Rona’s revamped board will have 12 directors, down from the 14 it put in place during a leadership shakeup in early 2013. Eight new directors came on board as a result of that overhaul, including current CEO Robert SawyerPaul Chiasson/The Canadian Press
Canadian hardware retailer Rona Inc. is shrinking its board to precrisis size as two directors who joined the company to bolster its turnaround effort step down in the months to come.
The departures close the door further on a rocky chapter in Rona's history following U.S. rival Lowe's Cos. Inc.'s unsolicited takeover offer of $14.50 a share three years ago. The Quebec company's share price has drifted above that level every day for the past month as it enjoys renewed attention from investors fleeing energy and other sectors.
Wesley Voorheis, the former Hollinger Inc. chief executive officer who advised Toronto-based Invesco Canada Ltd. when the investment management company began efforts to dislodge Rona's board in November, 2012, will not seek re-election to Rona's board at the annual meeting in May, according to company filings. Barry Gilbertson, a British-based property expert with experience in distressed real estate assets, will also leave the company.
Rona's revamped board will have 12 directors, down from the 14 it put in place during a leadership shakeup in early 2013 agreed to by Rona's two largest investors – Invesco and the Caisse de dépôt et placement du Québec. Eight new directors came on board as a result of that overhaul, including current CEO Robert Sawyer.
"Rona is in very good hands with Robert Sawyer," Mr. Voorheis said by e-mail. "All good there." He declined to comment further. Invesco did not return messages asking for comment.
The changes reflect a deliberate attempt by the board's governance committee to find new talent to match current market challenges, said Rona spokeswoman Valérie Gonzalo. The two departing directors were brought on at a time when Rona had to focus on restructuring, Ms. Gonzalo said.
"Rona is now moving into a different cycle, a growth cycle, and the profile of its board members is changing to adapt," she said.
The Boucherville, Que.-based home improvement retailer has made measurable strides, tallying a $65-million net profit from continuing operations for fiscal 2014 on revenue of $4.1-billion. A plan to trim costs by shutting down underperforming stores and cutting administrative staff has yielded $79-million in cumulative savings. Last year marked the company's first same-store sales growth since 2006.
But Mr. Sawyer still faces tough challenges ahead as he works to protect market share amid industry conditions that remain shaky. In general, lower oil prices are giving clients more disposable income to spend. But that's being offset by a falling Canadian dollar that's making inventory purchased outside the country more expensive.
While Rona's sales picture varies by region, lower housing starts across most of Canada are not helping the company. Construction of new housing units dropped 16 per cent overall nationally in February, according to Canada Mortgage and Housing Corp. New home construction fell 53 per cent from a year earlier in Quebec, where Rona generates roughly half its sales, and 35 per cent in Ontario. Home construction also dropped in Alberta, although economists said they expect a much steeper decline in the months ahead.
In a bid to offset some of this weakness, Rona has expanded its product offering to include new consumable items such as pet food and bottled water. Mr. Sawyer is a grocery industry veteran.
Analysts say the effort is part of a tactical price-promotion strategy by Rona management while they wait for consumer confidence to pick up. The aim is to give customers who walk in an immediate perception of what Rona's prices are, based on these common items near the store entrance. Those competitive prices will set the tone for the rest of the customer's shopping experience.
"We believe that Rona's limited exposure to the downside risk of oil producing provinces, increased investor confidence in management and the strong contribution of share buybacks to EPS growth will provide Rona's valuation with strong support in the near term," Barclays analyst Jim Durran wrote in a Feb.18 note.
Nicolas Van Praet