BUSINESS

Rona says it has turned around company with swing to profits in 2014

02/17/2015 10:32 EST | Updated 04/19/2015 05:59 EDT
MONTREAL - Rona reversed last year's big loss to post a profit in 2014 as the Quebec-based home renovation retailer enjoyed its first increase in full-year organic sales in eight years.

Rona (TSX:RON) capped the year by earning $5.4 million in net income attributable to shareholders in the fourth quarter as it handily beat expectations for both profit and revenue.

It was helped by six per cent growth in same-store retail sales from continuing operations and a 9.3 per cent increase in its distribution business.

Chief executive Robert Sawyer said the improvements came despite increased competition, reduced housing starts and a slow business environment in Quebec and the Atlantic Provinces.

"Could you imagine if we would have a wind in our back instead of our face," he said Tuesday during a conference call.

Rona has closed 11 unprofitable stores in Ontario and Western Canada, deriving more than $110 million in annualized cost savings and eliminating 1,000 front-line and management positions. It plans to open five new Reno-Depot big box stores in 2015, including the first outside Quebec in Aurora, Ont., and in Calgary North.

Shares in the company closed up nearly eight per cent Tuesday, gaining $1.01 to $13.93 on the Toronto Stock Exchange.

Rona said the profit amounted to three cents per diluted share for the three months ended Dec. 28, compared with a loss of $1.1 million or three cents per share a year ago.

Excluding one-time items such as $20.6 million in restructuring charges, Rona said its adjusted earnings from continuing operations were $17.3 million or 15 cents per share, up from $4.6 million or four cents per share a year ago.

Total revenue from continuing operations grew three per cent to $971.3 million.

The company was expected to earn 11 cents per share in adjusted profits on $957.6 million of revenues, according to analysts polled by Thomson Reuters.

Irene Nattel of RBC Capital Markets said Rona enjoyed a solid end to the year but that the larger economic outlook remains a concern, especially in Western Canada.

Sawyer said the company has not seen much negative impact so far from a slowing economy in the West, which accounts for about 30 per cent of sales.

For the full year, Rona earned a net profit attributable to shareholders of $76 million or 56 cents per diluted share, compared with a loss of $154-million or $1.34 per share in 2013. Revenues decreased two per cent to nearly $4.1 billion, but increased 1.1 per cent among stores open at least a year.