Cassis banner of approximately $6,000 pre-tax.
in fiscal 2013, volatility of the Canadian dollar moderated, but as consumer demand weakened due to economic conditions and higher consumer debt,
higher promotional activity resulted. Fiscal 2013 margins were also impacted by a disruption in the flow of inventory to stores as noted above.
the Company’s gross margin for fiscal 2014 continued to be under pressure due to the competitive landscape. gross profit was further impacted by substantial
discounting in the smart set banner. the Company’s margin, in deciding to exit the u.s. marketplace for thyme maternity shop-in-shop boutiques, has been
also impacted by significant discounting in its u.s. operations.

the thyme maternity shop-in-shop boutiques in the u.s. market have underperformed, not achieving anticipated results. the Company has decided to close
its thyme maternity shop-in-shop locations in the u.s. the closures are anticipated to take place through to June 2014. the thyme maternity u.s. operation
for fiscal 2014 has incurred losses of approximately $7,900, including impairment charges of $2,000. As the Company closes these locations over the next
few months, further operating losses are not anticipated to be significant.

despite a challenging retail environment over the past three years, the Company’s balance sheet is strong. the Company has continued to maintain
a strong position in cash, cash equivalents and marketable securities. inventories, although trending somewhat higher on a per store basis, continue to
be closely managed. the Company invested considerably in capital expenditures for fiscal 2012 and fiscal 2013 in both store renovations and systems
technology at the head office. in fiscal 2014, the Company significantly reduced its capital expenditures to $34,524, on a cash basis (fiscal 2013 –
$84,433). this level of expenditure is below earlier estimates due to cancellations and postponements of planned renovations and store openings.

ManageMent’s Discussion anD analysis ManageMent’s Discussion anD analysis Reitmans (Canada) LimitedMD&AstRAtegiC initiAtives
the Company continues to position itself for growth and has undertaken a number of strategic initiatives to enhance its brands, improve productivity at all
levels through system advances and fostering a culture of process improvements.

An update to previously announced initiatives include:

INITIATIVES

STATUS

the Company has embarked on a rebranding of the Reitmans, smart set,
Addition elle and Penningtons banners with an increased focus on fashion
and affordability.

the Company expanded its offering of thyme maternity merchandise
to u.s. customers
its partnership with Babies“R”us.
this business endeavor offered the Company an opportunity to introduce
its merchandise into the u.s. market through its shop-in-shop boutiques.

through

the Company has made significant changes in branding among its
banners. the branding strategies executed in Reitmans, Addition elle and
Penningtons banners have shown positive customer acceptance, while
the smart set branding initiatives have not achieved desired results.

the thyme maternity shop-in-shop boutiques in the u.s. market
have underperformed and have not achieved anticipated results.
the Company has decided to close its thyme maternity shop-in-shop
locations in the united states. the closures are anticipated to take place
through to June 2014.

in fiscal 2014 the Company was finalizing the steps necessary to launch
e-commerce for the RW & CO., smart set and thyme maternity banners
with fulfillment through the Company’s existing distribution centre.

the Company successfully
its RW & CO. e-commerce
launched
site in march 2013, smart set in April 2013 and thyme maternity in
July 2013. the Company now offers e-commerce for all of its banners.

the Company has an agreement with eziBuy ltd., a new Zealand based
retailer, to sell Addition elle merchandise through the partner’s online sales
channel. eziBuy ltd. is a multi-channel retailer offering fashion clothing
and home decor in Australia and new Zealand.

the Company commenced shipments with its new distribution channel
into foreign markets with eziBuy ltd. in the second quarter of fiscal 2014.
the Company is satisfied with the performance of this new channel of
distribution and sales.

the Company entered into an agreement with sears Canada for the
introduction of Penningtons plus-size apparel in sears stores in Canada.
this agreement provided for Penningtons products to initially be made
available in five sears stores, as well as online at sears.ca.

Continuation of a companywide supply chain optimization and retail
enterprise initiative, internally branded as “sCORe”, focused on deploying
best in class retail applications supported by a new and improved
technology platform. sCORe will enable new processes that will permit
flexibility and adaptability across the merchandising and supply chain
operations.

A corporate initiative aimed at reducing costs across the Company has
been introduced which includes a review of head office activities and
processes targeted at improving efficiencies, an in-depth review of
marketing expenditures and a significant reduction in capital expenditures.

A comprehensive review of the Company’s global sourcing strategy and
execution has been undertaken with a goal of reducing lead time for
bringing products to market.

the Company has successfully completed all steps necessary to enable
the fulfillment of sears Canada orders and now offers the Penningtons
brand in five selected store locations, as well as online at sears.ca.

the Company has completed the deployment of its warehouse
management system portion of the sCORe deployment. the warehouse
system is delivering anticipated results and improved system efficiencies
continue to be achieved. Remaining phases of the sCORe project are on
track for a fiscal 2016 final completion target.

For fiscal 2014 the Company has significantly reduced its capital
expenditures to $34,524 from $84,433 in fiscal 2013. the Company
has undertaken a comprehensive review of its marketing strategies and
related costs to determine any possible savings opportunities while
not diminishing advertising effectiveness. in fiscal 2014 the Company’s
initiatives included a reduction in the number of employees across
the Company resulting in severance costs. Process improvements
were implemented and resulted in additional savings with further
improvement in efficiencies anticipated as the Company continues to
move forward with this project.

this initiative has commenced and is progressing well with the
assessment of current practices in order to evaluate opportunities.

ManageMent’s Discussion anD analysis ManageMent’s Discussion anD analysis Reitmans (Canada) LimitedMD&A
OPeRAting Results FOR FisCAl 2014 (52 Weeks) And COmPARisOn tO
OPeRAting Results FOR FisCAl 2013 (53 Weeks)
sales for fiscal 2013 included an extra week due to the Company’s floating year-end. sales for fiscal 2014 were $960,397 as compared with $1,000,513
for fiscal 2013, a decrease of 4.0% (a decrease of 2.7% after adjusting for the extra week in fiscal 2013). same store sales decreased by 2.8%. sales for fiscal
2014 were impacted by a number of issues, including:

•

weak sales in certain banners with particularly disappointing performance in the Smart Set banner, despite its efforts to regain acceptance by consumers
through ongoing repositioning and rebranding;

a reduction in the number of stores as the Company rationalizes underperforming locations. There has been a net reduction of 33 stores in the year; and

competitive pressures necessitating more promotional pricing.

sales through the various banners’ e-commerce channels continued to show strong growth, with all banners now offering a wide assortment across virtually
all product categories.

gross profit for fiscal 2014 decreased 7.3% to $582,484 as compared with $628,378 for fiscal 2013, a reduction of $45,894. excluding the additional
week in the prior year, gross profit decreased $38,100 or 6.1%. the Company’s gross margin for fiscal 2014 decreased to 60.7% from 62.8% for fiscal 2013.
increased markdowns in the smart set banner significantly contributed to the reduction in gross profit. Additionally, the Company has been disappointed
with the results of its thyme maternity u.s. shop-in-shop operations and has decided to cease its operations. in order to manage an orderly exit from this
market, significant discounting of inventory has taken place and has impacted the gross profit.

selling and distribution expenses for fiscal 2014 decreased 1.0% or $5,486 to $544,679 as compared with $550,165 for fiscal 2013. A net decrease of
33 stores in fiscal 2014 along with cost savings related to corporate initiatives aimed at reducing costs across the Company has contributed to a reduction in
selling and distribution expenses. this decrease is despite an increase in the write-off of property and equipment and intangibles related to store closures and
net impairment losses relating to underperforming stores of $9,826 for fiscal 2014 ($3,114 for fiscal 2013) and an increase in expenses related to advertising.
the increase in impairment expense is primarily attributable to the poor performance of the smart set banner stores. depreciation, amortization and net
impairment losses included in selling and distribution expenses for fiscal 2014 were $61,130 compared to $56,869 for fiscal 2013.

Administrative expenses for fiscal 2014 decreased 1.2% or $575 to $47,154 compared with $47,729 for fiscal 2013. Company initiatives, including a reduction
of the number of employees, were the most significant contributors to the decrease in administrative expenses. depreciation and amortization expense
included in administrative expenses for fiscal 2014 was $2,594 compared to $2,786 for fiscal 2013.

Other income comprises a non-recurring gain on sale of intellectual property rights of $5,745 and $309 of proceeds from the settlement of a
trademark dispute.

Finance income for fiscal 2014 was $20,180 as compared to $5,624 for fiscal 2013. this increase of $14,556 is primarily due to a $7,650 foreign exchange
gain recognized for fiscal 2014 ($582 loss for fiscal 2013) largely attributable to the impact of the fluctuation of the u.s. dollar vis-à-vis the Canadian dollar
on u.s. currency held by the Company. Additionally, the Company has recorded a gain of $8,428 for fiscal 2014 ($1,036 for fiscal 2013) to recognize the
net change in the fair value of u.s. dollar call and put option contracts. dividend income for fiscal 2014 of $3,481 was comparable with fiscal 2013. interest
income decreased for fiscal 2014 to $621 as compared to $1,062 for fiscal 2013, which was impacted by the fluctuation of daily balances held in short-term
investments and the variable rates of interest earned on these short-term investments.

Finance costs for fiscal 2014 were $3,443 as compared to $1,330 for fiscal 2013. this increase is largely attributable to an impairment loss on available-for-
sale financial assets of $2,699 included in fiscal 2014 ($156 in fiscal 2013) and a realized loss on the disposal of available-for-sale financial assets of $248
(nil in fiscal 2013). included in fiscal 2014 was interest on long-term debt of $496 compared to $592 for fiscal 2013, which will continue to decrease as the
Company continues its repayment of the mortgage on the Company’s distribution centre.

For fiscal 2014, earnings before income taxes were $13,442 as compared to $34,778 for fiscal 2013, a decrease of $21,336 or 61.3%. Adjusted eBitdA
for fiscal 2014 was $70,453 as compared with $90,593 for fiscal 2013, a decrease of $20,140 or 22.2%. the reduction in earnings before income taxes
and adjusted eBitdA was primarily attributable to poor performance of the smart set banner and the thyme maternity shop-in-shop u.s. operations.
As previously reported, the Company embarked on an initiative aimed at reducing costs across the organization which included a review of head office
activities and processes targeted at improving efficiencies. to date this initiative has resulted in a reduction in the number of employees in both head office
and field operations resulting in severance costs of approximately $1,700 included in fiscal 2014 results, an increase from earlier projections due to charges in
the fourth quarter of fiscal 2014. the employee reductions are projected to result in annualized wage and benefit savings in excess of approximately $6,000,
this increase from earlier projections is due to further employee reductions in the fourth quarter of fiscal 2014. Additional savings have been achieved
through improved cost management in non-wage areas. the Company is continuing a review aimed at identifying additional process improvements and
anticipates additional savings and further efficiencies as the Company moves forward with this project.

ManageMent’s Discussion anD analysis ManageMent’s Discussion anD analysis Reitmans (Canada) LimitedMD&Aincome tax expense for fiscal 2014 amounted to $2,654 for an effective tax rate of 19.7%. in fiscal 2013, income tax expense amounted to $8,422 for an
effective tax rate of 24.2%. the reduction in the effective tax rate is primarily attributable to an increase in tax exempt dividend income and a gain on sale
of intellectual property rights. the Company’s effective tax rates reflect the impact of changes in substantively enacted tax rates in various tax jurisdictions
in Canada.

net earnings for fiscal 2014 decreased 59.1% to $10,788 ($0.17 diluted earnings per share) as compared with $26,356 ($0.40 diluted earnings per share)
for fiscal 2013.

the Company imports a majority of its merchandise purchases from foreign vendors, with lead times in some cases extending twelve months.
the Company considers a variety of strategies designed to manage the cost of its continuing u.s. dollar commitments, including spot rate purchases
and foreign exchange option contracts with maturities not exceeding twelve months. in fiscal 2014, the Company satisfied its u.s. dollar requirements
through a combination of spot purchases and foreign exchange option contracts. the Company entered into transactions with its bank whereby
it purchased call options and sold put options, both on the u.s. dollar. Purchased call options and sold put options expiring on the same date have the same
strike price.

in fiscal 2014, these merchandise purchases, payable in u.s. dollars, approximated $240,000 u.s. the Company’s u.s. dollar holdings, along with
contracts to purchase u.s. dollars are sufficient to satisfy its projected u.s. dollar denominated merchandise purchases for the fiscal year ending
January 31, 2015.

details of the foreign currency option contracts outstanding as at February 1, 2014 are as follows:

AVERAGE
STRIkE PRICE

NOTIONAL AMOUNT
IN U.S. DOLLARS

DERIVATIVE
FINANCIAL ASSET

DERIVATIVE
FINANCIAL LIABILITY

Call options purchased
Put options sold

$
$

1.07
1.07

$ 212,000
$ 364,000

11,775
–
11,775

–
(3,065)
(3,065)

details of the foreign currency option contracts outstanding as at February 2, 2013 are as follows:

NET

11,775
(3,065)
8,710

AVERAGE
STRIkE PRICE

NOTIONAL AMOUNT
IN U.S. DOLLARS

DERIVATIVE
FINANCIAL ASSET

DERIVATIVE
FINANCIAL LIABILITY

Call options purchased
Put options sold

$
$

0.98
0.98

$
$

30,000
60,000

548
–
548

–
(266)
(266)

NET

548
(266)
282

OPeRAting Results FOR the thiRteen Weeks ended FeBRuARy 1, 2014 (“FOuRth
quARteR OF FisCAl 2014”) And COmPARisOn tO OPeRAting Results FOR the
FOuRteen Weeks ended FeBRuARy 2, 2013 (“FOuRth quARteR OF FisCAl 2013”)
sales for the fourth quarter of fiscal 2013 included an extra week due to the Company’s floating year-end. sales for the fourth quarter of fiscal 2014 were
$240,677 as compared with $267,659 for the fourth quarter of fiscal 2013, a decrease of 10.1% (a decrease of 3.5% after adjusting for the extra week
in the fourth quarter of fiscal 2013). same store sales decreased by 2.3%. sales for the fourth quarter of fiscal 2014 were impacted by a number of issues,
including:

•

weak sales in certain banners with particularly disappointing performance in the Smart Set banner, despite its efforts to regain acceptance by consumers
through ongoing repositioning and rebranding;

a reduction in the number of stores as the Company rationalizes underperforming locations. There has been a net reduction of 33 stores in the year; and

competitive pressures necessitating more promotional pricing.

sales through the various banners’ e-commerce channels continued to show strong growth, with all banners now offering a wide assortment across virtually
all product categories.

ManageMent’s Discussion anD analysis ManageMent’s Discussion anD analysis Reitmans (Canada) LimitedMD&Agross profit for the fourth quarter of fiscal 2014 was $131,883 as compared with $158,327 for the fourth quarter of fiscal 2013, a decrease of $26,444 or
16.7%. excluding the additional week in the fourth quarter of fiscal 2013, gross profit decreased $14,539 or 9.9%. the Company’s gross margin for the fourth
quarter of fiscal 2014 decreased to 54.8% from 59.2% for the fourth quarter of fiscal 2013. increased markdowns in the smart set banner significantly
contributed to the reduction in gross profit. Additionally, the Company has been disappointed with the results of its thyme maternity u.s. shop-in-shop
operations and has decided to cease its operations. in order to manage an orderly exit from this market, significant discounting of inventory has taken place
and has impacted the gross profit.

selling and distribution expenses for the fourth quarter of fiscal 2014 were $139,444 as compared with $147,396 for the fourth quarter of fiscal 2013,
a decrease of $7,952 or 5.4%. A net decrease of 33 stores in fiscal 2014 along with cost savings related to corporate initiatives aimed at reducing costs across
the Company has contributed to a reduction in expenses. this decrease is despite an increase in the write-off of property and equipment and intangibles
related to store closures and net impairment losses relating to underperforming stores of $4,724 for the fourth quarter of fiscal 2014 ($805 in the fourth
quarter of fiscal 2013). depreciation, amortization and net impairment losses included in selling and distribution expenses for the fourth quarter of fiscal
2014 were $16,701 (compared to $14,793 for the fourth quarter of fiscal 2013).

Administrative expenses for the fourth quarter of fiscal 2014 were $13,317 as compared with $13,642 for the fourth quarter of fiscal 2013, a decrease of
$325 or 2.4%. this decrease is largely attributable to a reduction in personnel expense for certain head office functions. depreciation and amortization
expense included in administrative expenses for the fourth quarter of fiscal 2014 was $611, compared to $721 for the fourth quarter of fiscal 2013.

Other income comprises a non-recurring gain on sale of intellectual property rights of $5,745 and $309 of proceeds from the settlement of a trademark dispute.

Finance income for the fourth quarter of fiscal 2014 was $12,759 as compared to $1,361 for the fourth quarter of fiscal 2013. this increase of $11,398 is
primarily due to a gain of $7,388 for the fourth quarter of fiscal 2014 ($178 for the fourth quarter of fiscal 2013) recognizing the net change in the fair value
of u.s. dollar call and put option contracts. the Company has also recorded a $4,314 foreign exchange gain, recognized for the fourth quarter of fiscal 2014
(gain of $69 recognized for the fourth quarter of fiscal 2013), largely attributable to the impact of the fluctuation of the u.s. dollar vis-à-vis the Canadian
dollar on u.s. currency held by the Company. dividend income for the fourth quarter of fiscal 2014 of $873 was comparable with the fourth quarter of
fiscal 2013. interest income decreased for the fourth quarter of fiscal 2014 to $184 as compared to $203 for the fourth quarter of fiscal 2013 which was
impacted by the fluctuation of daily balances held in short-term investments and the variable rates of interest earned on these short-term investments.

