Canada's Rona profit up as cost-cutting plan takes effect

Tue Nov 12, 2013 2:04pm EST
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By Solarina Ho

TORONTO (Reuters) - Struggling Canadian home improvement retailer and distributor Rona Inc RON.TO reported a bigger quarterly profit on Tuesday as it cut costs, but competition and cooling new home construction hurt sales.

The Boucherville, Quebec-based company, facing a raft of challenges as it works through an aggressive restructuring plan, said its results were helped by on-target cost savings, but revenue declined on store closures and a sales slump at established stores.

The company noted ground breaking on new single-family homes shrank significantly in its home province in the three months ending September 29. Rona earns nearly 50 percent of its revenue in Quebec.

Rona, which also announced a share buy-back on Tuesday that helped support the stock, has underperformed its peers in a tough market dominated by big U.S. retailers like Home Depot Inc (HD.N: Quote) and Lowe's Co Ltd (LOW.N: Quote).

As part of a recovery plan announced in late June, the retailer said it generated annualized cost savings of C$63 million ($60 million), primarily due to job cuts, cheaper administration services and closing money-losing stores.

Last month, it also completed the sale of its plumbing, heating, ventilation and air conditioning division to Talisker Plumbing Corp for C$214 million.

On Monday, Rona said it was acquiring the 49 percent stake in a family-run business that it did not already own. Financial terms of the purchase of Groupe Coupal, which operates under the banner Materiaux Coupal and sells lumber and building materials to contractors, were not disclosed.

SALES SLUMP   Continued...

A Rona store is pictured in Ottawa February 24, 2011. REUTERS/Chris Wattie