Rona dumps stores, 800 jobs

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This article was published 28/06/2013 (4661 days ago), so information in it may no longer be current.

MONTREAL — Rona plans to close 11 of its money-losing stores in two provinces, cut more administrative jobs and trim its marketing budget in an effort to boost its financial results.

After years of efforts to address eroding profits, newly installed Rona CEO Robert Sawyer said his restructuring plan creates a simplified business structure and a more agile company and should be the last cost-cutting needed to turn the company around.

“It’s enough of restructuring,” he said in an interview Thursday.

Sawyer said his plan is based on a tough economy that doesn’t show much improvement.

The executive, who came from Metro Inc., said he will use his experience in the grocery business to revamp Rona’s flyers and offer attractive discounts to lure customers to the stores.

“The flyer is the No. 1 item (that is) a traffic-builder, so we’re going to try and be better in our program of flyers,” he said.

Investors welcomed Rona’s latest move, sending the company’s shares up nearly eight per cent to $10.47 in Thursday trading on the Toronto Stock Exchange.

Six Ontario stores in Mississauga, Windsor, Woodbridge, London, Huntsville and Collingwood will close in October and two Ontario stores in Toronto and Aurora will close in December. Three B.C. stores — in Duncan, Kamloops and Abbotsford — will shut down in October.

Sawyer said he decided to close the stores, particularly in Ontario, because years of effort to turn them around have failed, in part because there is too much retail square footage.

Rona will also look to convert a few of its 63 big-box stores outside Quebec into the discount Reno-Depot brand, which offers a more limited selection of cheaper items.

About 800 jobs will be eliminated by the closing of the stores, which together generated $130 million in annual sales. About two-thirds of the jobs are part-time. Rona said 125 more administrative jobs will be cut across Canada on top of the 200 announced last February. About 50 jobs are based at its headquarters in the Montreal area and the remaining positions are in Toronto, Calgary, Vancouver and Winnipeg.

The company expects to pay $15 million in severance due to store closures and administrative job cuts.

The Quebec-based home-renovations retailer will also dramatically reduce its marketing spending by ending all sponsorships, including the Olympics, reducing television advertising to focus on cheaper radio spots and focusing more on its weekly flyers.

Last week, Rona announced plans to sell its commercial and professional market division for about $215 million.

The company is aiming to reduce annual operating expenses by $110 million, but it will record up-front costs and accounting measures in its second quarter.

Rona said it will record $220 million of adjustments related to the restructuring and sale of the commercial division during the quarter, of which $195 million will be non-cash items.

The company plans to reinvest 30 per cent of the cost savings in the remaining business.

The efforts should improve Rona’s margins above six per cent, said chief financial officer Dominique Boies.

 

— The Canadian Press