Finance costs for the fourth quarter of fiscal 2014 were $2,369 as compared to $189 for the fourth quarter of fiscal 2013. this increase is largely attributable
to an impairment loss on available-for-sale financial assets of $2,007 included in the fourth quarter of fiscal 2014 ($50 in the fourth quarter of fiscal 2013)
and a realized loss on the disposal of available for sale financial assets of $248 in the fourth quarter of fiscal 2014 (nil in the fourth quarter of fiscal 2013).
included in the fourth quarter of fiscal 2014 was interest on long-term debt of $114 compared to $139 for the fourth quarter of fiscal 2013, which will
continue to decrease as the Company continues its repayment of the mortgage on the Company’s distribution centre.

in the fourth quarter of fiscal 2014, loss before income taxes was $4,434 as compared to a loss before income taxes of $1,539 in the fourth quarter
of fiscal 2013. Adjusted eBitdA in the fourth quarter of fiscal 2014 was $8,136 as compared with $13,050 in the fourth quarter of fiscal 2013,
a decrease of $4,914 or 37.7%. the reduction in earnings before income taxes and adjusted eBitdA was primarily attributable to poor performance of the
smart set banner and the thyme maternity shop-in-shop u.s. operations. As previously reported, the Company embarked on an initiative aimed at reducing
costs across the organization which included a review of head office activities and processes targeted at improving efficiencies. to date this initiative has
resulted in a reduction in the number of employees in both head office and field operations and resulted in wages and benefits reductions. Additional savings
have been achieved through improved costs management in non-wage areas. the Company is continuing a review aimed at process improvements and
anticipates additional savings and further efficiencies as the Company moves forward with this project.

due to a loss for income tax purposes, the Company has recorded an income tax recovery for the fourth quarter of fiscal 2014 which amounted to
$1,863 for an effective tax recovery rate of 42.0% as compared to $394 in the fourth quarter of fiscal 2013 (effective tax recovery rate of 25.6%).
the change in the effective tax rate is primarily attributable to an increase in tax exempt dividend income and a gain on sale of intellectual property rights.
the Company’s effective tax rates reflect the impact of changes in substantively enacted tax rates in various tax jurisdictions in Canada.

the Company recorded a net loss for the fourth quarter of fiscal 2014 of $2,571 ($0.04 diluted loss per share) as compared with a net loss of $1,145 ($0.02
diluted loss per share) for the fourth quarter of fiscal 2013.

ManageMent’s Discussion anD analysis ManageMent’s Discussion anD analysis Reitmans (Canada) LimitedMD&AsummARy OF quARteRly Results
the table below sets forth selected consolidated financial data for the eight most recently completed quarters. this unaudited quarterly information has
been prepared in accordance with iFRs. All references to “2014” are to the Company’s fiscal year ending February 1, 2014, to “2013” are to the Company’s
fiscal year ended February 2, 2013.

FOURTH QUARTER
2013 1

2014

THIRD QUARTER

2014

2013 1

SECOND QUARTER
2014

2013 1

FIRST QUARTER

2014

2013 1

sales
net earnings (loss)
earnings (loss) per share

Basic
diluted

$ 240,677
(2,571)

$ 267,659
(1,145)

$ 249,414
5,763

$ 236,247
(29)

$ 253,445
10,182

$ 279,513
27,649

$ 216,861
(2,586)

$ 217,094
(119)

(0.04)
(0.04)

(0.02)
(0.02)

0.09
0.09

0.00
0.00

0.16
0.16

0.42
0.42

(0.04)
(0.04)

0.00
0.00

1 quarterly results for fiscal 2013 have been adjusted to reflect the impact from the implementation of the amendments to iAs 19, Employee Benefits, as described in note 3 of the February 1, 2014

consolidated financial statements.

Fluctuations in the above-noted quarterly financial information reflect the underlying operations of the Company as well as the impact of a number of
factors including, but not limited to, the effect of the estimated loss in sales due to supply chain disruption in the third quarter of fiscal 2013 and the impact
in the fourth quarter of fiscal 2014 of the pre-closure discounting of the thyme maternity shop-in-shop boutiques in the u.s. A fifty-third week in fiscal 2013
resulted in a shift in the Company’s retail calendar, impacting each of the fiscal 2014 quarters and resulting in an additional week in the fourth quarter of
fiscal 2013. Financial results are also affected by seasonality and the timing of holidays. due to seasonality the results of operations for any quarter are not
necessarily indicative of the results of operations for the fiscal year.

BAlAnCe sheet
Cash and cash equivalents as at February 1, 2014 amounted to $122,355 as compared to $97,626 as at February 2, 2013, an increase of 25.3%. timing of
payments for rent and various sales and withholding taxes in fiscal 2013 resulted in lower cash balances, thereby resulting in a significant increase in cash
and cash equivalents when compared to fiscal 2013. Reduced capital expenditures, proceeds on sale of marketable securities and a reduction in dividends
paid contributed to an improvement in cash and cash equivalents. marketable securities were $55,062 at February 1, 2014 as compared to $71,630 at
February 2, 2013, $16,568 lower primarily due to the sale of marketable securities during the year.

the Company’s trade and other receivables are primarily credit card sales from the last few days of the fiscal quarter. trade and other receivables as at February 1,
2014 were $6,422 or $2,453 higher than as at February 2, 2013. this increase includes a receivable of $1,725 related to the sale of intellectual property rights
and trademark settlement along with an increase in trade receivables related to wholesale trade receivables. As at February 1, 2014, income taxes recoverable
were $5,656 (February 2, 2013 – $8,709), attributable to instalments made in excess of estimated tax liabilities. inventories as at February 1, 2014
were $109,601 or $16,284 higher than as at February 2, 2013, primarily due to in-transit merchandise for the spring selling season. Prepaid expenses,
consisting mainly of prepaid insurance, maintenance contracts and realty and business taxes, were $12,512 as at February 1, 2014 compared with $25,944
as at February 2, 2013. this reduction in prepaid expenses is largely attributable to the timing of February rent and common area disbursements that were
classified as prepaid in the prior year.

the Company has significantly reduced its capital expenditures in fiscal 2014, investing $34,524, on a cash basis, in additions to property and equipment
and intangible assets. this is comprised of $30,512 in new store construction and existing store renovation costs and $4,012 mainly related to information
technology system hardware and software enhancements. the Company embarked on a major systems development project (“sCORe”) in 2010
which is in the final phases of completion. the new functionality offered by this project which spans warehousing and distribution, merchandising,
operations and finance is projected for completion in fiscal 2016. Certain milestones have been successfully achieved and the project is progressing well.
the technology initiatives, along with warehouse management systems improvements, will support changes and growth across all areas of the Company
with improved integration, while enabling the Company to reduce the overall cost of system maintenance and upgrades. the total project is being phased
in and is estimated to cost approximately $34,000 of which approximately $24,000 has been incurred to date. the escalation in the sCORe project costs
are a result of problems encountered during the warehouse management system deployment in fiscal 2013, which has been remedied, along with a longer
deployment schedule than was originally planned.

total trade and other payables were $102,576 as at February 1, 2014 (February 2, 2013 – $80,575), or $22,001 higher than as at February 2, 2013 due
mainly to higher trade payables related to the increase of in-transit inventories and the timing of payments for various sales and withholding taxes.
the Company’s trade and other payables consist largely of trade payables, personnel liabilities, payables relating to premises and sales tax liabilities.

the Company entered into transactions with its bank whereby it purchased call options and sold put options, both on the u.s. dollar. these option contracts
extend over a period of twelve months. Purchased call options and sold put options expiring on the same date have the same strike price. the Company
has recorded a net derivative financial asset, related to foreign exchange option contracts, as at February 1, 2014 of $8,710 as compared to net derivative
financial asset of $282 as at February 2, 2013.

ManageMent’s Discussion anD analysis ManageMent’s Discussion anD analysis Reitmans (Canada) LimitedMD&Adeferred revenue consists of unredeemed gift cards, loyalty points and awards granted under customer loyalty programs. Revenue is recognized when the
gift cards, loyalty points and awards are redeemed. deferred revenue was $19,998 as at February 1, 2014 or $3,701 higher than as at February 2, 2013 in part
due to the timing of loyalty reward program incentives.

tenant allowances are recorded as deferred lease credits and amortized as a reduction of rent expense over the term of the related leases. As at February 1, 2014
deferred lease credits were $15,607 as compared to $16,805 as at February 2, 2013.

the Company’s long-term debt consists of a mortgage, which is secured by the Company’s distribution centre. As at February 1, 2014 long-term debt
was $7,003 as compared to $8,573 as at February 2, 2013. the decrease in long-term debt is attributable to the continued repayment of the mortgage
debt principal.

Pension liability as at February 1, 2014 was $18,259 or $700 higher than as at February 2, 2013. the increase is due to $2,157 of pension expense, offset by
actuarial gains of $497 and pension contributions paid of $960.

OPeRAting Risk mAnAgement
ECONOMIC ENVIRONMENT
economic factors that impact consumer spending patterns could deteriorate or remain unpredictable due to global, national or regional economic volatility.
these factors could negatively affect the Company’s revenue and margins. inflationary trends are unpredictable and changes in the rate of inflation or
deflation will affect consumer prices, which in turn could negatively affect the financial performance of the Company. the Company closely monitors
economic conditions in order to react to consumer spending habits and constraints in developing both its short-term and long-term operating decisions.
the Company is in a strong financial position with significant liquidity available and ample credit resources to draw upon as deemed necessary.

COMPETITIVE ENVIRONMENT
the retail apparel business in Canada is highly competitive with competitors including department stores, specialty apparel chains and independent retailers.
if the Company is ineffective in responding to consumer trends or in executing its strategic plans, its financial performance could be negatively affected.
there is no effective barrier to entry into the Canadian apparel retailing marketplace by any potential competitor, foreign or domestic, as witnessed
by the arrival over the past few years of a number of foreign-based competitors and additional foreign retailers continuing to expand into the Canadian
marketplace. Additionally, Canadian women have a significant number of e-commerce shopping alternatives available to them on a global basis.
the Company believes that it is well positioned to compete with any competitor. the Company operates multiple banners with product offerings
that are diversified as each banner is directed to and focused on a different niche in the Canadian women’s apparel market. Our stores, located
throughout Canada, offer affordable fashions to consumers. the Company also offers an e-commerce alternative for shoppers through each of the
banners’ websites. the e-commerce retail landscape is highly competitive with both domestic and foreign competition. the Company has invested
significantly in its e-commerce websites and social media to drive consumers to the websites and believes that it is positioned well to compete in
this environment.

SEASONALITY
the Company’s business is seasonal and is also subject to a number of factors which directly impact retail sales of apparel over which it has no control,
namely fluctuations in weather patterns, swings in consumer confidence and buying habits and the potential of rapid changes in fashion preferences.

DISTRIBUTION AND SUPPLY CHAIN
the Company depends on the efficient operation of its sole distribution centre, such that any significant disruption in the operation thereof (e.g. natural
disaster, system failures, destruction or major damage by fire), could materially delay or impair its ability to replenish its stores on a timely basis causing a
loss of sales, which could have a significant effect on the Company’s results of operations.

INFORMATION TECHNOLOGY
the Company depends on information systems to manage its operations, including a full range of retail, financial, merchandising and inventory control,
planning, forecasting, reporting and distribution systems. the Company embarked on a major systems development project in 2010 which is in the final
phases of completion. the new functionality offered by this project which spans warehousing and distribution, merchandising, operations and finance is
projected for completion in fiscal 2016. Any significant disruptions in the performance of distribution or any other systems could have a material adverse
impact on the Company’s operations and financial results.

GOVERNMENT LAwS AND REGULATION
the Company is structured in a manner that management considers to be most effective to conduct its business across Canada. the Company is therefore
subject to all manner of material and adverse changes in government regulation that can take place in any one or more of these jurisdictions as they might
impact income and sales, taxation, duties, quota impositions or re-impositions and other legislated or government regulated matters.

ManageMent’s Discussion anD analysis ManageMent’s Discussion anD analysis Reitmans (Canada) LimitedMD&AChanges to any of the laws, rules, regulations or policies (collectively, “laws”) applicable to the Company’s business, including income, capital, property
and other taxes, and laws affecting the importation, distribution, packaging and labelling of products, could have an adverse impact on the financial or
operational performance of the Company. in the course of complying with such changes, the Company could incur significant costs. Changing laws or
interpretations of such laws or enhanced enforcement of existing laws could restrict the Company’s operations or profitability and thereby threaten the
Company’s competitive position and ability to efficiently conduct business. Failure by the Company to comply with applicable laws and orders in a timely
manner could subject the Company to civil or regulatory actions or proceedings, including fines, assessments, injunctions, recalls or seizures, which in turn
could negatively affect the reputation, operations and financial performance of the Company.

the Company is subject to tax audits from various government and regulatory agencies on an ongoing basis. As a result, from time to time, taxing authorities
may disagree with the positions and conclusions taken by the Company in its tax filings or legislation could be amended or interpretations of current legislation
could change, any of which events could lead to reassessments. these reassessments could have a material impact on the Company in future periods.

MERCHANDISE SOURCING
virtually all of the Company’s merchandise is private label. On an annual basis, the Company directly imports approximately 80% of its merchandise, largely
from China. in fiscal 2014, no supplier represented more than 10% of the Company’s purchases (in dollars and/or units) and there are a variety of alternative
sources (both domestic and international) for virtually all of the Company’s merchandise. the Company has good relationships with its suppliers and has
no reason to believe that it is exposed to any material risk that would prevent the Company from acquiring, distributing and/or selling merchandise on an
ongoing basis.

the Company endeavours to be environmentally responsible and recognizes that the competitive pressures for economic growth and cost efficiency must
be integrated with sound sustainability management, including environmental stewardship. the Company has adopted sourcing and other business practices
to address the environmental concerns of its customers. the Company has established guidelines that require compliance with all applicable environmental
laws and regulations. Although the Company requires its suppliers to adhere to these guidelines, there is no guarantee that these suppliers will not take
actions that hurt the Company’s reputation, as they are independent third parties that the Company does not control. however, if there is a lack of apparent
compliance, it may lead the Company to search for alternative suppliers. this may have an adverse effect on the Company’s financial results, by increasing
costs and potentially causing delays in delivery.

PRIVACY AND INFORMATION SECURITY
the Company is subject to various laws regarding the protection of personal information of its customers, cardholders and employees and has adopted
a Privacy Policy setting out guidelines for the handling of personal information. the Company’s it systems contain personal information of customers,
cardholders and employees. Any failures or vulnerabilities in these systems or non-compliance with laws or regulations, including those in relation to
personal information belonging to the Company’s customers and employees, could negatively affect the reputation, operations and financial performance
of the Company.

FinAnCiAl Risk mAnAgement
the Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls,
and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the
Company’s activities. disclosures relating to exposure to risks, in particular credit risk, liquidity risk, foreign currency risk, interest rate risk and equity price
risk are provided below.

CREDIT RISk
Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. the Company’s
financial instruments that are exposed to concentrations of credit risk are primarily cash and cash equivalents, marketable securities, trade and other
receivables and foreign currency option contracts. the Company limits its exposure to credit risk with respect to cash and cash equivalents and foreign
currency option contracts by dealing with Canadian financial institutions. marketable securities consist primarily of preferred shares of highly-rated
Canadian public companies. the Company’s trade and other receivables consist primarily of credit card receivables from the last few days of the fiscal year,
which are settled within the first days of the next fiscal year.

As at February 1, 2014, the Company’s maximum exposure to credit risk for these financial instruments was as follows:

Cash and cash equivalents
marketable securities
trade and other receivables
derivative financial asset

122,355
55,062
6,422
11,775
$ 195,614

ManageMent’s Discussion anD analysis ManageMent’s Discussion anD analysis Reitmans (Canada) LimitedMD&ALIQUIDITY RISk
liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. the Company’s approach to managing liquidity
risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet liabilities when due. the contractual maturity of the majority of trade
and other payables is within twelve months. As at February 1, 2014, the Company had a high degree of liquidity with $177,417 in cash and cash equivalents
and marketable securities. in addition, the Company has unsecured credit facilities of $125,000, subject to annual renewals. the Company has financed
its store expansion through internally-generated funds and its unsecured credit facilities are used to finance seasonal working capital requirements for
u.s. dollar merchandise purchases. the Company’s long-term debt consists of a mortgage bearing interest at 6.40%, due november 2017, which is secured
by the Company’s distribution centre.

FOREIGN CURRENCY RISk
the Company purchases a significant amount of its merchandise with u.s. dollars and as such significant volatility in the u.s. dollar vis-à-vis the Canadian
dollar can have an adverse impact on the Company’s gross margin. the Company has a variety of alternatives that it considers to manage its foreign currency
exposure on cash flows related to these purchases. this includes, but is not limited to, various styles of foreign currency option or forward contracts, not
to exceed twelve months, and spot rate purchases. A foreign currency option contract represents an option or obligation to buy a foreign currency from a
counterparty. Credit risk exists in the event of failure by a counterparty to fulfill its obligations. the Company reduces this risk by dealing only with highly-
rated counterparties, normally major Canadian financial institutions. For fiscal 2014, the Company satisfied its u.s. dollar requirements primarily through
spot rate purchases and foreign exchange option contracts.

the Company has performed a sensitivity analysis on its u.s. dollar denominated financial instruments, which consist principally of cash and cash equivalents
of $17,096 and trade payables of $28,070 to determine how a change in the u.s. dollar exchange rate would impact net earnings. On February 1, 2014, a 1%
rise or fall in the Canadian dollar against the u.s. dollar, assuming that all other variables, in particular interest rates, had remained the same, would have
resulted in a $98 decrease or increase, respectively, in the Company’s net earnings for fiscal 2014.

the Company has performed a sensitivity analysis on its derivative financial instruments, a series of call and put options on u.s. dollars, to determine how
a change in the u.s. dollar exchange rate would impact net earnings. On February 1, 2014, a 1% rise or fall in the Canadian dollar against the u.s. dollar,
assuming that all other variables had remained the same, would have resulted in a $2,542 decrease or $1,133 increase, respectively, in the Company’s net
earnings for fiscal 2014.

