Struggling home-improvement retailer Rona Inc., which has spurned a $1.8-billion takeover proposal by U.S. rival Lowe’s Cos., is moving to streamline its business and sell off non-core assets.
On Thursday, Dominique Boies, acting chief executive officer, will unveil three new strategic priorities in a bid to revive the ailing retailer. They include reviewing its business in a bid to “dispose of non-core assets and redeploy capital to further leverage core assets,” says the release, obtained by The Globe and Mail.
Spokeswoman Michelle Laberge said the company hasn’t decided yet which businesses the company will categorize as non-core and sell off, and a decision will be made by next February when Rona reports its quarterly results.
“It’s really about making sure that going forward we focus on what it the most profitable businesses,” she said in a brief interview.
Mr. Boies will outline the priorities that the Quebec-based company’s board of directors decided on this week: leveraging the retailer’s core home-improvement business; pumping up key customer segments through “a more compelling value proposition;” and “unlocking the profit potential of a simplified business model.” The release does not spell out how the company will be streamlined or what assets will be sold.
“Our strategic priorities are perfectly aligned with our three financial priorities and underscore our efforts to compete in today’s marketplace and improve our operational and financial results,” he says in the release.
Mr. Boies, who replaced Robert Dutton a few weeks ago when the then CEO abruptly left the company, is scheduled to meet with reporters in Montreal on Thursday morning.
The release says the retailer will establish “a clearer value proposition” for key customer segments in stores, online and in distribution services offered to store owners.
And, to streamline the business, it says will “realign the critical operational functions, standardize processes ... and build on them through the development of a culture of constant improvement.”
Rona has been rocked by weak financial results and disgruntled shareholders that backed Lowe’s informal takeover offer last summer. One of Rona’s largest shareholders, Invesco Canada Ltd., plans to launch a proxy fight to remove Rona’s directors and elect new ones. Invesco has yet to elaborate on its plans and could not be reached on Wednesday.
The battle has unfolded with the backdrop of the Parti Québécois government, which opposes a foreign takeover of a retailer described by the province’s former finance minister as a “strategic interest.” He warned an acquisition by Lowe’s would squeeze Rona’s employees in the province and its suppliers.
Invesco is pushing for board reform after Rona parted ways with its chief executive officer last month amid signs that the Caisse de dépôt et placement du Québec, which also opposed a Lowe’s takeover, was getting impatient with the Canadian retailer’s poor results. The Caisse is Rona’s largest shareholder. Last month, Rona released weak third-quarter results that saw profit plummet 89 per cent to $5.1-million. Michael Sabia , CEO of the Caisse, made it known to Rona’s board that he wasn’t happy with the retailer’s performance, a source said. A Caisse spokesman wouldn’t comment.
Domestic retailers have struggled with a sluggish economy, debt-ridden consumers and steeper foreign competition. Still, U.S. giant Home Depot Inc. reported last month that its Canadian division had enjoyed “positive” third-quarter same-store sales, an important retail measure of sales at outlets open a year or more. Those quarterly sales at Rona dropped 1.2 per cent.
Rona’s results have been challenged for the past five years, prompting Mr. Dutton, the CEO of two decades until last month, earlier this year to introduce a new strategy of focusing more on smaller stores and closing some big-box outlets. The retailer plans to continue with that strategy of downsizing and shutting some of its superstores, Ms. Laberge said on Wednesday.