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Michael Knell

Leon's Furniture sales slip 2.7% in 4Q as earnings decline 17.9%

TORONTO — The retail environment remained stormy for Leon's Furniture in the final quarter of 2012 as the company reported declines in earnings, sales and corporate same-store sales.

System-wide sales for the quarter were C$248.2 million, down 2.7% from the same period of 2011, while corporate store sales were C$188.5 million, down 2.8%. Corporate same-store sales declined 2%, sagging for the third consecutive quarter.

The malaise at retail even affected the Leon's franchise network, whose fourth quarter sales totaled C$59.7 million, down 9.8% from the C$66.2 million reported for the last period of 2011. This was the first quarterly decline for the franchise network in quite a while.

Net income was C$16.1 million or 23 cents per share, a 17.9% drop from the C$19.9 million or 28 cents per share reported a year ago. However, the company noted that earnings were negatively affected, to the tune of C$1.5 million or two cents per share, by costs associated with its successful bid to acquire its main Canadian rival, The Brick.

Terry Leon, president and CEO of the publicly held, family-managed retailer, said in a statement, "2012 proved to be another challenging year where we saw continuing weakness in the economy, creating a very competitive retail environment."

For the full year, total system sales were C$880.2 million, a slight increase from the C$879.6 million in 2011, driven almost entirely by a modest uptick in sales by its franchise network.

Corporate store sales were C$682.2 million, down marginally from C$682.8 million the year before, although corporate same-store sales were off 2.9%.

Franchise store sales were C$198.1 million, a 0.7% advance from C$196.7 million in 2011.

Net income for 2012 was C$46.8 million or 67 cents per share, compared with C$56.7 million or 81 cents per share - a decrease of 17.3% per share.

Leon's is also continuing its expansion and remodeling program, opening newly renovated stores in Sault Ste. Marie and Sudbury, Ontario as well as its third Appliance Canada showroom in Toronto during the third quarter, and a replacement franchise store in St. John, New Brunswick, in the fourth quarter.

During the current quarter, the company plans to open two new Ontario stores, a 42,000-square-foot location Orangeville and a 36,000-square-foot unit in Brantford. In the second quarter, Leon's will open a 50,000-square-foot store in Sherbrooke, Quebec.

In November, the retailer entered into a definitive agreement to acquire The Brick in a deal valued at approximately C$700 million, and expects the transaction will close in the next few weeks.

Leon's operates 72 corporate and franchise stores across the country, with locations in every province except British Columbia.

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