President's Report

To our shareholders,

Fiscal 2012 will long be remembered as a most challenging and difficult year.

Sales for the year ended January 28, 2012 (“fiscal 2012”) decreased 3.7% to $1,019,397,000. Same store sales decreased 4.3%. Sales were challenging throughout the year as consumer spending on apparel was negatively impacted by reduced discretionary consumer income and by weak customer traffic as many consumers were faced with high personal debt levels and increased food and gasoline prices.

The Company's gross margin decreased from 66.9% in fiscal 2011 to 64.4% in fiscal 2012 as a result of increased promotional activity in a highly competitive environment. For fiscal 2012, adjusted EBITDA1 decreased to $126,788,000 as compared with $184,369,000 for fiscal 2011. Net earnings decreased 46.6% to $47,539,000 or $0.72 diluted earnings per share as compared with $88,985,000 or $1.32 diluted earnings per share last year.

On October 19, 2011 the Company announced the closure of its 25 Cassis stores of which approximately 12 stores will be converted to other Company banners. In fiscal 2012, the Company recorded costs associated with the Cassis closing including store conversions, closures and severances of approximately $4,400,000 after tax.

During the year, the Company opened 30 new stores and closed 56. Accordingly, at January 28, 2012, there were 942 stores in operation, consisting of 362 Reitmans, 150 Smart Set, 66 RW & CO., 76 Thyme Maternity, 152 Penningtons, 116 Addition Elle and 20 Cassis as compared with a total of 968 stores as at January 29, 2011.

In fiscal 2013, we expect to open 44 new stores, close 54 stores and remodel 60 stores. We continue to upgrade our technology platform and distribution centre. We continue to invest in our people with skills development and management training programs. Our cash resources and infrastructure allow us to seek out new business opportunities through acquisition and development.

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 86 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 continued growth of the Company.

On behalf of the Board of Directors,

Jeremy H. Reitman
Chairman and Chief Executive Officer

Montreal, March 28, 2012