BUSINESS

Rona hires grocery veteran to bring some discipline to rebuilding effort

03/19/2013 08:12 EDT | Updated 05/19/2013 05:12 EDT
MONTREAL - After years of "dreaming" and expansion, Rona has hired a tough veteran from Canada's grocery industry as chief executive to help it rebuild the embattled home improvement retailer to profitable growth, the company said Tuesday.

Robert Sawyer, 59, will become Rona's president and CEO next month after more than 30 years in grocery retailing, including nearly four years in the No. 2 management position at Metro Inc. (TSX:MRU) — another large Quebec-based national retailer.

"We've had great builders here. We've had great dreamers... but I think we forgot to run the business as efficiently as we should be running it," Rona's executive chairman Robert Chevrier said in an interview.

While Sawyer appears affable and friendly, he has the discipline to make the tough decisions required to turn Rona around, Chevrier added.

"He doesn't fool around. He has the ability of making quick decisions, even difficult decisions. I like his style. He makes things happen. He's a nice, solid, rigorous guy."

Sawyer's career may have been spent in the grocery business, but Chevrier said the dynamics of the two industries are "pretty much the same."

"I don't think we could have found a better fit with his credentials having run a large distribution, retail company with multi formats, banners, merchants oriented, corporate owned, franchise affiliates and so on which mirrors exactly the situation of Rona."

Rona (TSX:RON), which has its headquarters in the Montreal-area community of Boucherville, Que., has grown to nearly 30,000 employees across the country through a combination of acquisitions, partnerships and internal growth.

Chevrier said Sawyer will use his experience to adapt Rona's strategic plan to simplify and optimize the company's business model, particularly with respect to merchandising, pricing strategy, supply chain, service to consumers and service to Rona dealers.

"It doesn't mean he'll endorse 100 per cent of the things we've launched but he'll make the proper adjustments, fit it to his own style and agenda and I think he'll bring a lot to the party."

Rona's acting CEO, Dominique Boies, will assist Sawyer and be on the corporation's management committee.

Boies had been Rona's chief financial officer when he was named interim CEO after the company's long-time chief executive, Robert Dutton, stepped aside in November.

Sawyer's first task is to evaluate if he has the right management team to make Rona more efficient and adopt changes at the right pace, Chevrier said.

Many of Rona's investors have expressed frustration with the company's returns in recent years, especially since it rejected a takeover attempt by Lowe's last year. The U.S. home improvement company has a relatively small presence in Canada and an acquisition of Rona would have greatly increased its market share.

Chevrier denied suggestions that Rona is merely making changes to make itself more attractive to a higher bid from Lowe's.

"I don't see what they would add to the party," he said, adding that Rona has the winning model of smaller proximity stores that others want.

While other candidates reportedly turned down offers to become CEO before Chevrier became chairman three months ago, he said the francophone Sawyer was his first choice.

Chevrier said he approached Sawyer after being tipped by a few friends that the Metro executive was someone to look at.

Derek Dley of Canaccord Genuity called Sawyer a strong appointment but said it's going to take more than a new CEO to "right the ship" at Rona.

"They're facing a number of macroeconomic headwinds I don't think one individual can change at this point," he said.

In addition to a weak home renovation market in Canada, Rona is losing market share to the big players from the U.S. — Home Depot and Lowe's, Dley added.

Metro, which has 65,000 employees, 600 food stores and 250 drug stores under several banners, said the position of chief operating officer — often seen as a potential successor to a CEO — won't be filled after Sawyer's departure.

The heads of the grocery company's Quebec and Ontario divisions will now report to Metro CEO Eric La Fleche.

Irene Nattel of RBC Capital Markets said Sawyer's departure from Metro is "not the best news" but the grocer is in very good shape with deep management bench strength despite losing its second big executive in less than a year.

"For Rona, this is an excellent choice as Mr. Sawyer is an experienced retail veteran, albeit with no experience in discretionary retail," she wrote in a report, adding that the move was a great late-career challenge for Sawyer.

Despite Sawyer's talents, she too said he cannot change the macro headwinds facing Rona, such as slowing consumer spending and a forecasted decline in residential investment spending in 2013 and 2014.

On the Toronto Stock Exchange, Rona's shares were up 42 cents, or nearly 4 per cent, at $10.98 on Tuesday. Metro's shares were up a penny to $63.47.