INTEREST RATE RISk
interest rate risk exists in relation to the Company’s cash and cash equivalents, defined benefit pension plan and the Company sponsored supplemental
executive Retirement Plan (“seRP”). market fluctuations in interest rates impact the Company’s earnings with respect to interest earned on cash and cash
equivalents that are invested mainly in short-term deposits with major Canadian financial institutions. Overall return in the capital markets and the level of
interest rates affect the funded status of the Company’s pension plans. Adverse changes with respect to pension plan returns and the level of interest rates
from the date of the last actuarial valuation may have an adverse effect on the funded status of the retirement benefit plans and on the Company’s results
of operations. the Company has unsecured borrowing and working capital credit facilities available up to an amount of $125,000 or its u.s. dollar equivalent
that it utilizes for documentary and standby letters of credit, and the Company funds the drawings on these facilities as the payments are due.

the Company has performed a sensitivity analysis on interest rate risk at February 1, 2014 to determine how a change in interest rates would impact
net earnings. For fiscal 2014, the Company earned interest income of $621 on its cash and cash equivalents. An increase or decrease of 25 basis points in
the average interest rate earned during the year would have increased net earnings by $148 or decreased net earnings by $118, respectively. this analysis
assumes that all other variables, in particular foreign currency rates, remain constant.

the Company has performed a sensitivity analysis as at February 1, 2014 to determine how a change in interest rates, in relation to the Company’s
retirement benefit plans, would impact the benefit costs included in other comprehensive income. A one percentage point decrease in the year-end discount
rate would have resulted in an increase of approximately $5,211 in benefit costs included in other comprehensive income for fiscal 2014, whereas a one
percentage point increase would have resulted in a decrease of approximately $4,563.

EQUITY PRICE RISk
equity price risk arises from available-for-sale equity securities. the Company monitors the mix of equity securities in its investment portfolio based
on market expectations. material investments within the portfolio are managed on an individual basis and all buy and sell decisions are approved by the
Chief executive Officer.

the Company has performed a sensitivity analysis on equity price risk at February 1, 2014, to determine how a change in the market price of the Company’s
marketable securities would impact other comprehensive income. the Company’s equity investments consist principally of preferred shares of Canadian
public companies. the Company believes that changes in interest rates influence the market price of these securities. A 5% increase or decrease in the
market price of the securities at February 1, 2014, would result in a $2,481 increase or decrease, respectively, in other comprehensive income for fiscal 2014.
the Company’s equity securities are subject to market risk and, as a result, the impact on other comprehensive income may ultimately be greater than that
indicated above.

ManageMent’s Discussion anD analysis ManageMent’s Discussion anD analysis Reitmans (Canada) LimitedMD&Aliquidity, CAsh FlOWs And CAPitAl ResOuRCes
shareholders’ equity as at February 1, 2014 amounted to $423,431 or $6.56 per share (February 2, 2013 – $454,893 or $7.04 per share). the Company
continues to be in a strong financial position. the Company’s principal sources of liquidity are its cash and cash equivalents and investments in
marketable securities of $177,417 as at February 1, 2014 (February 2, 2013 – $169,256). Cash is conservatively invested mainly in short-term deposits
with major Canadian financial institutions. the Company closely monitors its risk with respect to short-term cash investments. the Company has
unsecured borrowing and working capital credit facilities available up to an amount of $125,000 or its u.s. dollar equivalent. As at February 1, 2014,
$30,270 (February 2, 2013 – $46,792) of the operating lines of credit were committed for documentary and standby letters of credit. these credit facilities
are used principally for u.s. dollar letters of credit to satisfy international third-party vendors which require such backing before confirming purchase
orders issued by the Company and to support u.s. dollar foreign exchange forward contract purchases. the Company rarely uses such credit facilities for
other purposes.

the Company has granted irrevocable standby letters of credit, issued by highly-rated financial institutions, to third parties to indemnify them in the event
the Company does not perform its contractual obligations. As at February 1, 2014, the maximum potential liability under these guarantees was $5,019
(February 2, 2013 – $5,014). the standby letters of credit mature at various dates during fiscal 2015. the Company has recorded no liability with respect to
these guarantees, as the Company does not expect to make any payments for these items.

the Company is self-insured on a limited basis with respect to certain property risks and also purchases excess insurance coverage from financially stable
third-party insurance companies. the Company maintains comprehensive internal security and loss prevention programs aimed at mitigating the financial
impact of theft.

the Company continued repayment on its long-term debt, relating to the mortgage on the distribution centre, paying down $1,570 in fiscal 2014.
the Company paid $0.20 dividends per share in the first, second and third quarter of fiscal 2014 and $0.05 in the fourth quarter of fiscal 2014 totalling
$41,981 compared to $0.80 dividends per share totalling $52,068 in fiscal 2013. With regard to dividend policy, the Board of directors considers the
Company’s earnings per share, cash flow from operations, the level of planned capital expenditures and its cash and marketable securities. the targeted
payout ratio is approximately 50% to 80% of sustainable earnings per share, 50% to 75% of cash flow from operations with consideration as to the ability
to augment the dividend from the liquidity on the Company’s balance sheet, if these targets are missed in a given year. the Board of directors reviews these
guidelines regularly.

in fiscal 2014, the Company invested $34,524, on a cash basis, primarily on new and renovated stores. the Company embarked on a major systems
development project in 2010 which is in the final phases of completion. the new functionality offered by this project which spans warehousing and
distribution, merchandising, operations and finance is projected for completion in fiscal 2016. Certain milestones have been successfully achieved and
the project is progressing well. the technology initiatives, along with warehouse management systems improvements, will support changes and
growth across all areas of the Company with improved integration, while enabling the Company to reduce the overall cost of system maintenance
and upgrades. the total project, which is being phased in through to completion in fiscal 2016, is estimated to cost approximately $34,000 of which
approximately $24,000 has been incurred to date. the escalation in the sCORe project costs are a result of problems encountered during the warehouse
management system deployment in fiscal 2013, which have been remedied, along with a longer deployment schedule than was originally planned.
in fiscal 2015, the Company expects to invest approximately $36,000 in capital expenditures. these expenditures, together with the payment of dividends,
the repayments related to the Company’s bank credit facility and long-term debt obligations, are expected to be funded by the Company’s existing financial
resources and funds derived from its operations.

FinAnCiAl COmmitments
the following table sets forth the Company’s financial commitments, excluding trade and other payables, as at February 1, 2014, the details of which are
described in the previous commentary.

Contractual Obligations

store & office operating leases 1
Purchase obligations 2
Other operating leases 3
long-term debt
interest on long-term debt
Total contractual obligations

TOTAL

433,768
119,661
17,381
7,003
898
$ 578,711

wITHIN
1 YEAR

99,418
118,949
3,961
1,672
394
$ 224,394

2 TO 4
YEARS

219,146
534
9,512
5,331
504
$ 235,027

5 YEARS
AND OVER

115,204
178
3,908
–
–
$ 119,290

1 Represents the minimum lease payments under long-term leases for store locations and office space.

2 includes amounts pertaining to agreements to purchase goods or services that are enforceable and legally binding on the Company.

3 includes lease payments for computer equipment, automobiles and office equipment.

ManageMent’s Discussion anD analysis ManageMent’s Discussion anD analysis Reitmans (Canada) LimitedMD&AAs at February 1, 2014, the Company had additional long-term liabilities which included pension liability and deferred income tax liabilities. these long-term
liabilities have not been included in the table above as the timing and amount of these future payments are uncertain.

OutstAnding shARe dAtA
At April 2, 2014, 13,440,000 Common shares and 51,145,506 Class A non-voting shares of the Company were issued and outstanding. each Common share
entitles the holder thereof to one vote at meetings of shareholders of the Company. the Company has 2,026,000 share options outstanding at an average
exercise price of $14.43. each share option entitles the holder to purchase one Class A non-voting share of the Company at an exercise price established
based on the market price of the shares at the date the option was granted.

the Company did not purchase any shares under a normal course issuer bid approved in november 2012 in fiscal 2014. the normal course issuer bid expired
on november 27, 2013. in december 2013, the Company received approval from the toronto stock exchange to proceed with a normal course issuer bid.
under the bid, the Company may purchase up to 4,000,000 Class A non-voting shares of the Company, representing 10% of the public float of the issued
and outstanding Class A non-voting shares as at december 10, 2013. the bid commenced on december 18, 2013 and may continue to december 17, 2014.
no Class A non-voting shares were purchased to date under this new program.

OFF-BAlAnCe sheet ARRAngements
DERIVATIVE FINANCIAL INSTRUMENTS
the Company in its normal course of business must make long lead time commitments for a significant portion of its merchandise purchases, in some cases
as long as twelve months. most of these purchases must be paid for in u.s. dollars. the Company considers a variety of strategies designed to manage
the cost of its continuing u.s. dollar long-term commitments, including spot rate purchases and foreign currency option contracts with maturities not
exceeding twelve months. the Company entered into transactions with its bank whereby it purchased call options and sold put options, both on the
u.s. dollar. these option contracts will expire within the next twelve months. Purchased call options and sold put options expiring on the same date have
the same strike price.

details of the foreign currency option contracts outstanding as at February 1, 2014 and as at February 2, 2013 are included in the “Operating Results for
Fiscal 2014 and Comparison to Operating Results for Fiscal 2013” section of this md&A.

A foreign currency option contract represents an option (call option) or obligation (put option) to buy a foreign currency from a counterparty at
a predetermined date and amount. Credit risks exist in the event of failure by a counterparty to fulfill its obligations. the Company reduces this risk
by dealing only with highly-rated counterparties, normally Canadian chartered banks. the Company does not use derivative financial instruments for
speculative purposes.

included in the determination of the Company’s net earnings for fiscal 2014 was net foreign exchange gains of $7,650 (losses of $582 for fiscal 2013).

RelAted PARty tRAnsACtiOns
TRANSACTIONS wITH kEY MANAGEMENT PERSONNEL
key management personnel are those persons who have the authority and responsibility for planning, directing and controlling the activities of the entity –
directly or indirectly. the definition of key management personnel includes directors (both executive and non-executive). the Chief executive Officer
and Chief Operating Officer are considered key management personnel. it is the Board of directors who has the responsibility for planning, directing and
controlling the activities of the Company. the directors participate in the share option plan, as described in note 17 to the audited consolidated financial
statements for fiscal 2014.

Compensation expense for key management personnel is as follows:

salaries, directors’ fees and short-term benefits
Post-employment benefits
share-based compensation costs

FOR THE FISCAL YEARS ENDED

FEBRUARY 1, 2014

FEBRUARY 2, 2013

1,993
–
338
2,331

1,944
(5)
595
2,534

Further information about the remuneration of individual directors is provided in the annual management Proxy Circular.

ManageMent’s Discussion anD analysis ManageMent’s Discussion anD analysis Reitmans (Canada) LimitedMD&AOTHER RELATED-PARTY TRANSACTIONS
the Company leases two retail locations which are owned by companies controlled by the major shareholders of the Company. For fiscal 2014, the rent
expense under these leases was, in the aggregate, approximately $204 (fiscal 2013 – $195).

the Company incurred $560 in fiscal 2014 (fiscal 2013 – $670) with professional service firms connected to outside directors of the Company for fees in
conjunction with general legal advice and other consultation.

these transactions are recorded at the amount of consideration paid as established and agreed to by the related parties.

FinAnCiAl instRuments
the Company is highly liquid with significant cash and cash equivalents along with marketable securities. the Company uses its cash resources to fund
ongoing store construction and renovations along with working capital needs. Financial instruments that are exposed to concentrations of credit risk consist
primarily of cash and cash equivalents, marketable securities, trade and other receivables and foreign currency option contracts. the Company reduces this
risk by dealing only with highly-rated counterparties, normally major Canadian financial institutions. the Company closely monitors its risk with respect to
short-term cash investments. marketable securities consist primarily of preferred shares of Canadian public companies. the Company’s investment portfolio
is subject to stock market volatility.

the volatility of the u.s. dollar vis-à-vis the Canadian dollar impacts earnings and while the Company considers a variety of strategies designed to
manage the cost of its continuing u.s. dollar commitments, such as spot rate purchases and foreign exchange option contracts, this volatility can result in
exposure to risk.

CRitiCAl ACCOunting estimAtes
PENSION PLANS
the Company maintains a contributory, defined benefit plan and sponsors a seRP. the costs of the defined benefit plan and seRP are determined by means
of actuarial valuations, which involve making assumptions about discount rates, future salary increases, mortality rates and the future increases in pensions.
Because of the long-term nature of the plans, such estimates are subject to a high degree of uncertainty. Based upon the most recently filed actuarial
valuation report as at december 31, 2012, the defined benefit plan, despite being fully funded on a going concern basis, had a solvency deficiency of $3,411.
the Company has funded the required amounts as at February 1, 2014. the seRP is an unfunded pay as you go plan.

GIFT CARDS / LOYALTY POINTS AND AwARDS
gift cards sold are recorded as deferred revenue and revenue is recognized when the gift cards are redeemed. An estimate is made of gift cards not expected
to be redeemed based on the terms of the gift cards and historical redemption patterns. loyalty points and awards granted under customer loyalty programs
are recognized as a separate component of revenue and are deferred at the date of initial sale. Revenue is recognized when the loyalty points and awards
are redeemed and the Company has fulfilled its obligation. the amount of revenue deferred is measured based on the fair value of loyalty points and awards
granted, taking into consideration the estimated redemption percentage.

INVENTORY VALUATION
inventories are valued at the lower of cost and net realizable value. estimates are required in relation to forecasted sales and inventory balances. in situations
where excess inventory balances are identified, estimates of net realizable values for the excess inventory are made. the Company has set up provisions
for merchandise in inventory that may have to be sold below cost. For this purpose, the Company has developed assumptions regarding the quantity of
merchandise sold below cost. given that inventory and cost of sales are significant components of the consolidated financial statements, any changes in
assumptions and estimates could have a material impact on the Company’s financial position and results of operations.

ASSET IMPAIRMENT
the Company must assess the possibility that the carrying amounts of tangible and intangible assets (including goodwill) may not be recoverable.
impairment testing is performed whenever there is an indication of impairment, except for goodwill and intangible assets with indefinite useful lives for
which impairment testing is performed at least once per year. significant management estimates are required to determine the recoverable amount of the
cash-generating unit (“Cgu”) including estimates of fair value, selling costs or the discounted future cash flows related to the Cgu. differences in estimates
could affect whether tangible and intangible assets (including goodwill) are in fact impaired and the dollar amount of that impairment.

ManageMent’s Discussion anD analysis ManageMent’s Discussion anD analysis Reitmans (Canada) LimitedMD&AneW ACCOunting POliCies AdOPted in FisCAl 2014
FAIR VALUE MEASUREMENT
in 2011, the iAsB issued iFRs 13, Fair Value Measurement (“iFRs 13”), which establishes a single framework for the fair value measurement and disclosure
of financial and non-financial assets and liabilities. the new standard unifies the definition of fair value and also introduces new concepts including “highest
and best use” and “principal markets” for non-financial assets and liabilities. there are additional disclosure requirements, including increased fair value
disclosure for financial instruments for interim and annual financial statements. the Company implemented this standard prospectively in the first
quarter of fiscal 2014. there were no measurement impacts on the Company’s consolidated financial statements as a result of the adoption of iFRs 13.

EMPLOYEE BENEFITS
in 2011, the iAsB revised iAs 19, Employee Benefits (“iAs 19”). the most significant amendments for the Company are the requirement to immediately
recognize all unvested past service costs and the replacement of interest cost and expected return on plan assets with a net interest amount that is
calculated by applying a prescribed discount rate to the net defined benefit obligation. the Company implemented this standard retrospectively in the first
quarter of fiscal 2014.

the impact arising from the adoption of the amendments to iAs 19 is summarized as follows:

Consolidated Balance Sheet:

deferred income tax assets
Pension liability
Retained earnings

Consolidated Statement of Earnings and Statement of Comprehensive Income:

earnings before income taxes
income taxes
net earnings
Other comprehensive loss
total comprehensive income

Consolidated Balance Sheet:

deferred income tax assets
Pension liability
Retained earnings

AS PRESENTED

$
$
$

26,400
17,390
400,605

AS AT FEBRUARY 2, 2013
RESTATEMENTS

$
$
$

44
169
(125)

AS RESTATED

$
$
$

26,444
17,559
400,480

AS PRESENTED

FOR THE YEAR ENDED FEBRUARY 2, 2013
RESTATEMENTS

AS RESTATED

35,136
(8,517)
26,619
(1,133)
25,486

(358)
95
(263)
325
62

34,778
(8,422)
26,356
(808)
25,548

AS PRESENTED

$
$
$

23,174
14,877
439,067

AS AT JANUARY 29, 2012
RESTATEMENTS

$
$
$

67
254
(187)

AS RESTATED

$
$
$

23,241
15,131
438,880

this new accounting policy did not have a material impact on the consolidated statement of cash flows or on earnings per share.

IMPAIRMENT OF ASSETS
in 2013, the iAsB issued amendments to iAs 36, Impairment of Assets, which clarifies the disclosure requirements for recoverable amounts of Cgus.
these amendments are required to be applied for periods beginning on or after January 1, 2014. the Company has elected to early adopt these
amendments during 2014. there was no significant impact on the Company’s consolidated financial statements as a result of these amendments.

