February 23, 2012 / 5:13 PM / 6 years ago

Rona looks to smaller format home-improvement stores

TORONTO (Reuters) - Canada’s Rona Inc RON.TO said on Thursday it is shifting its focus away from big-box home improvement stores and will start by closing or renovating 23 of its biggest outlets in a fresh strategy to stay competitive in a more crowded market.

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

The new business plan came as Rona, which operates 800 stores across Canada, reported little change in its quarterly earnings, excluding a goodwill impairment and restructuring costs. Sales in established stores declined, extending a string of quarters in which same-store sales dropped.

In the next two years Rona will cut the size of 13 of its big box stores by 30 to 50 percent, renting out the extra space. It will close 10 other stores, replacing them with 25 smaller locations. The company will also relaunch its website.

“Our research indicates that proximity continues to be the most important factor considered by consumers when selecting a store,” said Chief Executive Robert Dutton on a conference call. “We want our customers to be from one click to 10 minutes away from a Rona store.”

The Boucherville, Quebec-based Rona said stores in the new model will average 35,000 square feet. It has no short-term plans to build new big box stores.

Excluding items, earnings for the quarter ended December 25 dropped to C$19.7 million ($19.7 million), or 15 Canadian cents a share, from C$20 million, or 15 Canadian cents, a year earlier. A goodwill impairment and restructuring costs pushed the company to a C$151 million net loss.

Revenue rose to C$1.17 billion from C$1.14 billion. Analysts, on average, had expected earnings of 16 Canadian cents on revenue of C$1.13 billion.

The company said the weak results reflected fragile consumer confidence given global economic uncertainty.

Sales at established stores, a key measure for retailers, fell 2.3 percent in the fourth quarter. That is an improvement over the three previous quarters, when same-store sales fell 5 percent or more.

Rona, once Canada’s dominant do-it-yourself chain, has fared poorly as Lowe’s (LOW.N) and Home Depot (HD.N), the two largest U.S. home improvement retailers, have made deeper inroads north of the border.

($1=$1.00 Canadian)

Reporting By Allison Martell; Editing by Janet Guttsman

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