Analysts are wondering how long a recent pickup in sales at building-material stores can last – and there is intensifying competition from U.S. giants Home Depot Inc. and Lowe’s Co. Inc. in a crowded domestic market.CHRIS WATTIE/Reuters
The pressure is on Rona Inc.'s new chief executive officer Robert Sawyer to announce some encouraging developments in the saga at Canada's largest home-improvement chain.
Unfortunately, these are not the best of times to be trying to fix Boucherville, Que.-based Rona.
Analysts are wondering how long a recent pickup in sales at building-material stores can last – and there is intensifying competition from U.S. giants Home Depot Inc. and Lowe's Co. Inc. in a crowded domestic market.
Mr. Sawyer, a former grocery industry executive, and his team have been diligently cutting costs and shutting underperforming stores in an aggressive program that aims to chop $110-million by year's end.
The goal is to refashion the company as a leaner, more agile retailer amid a shift to smaller neighbourhood outlets.
A key element is forging better relations with concerned store owners, who fired off a letter to Mr. Sawyer in August complaining that the chain's financial results continue to decline while the promised recovery is nowhere in sight.
Investors are running out of patience after Rona's board last year rejected an informal $1.8-billion takeover offer from Lowe's.
Mr. Sawyer and other senior executives get a chance to defend their plan when Rona unveils third-quarter results on Tuesday.
Canaccord Genuity analyst Derek Dley is forecasting revenue of $1.256-billion, down 6 per cent year over year.
He anticipates earnings before interest, taxes, depreciation and amortization (EBITDA) of $69-million, off 13 per cent from the year-earlier period.
His earnings-per-share estimate is 26 cents, compared with 27 cents in the same period the previous year, and below the analysts' consensus estimate of 31 cents.
Mr. Dley cites Statistics Canada figures indicating that home-hardware and garden-supply sales rose 2.8 per cent in the first two months of the quarter, but says Rona "likely underperformed the broader market." He is calling for same-store sales to fall 0.5 per cent in the third quarter.
Same-store sales – sales at stores open for at least a year – are a key measure in the retail industry.
Rona is making progress on the cost-cutting front but a fiercely competitive market isn't helping matters, Mr. Dley said.
"As the home renovation spending market remains cautious, and with heightened competition, we believe Rona continues to face challenging headwinds."
Bertrand Marotte