CONSOLIDATED FINANCIAL STATEMENTS AND INTERESTS IN OTHER ENTITIES
in addition to the above standards, the Company implemented the following standards: iFRs 10, Consolidated Financial Statements and iFRs 12, Disclosure
of Interests in Other Entities. there was no significant impact on the Company’s consolidated financial statements as a result of the implementation of
these standards.

ManageMent’s Discussion anD analysis ManageMent’s Discussion anD analysis Reitmans (Canada) LimitedMD&A
neW ACCOunting stAndARds And inteRPRetAtiOns nOt yet AdOPted
A number of new accounting standards, and amendments to standards and interpretations, are not yet effective for fiscal 2014 and have not been applied in
preparing the consolidated financial statements. new standards and amendments to standards and interpretations that are currently under review include:

IFRS 9 – FINANCIAL INSTRUMENTS
On november 12, 2009, the iAsB issued a new standard, iFRs 9, Financial Instruments (“iFRs 9”) which will ultimately replace iAs 39, Financial Instruments:
Recognition and Measurement (“iAs 39”). the replacement of iAs 39 is a three-phase project with the objective of improving and simplifying the reporting
for financial instruments. the issuance of iFRs 9 is the first phase of the project, which provides guidance on the classification and measurement of financial
assets and financial liabilities and was initiated in response to the crisis in financial markets.

in november 2013, the iAsB released iFRs 9, Financial Instruments (2013), which introduces a new hedge accounting model, together with corresponding
disclosures about risk management activities. the new hedge accounting model represents a significant change in hedge accounting requirements.
it increases the scope of hedged items eligible for hedge accounting and it enables entities to better reflect their risk management activities in their
financial statements.

the mandatory effective date of this standard has been deferred. the Company is evaluating the impact of this standard on its consolidated financial statements.

IFRIC 21 – LEVIES
in may 2013, the iAsB issued iFRiC interpretation 21, Levies, which is an interpretation of iAs 37, Provisions, Contingent Liabilities and Contingent Assets.
iFRiC 21 clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the
payment of the levy. iFRiC 21 is effective for years beginning on or after January 1, 2014 and must be applied retrospectively. the Company is evaluating the
impact of this standard on its consolidated financial statements.

disClOsuRe COntROls And PROCeduRes
disclosure controls and procedures are designed to provide reasonable assurance that all material information related to the Company is gathered and
reported to senior management, including the Chairman and Chief executive Officer (“CeO”) and the Chief Financial Officer (“CFO”), on a timely basis so
that appropriate decisions can be made regarding public disclosure.

An evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures was conducted as of February 1, 2014.
Based on this evaluation, the CeO and the CFO have concluded that, as of February 1, 2014, the disclosure controls and procedures, as defined by national
instrument 52-109, were appropriately designed and were operating effectively.

inteRnAl COntROls OveR FinAnCiAl RePORting
internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements in accordance with iFRs. management is responsible for establishing and maintaining adequate internal control over financial reporting
for the Company.

An evaluation of the effectiveness of the design and operation of the Company’s internal control over financial reporting was conducted as of February 1, 2014.
Based on that evaluation, the CeO and the CFO concluded that the internal control over financial reporting, as defined by national instrument 52-109, was
appropriately designed and was operating effectively.

the evaluations were conducted in accordance with the framework and criteria established in “internal Control – integrated Framework”, issued by the
Committee of sponsoring Organizations of the treadway Commission (“COsO”) 1992, a recognized control model, and the requirements of national
instrument 52-109, “Certification of disclosure in issuers’ Annual and interim Filings”.

in designing such controls, it should be recognized that due to inherent limitations, any controls, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives and may not prevent or detect misstatements. Projections of any evaluations of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

there have been no changes in the Company’s internal controls over financial reporting during fiscal 2014 that have materially affected, or are reasonably
likely to materially affect, the Company’s internal controls over financial reporting.

ManageMent’s Discussion anD analysis ManageMent’s Discussion anD analysis Reitmans (Canada) LimitedMD&A
OutlOOk
the retail environment remains challenging with consumer debt remaining high and heightened competitive pressure on retailers. Changes to the retail
landscape in Canada are taking place with increased competition from both large and mid-size international rivals expanding into Canada, spurred by a
relatively strong Canadian economy and low barriers to entry. the Company has invested considerably in its stores and head office systems while reducing
capital expenditures significantly in fiscal 2014. in conjunction, the Company will leverage its technology with improved systems and processes as part of
the sCORe project while continuing its process improvement initiatives.

the Company’s hong kong office, with over 120 full-time employees, is dedicated to seeking out the highest quality, affordable and fashionable apparel for
all of our banners. A comprehensive review of the Company’s global sourcing strategy and execution has been undertaken with a goal of reducing lead time
for bringing products to market.

the Company has a strong balance sheet, with excellent liquidity and borrowing capacity providing the ability to act when opportunities present themselves
in whatever format including merchandising, store acquisition/construction, system replacements/upgrading or expansion by acquisition. the Company
believes in the strength of its employees and is committed to continue to invest in training for all levels.

ManageMent’s Discussion anD analysis ManageMent’s Discussion anD analysis Reitmans (Canada) LimitedMD&AmAnAgement’s ResPOnsiBility
FOR COnsOlidAted
FinAnCiAl stAtements

the accompanying consolidated financial statements and all the information in the annual report are the responsibility of management and have been
approved by the Board of directors of Reitmans (Canada) limited.

these consolidated financial statements have been prepared by management in conformity with international Financial Reporting standards and include
amounts that are based on best estimates and judgments. the financial information used elsewhere in the annual report is consistent with that in the
consolidated financial statements.

management of the Company has developed and maintains a system of internal accounting controls. management believes that this system of internal
accounting controls provides reasonable assurances that financial records are reliable and form a proper basis for the preparation of the consolidated
financial statements and that assets are properly accounted for and safeguarded.

the Board of directors carries out its responsibility for the consolidated financial statements in this annual report principally through its Audit Committee,
consisting of all outside directors. the Audit Committee reviews the Company’s annual consolidated financial statements and recommends their
approval to the Board of directors. the auditors appointed by the shareholders have full access to the Audit Committee, with and without management
being present.

these consolidated financial statements have been examined by the auditors appointed by the shareholders, kPmg llp, and their report is
presented hereafter.

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(signed)

Jeremy h. Reitman
Chairman and Chief executive Officer

April 2, 2014

eric Williams, CPA, CA
vice-President, Finance and Chief Financial Officer

indePendent
AuditORs’ RePORt

to the shareholders of Reitmans (Canada) limited

We have audited the accompanying consolidated financial statements of Reitmans (Canada) limited, which comprise the consolidated balance sheets as at
February 1, 2014 and February 2, 2013, the consolidated statements of earnings, comprehensive income, changes in shareholders’ equity and cash flows for
the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

MANAGEMENT’S RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS
management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with international Financial
Reporting standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.

AUDITORS’ RESPONSIBILITY
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with
Canadian generally accepted auditing standards. those standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.
the procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. in making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of
the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

OPINION
in our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Reitmans (Canada) limited
as at February 1, 2014 and February 2, 2013, and its consolidated financial performance and its consolidated cash flows for the years then ended in
accordance with international Financial Reporting standards.

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montreal, Canada
April 2, 2014

* CPA auditor, CA, public accountancy Permit no. A122264

kPmg llp is a Canadian limited liability partnership and a member firm of the kPmg network of independent member
firms affiliated with kPmg international Cooperative (“kPmg international”), a swiss entity. kPmg Canada provides
services to kPmg llp.

COnsOlidAted stAtements OF eARnings

FOR the yeARs ended FeBRuARy 1, 2014 (52 Weeks) And FeBRuARy 2, 2013 (53 Weeks)
(in thOusAnds OF CAnAdiAn dOllARs exCePt PeR shARe AmOunts)

COnsOlidAted BAlAnCe sheets

As At FeBRuARy 1, 2014 And FeBRuARy 2, 2013

(in thOusAnds OF CAnAdiAn dOllARs)

sales
Cost of goods sold (note 7)
gross profit
selling and distribution expenses
Administrative expenses
Results from operating activities

Other income (note 19)
Finance income (note 19)
Finance costs (note 19)
earnings before income taxes

income tax expense (note 11)

net earnings

earnings per share (note 20):

Basic
diluted

2014

2013

(NOTE 3A)

$ 960,397
377,913
582,484
544,679
47,154
(9,349)

$ 1,000,513
372,135
628,378
550,165
47,729
30,484

6,054
20,180
3,443
13,442

2,654

–
5,624
1,330
34,778

8,422

10,788

26,356

0.17
0.17

0.40
0.40

the accompanying notes are an integral part of these consolidated financial statements.

COnsOlidAted stAtements OF COmPRehensive inCOme

FOR the yeARs ended FeBRuARy 1, 2014 (52 Weeks) And FeBRuARy 2, 2013 (53 Weeks)
(in thOusAnds OF CAnAdiAn dOllARs)

net earnings
Other comprehensive loss

items that are or may be reclassified subsequently to net earnings:

Reclassification of impairment loss on available-for-sale financial assets to net earnings

(net of tax of $358; 2013 – $21) (note 19)

net change in fair value of available-for-sale financial assets (net of tax of $561; 2013 – $25) (note 19)

Foreign currency translation differences

items that will not be reclassified to net earnings:

Actuarial gain (loss) on defined benefit plans (net of tax of $124; 2013 – $293) (note 15)

total other comprehensive loss

total comprehensive income

the accompanying notes are an integral part of these consolidated financial statements.

2014

2013

(NOTE 3A)

10,788

26,356

2,341
(3,679)
29
(1,309)

373

(936)

135
(207)
–
(72)

(736)

(808)

9,852

25,548

Reitmans (Canada) LimitedCOnsOlidAted stAtements OF eARnings

FOR the yeARs ended FeBRuARy 1, 2014 (52 Weeks) And FeBRuARy 2, 2013 (53 Weeks)

(in thOusAnds OF CAnAdiAn dOllARs exCePt PeR shARe AmOunts)

COnsOlidAted BAlAnCe sheets

As At FeBRuARy 1, 2014 And FeBRuARy 2, 2013
(in thOusAnds OF CAnAdiAn dOllARs)

ASSETS
CuRRent Assets

Cash and cash equivalents (note 5)
marketable securities
trade and other receivables
derivative financial asset (note 6)
income taxes recoverable
inventories (note 7)
Prepaid expenses

total Current Assets

nOn-CuRRent Assets

Property and equipment (note 8)
intangible assets (note 9)
goodwill (note 10)
deferred income taxes (note 11)
total non-Current Assets

total Assets

LIABILITIES AND SHAREHOLDERS’ EQUITY
CuRRent liABilities

trade and other payables (note 12)
derivative financial liability (note 6)
deferred revenue (note 13)
Current portion of long-term debt (note 14)

total Current liabilities

nOn-CuRRent liABilities
Other payables (note 12)
deferred lease credits
long-term debt (note 14)
Pension liability (note 15)

total non-Current liabilities

shARehOldeRs’ equity
share capital (note 16)
Contributed surplus
Retained earnings
Accumulated other comprehensive income (note 16)

total shareholders’ equity

2014

2013

(NOTE 3A)

$ 122,355
55,062
6,422
11,775
5,656
109,601
12,512
323,383

178,341
17,211
42,426
28,578
266,556

97,626
71,630
3,969
548
8,709
93,317
25,944
301,743

205,131
19,224
42,426
26,444
293,225

$ 589,939

$ 594,968

90,734
3,065
19,998
1,672
115,469

11,842
15,607
5,331
18,259
51,039

39,227
7,188
369,660
7,356
423,431

69,150
266
16,297
1,570
87,283

11,425
16,805
7,003
17,559
52,792

39,227
6,521
400,480
8,665
454,893

total liabilities and shareholders’ equity

$ 589,939

$ 594,968

Commitments (note 18)

the accompanying notes are an integral part of these consolidated financial statements.

On behalf of the Board,

(signed)

Jeremy h. Reitman, director

John J. swidler, director

Reitmans (Canada) Limited
COnsOlidAted stAtements OF ChAnges in shARehOldeRs’ equity

FOR the yeARs ended FeBRuARy 1, 2014 (52 Weeks) And FeBRuARy 2, 2013 (53 Weeks)
(in thOusAnds OF CAnAdiAn dOllARs)

COnsOlidAted stAtements OF CAsh FlOWs

FOR the yeARs ended FeBRuARy 1, 2014 (52 Weeks) And FeBRuARy 2, 2013 (53 Weeks)

(in thOusAnds OF CAnAdiAn dOllARs)

NOTE

SHARE
CAPITAL

CONTRIBUTED
SURPLUS

ACCUMULATED
OTHER
RETAINED COMPREHENSIVE
INCOME
EARNINGS

TOTAL
SHAREHOLDERS’
EQUITY

Balance as at February 3, 2013

39,227

6,521

$ 400,480

8,665

$ 454,893

total comprehensive income for the year

net earnings
total other comprehensive income (loss)

total comprehensive income for the year

Contributions by (distributions to) owners of the Company

share-based compensation costs
dividends

total contributions by (distributions to) owners
of the Company

Balance as at February 1, 2014

Balance as at January 29, 2012

total comprehensive income for the year

net earnings
total other comprehensive loss

total comprehensive income for the year

Contributions by (distributions to) owners of the Company

Cancellation of shares pursuant to share
repurchase program
share-based compensation costs
dividends
Premium on repurchases of Class A non-voting shares

total contributions by (distributions to) owners
of the Company

–

667

10,788
373
11,161

(41,981)

(1,309)
(1,309)

10,788
(936)
9,852

667
(41,981)

667

(41,981)

–

(41,314)

–

39,227

39,890

7,188

$ 369,660

5,158

$ 438,880

7,356

$ 423,431

8,737

$ 492,665

–

26,356
(736)
25,620

(72)
(72)

(663)

1,363

(52,068)
(11,952)

26,356
(808)
25,548

(663)
1,363
(52,068)
(11,952)

(663)

1,363

(64,020)

–

(63,320)

17
16

16
17
16
16

Balance as at February 2, 2013

39,227

6,521

$ 400,480

8,665

$ 454,893

the accompanying notes are an integral part of these consolidated financial statements.

Reitmans (Canada) Limited
COnsOlidAted stAtements OF CAsh FlOWs

FOR the yeARs ended FeBRuARy 1, 2014 (52 Weeks) And FeBRuARy 2, 2013 (53 Weeks)
(in thOusAnds OF CAnAdiAn dOllARs)

CAsh FlOWs FROm OPeRAting ACtivities

net earnings
Adjustments for:

depreciation, amortization and net impairment losses
share-based compensation costs
Amortization of deferred lease credits
deferred lease credits
Pension contribution
Pension expense
Other income
Realized loss on sale of marketable securities
impairment loss on available-for-sale financial assets
net change in fair value of derivatives
Foreign exchange gain on cash and cash equivalents
interest and dividend income, net
interest paid
interest received
dividends received
income tax expense

Changes in:

trade and other receivables
inventories
Prepaid expenses
trade and other payables
deferred revenue

Cash from operating activities
income taxes received
income taxes paid
net cash flows from operating activities

CAsh FlOWs used in investing ACtivities

Purchases of marketable securities
Proceeds on sale of marketable securities
Proceeds on sale of trademarks
Additions to property and equipment and intangible assets
Cash flows used in investing activities

CAsh FlOWs used in FinAnCing ACtivities

dividends paid
Purchase of Class A non-voting shares for cancellation
Repayment of long-term debt
Cash flows used in financing activities

FOReign exChAnge gAin On CAsh held in FOReign CuRRenCy
net inCReAse (deCReAse) in CAsh And CAsh equivAlents
CAsh And CAsh equivAlents, Beginning OF the yeAR

2014

2013

(NOTE 3A)

10,788

26,356

63,724
667
(4,517)
3,319
(960)
2,157
(6,054)
248
2,699
(8,428)
(1,604)
(3,358)
(496)
594
3,355
2,654
64,788

(533)
(15,945)
13,432
20,929
3,701
86,372
650
(2,306)
84,716

(420)
12,500
4,329
(34,524)
(18,115)

(41,981)
–
(1,570)
(43,551)

1,679
24,729
97,626

59,655
1,363
(4,485)
3,973
(303)
1,701
–
–
156
(1,036)
(4)
(3,996)
(592)
1,184
3,871
8,422
96,265

(906)
(129)
(14,042)
(8,107)
(5,981)
67,100
4,497
(19,800)
51,797

(420)
–
–
(84,433)
(84,853)

(52,068)
(12,615)
(1,474)
(66,157)

4
(99,209)
196,835

CAsh And CAsh equivAlents, end OF the yeAR

$ 122,355

97,626

supplementary cash flow information (note 26)

the accompanying notes are an integral part of these consolidated financial statements.

Reitmans (Canada) Limited
nOtes tO
the COnsOlidAted
FinAnCiAl stAtements

FOR the yeARs ended FeBRuARy 1, 2014 (52 Weeks) And FeBRuARy 2, 2013 (53 Weeks)
(All AmOunts in thOusAnds OF CAnAdiAn dOllARs exCePt PeR shARe AmOunts)

1 RePORting entity

Reitmans (Canada) limited (the “Company”) is a company domiciled in Canada and is incorporated under the Canada Business Corporations Act. the address
of the Company’s registered office is 3300 highway #7 West, suite 702, vaughan, Ontario l4k 4m3. the principal business activity of the Company is the
sale of women’s wear at retail.

