Unusual items drag down Rona profit
A Rona store is shown in Toronto on Tuesday, July 31, 2012. (Nathan Denette / THE CANADIAN PRESS)
Published Wednesday, August 8, 2012 10:24AM EDT
BOUCHERVILLE, Que. -- Rona Inc. says its second quarter results were in line with its strategic targets, although the impact of usual items drove the national retailer's net profit about $3 million lower than the same period last year.
Canada's largest chain of home-improvement stores, which is fending off an unwanted takeover proposal from Lowe's, says its net profit for the quarter fell to $34.1 million from $37 million in the second quarter of 2011.
After adjustments to exclude $9.5 million in unusual items and other factors, Rona's profit rose to $43.6 million or 36 cents per share.
That's up from $37 million or 28 cents per share a year earlier but a penny per share below analyst estimates compiled by Thomson Reuters.
Revenue was in line with estimates, rising by 3.4 per cent from a year ago to $1.4 billion.
The company, which has its headquarters in Boucherville, Que., near Montreal, said the unusual items recognized part of the cost of moving some of its sales volume out of Rona's big-box stores and into smaller locations.
That strategic shift, which will have a total estimated cost of $110 million, was announced earlier this year.
Since Rona's second quarter ended on June 24, the company received and rejected an offer of $14.50 per share from Lowe's, the second-largest home-improvement retailer in the United States.
The announcement of Lowe's offer, just days before Premier Jean Charest announced Quebec will go to the polls on Sept. 4, was quickly denounced by his government.
The Lowe's offer comes as both it and Rona look for ways to grow revenue.
Rona has said it intends to maintain its strategy, which includes using a variety of store formats to meet different market conditions throughout Canada.
Robert Dutton, Rona's president and chief executive officer, said Wednesday that the company's performance has met expectations in the six months since outlining its strategic vision.
"In the second quarter we continued our disciplined and rigorous management in line with our financial priorities, which are to improve efficiency, optimize the capital structure and increase the return on capital," Dutton said in a statement.
"This approach enabled us to grow earnings per share before unusual items by 29 per cent while maintaining a solid balance sheet."
Headquartered in Mooresville, N.C., Lowe's has a small presence in Canada with only about 31 stores. Overall, Lowe's has 1,745 stores in North America, mostly in the United States.
The first Canadian Lowe's store was opened in 2007, several years after fellow American retailer Home Depot (NYSE:HD) already established a significant presence in Canada. Home Depot currently has 180 stores across Canada.
By contrast, Rona has more than 30,000 employees operating a network of nearly 800 stores under several banners as well as 14 hardware and construction distribution centres.