August 11, 2009 / 1:25 PM / in 9 years

UPDATE 2-Rona's profit drops on weak housing market

* EPS C$0.55 ex-items vs forecast C$0.59

* Revenue drops 7 pct to C$1.37 bln

* Same-store sales down 6.2 percent

* Cuts 2009 capex by 18.4 pct to C$160 mln (Adds analyst comments and background)

TORONTO, Aug 11 (Reuters) - Rona Inc RON.TO reported a lower second-quarter profit on Tuesday amid weak same-store sales and a battered housing market that shows no signs of improving.

Canada’s biggest home-improvement chain with, about 700 stores across the country, said earnings fell to C$60.8 million ($55.3 million), or 51 Canadian cents a share, from C$76.6 million, or 66 Canadian cents a share, a year earlier.

Excluding items, Rona earned C$66.5 million, or 55 Canadian cents a share, down from C$80.6 million, or 69 Canadian cents per share.

Revenue fell 7 percent to C$1.37 billion.

Analysts, on average, had expected earnings of 59 Canadian cents a share before items and revenue of C$1.43 billion, according to Reuters Estimates.

Same-store sales, a measure of the performance of stores open for at least a year, slipped 6.2 percent due to the slumping economy and the soft Canadian housing market.

Rona said it will remain cautious about the months ahead until it sees clear signs of a recovery. Earlier on Tuesday, Canada Mortgage and Housing Corp said housing starts fell 4.1 percent in July.

“The negative housing starts and unemployment continue to weigh on them,” said Brian Yarbrough, an analyst at Edward Jones, St. Louis, Missouri. “It’s not the perfect storm but close to it.”

The weak housing market, which has resulted in slowing purchases of renovation products by contractors and homeowners, has also forced the company to scale back on its capital expenditures.

Rona said it expects to spend about C$160 million in capex during the year, down 18.4 percent from the 2008 figure. ($1=$1.10 Canadian) (Reporting by Scott Anderson; editing by Rob Wilson)

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