Rona looking to boost long-term profits
Retailer makes strategic moves
Rona is hoping to convince investors of the long-term potential of Canada’s largest homeimprovement chain by making strategic moves, including the sale of non-core assets, to improve profitability after years of focusing on top line growth.
“This is really managing the business long-term and creating value long-term,” acting CEO Dominique Boies said Thursday after Rona disclosed the Quebec-based company’s strategic plan.
“If someone wants cash-out tomorrow morning, that might not please them. But we’re not managing the business for the next quarter, we’re managing the business for the long run — so that’s why those strategic priorities are there.”
Rona Inc. said it will take until Feb. 21 to evaluate what changes need to be made to unlock “the profit potential of a simplified business model.”
The troubled company has been under pressure to improve its bottom line, especially since it rejected a lucrative takeover bid by U.S. rival Lowe’s.
Lowe’s unofficial bid — which was dropped after the American company met stiff resistance from Rona’s board, Quebec politicians and the independent dealership owners that operate under Rona’s brands — had been worth $1.8 billion.
Since then, Rona has reported dismal financial results, replaced its longtime chief executive officer and received a formal request from a major fund manager for a shareholder meeting to select a new board of directors.
Its shares gained 25 cents at $10.40 in Thursday trading — well below the offer of $14.50 per share that the Rona board rejected in July.
The former chief finan- cial officer denied that the strategic plan is a defensive move to address mounting shareholder dissatisfaction with Rona’s performance.
“It’s a step where right now of course we need to improve the financial performance of Rona and that’s not defensive at all.”
Under the leadership of longtime CEO Robert Dutton, who left the company suddenly last month, Rona had amassed a retail network with a wide variety of store formats and sizes — many of them acquired by purchasing local and regional home improvement and building centres.
Boies, 40, said the company will now focus on improving its lagging profits by reviewing all of its operation to see if they meet new criteria.
“Today what’s different is there is no sacred cow,” he said. “We’ve grown all those businesses over the past 73 years and now we’re stopping, taking a deep breath and saying ‘OK how do we envision the future?’ ”
The three priorities are: leverage the strength of Rona’s core business, grow key customer segments with a “more compelling value proposition” and unlock the profit potential of a simplified business model.
Boies said he has no financial target for how much can be saved and won’t prejudge the process by suggesting what assets could be disposed and how many employees could be let go.
Given the strength of its distribution network and contribution of big box stores in Quebec, the changes are more likely to affect its operations in the rest of the country, he added.
Boies doesn’t think there’s necessarily a problem outside Quebec, but said the company needs to decide on which customer segments it wants to serve and how to deliver to those patrons.
The acting CEO, who would like to get the job on a permanent basis after a headhunting firm completes its search, said he will continue to meet with shareholders.
He noted that Rona’s largest shareholder, Invesco, declined an invitation to meet a couple of weeks ago.