Leon's 2Q Earnings Decline 5.9% to C$11.1M
Michael Knell -- Furniture Today, September 29, 2011
TORONTO - Waning consumer confidence, falling housing starts and an uptick in household debt squeezed sales and earnings for Leon's Furniture in the second quarter, the publicly held and family managed full-line furniture and appliance retailer reported.
Revenues of C$209.3 million in the quarter were down 2.4% over the C$214.4 million generated during the same period in 2010. Net earnings were C$11.1 million or 16 Canadian cents per share compared to C$12.3 million or 17 cents - decrease of 5.9% year-over-year.
"The decrease in sales was mainly due to a lower average selling price than the prior year. We continue to face a difficult economy, with decreasing new housing starts and record consumer debt," Terry Leon, president and CEO, said in a note to shareholders.
Sales by Leon's 38 corporate stores were down 3% to C$163.9 million with same-store sales off 4.1%. Gross margins, however, remained steady at 40.7%.
Meanwhile, sales by Leon's 28-unit franchise network were essentially flat at C$45.5 million. The company said the division achieved modest growth in Western and Atlantic Canada, which was offset by declines in Ontario.
For the first half of the year, which also ended on June 30, Leon's had total revenue of C$400.9 million, down 4.1% from the same period in 2010. Net income fell to C$21 million or 30 cents per share from C$23.7 million or 33 cents per share, a decline of 9.1% on a per share basis.
Corporate store sales fell 5% to C$314.6 million while franchise division sales were off 2% to C$86.3 million.
Leon said sales and productivity will be aided by the opening of four additional stores this year. Renovations on a new 76,000 square foot leased store in Guelph, Ontario, have been completed and the store recently held a grand opening.
Meanwhile, construction of a new 84,000-square-foot store in Regina, Saskatchewan, is proceeding apace and a grand opening will be held in the fourth quarter. Grand openings also are planned this fall for two new 40,000-square-foot stores in Mississauga, Ontario, and Rosemère, Quebec.
Leon's also is set to start renovating and expanding its stores in Sault Ste. Marie and Sudbury, Ontario, with work scheduled for completion in the summer of 2012.
A new franchise division store will be added to the network in Bathurst, New Brunswick in the fourth quarter of 2011.
The company ended the first half with cash and equivalents valued at C$218.6 million. While that's down from C$240.4 million at the end of December, Leon's has a "pay as you go" policy in financing its renovation and expansion, and has no debt.
While he believes Leon's financial position will enable the company to cope with a challenging retail environment, Terry Leon cautioned shareholders not to expect great gains in the coming months.
"In the second quarter of 2011 we saw a reduction in same store sales from the prior year quarter. Although we saw a slight improvement from the first quarter of 2011, we continue to see a slowdown in new housing starts and a general slowdown in consumer spending that we noted in 2010," he said. "At this point we do not see any clear signs pointing towards a strong economic turnaround."
However, the company is planning what he described as "an even more robust marketing and merchandising campaign" for the closing months of 2011.
Merinos Home Furnishings opening display room, Boyles addition
‘Mega vessels' likely to boost capacity, stabilize freight rates
HOM Furniture adds flooring to six Twin Cities stores
Dan Masters joins Furniture Brands as VP, business development
21 companies from Turkey, Taiwan and China to exhibit at Showtime
Featured Company
-
Wright Labels
Bill and Tom Wright founded Wright of Thomasville in 1961 on the idea that printing was a creative medium and the belief that "a promise made is a promise kept." The Wright brothers focused their attention on providing exceptional printing for the... more
VIEW ALL GALLERIES
