Leon's 3Q sales grow 10.7% as profits rise 9.2%
By Michael J. Knell -- Furniture Today, December 3, 2006
Toronto — Major retailer Leon's Furniture posted double-digit third-quarter gains in sales and earnings at corporately owned stores, while sales at franchised units advanced more modestly.
Corporate sales grew 10.7% to C$157.1 million, as net income rose 9.2% to C$14.9 million, or 81 Canadian cents per share, from C$13.6 million, or 74 cents per share, in last year's third quarter. Same-store sales were up 6.4%. Leon's had 33 corporate stores at the end of the third quarter.
Sales at Leon's 26 franchise stores were C$46.5 million in the latest quarter, a gain of 3.2% year-over-year, giving the company total revenue of C$203.6 million, an increase of 8.9%.
The corporate gains were driven in part by two new stores in Ontario and the conversion of a franchise store to corporate ownership early in 2006. Third-quarter gross margins at corporate stores showed a slight improvement to 41.7%, the company said.
For the nine months, total Leon's sales were C$531.7 million, including C$120.5 million at franchise units, an increase of 7.2% over last year's C$496 million, which included C$118.5 million in franchise sales. Net income grew 14.8% to C$32.9 million, or C$1.86 per share, from C$29.3 million, or C$1.62 per share.
"Our strong capital position will allow us to focus on increasing market share in existing and new markets going forward," said Terry Leon, president and CEO of the publicly held, family-managed furniture and bedding chain. "Renovation and expansion plans will continue during 2006 and beyond."
In the third quarter, the company completed renovations in Dartmouth, Nova Scotia, and Winnipeg, Manitoba. It plans to open new stores in Saskatoon, Saskatchewan, this month, and in Newmarket, Ontario, and Longueil, Quebec, in 2007. Renovations of stores in Calgary, Alberta, and Kitchener, Ontario, should be completed by late spring 2007.
When a new franchise unit in Nanaimo, British Columbia, opens this month, Leon's will have stores in every province. Other than Sears Canada, it will be the only furniture and bedding retailer to operate coast-to-coast in Canada.
"During the first three quarters of 2006, we saw an improvement in consumer spending, which enabled us to increase sales and profits," Leon said. "We expect the final quarter of 2006 to show a moderation in growth as compared to last year. The opening of a new Saskatoon store in the fourth quarter should help grow sales.
"However, we believe profit growth may be more difficult due to pressure on margins and the costs of servicing our increase in sales," he said.
| Leon's(a) | |||
|---|---|---|---|
| Earnings per share are fully diluted. | |||
| Quarter ended 9/30 | 2006 | 2005 | Change |
| (a) In Canadian dollars. (b) Includes a C$2 million pretax gain on the sale of capital property. |
|||
| Sales | C$157,132,000 | C$141,985,000 | 10.7% |
| Operating income | 23,440,000 | 20,521,000 | 14.2% |
| Net income | 14,886,000 | 13,630,000 | 9.2% |
| Earnings per share | 0.81 | 0.74 | 9.5% |
| 9 months ended 9/30 | 2006 | 2005 | Change |
| Sales | C$411,178,000 | C$377,500,000 | 8.9% |
| Operating income | 50,621,000 | 45,321,000 | 11.7% |
| Net income | (b)32,890,000 | 29,306,000 | 12.2% |
| Earnings per share | 1.78 | 1.57 | 13.4% |
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