RONA same-store sales, income down in first quarter
Pointing to poor economic and weather conditions, Boucherville, Quebec, Canada-based hardware retailer RONA announced that same-store sales were down 5.2 percent in the first quarter of 2008, a period that also saw operating income decline 18.2 percent from $40.9 million to $33.4 million.
While RONA’s sales did increase 3.8 percent from $878.5 million to $911.5 million for the quarter, net earnings stood at $1.0 million, or $0.01 per share, compared to $9.0 million, or $0.08 per share, in 2007.
“The results for first quarter 2008 reflect the strong drop in consumer confidence in the country’s economic growth,” said RONA president and CEO Robert Dutton. “Results were also affected by weather conditions that were particularly unfavourable to construction and renovation activity in Ontario and Quebec, where we get nearly 70 percent of our sales.”
Dutton further explained that, because of the seasonality of RONA’s business, only 15 percent of annual sales and 5 percent of earnings are on average generated in the first quarter of the year. “So we have very little room to manoeuvre at the beginning of the year to compensate for these difficult market conditions,” he said.
Still, RONA introduced several initiatives in the quarter under its new PEP (Productivity, Efficiency, Profitability) program, with the following results:
• 130 basis point improvement in gross margin
• More than 10 percent growth in sales of private brand products and installation services
• $83 million, or 9 percent, reduction in inventories on a comparable basis versus first quarter 2007
In addition, RONA stepped up training for employees in sales support in several products and services, including the Project Guide service, RONA by Design, installation services, credit and financing solutions and the new line of RONA ECO products.
“The results of these efforts are very encouraging for the coming quarters. This, combined with the various initiatives to boost sales and stimulate customer loyalty, will allow us to mitigate for the current slowdown in our industry,” Dutton said.
RONA, a distributor and retailer of hardware, home renovation and gardening products, operates a network of more than 680 corporate, franchise and affiliate stores and generates over $6.3 billion in annual retail sales.