Rona's Q2 net income down 44.2% year-over-year to C$37M, sales down 2.4% to C$1.37B; results influenced by poor weather conditions, fragile consumer confidence

BOUCHERVILLE, Quebec , August 10, 2011 (press release) – RONA inc. (TSX: RON, RON.PR.A), the largest Canadian distributor and retailer of hardware, renovation and gardening products, today reported its financial results for the 13-week and 26-week periods ended June 26, 2011 (second quarter of 2011). All figures in this release are in Canadian dollars and presented according to IFRS accounting standards.

Financial Highlights

Compared to the second quarter of 2010:

  • Sales decreased 2.4%, or $34.2 million: same-store sales were down 9.6%, the contribution from acquisitions was 7.0%
  • EBITDA went from $133.1 million to $89.9 million
  • Net income attributable to participating shares of $37.0 million, compared to $66.3 million
  • Earnings per share of $0.28 (diluted), compared to $0.51 per share (diluted)
  • Cash flow from operations of $210.6 million, compared to $71.1 million
Counting on its strong free cash flow generation, the Corporation’s Board of Directors approved the implementation of a normal course issuer bid, subject to the Toronto Stock Exchange approval, at its quarterly meeting.

Operational Highlights
  • Very poor weather conditions across Canada, particularly in April and May; consumers continued to take a careful approach to major renovation projects
  • Reduction in comparable retail and distribution inventories of $15 million, in line with the objective of reducing comparable inventories by $100 million by the end of 2011
  • Net change in working capital of $134.1 million compared to a negative variation of $42.2 million in 2010
  • CAPEX reduced to level lower than depreciation expense
  • Marked growth in penetration of private and controlled brands, from 24% to 28%
  • Recruitment of 7 new RONA affiliated dealer stores and 45 new TruServ Canada clients since the start of the year
  • Opening of 5 new points of sales specialized in plumbing under the Noble banner in the Commercial and Professional Market division
"For the second quarter in a row, very poor weather conditions, especially in April and May, and fragile consumer confidence significantly impacted our quarterly results," said Robert Dutton, President and CEO of RONA.

"Although the pressure on sales, and the promotional activities demanded by the context affected our earnings, we have managed the situation very prudently. We have, among other things, increased the sales penetration rate of our private-brand and controlled-brand products from 24% to 28%, reduced our same-store administrative expenses by 10% on an annualized basis, reduced our same-store retail and distribution inventories by $15 million, and been very disciplined in our capital investments, reducing them to less than the Corporation's depreciation expense. These measures will definitely have a positive impact on results in coming quarters," said Mr. Dutton.

Commenting on the outlook, Mr. Dutton noted: "Although there was less pressure on same-store sales in July, especially in Ontario, and sales in the kitchen and construction material categories were up sharply, we expect continued pressure on same-store sales overall until the end of the year in light of the fragile nature of consumer confidence in Canada and consumers' careful approach to major renovation projects. Given the situation, we implemented further efficiency improvement measures in the second quarter, which will permit us to improve the gross margin and reduce our sales and administrative expenses by the end of the fiscal year. We therefore expect to generate net income comparable to last year in the second half of the year."

Mr. Dutton added: "Although the current market conditions pose certain difficulties, I am convinced that we have the best business plan for dealing with the current and future changes in our industry. I also believe that a number of players are in a difficult situation, which will create opportunities for RONA and its affiliated dealers. In fact, our affiliated dealers are already taking steps as they are investing more than $30 million this year in a number of expansion and improvement projects, which shows their confidence in our development plan. Their sons and daughters are also very positive, as a number of them have used or are planning to use our unique succession-planning program and our store-purchase development fund."

Additional Information

The Management’s Discussion and Analysis (MD&A) and unaudited interim consolidated financial statements with notes for the second quarter of 2011 can be found in the "Investor Relations" section of the Corporation's website at and on the SEDAR website at The Corporation's Annual Report, along with other information about RONA, including its Annual Information Form, can also be found on the RONA and SEDAR websites.

Telephone Conference with the Financial Community

On Wednesday, August 10, 2011, at 11:00 a.m. (EST), RONA will hold a telephone conference for the financial community. To join the conference, please call 416-340-2216 or 1 866 226-1792. To listen to the call online, please go to

About RONA

RONA is the largest Canadian distributor and retailer of hardware, home renovation and gardening products. RONA operates a network of more than 950 corporate, franchise and affiliate stores of various sizes and formats. With close to 30,000 employees working under its family of banners in every region of Canada and more than 17 million square feet of retail space, the RONA store network generates over $6 billion in annual retail sales. For more information, please visit

Industry Intelligene Editor's Note: In an omitted table, Rona reported Q2 net sales of C$1.37 billion.  For the same period a year ago, the company recorded net sales of US$1.4 billion.

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.