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RONA's blames wider Q1 loss on reluctant consumers & high product costs

RONA's blames wider Q1 loss on reluctant consumers & high product costs

 

Home renovation retail chain RONA (TSE: RON) continues to struggle amid increasing competition and the high cost of goods weighing on its bottom line. 

The Boucherville, Quebec-based company says its adjusted quarterly loss widened in the first quarter to $0.19 per share, from $0.11 per share during the same prior-year period. RONA missed analyst expectations by eight cents, the fourth quarter in a row that it has underperformed. 

The news rattled investors, who sent the stock plunging as much as five per cent on the news. 

Revenue fell half a per cent to $929.4 million as a rise in sales in the distribution segment offset gains in the retail and commercial segment. Same-store sales rose 9.5 per cent in the distribution segment and fell three per cent in the retail and commercial segment.

"2013 is clearly a transition year for RONA and further changes will be required to allow us to return to sustained growth in net income," said Dominique Boies, executive vice-president and chief financial officer in a statement.

Part of that transition is the repositioning of the Réno-Dépôt banner and the decision to keep its big-box store network outside Quebec. As part of a cost-cutting plan that trimmed $17 million in mostly workforce-related expenses, RONA says it will target a total cost reduction of $45 million by the end of next year. 

U.S.-based competitor Lowe's (NYSE: LOW) is gradually creeping into Canada, with eyes on setting up more small-format stores. RONA shares have slumped around 20 per cent since Lowe's pulled its $1.8 billion bid for the company. 

RONA was trading $0.39 lower at $10.25 as of 12:15 pm ET. 

 

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