Disagreements erupting during Reitmans' shareholders gathering
Pulling Back the Curtains at Reitmans: Frustrated Shareholders Voice Concerns
The air was thick with tension on Wednesday, as disgruntled shareholders stormed the shareholders' meeting for Montreal-based retail titan Reitmans, stationed at the Palace Convention Centre in Laval.
Richard Dufour, our on-site reporter, witnessed several unwilling shareholders taking the stage to grill the management, expressing their mounting frustrations and questioning some questionable decisions made by the company.
The majority of concerns revolved around the lackluster performance presented at the meeting, while others called for clarification regarding the demands put forth by two influential institutional shareholders, Toronto-based asset manager Donville Kent and Irish family office Parma Investments, among others.
These vocal critics have demanded a revamp of the board of directors, the abolition of the two-tiered share system, and a transfer of the company listing to the Toronto Stock Exchange (TSE).
Yet, despite their collective outcry, they remained powerless to enact any meaningful change, as the control of Reitmans remains tightly clutched by the founding family.
Samuel Mintzberg, the main administrator and vice-president of Reitmans' board, presided over the meeting. He assured those in attendance that the board was diligently considering various options, such as the adoption of a TSE listing and the possibility of a dividend payout.
Jesse Gamble, a portfolio manager at Donville Kent, expressed his disappointment with the management's responses during the meeting. Nonetheless, he appreciated the opportunity for other shareholders to air their grievances and engage in discussions with the leaders.
Gamble had previously throw his hat in the ring, vying for a seat on the board of directors. He believed the company's fortunes would be vastly improved by injecting some fresh blood into its ranks.
Regrettably, his bid for election fell on deaf ears. He lamented the company's performance, as sales for February, March, and April had plummeted by 4% in comparison to the same period last year, leading to a net loss of a staggering $20 million.
CEO Andrea Limbardi attempted to divert blame by pinning the poor results on inclement weather, particularly snowstorms in certain regions, which brought store traffic to a screeching halt.
This defense did not sit well with Jesse Gamble, who quickly reminded the management that Montreal-based clothing retailer Groupe Dynamite made no such weather-related excuses when discussing their own results.
"They had an exceptional quarter. I wish we had the same results," Mintzberg retorted.
"Their results were indeed exceptional," Limbardi agreed. "Our five-year strategic plan, implemented since April, aims to mirror those results."
Reitmans' long-term objective is to generate $1 billion in revenue by the end of the 2030 fiscal year—a 5% compounded annual growth rate. They also aim to increase adjusted earnings before interest, taxes, and amortization between $60 and $70 million—a compounded annual growth rate of over 20%.
To achieve these ambitious goals, Reitmans plans to invest $100 million in growth initiatives over the next five years, or $20 million per year, by renovating, expanding, and opening stores, modernizing digital technologies, and revamping infrastructure.
Part of the company's growth strategy involves doubling men's clothing sales, which will be facilitated by the unveiling of a new store concept this fall. Female apparel is also expected to see double-digit growth.
The stock market reacted harshly to Wednesday's developments, with Reitmans' Class A shares plummeting 11% to close at $2.00 on the TSX Venture Exchange. Common shares also endured a 16% nosedive, closing at $2.25.
This renewed attention from investors comes after Reitmans filed for protection under the Companies' Creditors Arrangement Act in 2022, in an effort to tidy up their balance sheet and streamline operations during the pandemic.
Reitmans' shift from the TSX Venture Exchange to the TSE is a contentious issue among disgruntled shareholders, who view this move as a means of boosting Reitmans' profile among investors and enhancing liquidity. They also argue that abolishing the dual-class share system would rectify what they perceive as an unfair equity treatment issue that discourages large institutional investors.
- The concerned shareholders questioned the management about the company's financial strategies, expressing their dissatisfaction with the lackluster performance and the demand for a possible transition to the Toronto Stock Exchange (TSE) as a means to attract more investors.
- Jesse Gamble, a representative from asset manager Donville Kent, pointed out the contrast between Reitmans' performance and that of their competitor, Groupe Dynamite, expressing the need for fresh perspectives in the company's board of directors to improve its business and investing prospects.
