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Michael Knell

Brick acquisition continues to drive sales, earnings for Leon's

TORONTO — Its acquisition of chief rival The Brick led to a strong uptick in third quarter sales and earnings for Leon's Furniture, which is now one of North America's largest full-line furniture, mattress and major appliance retailers.

Leon's reported system-wide revenues of C$628.6 million. Considering the publicly held and family-managed retailer only took over The Brick on March 28, there isn't a real prior-year comparative.

Corporate store sales were C$538.6 million, well over double the C$223.7 million for the pre-acquisition third quarter of 2012. However, the company said same-store sales for the period were down 1%, assuming The Brick stores are included in its comparative 2012 results.

Franchise sales totaled C$100 million for the period.

Sales by the company's 33 Leon's banner franchise stores accounted for C$49.8 million, up by less than 1% over the third quarter of 2012.

The 70-store Brick franchise network had sales of C$50.2 million, up 2.7% year over year. The company attributed the uptick to the five new franchises added to network since the third quarter of 2012.

Net income for the third quarter of 2013 was C$21.3 million or 30 cents per share, compared with the prior year's C$13.1 million or 19 cents per common share, a 58% increase on a per share basis.

The company said Leon's and The Brick continue to operate separately, and that the management teams of both are working to leverage the best practises of each.

"We have made good progress on the integration to date and continue to identify more opportunities to realize on the benefits of this acquisition. While we recognize it will be a challenging period for the company, we believe our customers and shareholders will benefit from our actions," Leon's said in a statement.

For the nine months ended Sept. 30, Leon's had system-wide sales of C$1.4 billion, including franchise network sales of C$233.9 million.

Net income was C$41.1 million or 58 cents per share, compared to C$30.6 million or 44 cents per share - up 32% on a per share basis.

In the third quarter, the company opened a new Leon's franchise store in Saint-Georges, Quebec, and two new Brick franchises in Collingwood, Ontario, and Swan River, Manitoba. The company has also secured land for a new store in Rocky View County, Alberta, which is just north of Calgary.

"Overall we are very pleased with the significant increase in sales and solid profit growth we have experienced with the purchase of The Brick since the acquisition on March 28, 2013," Terry Leon, the company's longtime president and CEO, said in a note to shareholders. "Even though we continue to see poor economic growth, we expect to see improved sales and profits for the balance of the year, as a result of the acquisition of The Brick."

Leon's also announced that Dr. Joseph Leon, one of the company's original directors, will retire from the board on Dec. 31. He will be replaced by Joseph Michael Leon.

At the end of September, Leon's operated 311 stores under several different banners, including Leon's, Appliance Canada, The Brick, Urban Brick, Brick Mattress Store, Brick Clearance Centre, United Furniture Warehouse and Midnorthern Appliance.

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