2 BAsis OF PResentAtiOn

A) FISCAL YEAR

the Company’s fiscal year ends on the saturday closest to the end of January. All references to 2014 and 2013 represent the fiscal years ended
February 1, 2014 and February 2, 2013, respectively. Fiscal 2013 included 53 weeks instead of 52 weeks. the inclusion of an extra week occurs every
fifth or sixth fiscal year due to the Company’s floating year-end date.

B) STATEMENT OF COMPLIANCE

these consolidated financial statements have been prepared in accordance with international Financial Reporting standards (“iFRs”) as issued by the
international Accounting standard Board (“iAsB”). Certain comparative figures have been reclassified to conform to the current year’s presentation.

these consolidated financial statements were authorized for issue by the Board of directors on April 2, 2014.

C) BASIS OF MEASUREMENT

these consolidated financial statements have been prepared on the historical cost basis except for the following material items:

• available-for-sale financial assets are measured at fair value through other comprehensive income;

• the pension liability is recognized as the present value of the defined benefit obligation less the total of the fair value of the plan assets; and

• derivative financial instruments are measured at fair value.

D) FUNCTIONAL AND PRESENTATION CURRENCY

these consolidated financial statements are presented in Canadian dollars, which is the Company’s functional currency. All financial information
presented in Canadian dollars has been rounded to the nearest thousand, except per share amounts.

ESTIMATES, JUDGMENTS AND ASSUMPTIONS
the preparation of the consolidated financial statements in accordance with iFRs requires management to make judgments, estimates and assumptions
that affect the application of accounting policies and the reported amounts of assets, liabilities, the disclosure of contingent assets and contingent
liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the period. these estimates
and assumptions are based on historical experience, other relevant factors and expectations of the future and are reviewed regularly. Revisions to
accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Actual results may differ from
these estimates.

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nOtes tO the COnsOlidAted FinAnCiAl stAtements

Following are the most important accounting policies subject to such judgments and the key sources of estimation uncertainty that the Company
believes could have the most significant impact on the reported results and financial position.

key Sources of Estimation Uncertainty
i)

Pension Plans
the cost of defined benefit pension plans is determined by means of actuarial valuations, which involve making assumptions about discount
rates, future salary increases, mortality rates and the future increases in pensions. Because of the long-term nature of the plans, such estimates
are subject to a high degree of uncertainty.

ii) Gift Cards / Loyalty Points and Awards

gift cards sold are recorded as deferred revenue and revenue is recognized when the gift cards are redeemed. An estimate is made of gift cards
not expected to be redeemed based on the terms of the gift cards and historical redemption patterns. loyalty points and awards granted under
customer loyalty programs are recognized as a separate component of revenue and are deferred at the date of initial sale. Revenue is recognized
when the loyalty points and awards are redeemed and the Company has fulfilled its obligation. the amount of revenue deferred is measured based
on the fair value of loyalty points and awards granted, taking into consideration the estimated redemption percentage.

iii)

Inventory
inventories are valued at the lower of cost and net realizable value. estimates are required in relation to forecasted sales and inventory balances. in
situations where excess inventory balances are identified, estimates of net realizable values for the excess inventory are made. the Company has
set up provisions for merchandise in inventory that may have to be sold below cost. For this purpose, the Company has developed assumptions
regarding the quantity of merchandise sold below cost.

iv) Asset Impairment

the Company must assess the possibility that the carrying amounts of tangible and intangible assets (including goodwill) may not be recoverable.
impairment testing is performed whenever there is an indication of impairment, except for goodwill and intangible assets with indefinite
useful lives for which impairment testing is performed at least once per year. significant management estimates are required to determine the
recoverable amount of the cash-generating unit (“Cgu”) including estimates of fair value, selling costs or the discounted future cash flows related
to the Cgu. differences in estimates could affect whether tangible and intangible assets (including goodwill) are in fact impaired and the dollar
amount of that impairment.

Judgments Made in Relation to Accounting Policies Applied
i)

Financial Instruments
the Company does not separately account for embedded u.s. dollar foreign exchange derivatives in its purchase contracts of merchandise from
suppliers in China as the Company has determined the u.s. dollar to be commonly used in that country’s economic environment.

Reitmans (Canada) LimitedNOTES3 signiFiCAnt ACCOunting POliCies

the accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

A) ADOPTION OF NEw ACCOUNTING POLICIES

Fair Value Measurement
in 2011, the iAsB issued iFRs 13, Fair Value Measurement (“iFRs 13”), which establishes a single framework for the fair value measurement and disclosure
of financial and non-financial assets and liabilities. the new standard unifies the definition of fair value and also introduces new concepts including
“highest and best use” and “principal markets” for non-financial assets and liabilities. there are additional disclosure requirements, including increased
fair value disclosure for financial instruments for interim and annual financial statements. the Company implemented this standard prospectively in the
first quarter of the year ended February 1, 2014. there were no measurement impacts on the Company’s consolidated financial statements as a result
of the adoption of iFRs 13. the Company has included the additional disclosures required by this standard in note 6.

Employee Benefits
in 2011, the iAsB revised iAs 19, Employee Benefits (“iAs 19”). the most significant amendments for the Company are the requirement to immediately
recognize all unvested past service costs and the replacement of interest cost and expected return on plan assets with a net interest amount that
is calculated by applying a prescribed discount rate to the net defined benefit obligation. the Company implemented this standard retrospectively
in the first quarter of the year ended February 1, 2014. the Company has included the additional disclosures required by this standard in note 15.

the impact arising from the adoption of the amendments to iAs 19 is summarized as follows:

Consolidated Balance Sheet:

deferred income tax assets
Pension liability
Retained earnings

AS PRESENTED

AS AT FEBRUARY 2, 2013
RESTATEMENTS

AS RESTATED

26,400
$
17,390
$
$ 400,605

$
$
$

44
169
(125)

26,444
$
17,559
$
$ 400,480

Consolidated Statement of Earnings and Statement of Comprehensive Income:

FOR THE YEAR ENDED FEBRUARY 2, 2013
RESTATEMENTS

AS PRESENTED

AS RESTATED

earnings before income taxes
income taxes
net earnings
Other comprehensive loss
total comprehensive income

Consolidated Balance Sheet:

deferred income tax assets
Pension liability
Retained earnings

35,136
(8,517)
26,619
(1,133)
25,486

(358)
95
(263)
325
62

34,778
(8,422)
26,356
(808)
25,548

AS PRESENTED

AS AT JANUARY 29, 2012
RESTATEMENTS

AS RESTATED

23,174
$
$
14,877
$ 439,067

$
$
$

67
254
(187)

23,241
$
$
15,131
$ 438,880

this new accounting policy did not have a material impact on the consolidated statement of cash flows or on earnings per share.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTESImpairment of Assets
in 2013, the iAsB issued amendments to iAs 36, Impairment of Assets, which clarifies the disclosure requirements for recoverable amounts
of Cgus. these amendments are required to be applied for periods beginning on or after January 1, 2014. the Company has elected to early
adopt these amendments during 2014. there was no significant impact on the Company’s consolidated financial statements as a result of
these amendments.

Consolidated Financial Statements and Interests in Other Entities
in addition to the above standards, the Company implemented the following standards: iFRs 10, Consolidated Financial Statements and iFRs 12,
Disclosure of Interests in Other Entities. there was no significant impact on the Company’s consolidated financial statements as a result of the
implementation of these standards.

B) BASIS OF CONSOLIDATION

the consolidated financial statements comprise the financial statements of the Company and its subsidiaries. Control exists when the Company has the
existing rights that give it the current ability to direct the activities that significantly affect the entities’ returns. the Company reassesses control on an
ongoing basis. subsidiaries are consolidated from the date on which the Company obtains control until the date that such control ceases. the financial
statements of subsidiaries are prepared with the same reporting period of the Company. the accounting policies of subsidiaries are aligned with the
policies of the Company. All significant inter-company balances and transactions, and any unrealized income and expenses arising from inter-company
transactions, have been eliminated in preparing the consolidated financial statements.

C) FOREIGN CURRENCY TRANSLATION

monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange
rate at that date. Other balance sheet items denominated in foreign currencies are translated into Canadian dollars at the exchange rates prevailing
at the respective transaction dates. Revenues and expenses denominated in foreign currencies are translated into Canadian dollars at average rates of
exchange prevailing during the period. the resulting gains or losses on translation are included in the determination of net earnings.

D) FOREIGN OPERATIONS

the assets and liabilities of foreign operations are translated to Canadian dollars at exchange rates at the reporting date. the income and expenses of
foreign operations are translated to Canadian dollars at exchange rates at the dates of the transactions. Foreign currency differences are recognized in
other comprehensive income.

E) CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash on hand, bank balances and short-term deposits with original maturities of three months or less.

FINANCIAL INSTRUMENTS
All financial instruments are classified into one of the following five categories: financial assets and financial liabilities at fair value through profit
or loss, held-to-maturity investments, loans and receivables, available-for-sale financial assets or other financial liabilities. All financial instruments,
including derivatives, are included on the consolidated balance sheet and are initially measured at fair value. the Company accounts for
transaction costs related to financial instruments, other than those classified as fair value through profit or loss and for derivative instruments,
in the initial measurement of the instrument. subsequent measurement depends on their initial classification. Financial instruments and financial
liabilities classified as financial assets and liabilities at fair value through profit or loss are subsequently measured at fair value and all gains and
losses are included in net earnings in the period in which they arise. Available-for-sale financial instruments are subsequently measured at fair
value and changes therein, other than impairment losses, are recognized in other comprehensive income. When an investment is derecognized,
the cumulative gain or loss in other comprehensive income is transferred to net earnings. loans and receivables, held-to-maturity investments and
other financial liabilities, are subsequently measured at amortized cost using the effective interest rate method, less impairment losses.

the Company has classified its cash and cash equivalents and its trade and other receivables as loans and receivables and its marketable securities as
available-for-sale financial assets. trade and other payables and long-term debt have been classified as other financial liabilities.

Financial assets and liabilities are offset and the net amount is presented in the consolidated balance sheet when, and only when, the Company has a
legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

derivative instruments are recorded at their fair value except under the own use exemption. Certain derivatives embedded in other contracts must
also be measured at fair value. All changes in the fair value of derivatives are recognized in net earnings unless specific hedge criteria are met.

the Company uses foreign currency option contracts, with maturities not exceeding twelve months, to manage its u.s. dollar exposure. Foreign currency
option contracts are not designated as hedges. derivative financial instruments are not used for trading or speculative purposes.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTESG) PROPERTY AND EQUIPMENT

items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures
that are directly attributable to the acquisition of the asset, including any costs directly attributable to bringing the asset to a working condition for its
intended use. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.

When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property
and equipment.

depreciation is recognized in net earnings on a straight-line basis over the estimated useful lives of each component of an item of property
and equipment. land is not depreciated. leasehold improvements are depreciated over the lesser of the estimated useful life of the asset and the
lease term. Assets not in service include expenditures incurred to-date for equipment not yet available for use. depreciation of assets not in service begins
when they are ready for their intended use. depreciation is calculated over the depreciable amount, which is the cost of an asset, less its residual value.

the estimated useful lives for the current and comparative periods are as follows:

Buildings
Fixtures and equipment
leasehold improvements

10 to 50 years
3 to 20 years
6.7 to 10 years

depreciation methods, useful lives and residual values are reviewed at each annual reporting date and adjusted prospectively, if appropriate.

gains and losses on disposal of items of property and equipment are recognized in net earnings.

H) GOODwILL

goodwill is measured at the acquisition date as the fair value of the consideration transferred less the net identifiable assets of the acquired company
or business activities. goodwill is not amortized and is carried at cost less accumulated impairment losses.

INTANGIBLE ASSETS
intangible assets are comprised of software and acquired trademarks and their useful lives are assessed to be either finite or indefinite.

intangible assets that are acquired by the Company and have finite useful lives are measured at cost less accumulated amortization and accumulated
impairment losses. Amortization is calculated over the cost of the asset less its residual value. Amortization is recognized in net earnings on a straight-
line basis over the estimated useful lives of the intangible assets. Amortization of intangible assets not in service begins when they are ready for their
intended use. intangible assets with finite lives are assessed for impairment whenever there is an indication that the intangible asset may be impaired.

the estimated useful lives for the current and comparative periods are as follows:

software

3 to 5 years

Amortization methods, useful lives and residual values are reviewed at each annual reporting date and adjusted prospectively, if appropriate.

intangible assets with indefinite useful lives are not subject to amortization and are tested for impairment annually or more frequently if events or
changes in circumstances indicate the asset may be impaired. the useful life of an intangible asset with an indefinite useful life is reviewed annually to
determine whether the indefinite life assessment continues to be supportable. if not, the change in the useful life assessment from indefinite to finite
is made on a prospective basis. trademarks are considered to have indefinite useful lives.

LEASED ASSETS
leases are classified as either operating or finance, based on the substance of the transaction at inception of the lease. Classification is re-assessed if
the terms of the lease are changed.

leases in which a significant portion of the risks and rewards of ownership are not assumed by the Company are classified as operating leases.
the Company carries on its operations in premises under leases of varying terms, which are accounted for as operating leases. Payments under an
operating lease are recognized in net earnings on a straight-line basis over the term of the lease. When a lease contains a predetermined fixed escalation
of the minimum rent, the Company recognizes the related rent expense on a straight-line basis and, consequently, records the difference between the
recognized rental expense and the amounts payable under the lease as deferred rent, which is included in trade and other payables on the balance sheet.
Contingent (sales-based) rentals are recognized in net earnings in the period in which they are incurred.

tenant allowances are recorded as deferred lease credits and amortized as a reduction of rent expense over the term of the related leases.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTESk)

INVENTORIES
merchandise inventories are measured at the lower of cost, determined on an average basis, and net realizable value. Costs include the cost
of purchase, transportation costs that are directly incurred to bring inventories to their present location and condition, and certain distribution centre
costs related to inventories. the Company estimates net realizable value as the amount that inventories are expected to be sold, in the ordinary
course of business, less the estimated costs necessary to make the sale, taking into consideration fluctuations of retail prices due to seasonality.

IMPAIRMENT
i) Non-Financial Assets

All non-financial assets are reviewed at each reporting date for indications that the carrying amount may not be recoverable. When there is
evidence of impairment, an impairment test is carried out. goodwill is tested for impairment at least annually at the year-end reporting date,
and whenever there is an indication that the asset may be impaired. For the purpose of impairment testing, assets that cannot be tested
individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent
of the cash inflows of other assets or groups of assets (defined as “cash-generating unit” or “Cgu”). impairment losses recognized in respect of
Cgus are allocated first to reduce the carrying amount of any goodwill allocated to the Cgu, and then to reduce the carrying amount of the
other assets in the Cgu.

An impairment loss is recognized in net earnings if the carrying amount of an asset or its related Cgu exceeds its estimated recoverable amount.
the recoverable amount is the higher of the value-in-use and the fair value less costs to sell. the value-in-use is the present value of estimated
future cash flows, using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset or Cgu. the fair value less costs to sell is the amount for which an asset or Cgu can be sold in a transaction under normal market conditions
between knowledgeable and willing contracting parties, less costs to sell.

For the purpose of impairment testing of property and equipment, each store is managed at the corporate level, with internal reporting organized
to measure performance of each retail store. management has determined that its cash generating units are identifiable at the individual retail
store level since the assets devoted to and cash inflows generated by each store are separately identifiable and independent of each other.

For the purposes of impairment testing, goodwill acquired in a business combination is allocated to the Cgus that are expected to benefit from
the synergies of the combination. this allocation reflects the lowest level at which goodwill is monitored for internal reporting purposes.

the Company’s corporate assets do not generate separate cash inflows. if there is an indication that a corporate asset may be impaired,
then the recoverable amount is determined for the Cgus to which the corporate asset belongs.

An impairment loss in respect of goodwill is not reversed. in respect of other assets, an impairment loss is reversed if there has been a change
in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount
does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had
been recognized.

ii)

Financial Assets
For an investment in an equity security, a significant or prolonged decline in its fair value below cost is objective evidence of impairment.
impairment losses on available-for-sale financial assets are recognized by reclassifying losses accumulated in accumulated other comprehensive
income to net earnings. the cumulative loss that is reclassified from accumulated other comprehensive income is the difference between the
acquisition cost and the current fair value, less any impairment losses recognized previously in net earnings.

Any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognized in other comprehensive income.

M) EMPLOYEE BENEFITS

Pension Benefit Plans
the Company maintains a contributory defined benefit plan (“Plan”) that provides benefits to Reitmans (Canada) limited (the “employer”)
executive employees based on length of service and average earnings in the best five consecutive years of employment. Contributions are
made by the Plan members and employer. A Pension Committee, as appointed under the provisions of the Plan, is responsible for the administration
of the Plan. All the investments of the Plan are deposited with RBC investors services trust, which acts as the custodian of the assets entrusted to
it. the investment manager of the Plan’s investments is sei investments Canada Company. the Company also sponsors a supplemental executive
Retirement Plan (“seRP”) for certain senior executives, which is neither registered nor pre-funded. the costs of these retirement benefit plans are
determined periodically by independent actuaries.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTESBenefits are also given to employees through defined contribution plans administered by the Federal and québec governments. Company
contributions to these plans are recognized in the periods when the services are rendered.

the Company’s net liability in respect of defined benefits is calculated separately for each plan by estimating the amount of future benefits that
Plan members have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

defined benefit obligations are actuarially calculated annually by a qualified actuary as at the reporting date. the actuarial valuations are
determined based on management’s best estimate of the discount rate, the rate of compensation increase, retirement rates, termination rates
and mortality rates. the discount rate used to value the net defined benefit obligation for accounting purposes is based on the yield on a portfolio
of Corporate AA bonds denominated in the same currency in which the benefits are expected to be paid and with terms to maturity that,
on average, match the terms of the defined benefit plan obligations.

the fair value of plan assets are deducted from the defined benefit obligation to arrive at the net liability. Plan assets are measured at fair value as
at the reporting date. Past service costs arising from plan amendments are recognized in net earnings in the period that they arise.

