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Q2 Comps Down As Rona Pushes Recovery Plan

Rona Inc. has announced its operating results for the second quarter ended June 30, 2013. Consolidated revenues from continuing operations amounted to $1,249.0 million in the second quarter of 2013, down $59.6 million, or 4.6%, from $1,308.6 million in 2012. The decrease stems mainly from the loss of $35.1 million in sales due to store closures and a 1% decrease in same-store sales for all Rona operations.

Same-store sales were affected by relatively difficult market conditions, from poor weather, a June strike in the Quebec construction industry and a decrease in single-unit housing starts across the country, the retailer noted.

The distribution segment recorded revenues of $349.7 million in second quarter 2013, down $18.2 million, or 4.9%, from $367.9 million in 2012. The retail segment recorded revenues of $899.3 million, down $41.4 million, or 4.4%, from $940.7 million in 2012.

EBITDA for continuing operations amounted to $0.2 million in the second quarter of 2013, down $84.5 million from $84.7 million in 2012. The decrease was mainly attributable to operations in the retail segment and stemmed primarily from a lower gross margin due to promotions and inventory sell-off, as well as changes made to the mix of product categories sold, as set out in the Rona recovery plan. In the second quarter of 2013, the net loss from continuing operations attributable to participating shares was $38.7 million, compared to income of $35.6 million in 2012.

Effective this quarter, the company’s commercial and professional market division, for which a sale agreement was reached in June, is classified as discontinued operations. In the second quarter of 2013, Rona recorded a net loss from discontinued operations of $106.1 million, compared to a net loss of $1.7 million in 2012. This decrease mainly comes from a goodwill impairment for these operations, as well as transaction related costs and other charges totaling $98.8 million after-tax.

In the second quarter, Rona started to see the benefits of its previously announced recovery plan, it noted.

“The results presented today are lower than in 2012, given the unusual items with respect to the current restructuring, the sale of assets, investments in promotions and inventory liquidation, as well as adjustments in various product categories as set out in our recovery plan,” said Robert Sawyer, president and CEO of Rona. “2013 is a year of transition for Rona. I have confidence in the future of the corporation. In just a few months we have implemented measures that have reduced costs by $30 million on an annualized basis. “Our teams are highly motivated to achieve our goal of reducing costs by an annualized $110 million, of which a portion will be reinvested to improve the customer experience in our four major store categories: Rona big-box stores, the Réno-Dépôt banner, Rona proximity stores and contractor specialists. We are just starting the major repositioning of our banners, particularly with respect to merchandising and marketing, and the first signs are encouraging. We must, however, remain vigilant in the short-term, given the significance of the changes being implemented in a period when the market conditions are difficult.”

Rona, a Canadian distributor and a retailer of hardware, home renovation and gardening products, operates a network of close to 800 corporate, franchise and affiliate retail stores of various sizes and formats under different banners, and a network of 14 hardware and construction materials distribution centers.