MONTREAL – Rona posted stronger earnings in 2015 and the best same-store sales growth in almost a decade as the Canadian home renovations retailer heads towards a friendly takeover by U.S. giant Lowe’s later this year.
The Quebec-based company said its restructuring plan adopted three years ago had led to a fast turnaround in same-store sales, which measures sales at stores that have been open for at least a year.
Sales grew by 3.1 per cent in 2015, up from 1.1 per cent a year earlier and seven consecutive years of decreases.
“(The) Rona network is much stronger now than it was a year ago,” CEO Robert Sawyer said Tuesday during what was likely his last conference call before the sale to Lowe’s is consummated.
Rona’s shareholders are expected to vote March 31 on Lowe’s offer of $24 per share, although various regulatory approvals are required before the deal closes, likely in the second quarter.
Lowe’s executives and Rona chairman Robert Chevrier have credited Rona’s financial turnaround for facilitating the takeover.
Rona (TSX:RON) earned $16.7 million in the 13 weeks ended Dec. 27, compared with $6.05 million a year earlier.
Excluding one-time items, its adjusted net income from continuing operations rose to $21.2 million or 20 cents per share, from $17.3 million or 15 cents per share in the fourth quarter of 2014. Revenue grew 6.5 per cent to $1.03 billion, mainly from the acquisition of 20 franchised stores and a 0.8 per cent increase in retail same-store sales.
The company had been expected to earn 18 cents per share on $1.01 billion of revenue, according to analysts polled by Thomson Reuters.
“The overall performance for the year was achieved despite a challenging competitive environment, a sluggish economy and difficult market conditions in many regions,” Sawyer said.
Rona said a good performance in Ontario and British Columbia and warmer weather conditions prolonged the building and renovation season in several regions of the country, offsetting challenging economic conditions in Alberta.
“It’s not getting worse and we’re still overall in a relatively good spot with Western Canada,” added chief financial officer Dominique Boies.
For the full year, net profits decreased to $68.05 million from $78.25 million. Excluding restructuring and other costs, adjusted net income grew to $261.7 million or 95 cents per share, from $235.4 million or 70 cents per share in 2014.
Revenues were $4.23 billion, up from $4.1 billion.
Peter Sklar of BMO Capital Markets said the results were slightly above expectations “but not relevant given Lowe’s offer.”