Remeasurements of the net defined benefit liability, which comprise actuarial gains or losses, the return on plan assets, excluding interest, and
the effect of the asset ceiling, if any, are recognized in other comprehensive income in the period in which they arise and subsequently reclassified
from accumulated other comprehensive income to retained earnings.

Pension expense consists of the following:

• the cost of pension benefits provided in exchange for Plan members’ services rendered in the period;

• net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the net
defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes
in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments;

• past service costs; and

• gains or losses on settlements or curtailments.

expenses related to defined contribution plans are recognized in net earnings in the periods in which they occur.

ii)

Short-Term Employee Benefits
short-term employee benefit obligations, which include wages, salaries, compensated absences and bonuses, are measured on an undiscounted
basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonuses or profit-sharing plans if the Company has a present
legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

iii) Share-Based Compensation

some employees receive part of their compensation in the form of share-based payments which are recognized as an employee expense, with
a corresponding increase to contributed surplus in equity, over the period that the employees unconditionally become entitled to the awards.
the Company accounts for share-based compensation using the fair value based method. Compensation expense is measured at the fair value
at the date of grant and the fair value of each award is recognized over its respective vesting period, which is normally five years. the amount
recognized as an expense is adjusted to reflect the number of awards for which the related service conditions are expected to be met.

N) PROVISIONS

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is
probable that an outflow of economic benefits will be required to settle the obligation. if the effect of the time value of money is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and
the risks specific to the liability. Where discounting is used, the unwinding of the discount is recognized as finance cost.

O) REVENUE

Revenue is recognized from the sale of merchandise when a customer purchases and takes delivery of the merchandise. Reported sales are net of
returns and estimated possible returns and exclude sales taxes.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTESloyalty points and awards granted under customer loyalty programs are recognized as a separate component of revenue, and are deferred
at the date of initial sale. Revenue is recognized when the loyalty points and awards are redeemed and the Company has fulfilled its obligation.
the amount of revenue deferred is measured based on the fair value of loyalty points and awards granted, taking into consideration the estimated
redemption percentage.

FINANCE INCOME AND FINANCE COSTS
Finance income comprises interest and dividend income, realized gains on sale of marketable securities, changes in the fair value of derivatives as
well as foreign exchange gains. Finance costs comprise interest expense, realized losses on sale of marketable securities, changes in the fair value of
derivatives as well as foreign exchange losses. interest income is recognized on an accrual basis and interest expense is recorded using the effective
interest method. dividend income is recognized when the right to receive payment is established. Foreign exchange gains and losses and changes in the
fair value of derivatives are reported on a net basis.

INCOME TAx
income tax expense comprises current and deferred taxes. Current income taxes and deferred income taxes are recognized in net earnings except for
items recognized directly in equity or in other comprehensive income.

the Company’s income tax expense is based on tax rules and regulations that are subject to interpretation and require estimates and assumptions
that may be challenged by taxation authorities. Current income tax is the expected tax payable or receivable on the taxable income or loss for
the period, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to taxes payable in respect of previous years.
the Company’s estimates of current income tax assets and liabilities are periodically reviewed and adjusted as circumstances warrant, such as for
changes to tax laws and administrative guidance, and the resolution of uncertainties through either the conclusion of tax audits or expiration of
prescribed time limits within the relevant statutes. the final results of government tax audits and other events may vary materially compared to
estimates and assumptions used by management in determining the income tax expense and in measuring current income tax assets and liabilities.

deferred income tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. deferred income tax assets and liabilities are measured using enacted or substantively enacted
income tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. the effect
on deferred income tax assets and liabilities of a change in tax rates is included in net earnings in the period that includes the enactment date, except
to the extent that it relates to an item recognized either in other comprehensive income or directly in equity in the current or in a previous period.

the Company only offsets income tax assets and liabilities if it has a legally enforceable right to offset the recognized amounts and intends either to
settle on a net basis, or to realize the asset and settle the liability simultaneously.

A deferred income tax asset is recognized to the extent that it is probable that future taxable profits will be available against which they can be utilized.
deferred income tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit
will be realized.

deferred income tax assets and liabilities are recognized on the consolidated balance sheet under non-current assets or liabilities, irrespective of the
expected date of realization or settlement.

EARNINGS PER SHARE
the Company presents basic and diluted earnings per share (“ePs”) data for its shares.

Basic ePs is calculated by dividing the net earnings of the Company by the weighted average number of Class A non-voting and Common shares
outstanding during the period.

diluted ePs is determined by adjusting the weighted average number of shares outstanding to include additional shares issued from the assumed
exercise of share options, if dilutive. the number of additional shares is calculated by assuming that the proceeds from such exercises, as well as the
amount of unrecognized share-based compensation, are used to purchase Class A non-voting shares at the average market share price during the
reporting period.

SHARE CAPITAL
Class A non-voting shares and Common shares are classified as equity. incremental costs directly attributable to the issue of these shares and share
options are recognized as a deduction from equity, net of any tax effects.

When share capital recognized as equity is purchased for cancellation, the amount of the consideration paid, which includes directly attributable costs,
net of any tax effects, is recognized as a deduction from equity. the excess of the purchase price over the carrying amount of the shares is charged to
retained earnings.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTEST) NEw STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

A number of new standards, and amendments to standards and interpretations, are not yet effective for the year ended February 1, 2014 and have not
been applied in preparing these consolidated financial statements. new standards and amendments to standards and interpretations that are currently
under review include:

IFRS 9 – Financial Instruments
On november 12, 2009, the iAsB issued a new standard, iFRs 9, Financial Instruments (“iFRs 9”) which will ultimately replace iAs 39, Financial
Instruments: Recognition and Measurement (“iAs 39”). the replacement of iAs 39 is a three-phase project with the objective of improving and
simplifying the reporting for financial instruments. the issuance of iFRs 9 is the first phase of the project, which provides guidance on the classification
and measurement of financial assets and financial liabilities and was initiated in response to the crisis in financial markets.

the mandatory effective date of this standard has been deferred. the Company is evaluating the impact of this standard on its consolidated
financial statements.

IFRIC 21 – Levies
in may 2013, the iAsB issued iFRiC interpretation 21, Levies, which is an interpretation of iAs 37, Provisions, Contingent Liabilities and Contingent Assets.
iFRiC 21 clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the
payment of the levy. iFRiC 21 is effective for years beginning on or after January 1, 2014 and must be applied retrospectively. the Company is evaluating
the impact of this standard on its consolidated financial statements.

4 FAiR vAlue meAsuRement

When measuring the fair value of an asset or liability the Company uses observable market data whenever available. Fair values are classified within the fair
value hierarchy based on the lowest level input that is significant to the fair value measurement as a whole, as follows:

•

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices)
or indirectly (i.e., derived from prices); and

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Fair value estimates are made at a specific point in time, using available information about the asset or liability. these estimates are subjective in nature
and often cannot be determined with precision. Fair values have been determined for measurement and/or disclosure purposes based on the following
methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset
or liability.

A) FINANCIAL ASSETS

the Company has determined that the carrying amount of its short-term financial assets approximates fair value at the reporting date due to the
short-term maturity of these instruments. the fair value of the Company’s available-for-sale financial assets is determined by reference to their quoted
closing prices in active markets at the reporting date, which is considered level 1 input in the fair value hierarchy.

B) NON-DERIVATIVE FINANCIAL LIABILITIES

the fair value of the Company’s long-term debt bearing interest at a fixed rate, which is determined for disclosure purposes, is calculated using the
present value of future payments of principal and interest discounted at the current market rates of interest available to the Company for the same or
similar debt instruments with the same remaining maturity, which is considered level 2 input in the fair value hierarchy.

C) DERIVATIVE FINANCIAL INSTRUMENTS

the fair value of foreign currency option contracts is determined through a standard option valuation technique used by the counterparty based on
level 2 inputs.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTES5 CAsh And CAsh equivAlents

Cash on hand and with banks
short-term deposits, bearing interest at 0.9% (February 2, 2013 – 0.6%)

6 FinAnCiAl instRuments

FEBRUARY 1, 2014

FEBRUARY 2, 2013

19,224
103,131
$ 122,355

9,248
88,378
97,626

ACCOUNTING CLASSIFICATION AND FAIR VALUES
the following table shows the carrying amounts and fair values of the financial assets and financial liabilities, including their levels in the fair value hierarchy.
it does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable
approximation of the fair value. the Company has determined that the fair value of its current financial assets and liabilities (other than those included
below) approximates their respective carrying amounts as at the reporting dates because of the short-term nature of those financial instruments.

CARRYING AMOUNT

FAIR VALUE

FEBRUARY 1, 2014

FAIR VALUE
THROUGH
PROFIT OR LOSS

AVAILABLE-
FOR-SALE

OTHER
FINANCIAL
LIABILITIES

TOTAL

LEVEL 1

LEVEL 2

TOTAL

Financial assets measured
at fair value
derivative financial asset
marketable securities

Financial liabilities measured
at fair value
derivative financial liability

Financial liabilities not measured
at fair value
long-term debt

Financial assets measured
at fair value
derivative financial asset
marketable securities

Financial liabilities measured
at fair value
derivative financial liability

Financial liabilities not measured
at fair value
long-term debt

$
$

11,775
–

$
$

–
55,062

$
$

–
–

$
$

11,775
55,062

$
$

–
55,062

$
$

11,775
–

$
$

11,775
55,062

(3,065)

–

(3,065)

–

(3,065)

–

7,003

–

7,462

CARRYING AMOUNT

FAIR VALUE

FEBRUARY 2, 2013

FAIR VALUE
THROUGH
PROFIT OR LOSS

AVAILABLE-
FOR-SALE

OTHER
FINANCIAL
LIABILITIES

TOTAL

LEVEL 1

LEVEL 2

TOTAL

$
$

548
–

$
$

–
71,630

$
$

–
–

$
$

548
71,630

$
$

–
71,630

$
$

548
–

$
$

548
71,630

(266)

–

(266)

–

(266)

–

8,573

–

9,208

there were no transfers between levels of the fair value hierarchy for the years ended February 1, 2014 and February 2, 2013.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTESDERIVATIVE FINANCIAL INSTRUMENTS
during the year, the Company entered into transactions with its bank whereby it purchased call options and sold put options, both on the u.s. dollar.
these option contracts extend over a period of twelve months. Purchased call options and sold put options expiring on the same date have the same
strike price.

details of the foreign currency option contracts outstanding for the years ended February 1, 2014 and February 2, 2013 are as follows:

AVERAGE
STRIkE
PRICE

NOTIONAL
AMOUNT IN
U.S. DOLLARS

FEBRUARY 1, 2014

DERIVATIVE
FINANCIAL
ASSET

DERIVATIVE
FINANCIAL
LIABILITY

NET

$
$

1.07
1.07

$ 212,000
$ 364,000

11,775
–
11,775

–
(3,065)
(3,065)

11,775
(3,065)
8,710

AVERAGE
STRIkE
PRICE

NOTIONAL
AMOUNT IN
U.S. DOLLARS

FEBRUARY 2, 2013

DERIVATIVE
FINANCIAL
ASSET

DERIVATIVE
FINANCIAL
LIABILITY

$
$

0.98
0.98

$
$

30,000
60,000

548
–
548

–
(266)
(266)

NET

548
(266)
282

Call options purchased
Put options sold

inventORies

during the year ended February 1, 2014, inventories recognized as cost of goods sold amounted to $374,922 (February 2, 2013 – $369,271). in addition,
$2,991 (February 2, 2013 – $2,864) of write-downs of inventories as a result of net realizable value being lower than cost were recognized in cost of
goods sold, and no inventory write-downs recognized in previous periods were reversed. included in inventories is an amount of $30,524 (February 2, 2013 –
$21,600) representing goods in transit.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTES8 PROPeRty And equiPment

Cost
Balance at January 29, 2012
Additions
disposals
Balance at February 2, 2013

Balance at February 3, 2013
Additions
disposals
effect in movement in exchange rate
Balance at February 1, 2014

Accumulated depreciation and impairment losses
Balance at January 29, 2012
depreciation
impairment loss
Reversal of impairment loss
disposals
Balance at February 2, 2013

Balance at February 3, 2013
depreciation
impairment loss
Reversal of impairment loss
disposals
effect in movement in exchange rate
Balance at February 1, 2014

Net carrying amounts
At February 2, 2013
At February 1, 2014

LAND

BUILDINGS

FIxTURES AND
EQUIPMENT

LEASEHOLD
IMPROVEMENTS

TOTAL

$
$

5,860
–
–
5,860

5,860
–
–
–
5,860

–
–
–
–
–
–

–
–
–
–
–
–
–

5,860
5,860

$
$

54,163
1,166
(2,180)
53,149

53,149
267
(4,818)
–
48,598

22,018
2,629
–
–
(2,180)
22,467

22,467
2,459
–
–
(4,818)
–
20,108

30,682
28,490

$ 163,119
34,757
(31,120)
$ 166,756

$ 166,756
16,659
(35,819)
166
$ 147,762

92,429
24,627
–
–
(31,120)
85,936

85,936
24,026
1,378
–
(35,819)
32
75,553

$
$

$ 182,073
39,562
(31,905)
$ 189,730

$ 189,730
14,512
(39,702)
–
$ 164,540

$ 106,547
25,791
2,128
(600)
(31,905)
$ 101,961

$ 101,961
24,691
6,583
(775)
(39,702)
–
92,758

$ 405,215
75,485
(65,205)
$ 415,495

$ 415,495
31,438
(80,339)
166
$ 366,760

$ 220,994
53,047
2,128
(600)
(65,205)
$ 210,364

$ 210,364
51,176
7,961
(775)
(80,339)
32
$ 188,419

80,820
72,209

$
$

87,769
71,782

$ 205,131
$ 178,341

during the year, the Company tested for impairment certain items of property and equipment for which there were indications that their carrying amounts
may not be recoverable and recognized an impairment loss of $7,961 (February 2, 2013 – $2,128). When determining the value in use of a retail location,
the Company develops a discounted cash flow model for each Cgu. the duration of the cash flow projections for individual Cgus varies based on the
remaining useful life of the significant asset within the Cgu. sales forecasts for cash flows are based on actual operating results, industry’s expected growth
rates and management’s experiences. the recoverable amounts of the Cgus tested for impairment were based on their value-in-use which was determined
using a pre-tax discount rate of 13% (February 2, 2013 – 10%). during the year, $775 of impairment losses were reversed following an improvement in the
profitability of certain Cgus (February 2, 2013 – $600).

depreciation expense and net impairment losses for the year have been recorded in selling and distribution expenses for an amount of $56,697
(February 2, 2013 – $52,903) and in administrative expenses for an amount of $1,665 (February 2, 2013 – $1,672) in the consolidated statements
of earnings.

Property and equipment includes an amount of $1,802 (February 2, 2013 – $1,779) that is not being depreciated. depreciation will begin when the assets
are available for use.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTES9

intAngiBle Assets

Cost
Balance at January 29, 2012
Additions
disposals
Balance at February 2, 2013

Balance at February 3, 2013
Additions
disposals
effect in movement in exchange rates
Balance at February 1, 2014

Accumulated depreciation and impairment losses
Balance at January 29, 2012
Amortization
disposals
Balance at February 2, 2013

Balance at February 3, 2013
Amortization
impairment loss
disposals
effect in movement in exchange rates
Balance at February 1, 2014

Net carrying amounts
At February 2, 2013
At February 1, 2014

SOFTwARE

TRADEMARkS

TOTAL

$
$

28,254
6,748
(6,086)
28,916

28,916
3,351
(7,425)
1
24,843

11,197
5,080
(6,086)
10,191

10,191
4,738
125
(7,425)
3
7,632

18,725
17,211

$
$

–
499
–
499

499
–
–
–
499

–
–
–
–

–
–
499
–
–
499

499
–

$
$

28,254
7,247
(6,086)
29,415

29,415
3,351
(7,425)
1
25,342

11,197
5,080
(6,086)
10,191

10,191
4,738
624
(7,425)
3
8,131

19,224
17,211

during the year, the Company tested for impairment certain items of intangible assets for which there were indications that their carrying amounts may not
be recoverable and recognized an impairment loss of $624 (February 2, 2013 – nil).

the amortization of intangibles has been recorded in selling and distribution expenses for an amount of $4,433 (February 2, 2013 – $3,966) and in
administrative expenses for an amount of $929 (February 2, 2013 – $1,114) in the consolidated statements of earnings.

software includes an amount of $8,892 (February 2, 2013 – $6,638) that is not being amortized. Amortization will begin when the software is put
into service.

10 gOOdWill

goodwill is tested for impairment as described in note 3(l). For impairment testing purposes the Company uses the value-in-use approach. value-in-use is
determined by discounting the future cash flows generated from the continuing use of the respective Cgu.

management’s key assumptions for cash flow projections are based on the most recent annualized operating results and budget projections for the
coming year, assuming a series of cash flows in perpetuity. Projected cash flows were discounted using a pre-tax rate of 12.5% (February 2, 2013 – 9.5%).
the discount rate represents a weighted average cost of capital (WACC) for comparable companies operating in similar industries, based on publicly available
information. the WACC is an estimate of the overall required rate of return on an investment for both debt and equity owners and serves as the basis for
developing an appropriate discount rate. determination of the WACC requires separate analysis of the cost of equity and debt, and considers a risk premium
based on an assessment of risks related to the projected cash flows of the Cgu.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTESthe pre-tax rate used for discounting cash flows was based on a risk-free rate, equity risk premium adjusted for betas of comparable publicly traded
companies, an unsystematic risk premium, after-tax cost of debt based on corporate bond yields and the capital structure of the Company.

