* Q2 EPS C$0.28 vs forecast C$0.40
* Sales at stores open at least a year down 9.6 pct
* Second-half same-store sales seen little changed or down
* Retailer blames weather, weak consumer confidence
* Shares fall 5 pct on Toronto Stock Exchange
(Adds quotes, detail from earnings call, updates share price)
By S. John Tilak and Allison Martell
TORONTO, Aug 10 Rona Inc's RON.TO quarterly
profit dropped a steeper-than-expected 40 percent as Canadian
consumers cut spending on its home improvement products,
sending its shares down 5 percent.
The reluctance of homeowners to invest in big-ticket
renovation projects, the lifeblood of Rona's business, has
plagued Canada's No. 1 do-it-yourself chain.
Second-quarter sales at its established stores fell 9.6
percent, following a 12.6 percent decline in the first
"The results were ugly -- in all capital letters and bold,"
Edward Jones analyst Brian Yarbrough said. "People are just not
willing to spend."
Second-quarter earnings fell to C$39.5 million ($39.9
million), or 28 Canadian cents a share, from C$66.3 million, or
51 Canadian cents, a year before.
Analysts on average were looking for earnings of 40
Canadian cents, according to Thomson Reuters I/B/E/S.
Revenue fell 2 percent to C$1.37 billion, missing the
average analyst estimate of C$1.43 billion.
The company sees same-store sales staying little changed or
falling up to 5 percent in the second half of the year. It sees
earnings in the second half to be little changed from the year
HIT HARD BY CONSUMER CONFIDENCE
Consumer spending on home improvement products has remained
tepid, never fully returning though the country's economic
downturn eased over the past year. Rona's more expensive
discretionary products such as solariums and patios are seen as
a low priority when budgets are tight.
"We faced very challenging conditions in the quarter,
especially in April and May, when weather was not favorable for
construction and renovation projects," said Chief Executive
Officer Robert Dutton on a conference call.
Dutton also said the company was hurt by consumers'
continuing prudent spending on renovation.
Yarbrough said weather was not the issue. Same-store sales
have not grown on an annual basis since 2006, he said.
"The consumer spending environment is weak, but more so in
The company competes with Home Depot Inc (HD.N) (HD.N) and
Lowe's Cos Inc (LOW.N). Both companies reported falling
same-store sales in the first quarter of 2010 and are due to
report second-quarter results next week.
Those companies do not break out their Canadian sales,
however. Yarbrough said Rona may be facing a tougher
environment north of the border.
"The industry overall is tough in Canada. Home Depot and
Lowe's are struggling as well in Canada," Yarbrough said.
The stock, down 24 percent since the start of the year,
fell 5 percent to C$10.20 on the Toronto Stock Exchange. It hit
a near-three-year low of C$10.03 earlier in the day.
(Editing by Frank McGurty)