UPDATE 2-Canada's Rona outlines strategy after another quarterly loss

Thu Feb 21, 2013 10:11am EST

* Posts weaker than expected earnings, excluding items

* Shares fall 1.6 percent in early trading

* Rona outlines plan to turn profitable again

TORONTO, Feb 21 (Reuters) - Rona Inc, Canada's top home-improvement retailer and distributor, reported a narrower quarterly loss on Thursday and outlined plans to expand its distribution business and scale back its big-box store strategy outside the province of Quebec.

Fourth quarter earnings for the Boucherville, Quebec-based company, which also announced plans to cut roughly 200 full-time administrative jobs, were weaker than expected after stripping out charges related to restructuring, impairments and other one-time items.

Rona shares dropped about 1.6 percent after the news.

The company, which rebuffed an unsolicited C$1.8 billion ($1.77 billion) takeover proposal from larger U.S. rival Lowe's Cos Inc in August, has come under intense investor pressure after a string of disappointing quarterly results. It bowed to the pressure and shuffled its board in January, promising to make "drastic moves" to improve performance.

Acting Chief Executive Dominique Boies said he believes Rona's new strategy would allow it to get back on a profitable growth track.

"We are facing short-term headwind in our industry with key indicators trending downward but the fundamentals of the renovation and construction industry remain robust," Boies said in a statement.

Rona's long-time Chief Executive Robert Dutton stepped down in November. Rona said on Thursday its search for a new CEO is well underway and a decision should be announced shortly.

In January, Rona named a new executive chairman and four other new directors as part of a deal with its top shareholders to avoid a potentially bruising proxy battle.

The new executive chairman, Robert Chevrier, said last month Rona would consider selling non-core assets and making other moves to address weak sales at big-box stores.

Rona was founded in Quebec in 1939 by independent hardware stores keen to ditch their powerful wholesalers, and the French-speaking province is still home to about half of its 30,000 employees.

The company transformed itself from a modest Quebec hardware distributor to a national retailer in the 1990s, making a string of acquisitions, in a bid to head off Home Depot Inc as the big-box retailer arrived in Canada.

Rona said the 15 percent reduction in administrative staff would result in a restructuring charge of about C$25 million. The move will boost earnings before interest, taxes, depreciation and amortization by C$35 million to C$45 million over the next two years.

Rona shares fell 1.6 percent to C$11.91 in early trading on the Toronto Stock Exchange on Thursday.

QUARTERLY RESULTS

The net loss in the fourth quarter was C$17.9 million ($17.6 million) or 15 Canadian cents a share. That compared with a year-earlier loss of C$153.6 million, or C$1.19, when its results were hit by a very large goodwill impairment charge.

Excluding one-time items, the company said earnings in the period ended Dec. 30 fell to 5 Canadian cents a share, down from 15 Canadian cents a share, a year earlier.

Analysts, on average, had forecast earnings of 12 Canadian cents a share, according to Thomson Reuters I/B/E/S.

Quarterly revenue rose 2.2 percent to C$1.20 billion, mainly due to the booking of an extra week of sales in the quarter and the opening of some new stores.

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