The incoming leader of Rona Inc., who helped spearhead a transformational expansion at grocer Metro Inc., now has the mandate to work his retailing skills to revive the troubled home-improvement purveyor amid soft consumer spending.
Robert Sawyer, currently chief operating officer of Metro, will begin the tough task next month of leading the turnaround at Rona, also a Quebec-based merchant, even though his retail experience is limited to the supermarket sector rather than hardware and home goods.
Rona is betting that Mr. Sawyer’s strengths as a seasoned retailer who oversaw the acquisition of a mishmash of different banners and their streamlining under one name, even while Metro’s stock picked up, will lure shoppers away from savvy home reno rivals.
The work won’t be easy for Mr. Sawyer, even though he comes to the new job with solid credentials. Consumer spending is slowing amid a forecast of declining home sales, which can hurt renovation spending, this year and next.
“As talented as Mr. Sawyer may be, he cannot change the macro headwinds buffeting the company,” said Irene Nattel, retail analyst at RBC Capital Markets.
Rona, whose former long-time CEO Robert Dutton was shown the door last November, is struggling to downsize its unwieldy operations after years of small acquisitions and mixing big box stores with smaller ones. Its board of directors has set out a strategy to sell off underperforming superstores and non-core businesses while focusing on its most promising small outlets.
Now Mr. Sawyer has to fine-tune the strategy while learning the home-improvement ropes and grappling with a cautious consumer.
Last month, Rona announced its latest restructuring plan, starting with 200 layoffs across Canada and a refit to become smaller but more profitable – aimed at raising operating profit by $35-million to $45-million within two years.
Robert Chevrier, chairman of Rona, said his first mission is to ensure he builds the best team to execute the strategic plan announced six months ago.
“Mr. Sawyer is well aware of the strategy and his experience as an established operator with a broad knowledge of a similarly structured corporation will help Rona in realizing the plan,” a Rona spokeswoman said in an e-mail.
Mr. Sawyer brings an excellent track record in store operations and merchandising, which are critical in Rona’s transformation, said Mark Petrie, a retail analyst at CIBC World Markets. He said the appointment is a strong choice and a positive step forward for Rona.
But Mr. Sawyer “will be faced with immense challenges at Rona,” Mr. Petrie added. “The business outside of Quebec has chronically underperformed.”
The company has made little progress in its efforts to move out of some non-Quebec big-box locations, he said. “Exiting leases would come with large penalties, and the associated loss of sales volume would dent the profitability of the rest of the network through reduced purchasing power.”
And Rona’s expected sale of its lucrative commercial and professional segment would free up capital for store investments and share buybacks, but “would remove one of the better-performing pieces of the business,” Mr. Petrie said.
Last year, Rona angered many of its shareholders when it rejected a $1.8-billion takeover proposal from U.S.-based Lowe’s Cos. amid strong opposition from the Quebec government.
In Canada, Lowe’s continues to add stores to shore up its underperforming business. Its plan to add three new superstores this year, which would bring its store count to 37, implies a 9 per cent growth in selling space in an already crowded market, Mr. Petrie said.