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A Rona store in Toronto.

Fred Lum/The Globe and Mail

Rona Inc. is sparring with major home improvement retail rivals in a battle that has seen U.S. heavyweight Home Depot Inc. emerge as a winner as they all grapple with cautious home renovation spending.

Under new leadership, Rona is now racing to close unprofitable outlets, shrink its work force, restock shelves and lower some prices.

The Canadian retailer has seen mostly declines at stores open a year or more, while Home Depot Canada has posted sales gains in each of the past six quarters. Home Depot draws customers by bolstering staff training, replenishing shelves with popular items and speeding up service to contractors who buy lumber and other pricier merchandise.

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The fight for the tight-fisted home-reno shopper will only become more fierce as debt-ridden consumers hold back on discretionary purchases, forcing both Rona and arch-rival Lowe's Canada to move faster to improve their bottom lines. Each of these retailers are now led by executives with backgrounds in the grocery sector, as they bet that experience in that industry gives them the tools needed to snag customers.

"Besides the challenging context in our industry, I strongly believe that there's a lot of upside in Rona," Robert Sawyer, the company's chief executive officer, said this spring.

On Wednesday, when Rona reports its second-quarter results, it is expected to provide a better glimpse into how its restructuring is playing out after unseasonably cool and rainy weather in many parts of Canada threatened to hamper its efforts.

"I don't think they can make the changes fast enough for us to see the results in this quarter," said Michael McLarney, president of industry publication and consultancy Hardlines. "Their results will reflect that the home improvement industry in Canada is still not entirely back on its feet."

Home-reno spending is expected to stay soft for the next couple of years, said Adrienne Warren, senior economist at Bank of Nova Scotia. In 2012, sales in the $45.9-billion home-reno market rose just 1.3 per cent (in constant dollars) and are projected to pick up about 1 per cent in 2013 and 2014, her research found.

The retailers are feeling the pinch of new homeowners who are delaying renovations two years or more after buying a home, up from a pre-recession six-to-nine-month delay, said Derek Dley, retail analyst at Cannacord Genuity. Low interest rates spur them to buy homes, but then they feel tapped out and hold off longer on remodelling.

As Robert Niblock, CEO of Lowe's Cos. Inc. in Mooresville, N.C., said earlier this year: "The downturn and slowdown in overall housing and continued strong prices in the real estate market have been somewhat of a challenge up there" in Canada.

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Lowe's struggles in Canada because of a limited presence relative to its competitors; it has just 35 big-box outlets here, compared with Home Depot's 180 and Rona's 73 (among the latter's roughly 800 stores in all). At the same time, a growing array of U.S. players, including discounter Target Corp., are vying for a limited supply of retail space in Canada.

"I think ideally you want to be at least twice the scale we're at today," Mr. Niblock said.

Last year, Lowe's failed in its $1.8-billion takeover offer for Rona, in what became a messy political spat defined by resistance to foreign ownership of the Canadian retailer.

Lowe's, which has no stores in Quebec, has tried to attract business with attentive customer service and more upscale items. That focus pushed Home Depot Canada to broaden its mix when Lowe's arrived in this country at the end of 2007. Under new president Sylvain Prud'homme, a former Loblaw Cos. Ltd. executive, Lowe's Canada is looking at launching smaller stores, a move that mimics Rona's strategy.

Despite the retailers' initiatives, consolidation in the sector may be inevitable. Canadian Tire Corp. Ltd. could consider snapping up Rona – or even Lowe's Canada, suggested Mark Petrie, an analyst at CIBC World Markets. While he's not wagering much on either of those scenarios, he points rather to strengthening potential in the longer term of Lowe's finally acquiring Rona.

"As conditions improve, the possibility of a transaction rises," Mr. Petrie said.

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