Based upon the impairment tests as at February 1, 2014 and February 2, 2013, the value-in-use was determined to be higher than the carrying values.
As a result, no impairment losses were recognized.

11 inCOme tAx

INCOME TAx ExPENSE
the Company’s income tax expense is comprised as follows:

Current tax expense
Current period
Adjustment in respect of prior years
Current tax expense

Deferred tax expense
deferred tax recovery prior to adjustment
Changes in tax rates
deferred tax recovery
total income tax expense

FOR THE YEARS ENDED

FEBRUARY 1, 2014

FEBRUARY 2, 2013

4,708
1
4,709

(1,955)
(100)
(2,055)
2,654

11,450
(121)
11,329

(2,562)
(345)
(2,907)
8,422

INCOME TAx RECOGNIzED IN OTHER COMPREHENSIVE INCOME

FEBRUARY 1, 2014

TAx RECOVERY
(ExPENSE)

BEFORE TAx

FOR THE YEARS ENDED

FEBRUARY 2, 2013

NET OF TAx

BEFORE TAx

TAx RECOVERY

NET OF TAx

Available-for-sale financial assets
defined benefit plan actuarial gains (losses)

(1,541)
497
(1,044)

203
(124)
79

(1,338)
373
(965)

(76)
(1,029)
(1,105)

4
293
297

(72)
(736)
(808)

RECONCILIATION OF EFFECTIVE TAx RATE

earnings before income taxes
income tax using the Company’s statutory tax rate
Changes in tax rates
non-deductible expenses and other adjustments
tax exempt income
Adjustment in respect of prior years

FEBRUARY 1, 2014

FEBRUARY 2, 2013

FOR THE YEARS ENDED

13,442
3,631
(100)
24
(902)
1
2,654

27.01%
(0.74%)
0.18%
(6.71%)
0.00%
19.74%

34,778
9,331
(345)
591
(1,034)
(121)
8,422

26.83%
(0.99%)
1.70%
(2.97%)
(0.35%)
24.22%

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTESRECOGNIzED DEFERRED TAx ASSETS AND LIABILITIES
deferred tax assets and liabilities are attributable to the following:

ASSETS

LIABILITIES

NET

FEBRUARY 1, 2014

FEBRUARY 2, 2013

FEBRUARY 1, 2014

FEBRUARY 2, 2013

FEBRUARY 1, 2014

FEBRUARY 2, 2013

Property, equipment and intangible assets
marketable securities
inventories
trade and other payables
derivative financial asset
Pension liability
tax benefit of losses carried forward
Other

21,253
207
–
4,012
–
4,845
2,037
–
32,354

19,326
–
–
3,636
–
4,639
693
33
28,327

–
–
1,429
–
2,311
–
–
36
3,776

–
354
1,490
–
–
–
–
39
1,883

21,253
207
(1,429)
4,012
(2,311)
4,845
2,037
(36)
28,578

19,326
(354)
(1,490)
3,636
–
4,639
693
(6)
26,444

CHANGES IN DEFERRED TAx BALANCES DURING THE YEAR

BALANCE
JANUARY 28, 2012

RECOGNIzED IN
NET EARNINGS

RECOGNIzED IN
OTHER
COMPREHENSIVE
INCOME

BALANCE
FEBRUARY 2, 2013

RECOGNIzED IN
NET EARNINGS

RECOGNIzED IN
OTHER
COMPREHENSIVE
INCOME

BALANCE
FEBRUARY 1, 2014

Property, equipment
and intangible assets
marketable securities
inventories
trade and other

payables

derivative financial
asset

Pension liability
tax benefit of losses
carried forward

Other

17,364
(379)
(1,144)

3,461

–
3,934

–
4
23,240

1,962
21
(346)

175

–
412

693
(10)
2,907

–
4
–

–

–
293

–
–
297

19,326
(354)
(1,490)

3,636

–
4,639

693
(6)
26,444

1,927
358
61

376

(2,311)
330

1,344
(30)
2,055

–
203
–

–

–
(124)

–
–
79

21,253
207
(1,429)

4,012

(2,311)
4,845

2,037
(36)
28,578

12 tRAde And OtheR PAyABles

trade payables
non-trade payables due to related parties
Other non-trade payables
Personnel liabilities
Payables relating to premises
Provision for sales returns

less non-current portion

FEBRUARY 1, 2014

FEBRUARY 2, 2013

49,593
55
10,878
25,566
15,777
707
102,576
11,842
90,734

41,494
74
319
24,443
13,489
756
80,575
11,425
69,150

the non-current portion of trade and other payables, which is included in payables relating to premises, represents the portion of deferred rent to be
amortized and other payables beyond the next twelve months.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTES13 deFeRRed Revenue

loyalty points and awards granted under loyalty programs
unredeemed gift cards

14 lOng-teRm deBt

mortgage payable
less current portion

FEBRUARY 1, 2014

FEBRUARY 2, 2013

7,198
12,800
19,998

5,473
10,824
16,297

FEBRUARY 1, 2014

FEBRUARY 2, 2013

7,003
1,672
5,331

8,573
1,570
7,003

the mortgage, bearing interest at 6.40%, is payable in monthly instalments of principal and interest of $172. it is due november 2017 and is secured by the
Company’s distribution centre having a carrying value of $16,354 (February 2, 2013 – $17,330).

As at February 1, 2014, principal repayments on long-term debt are as follows:

Within 1 year
Within 2 years
Within 3 years
Within 4 years

1,672
1,780
1,896
1,655
7,003

15 PensiOn liABility

the following tables present reconciliations of the pension obligations, the plan assets and the funded status of the retirement benefit plans:

FUNDED STATUS

As at February 1, 2014
Plan
seRP
total

As at February 2, 2013
Plan
seRP
total

FAIR VALUE OF
PLAN ASSETS

DEFINED BENEFIT
OBLIGATION

PENSION ASSET
(LIABILITY)

18,544
–
18,544

16,432
–
16,432

18,238
18,565
36,803

17,192
16,799
33,991

306
(18,565)
(18,259)

(760)
(16,799)
(17,559)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTESFEBRUARY 1, 2014

FEBRUARY 2, 2013

PLAN

SERP

TOTAL

PLAN

SERP

TOTAL

FOR THE YEARS ENDED

Movement in the present value of
the defined benefit obligation
defined benefit obligation,
beginning of year
Current service cost
interest cost
employee contributions
Actuarial (gain) / loss – experience
Actuarial loss – demographic assumptions
Actuarial (gain) / loss –
financial assumptions

Benefits paid
Past service costs
defined benefit obligation, end of year

Movement in the fair value
of plan assets
Fair value of plan assets, beginning of year
Return on plan assets
interest income on plan assets
employer contributions
employee contributions
Benefits paid
Plan administration costs
Fair value of plan assets, end of year

17,192
905
713
146
(403)
1,299

(776)
(838)
–
18,238

16,432
1,413
658
830
146
(838)
(97)
18,544

16,799
103
674
–
140
1,376

(720)
(130)
323
18,565

–
–
–
130
–
(130)
–
–

33,991
1,008
1,387
146
(263)
2,675

(1,496)
(968)
323
36,803

16,432
1,413
658
960
146
(968)
(97)
18,544

15,318
812
690
143
1
–

697
(469)
–
17,192

15,727
280
671
175
143
(469)
(95)
16,432

15,540
105
670
–
(24)
–

636
(128)
–
16,799

–
–
–
128
–
(128)
–
–

30,858
917
1,360
143
(23)
–

1,333
(597)
–
33,991

15,727
280
671
303
143
(597)
(95)
16,432

For the year ended February 1, 2014, the net defined benefit obligation can be allocated to the plans’ participants as follows:

•

Active plan participants 69% (February 2, 2013 – 71%)

Retired plan members 24% (February 2, 2013 – 24%)

Deferred plan participants 7% (February 2, 2013 – 5%)

the defined benefit pension plan assets are held in trust and consisted of the following assets categories:

Equity securities

Canadian – pooled funds
Foreign – pooled funds

total equity securities
Debt securities – fixed income pooled funds
Cash and cash equivalents
total

FEBRUARY 1, 2014

FEBRUARY 2, 2013

FOR THE YEARS ENDED

6,174
5,185
11,359
6,833
352
18,544

33%
28%
61%
37%
2%
100%

5,449
4,654
10,103
5,956
373
16,432

33%
28%
61%
37%
2%
100%

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTES
the Company’s pension expense was as follows:

FEBRUARY 1, 2014

FEBRUARY 2, 2013

PLAN

SERP

TOTAL

PLAN

SERP

TOTAL

FOR THE YEARS ENDED

Pension costs recognized in
net earnings
Current service cost
net interest cost on net pension liability
Plan administration costs
Past service cost
Pension expense

905
55
97
–
1,057

103
674
–
323
1,100

1,008
729
97
323
2,157

812
19
95
–
926

105
670
–
–
775

917
689
95
–
1,701

Pension expense is recognized in administrative expenses in the consolidated statements of earnings.

the following table presents the change in the actuarial gains and losses recognized in other comprehensive income:

FEBRUARY 1, 2014

FEBRUARY 2, 2013

PLAN

SERP

TOTAL

PLAN

SERP

TOTAL

FOR THE YEARS ENDED

Cumulative loss in retained earnings
at the beginning of the year

(gain) loss recognized during the year
Cumulative loss in retained earnings
at the end of the year

(gain) loss recognized during the year
net of tax

2,729
(1,293)

3,355
796

1,436

4,151

6,084
(497)

2,312
417

2,743
612

5,587

2,729

3,355

(373)

5,055
1,029

6,084

736

ACTUARIAL ASSUMPTIONS
Principal actuarial assumptions used were as follows:

FOR THE YEARS ENDED

FEBRUARY 1, 2014

FEBRUARY 2, 2013

Accrued benefit obligation:

discount rate
salary increase
mortality

employee benefit expense:

discount rate
salary increase

4.30%
5.00%

4.00%
5.00%
CPM-RPP 2014 1994 uninsured
Pensioner
(projected mortality table
(projected
generationally
using scale AA)

generationally
using Scale A1-
2014)

Public

4.00%
5.00%

4.30%
5.00%

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTESSENSITIVITY OF kEY ACTUARIAL ASSUMPTIONS
the following table outlines the key assumptions for the year ended February 1, 2014 and the sensitivity of a 1% change in each of these assumptions on
the defined benefit plan obligations and the net defined benefit plan costs.

the sensitivity analysis provided in the table is hypothetical and should be used with caution. the sensitivities of each key assumption have been calculated
independently of any changes in other key assumptions. Actual experience may result in changes in a number of key assumptions simultaneously. Changes in
one factor may result in changes in another, which could amplify or reduce the impact of such assumptions.

(Decrease) increase in defined benefit obligation
Discount rate

impact of increase in discount rate of 1%
impact of decrease in discount rate of 1%

Lifetime expectancy

impact of increase of 1 year in expected lifetime of plan members

PLAN

FEBRUARY 1, 2014
SERP

TOTAL

$
$

(2,354)
2,703

502

$
$

(2,209)
2,508

470

$
$

(4,563)
5,211

972

Overall return in the capital markets and the level of interest rates affect the funded status of the Company’s pension plans. Adverse changes with respect
to pension plan returns and the level of interest rates from the date of the last actuarial valuation may have an adverse effect on the funded status of the
retirement benefit plans and on the Company’s results of operations.

the Company expects $700 in employer contributions to be paid to the Plan and $131 to the seRP in the year ended January 31, 2015.

the Company measures its accrued benefit obligations and the fair value of plan assets for accounting purposes at year-end. the most recent actuarial
valuation for funding purposes was as of december 31, 2012 and the next required valuation will be as of december 31, 2013.

16 shARe CAPitAl And OtheR COmPOnents OF equity

the change in share capital for each of the periods listed was as follows:

Common shares
Balance at beginning and end of the year

Class A non-voting shares
Balance at beginning of the year
shares purchased under issuer bid
Balance at end of the year

total share capital

FOR THE YEARS ENDED

FEBRUARY 1, 2014

FEBRUARY 2, 2013

NUMBER

OF SHARES

(IN 000’S)

CARRYING

AMOUNT

NUMBER

OF SHARES

(IN 000’S)

CARRYING

AMOUNT

13,440

482

13,440

482

51,146
–
51,146

38,745
–
38,745

52,146
(1,000)
51,146

39,408
(663)
38,745

64,586

39,227

64,586

39,227

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTESAUTHORIzED SHARE CAPITAL
the Company has authorized for issuance an unlimited number of Common shares and Class A non-voting shares. Both Common shares and Class A
non-voting shares have no par value. All issued shares are fully paid.

the Common shares and Class A non-voting shares of the Company rank equally and pari passu with respect to the right to receive dividends and upon any
distribution of the assets of the Company. however, in the case of share dividends, the holders of Class A non-voting shares shall have the right to receive
Class A non-voting shares and the holders of Common shares shall have the right to receive Common shares.

ISSUANCE OF CLASS A NON-VOTING SHARES
during the year ended February 1, 2014, there were no Class A non-voting shares issued as a result of the exercise of vested options arising from the
Company’s share option program (February 2, 2013 – nil).

PURCHASE OF SHARES FOR CANCELLATION
For the year ended February 1, 2014, the Company did not purchase any shares under a normal course issuer bid approved in november 2012. For the year
ended February 2, 2013, the Company purchased, under the prior year’s normal course issuer bid, 1,000,000 Class A non-voting shares having a carrying
value of $663 for a total cash consideration of $12,615. the excess of the purchase price over the carrying value of the shares in the amount of $11,952 was
charged to retained earnings.

in december 2013, the Company received approval from the toronto stock exchange to proceed with a normal course issuer bid. under the bid, the Company
may purchase up to 4,000,000 Class A non-voting shares of the Company, representing 10% of the public float of the issued and outstanding Class A
non-voting shares as at december 10, 2013. the bid commenced on december 18, 2013 and may continue to december 17, 2014. no Class A non-voting
shares were purchased under this new program.

ACCUMULATED OTHER COMPREHENSIVE INCOME (“AOCI”)
AOCi is comprised of the following:

net change in fair value of available-for-sale financial assets, net of taxes

DIVIDENDS
the following dividends were declared and paid by the Company:

Common shares and Class A non-voting shares
dividends per share

17 shARe-BAsed PAyments

FEBRUARY 1, 2014

FEBRUARY 2, 2013

7,356

8,665

FOR THE YEARS ENDED

FEBRUARY 1, 2014

FEBRUARY 2, 2013

$
$

41,981
0.65

$
$

52,068
0.80

A) DESCRIPTION OF THE SHARE-BASED PAYMENT ARRANGEMENTS

the Company has a share option plan that provides that up to 10% of the Class A non-voting shares outstanding, from time to time, may be issued
pursuant to the exercise of options granted under the plan to key management and employees. the granting of options and the related vesting period,
which is normally up to 5 years, are at the discretion of the Board of directors and the options have a maximum term of 10 years. the exercise price
payable for each Class A non-voting share covered by a share option is determined by the Board of directors at the date of grant, but may not be less
than the closing price of the Company’s shares on the trading day immediately preceding the effective date of the grant.

B) MEASUREMENT OF THE SHARE-BASED PAYMENT ARRANGEMENTS

the fair values of the employee share options are measured based on the Black-scholes valuation model. measurement inputs include share price on
measurement date, exercise price of the share option, expected volatility (based on weighted average historic volatility adjusted for changes expected
due to publicly available information), weighted average expected life of the share option (based on historic experience and general option holder
behaviour), expected dividends, and risk-free interest rate (based on government bonds).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTESC) DISCLOSURE OF EQUITY-SETTLED SHARE OPTION PLAN
Changes in outstanding share options were as follows:

Outstanding, at beginning of year
granted
exercised
Forfeited
expired
Outstanding, at end of year
Options exercisable, at end of year

FOR THE YEARS ENDED

FEBRUARY 1, 2014

FEBRUARY 2, 2013

OPTIONS
(IN 000’S)

wEIGHTED
AVERAGE
ExERCISE PRICE

OPTIONS
(IN 000’S)

wEIGHTED
AVERAGE
ExERCISE PRICE

2,420
–
–
(240)
(90)
2,090
1,255

$
$

14.53
–
–
14.69
16.59
14.43
14.53

1,945
790
–
(160)
(155)
2,420
964

$
$

15.07
14.28
–
14.50
20.00
14.53
14.78

For the year ended February 1, 2014 and February 2, 2013, no share options were exercised.

there were no share option awards granted during the year ended February 1, 2014. Compensation cost related to share option awards granted during
the year ended February 2, 2013 under the fair value based approach was calculated using the following assumptions:

expected option life
Weighted average risk-free interest rate
expected stock price volatility
Average dividend yield
Weighted average fair value of options granted
share price at grant date

FOR THE YEAR ENDED FEBRUARY 2, 2013

590 OPTIONS
GRANTED
MAY 30, 2012

100 OPTIONS
GRANTED

100 OPTIONS
GRANTED
AUGUST 29, 2012 DECEMBER 11, 2012

6.4 years
1.91%
32.70%
5.33%
2.70
15.00

$
$

6.1 years
1.40%
32.80%
6.34%
1.86
12.62

$
$

5.8 years
1.47%
32.70%
6.85%
1.66
11.68

$
$

the following table summarizes information about share options outstanding at February 1, 2014:

Range of Exercise Prices

$11.68 – $12.62
$14.50 – $15.00
$18.26

D) EMPLOYEE ExPENSE

OPTIONS OUTSTANDING

OPTIONS ExERCISABLE

NUMBER
OUTSTANDING

wEIGHTED
AVERAGE
REMAINING
(IN 000’S) CONTRACTUAL LIFE

200
1,875
15
2,090

8.00 years
4.41
3.00
4.75 years

wEIGHTED
AVERAGE
ExERCISE PRICE

12.15
14.64
18.26
14.43

NUMBER
ExERCISABLE
(IN 000’S)

wEIGHTED
AVERAGE
ExERCISE PRICE

40
1,206
9
1,255

12.15
14.58
18.26
14.53

For the year ended February 1, 2014, the Company recognized compensation costs of $667 relating to share-based payment arrangements ($1,363 for
the year ended February 2, 2013), with a corresponding credit to contributed surplus.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTES18 COmmitments

As at February 1, 2014, financial commitments for minimum lease payments under operating leases for retail stores, offices, automobiles and equipment,
as well as amounts pertaining to agreements to purchase goods or services that are enforceable and legally binding on the Company, exclusive of additional
amounts based on sales, taxes and other costs are payable as follows:

Within 1 year
Within 2 years
Within 3 years
Within 4 years
Within 5 years
subsequent years
Total

STORE AND OFFICE
OPERATING
LEASES

99,418
89,461
73,007
56,678
42,443
72,761
$ 433,768

PURCHASE
OBLIGATIONS

$ 118,949
178
178
178
178
–
$ 119,661

OTHER
OPERATING
LEASES

3,961
3,824
2,869
2,819
2,348
1,560
17,381

TOTAL

$ 222,328
93,463
76,054
59,675
44,969
74,321
$ 570,810

the Company leases retail stores and offices under operating leases. the leases have varying terms, escalation clauses and renewal rights. generally, the
leases run for a period that does not exceed 10 years, with options to renew that do not exceed 5 years, if at all. the majority of the leases require additional
payments for the cost of insurance, taxes, maintenance and utilities. Certain rental agreements include contingent rent, which is generally based on revenue
exceeding a minimum amount.

