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Higher costs dent Leon’s Furniture profit

Terry Leon, president and CEO of Leon's Furniture at his flaship Toronto store after announcing the purchase of Brick Ltd. Nov. 12, 2012.

J.P. MOCZULSKI/J.P. MOCZULSKI

Leon's Furniture Ltd. posted a $13-million profit in the third quarter, a 15-per-cent decline from the same period last year as the addition of four stores last year added overhead expenses during a period of flat sales growth.

Profit for the quarter was equal to 19 cents a common share, down 13.6 per cent from 22 cents a share or $15.3-million in the comparable period of 2011.

Leon's issued its report two days after announcing plans to acquire Brick Ltd., an Edmonton-based rival, in a friendly deal they say will help the Canadian retailers cope with U.S.-based competitors such as Target Corp. and Wal-Mart Stores Inc.

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Toronto-based Leon's said overall sales throughout its system, including franchised locations, totalled $223.68-million in the three months ended Sept. 30.

That was barely changed from the third quarter of 2011, when overall system sales totalled $223.65-million.

Net operating expenses rose 3 per cent from a year ago to $54.2-million – mainly owing to higher marketing costs and administration expenses resulting from the addition of four stores last fall.

"The slowdown in the economy continues to affect our results and we do not see any immediate signs of improvement. As such, we anticipate that consumer discretionary spending will remain soft for the balance of 2012," the company said in a statement on Tuesday.

"To help counter this, we will continue our strong marketing and merchandising campaign. The opening of four new stores in the latter part of 2011 should also aid our sales in the fourth quarter of 2012. Even with these measures in place, growing profits for the remainder of 2012 will be challenging."

The Canadian retail landscape has been shifting in recent years as more American chains, in search of growth opportunities, make their way north.

As well, many Canadian retailers from Loblaw Cos. Ltd. to Canadian Tire Corp. Ltd. have moved to offer their customers one-stop shopping by branching into furniture.

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