MONTREAL - Canadian home renovation retailer Rona fell far short of analyst expectations in the fourth quarter on lower sales blamed on poor weather and weak housing starts.
The Quebec-based company's revenues decreased 12 per cent to $941.1 million, from $1.07 billion in the year-ago period, which included an extra week of business.
Its adjusted profit decreased 28 per cent to $4.6 million or four cents per share for the period ended Dec. 29, one cent less than the prior year and six cents per share below the general estimate.
Same-store sales dropped 3.5 per cent due to poor weather in Ontario and Quebec in December and a decline in housing starts.
Rona chief executive Robert Sawyer, who was brought in from Metro Inc. (TSX:MRU) last April, said he was satisfied with Rona's progress and said it achieved the goal of $110 million of annualized cost savings.
"Fiscal 2013 was a year of profound organizational change at Rona, against the backdrop of a difficult market context for our industry," Sawyer said in the company's quarterly announcement.
Rona (TSX:RON) had been expected to earn 10 cents per share in adjusted profits on $1.08 billion of revenues, according to analysts polled by Thomson Reuters.
Including one-time items, the company's net loss from continuing operations was $1.1 million or one cent per share. That compared to a net loss of $17.3 million or 14 cents per share a year earlier.
Rona has Canada's largest network of home renovation, hardware and gardening stores of various sizes.
Rona's (TSX:RON) shares were down 7.36 per cent early Tuesday afternoon after the announcement, losing 91 cents at $11.46.
For the full year, the retailer's net loss from continuing operations was $45.9 million or 38 cents per share, compared to a profit of $12.3 million or 10 cents per share in 2012. The adjusted profits plummeted to $49.9 million or 41 cents per share, compared to $73.5 million or 60 cents per share a year earlier.
Revenues were down 5.7 per cent to $4.19 billion on a 1.9 per cent decrease in sales for stores open at least a year.
The company will focus this year on repositioning some store banners and stabilizing profit margins after lowering price and selling excess inventory.
"Most importantly, we will concentrate on meeting the needs of our target customers so that we can increase our market share in an industry that is experiencing a cyclical slowdown," Sawyer said.
Rona received $214 million in cash from the sale of its commercial and professional market division in the quarter. The proceeds were earmarked for its credit facility, whose balance was reduced to $45 million. Its net debt was reduced to $167.2 million from nearly $300 million at the end of 2012.
The net loss at Rona's commercial and professional division was $2.4 million in the quarter and $117.4 million for the year. That compared to a loss of $800,000 in the quarter and $5.1 million for the year in 2012.
Irene Nattel of RBC Capital Markets said the fourth-quarter results "underscore yet again the challenging macro environment facing Rona as it works to rebuild its foundation."
In recent years, Rona has struggled with slower home construction, weak Canadian economic growth in many markets and competition from U.S. big-box retailers Home Depot and Lowes.
It has closed several large format stores in Ontario and B.C., eliminated more than 1,000 store and management positions and has targeted $110 million in annual cost savings. The chain is repositioning its Reno-Depot banner in Quebec based on a new store concept and plans to complete the changes at all 16 Reno-Depot stores by late 2014.
Rona said the new concept store has a redesigned shopping experience and a new procurement policy to ensure the right amount of merchandise is always in stock.
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