Home improvement retailer Rona Inc. saw its net profit fall to $5.1-million in the third quarter due to a drop in sales, more competition and several non-recurring costs.
That’s down from a net profit of $47.8-million in the same period last year. Diluted earnings per share dropped to four cents from 36 cents year-over-year, the company said Wednesday.
The quarter included a period when the company, headquartered near Montreal in Boucherville, Que., was fending off an unsolicited takeover by the Lowes chain – which later backed off and dropped the $1.76-billion attempt.
Rona stressed in its earnings announcement Wednesday that unusual and non-recurring items had been a major reason for the lower profit.
Excluding those items, Rona had a net income of $33.1-million, or 27 cents per share – still well below analyst estimates.
Consolidated revenues for the third quarter were fairly steady at $1.34-billion, down $10.6-million or less than 1 per cent from the third quarter of 2011.
Rona was expected to earn 40 cents per share in adjusted profits on $1.35-billion in revenues in the third quarter, according to a consensus estimate compiled by Thomson Reuters.
The non-recurring costs included severance payments due to an administrative-services reorganization in July and the temporary increase in advertising expense for the 2012 Summer Olympics campaign.
“Rona’s third quarter results contain unusual items and non-recurring items which had a one-time impact on the Corporation’s financial performance,” the Montreal-area company said in a news release.
“In effect, after improving from February to June, market conditions during the quarter reflected renewed consumer caution, or even reluctance, with respect to spending,” Rona said.
Lowe’s Cos. Inc.’s abandoned its bid for Rona in September after Rona’s board rejected the offer and Quebec politicians objected to a foreign takeover of such a large Quebec-based retailer and employer.
Analysts said Lowe’s may still have designs for Rona, if not by acquisition of the whole chain, then perhaps by adding big box stores as Rona expands the number of smaller, proximity stores.
Some suggested a hostile bid could be launched before Rona closes or shrinks the size of 20 more big box stores outside Quebec.
Rona closed three stores in Whitby, Ont., Calgary and Edmonton that were close to Lowe’s locations and has vowed to take action on the other stores over the next six months.
Only 31 of Lowe’s stores are in Canada, out of 1,745 across North America.
Rona has more than 30,000 employees operating a network of about 830 company and affiliate-owned home improvement locations in Canada under its banner, but only about 80 in the large store format. It also has a division geared to the professional contractor market.
Home Depot currently has 180 stores across Canada.