For the year ended February 1, 2014, $177,904 was recognized as an expense in net earnings with respect to operating leases ($179,423 for the year ended
February 2, 2013), of which $175,542 ($176,948 for the year ended February 2, 2013) represents minimum lease payments and additional rent charges and
$2,362 ($2,475 for the year ended February 2, 2013) represents contingent rents.

19 OtheR inCOme, FinAnCe inCOme And FinAnCe COsts

RECOGNIzED IN NET EARNINGS

dividend income from available-for-sale financial assets
interest income from loans and receivables
net change in fair value of derivatives (note 6)
Foreign exchange gain
Finance income

interest expense – mortgage
impairment loss on available-for-sale financial assets
Foreign exchange loss
Realized loss on disposal of available-for-sale financial assets
Finance costs

FOR THE YEARS ENDED

FEBRUARY 1, 2014

FEBRUARY 2, 2013

3,481
621
8,428
7,650
20,180

496
2,699
–
248
3,443

3,526
1,062
1,036
–
5,624

592
156
582
–
1,330

net finance income recognized in net earnings

16,737

4,294

Other income comprises a gain on sale of intellectual property rights of $5,745 and $309 of proceeds from the settlement of a trademark dispute.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTESRECOGNIzED IN OTHER COMPREHENSIVE INCOME

net change in fair value of available-for-sale financial assets arising during the year

(net of tax of $561; 2013 – $25)
Finance cost recognized in other comprehensive income (net of tax)

20 eARnings PeR shARe

FOR THE YEARS ENDED

FEBRUARY 1, 2014

FEBRUARY 2, 2013

$
$

(3,679)
(3,679)

$
$

(207)
(207)

the calculation of basic and diluted earnings per share is based on net earnings for the year ended February 1, 2014 of $10,788 ($26,356 for the year ended
February 2, 2013).

the number of shares (in thousands) used in the earnings per share calculation is as follows:

Weighted average number of shares per basic earnings per share calculations
Weighted average number of shares per diluted earnings per share calculations

FOR THE YEARS ENDED

FEBRUARY 1, 2014

FEBRUARY 2, 2013

64,586
64,586

65,188
65,188

As at February 1, 2014, a total of 2,090,000 (February 2, 2013 – 2,420,000) share options were excluded from the calculation of diluted earnings per share
as these options were deemed to be anti-dilutive, because the exercise prices were greater than the average market price of the shares during the year.

the average market value of the Company’s shares for purposes of calculating the dilutive effect of share options was based on quoted market prices for the
period during which the options were outstanding.

21 RelAted PARties

TRANSACTIONS wITH kEY MANAGEMENT PERSONNEL
key management personnel are those persons who have the authority and responsibility for planning, directing and controlling the activities of the entity –
directly or indirectly. the definition of key management personnel includes directors (both executive and non-executive). the Chief executive Officer
and Chief Operating Officer are considered key management personnel. it is the Board of directors who has the responsibility for planning, directing and
controlling the activities of the Company. the directors participate in the share option plan, as described in note 17.

Compensation expense for key management personnel is as follows:

salaries, directors’ fees and short-term benefits
Post-employment benefits
share-based compensation costs

FOR THE YEARS ENDED

FEBRUARY 1, 2014

FEBRUARY 2, 2013

1,993
–
338
2,331

1,944
(5)
595
2,534

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTESOTHER RELATED-PARTY TRANSACTIONS
the Company leases two retail locations which are owned by companies controlled by the major shareholders of the Company. For the year ended
February 1, 2014, the rent expense under these leases was, in the aggregate, approximately $204 (February 2, 2013 – $195).

the Company incurred $560 in the year ended February 1, 2014 (February 2, 2013 – $670) with professional service firms connected to outside directors of
the Company for fees in conjunction with general legal advice and other consultation.

these transactions are recorded at the amount of consideration paid as established and agreed to by the related parties.

22 PeRsOnnel exPenses

Wages, salaries and employee benefits
expenses related to defined benefit plans
share-based compensation costs

23 CRedit FACility

FOR THE YEARS ENDED

FEBRUARY 1, 2014

FEBRUARY 2, 2013

$ 248,952
2,157
667
$ 251,776

$ 255,387
1,701
1,363
$ 258,451

At February 1, 2014, the Company had unsecured operating lines of credit available with Canadian chartered banks to a maximum of $125,000 or its
u.s. dollar equivalent. As at February 1, 2014, $30,270 (February 2, 2013 – $46,792) of the operating lines of credit were committed for documentary and
standby letters of credit.

24 guARAntees

the Company has granted irrevocable standby letters of credit, issued by highly-rated financial institutions, to third parties to indemnify them in the event
the Company does not perform its contractual obligations. As at February 1, 2014, the maximum potential liability under these guarantees was $5,019
(February 2, 2013 – $5,014). the standby letters of credit mature at various dates during year ending January 31, 2015. the contingent portion of the
guarantee is recorded when the Company considers it probable that a payment relating to the guarantee has to be made to the other party of the contract or
guarantee. the Company has recorded no liability with respect to these guarantees as the Company does not expect to make any payments for these items.

25 OPeRAting segments

in order to identify the Company’s reportable segments, the Company uses the process outlined in iFRs 8, which includes the identification of the Chief
Operating decision maker (“COdm”), the identification of operating segments and the aggregation of operating segments. the Company’s operating
segments, before aggregation, have been identified as the Company’s six banners: Reitmans, smart set, RW & CO., thyme maternity, Penningtons and
Addition elle. each operating segment is reviewed by the COdm in reviewing their profitability so that the information can be used to ensure adequate
resources are allocated to that part of the Company’s operations. the Company has aggregated its operating segments into one reportable segment,
because the operating segments have similar economic characteristics and derive revenue mainly from the sale of ladies’ specialty apparel to customers.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTES26 suPPlementARy CAsh FlOW inFORmAtiOn

non-cash transactions:

Additions to property and equipment and intangible assets included in trade and other payables

1,592

1,327

FEBRUARY 1, 2014

FEBRUARY 2, 2013

27 FinAnCiAl Risk mAnAgement

the Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls,
and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the
Company’s activities. disclosures relating to the Company’s exposure to risks, in particular credit risk, liquidity risk, foreign currency risk, interest rate risk
and equity price risk are provided below.

CREDIT RISk
Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. the Company’s
financial instruments that are exposed to concentrations of credit risk are primarily cash and cash equivalents, marketable securities, trade and other
receivables and foreign currency option contracts. the Company limits its exposure to credit risk with respect to cash and cash equivalents and foreign
currency option contracts by dealing with Canadian financial institutions. marketable securities consist primarily of preferred shares of highly-rated Canadian
public companies. the Company’s trade and other receivables consist primarily of credit card receivables from the last few days of the fiscal year, which are
settled within the first days of the next fiscal year.

As at February 1, 2014, the Company’s maximum exposure to credit risk for these financial instruments was as follows:

Cash and cash equivalents
marketable securities
trade and other receivables
derivative financial asset

$ 122,355
55,062
6,422
11,775
$ 195,614

LIQUIDITY RISk
liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. the Company’s approach to managing liquidity
risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet liabilities when due. the contractual maturity of the majority of trade
and other payables is within twelve months. As at February 1, 2014, the Company had a high degree of liquidity with $177,417 in cash and cash equivalents,
and marketable securities. in addition, the Company has unsecured credit facilities of $125,000 subject to annual renewals. the Company has financed its
store expansion through internally-generated funds and its unsecured credit facilities are used to finance seasonal working capital requirements for u.s. dollar
merchandise purchases. the Company’s long-term debt consists of a mortgage bearing interest at 6.40%, due november 2017, which is secured by the
Company’s distribution centre.

FOREIGN CURRENCY RISk
the Company purchases a significant amount of its merchandise with u.s. dollars and as such significant volatility in the u.s. dollar vis-à-vis the Canadian
dollar can have an adverse impact on the Company’s gross margin. the Company has a variety of alternatives that it considers to manage its foreign
currency exposure on cash flows related to these purchases. this includes, but is not limited to, various styles of foreign currency option or forward contracts,
not to exceed twelve months, and spot rate purchases. A foreign currency option contract represents an option or obligation to buy a foreign currency from a
counterparty. Credit risks exist in the event of failure by a counterparty to fulfill its obligations. the Company reduces this risk by dealing only with highly-rated
counterparties, normally major Canadian financial institutions. For the year ended February 1, 2014, the Company satisfied its u.s. dollar requirements
primarily through spot rate purchases and foreign exchange option contracts.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTESthe Company has performed a sensitivity analysis on its u.s. dollar denominated financial instruments, which consist principally of cash and cash equivalents
of $17,096 and trade payables of $28,070 to determine how a change in the u.s. dollar exchange rate would impact net earnings. On February 1, 2014, a 1% rise
or fall in the Canadian dollar against the u.s. dollar, assuming that all other variables, in particular interest rates, had remained the same, would have resulted
in a $98 decrease or increase, respectively, in the Company’s net earnings for the year ended February 1, 2014.

the Company has performed a sensitivity analysis on its derivative financial instruments, a series of call and put options on u.s. dollars, to determine how
a change in the u.s. dollar exchange rate would impact net earnings. On February 1, 2014, a 1% rise or fall in the Canadian dollar against the u.s. dollar,
assuming that all other variables had remained the same, would have resulted in a $2,542 decrease or a $1,133 increase, respectively, in the Company’s net
earnings for the year ended February 1, 2014.

INTEREST RATE RISk
interest rate risk exists in relation to the Company’s cash and cash equivalents. market fluctuations in interest rates impacts the Company’s earnings
with respect to interest earned on cash and cash equivalents that are invested mainly in short term deposits with major Canadian financial institutions.
the Company has unsecured borrowing and working capital credit facilities available up to an amount of $125,000 or its u.s. dollar equivalent that it utilizes
for documentary and standby letters of credit, and the Company funds the drawings on these facilities as the payments are due.

the Company has performed a sensitivity analysis on interest rate risk at February 1, 2014 to determine how a change in interest rates would impact net
earnings. For the year ended February 1, 2014, the Company earned interest income of $621 on its cash and cash equivalents. An increase or decrease of
25 basis points in the average interest rate earned during the year would have increased net earnings by $148 or decreased net earnings by $118, respectively.
this analysis assumes that all other variables, in particular foreign currency rates, remain constant.

the Company has performed a sensitivity analysis on equity price risk at February 1, 2014, to determine how a change in the market price of the Company’s
marketable securities would impact other comprehensive income. the Company’s equity investments consist principally of preferred shares of Canadian
public companies. the Company believes that changes in interest rates influence the market price of these securities. A 5% increase or decrease in the market
price of the securities at February 1, 2014, would result in a $2,481 increase or decrease, respectively, in other comprehensive income for the year ended
February 1, 2014. the Company’s equity securities are subject to market risk and, as a result, the impact on other comprehensive income may ultimately be
greater than that indicated above.

28 CAPitAl mAnAgement

the Company’s objectives in managing capital are:

•

to ensure sufficient liquidity to enable the internal financing of capital projects thereby facilitating its expansion;

to maintain a strong capital base so as to maintain investor, creditor and market confidence; and

to provide an adequate return to shareholders.

the Company’s capital is composed of long-term debt, including the current portion and shareholders’ equity. the Company’s primary uses of capital are
to finance increases in non-cash working capital along with capital expenditures for new store additions, existing store renovation projects and office and
distribution centre improvements. the Company currently funds these requirements out of its internally-generated cash flows. the Company’s long-term
debt constitutes a mortgage on the distribution centre facility. the Company maintains unsecured operating lines of credit that it uses to satisfy
commitments for u.s. dollar denominated merchandise purchases. the Company does not have any long-term debt, other than the mortgage related
to the distribution centre, and therefore net earnings generated from operations are available for reinvestment in the Company or distribution to the
Company’s shareholders. the Board of directors does not establish quantitative return on capital criteria for management, but rather promotes year over
year sustainable profitable growth. On a quarterly basis, the Board of directors also reviews the level of dividends paid to the Company’s shareholders
and monitors the share repurchase program activities. the Company does not have a defined share repurchase plan and decisions are made on a specific
transaction basis and depend on market prices and regulatory restrictions. the Company is not subject to any externally imposed capital requirements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSReitmans (Canada) LimitedNOTESdiReCtORs
And OFFiCeRs

diReCtORs

David J. kassie
Stephen J. kauser
Samuel Minzberg

Daniel Rabinowicz
Jeremy H. Reitman
Stephen F. Reitman

Howard Stotland
John J. Swidler
Robert S. Vineberg

d
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a
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i
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OFFiCeRs

CORPORAte
Jeremy H. Reitman
Chairman and Chief executive Officer

Stephen F. Reitman
President and Chief Operating Officer

Brian Lindy, CPA, CA
executive vice-President

Eric williams, CPA, CA
vice-President – Finance and Chief Financial Officer

Henry Fiederer
senior vice-President

walter Lamothe
group President

Diane Archibald
vice-President – store design and development

Nathalie Bélanger
vice-President – eCommerce

Leta Bridgeman
vice-President – global sourcing

Domenic Carbone
vice-President – distribution and logistics

Alain Murad
vice-President – legal and secretary

Isabelle Oliva
vice-President – human Resources

Diane Randolph
vice-President – Chief information Officer

Allen F. Rubin
vice-President – Operations

Saul Schipper
vice-President – Real estate

Danielle Vallières
vice-President – global sourcing

Richard wait, CPA, CGA
vice-President – Comptroller

BAnneRs
Nadia Cerantola
President – Reitmans

Bruce Mackeracher
vice-President – Reitmans

Stefanie Ravenda
vice-President – Reitmans

Jacqueline Tardif
vice-President – Reitmans

Henry Fiederer
President – smart set

Cathy Cockerton
vice-President – smart set

Sylvain Forest
vice-President – smart set

Valérie Vedrines
vice-President – smart set

Jonathan Plens
President – thyme maternity

walter Lamothe
President – RW & CO.

Jean-François Fortin
vice-President – RW & CO.

Alain Lessard
vice-President – RW & CO.

Rita McAdam
vice-President – RW & CO.

Jeff Ronald
vice-President – RW & CO.

walter Lamothe
President – Penningtons / Addition elle

Maria Bligouras
vice-President – Penningtons

Ginette Harnois
vice-President – Penningtons

Rhonda Sandler
vice-President – Penningtons

Richard Dumont
vice-President – Addition elle

Sophie Gagnon
vice-President – thyme maternity

Roslyn Griner
vice-President – Addition elle

Roxane Liboiron
vice-President – thyme maternity

Janice Leclerc
vice-President – Addition elle

CORPORAte
inFORmAtiOn

ReitmAns (CAnAdA) limited

AdministRAtiOn OFFiCe
250 sauvé street West
montreal, québec h3l 1Z2
telephone:
Fax:
e-mail:
Corporate Website:

(514) 384-1140
(514) 385-2669
info@reitmans.com
reitmans.ca

RegisteRed OFFiCe
3300 highway #7 West, suite 702
vaughan, Ontario l4k 4m3
telephone:
Fax:

(905) 761-2830
(905) 761-8922

tRAnsFeR Agent And RegistRAR
Computershare investor services inc.
montreal, toronto, Calgary, vancouver

stoCk symboLs
the tOROntO stOCk exChAnge
Common
Class A non-voting

Ret
Ret.A

Une version française de ce rapport peut être obtenue en écrivant au secrétaire de
Reitmans (Canada) Limitée, 250, rue sauvé ouest, montréal, Québec H3L 1Z2

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design And PROduCtiOn:
COmmuniCAtiOns mARilyn gelFAnd inC.