RONA INC.
TSX : RON

RONA INC.

April 27, 2010 11:00 ET

RONA Well Positioned to Capitalize on the Recovery With its New World Program

BOUCHERVILLE, QUEBEC--(Marketwire - April 27, 2010) - RONA inc. (TSX:RON), the largest Canadian distributor and retailer of hardware, renovation and gardening products, ended a very challenging 2009 armed with a strong balance sheet and innovative new marketing and merchandising programs that will help drive renewed growth in a rapidly changing market environment, shareholders were told today.

Addressing the annual meeting of shareholders at the Company's Boucherville headquarters, RONA President and CEO Robert Dutton observed that "businesses with staying power know how to do two things well: deal with the issues of the day, no matter how difficult; and continue to prepare for the future, no matter how troublesome the present may be. That is exactly what RONA did in 2009", he said.

PEP program right for the times

The challenges of 2008 and 2009 did not catch RONA unprepared, Mr. Dutton said, noting that the Company's carefully crafted PEP program (for Productivity, Efficiency, Profitability) proved to be the right approach to help RONA weather the worst of the economic storm. PEP provided the foundation for Phase 1 of the Company's 2008-2011 strategic plan. Over the past two years, it enabled RONA to:

  • Improve its gross margin by 123 basis points;
  • Improve the profitability of under-performing stores;
  • Increase the penetration rate of private-label products from 16 to 19%;
  • Reduce comparable inventories by $168 million;
  • Improve the quality of inventory through a $40-million reduction in slow-moving products;
  • Reduce logistics and transportation costs by $14 million.

"That's what we call making the best of a bad situation — and those gains are there to stay", Mr. Dutton said. "We got through the recession quite smoothly, and I am confident we have the right business model and the right business plan to rapidly take advantage of the recovery."

New World focuses on renewed growth

Phase 2 of the Company's strategic plan, the "New World" program, focuses more on renewed growth. Mr. Dutton said the program, which is being implemented during 2010 and 2011, has been structured to address the new post-recession environment and includes a number of initiatives aimed at providing an enhanced customer experience.

As it gears up for the New World, RONA has begun segmenting its customers on a new basis. Rather than looking at individuals, market researchers focused on households or family units, knowing that decisions regarding hardware and renovations tend to be made collectively. Mr. Dutton said the analysis also confirmed earlier findings that today's consumers attach considerable importance to the environmental implications of their activities, underscoring the Company's commitment to embrace sustainable development as an integral part of its mission.

The New World program also includes initiatives designed to help attract next-generation entrepreneurs to the RONA banner. In fact, a major undertaking announced late in 2009 — the introduction of a unique succession-planning program for store owners — provides a taste of what is to come.

New World notwithstanding, Mr. Dutton said the Company's four established growth vectors — customer growth, development of the affiliate network, new store construction, and acquisitions — remain essential to RONA's development strategy. The Company will continue to build on this successful model and will be taking a more integrated approach that will entail coordinating all four avenues of growth in order to more quickly achieve critical mass in key target markets or sectors of activity.

During 2010 and 2011, RONA will focus primarily on growing its market share in Ontario and Western Canada while reinforcing its strong position in Quebec. Further development of the professional and commercial market is another priority. While pursuing the rapid expansion of its network, the Company will continue to improve its productivity, efficiency and profitability.

Mr. Dutton said it is difficult to determine what lasting impact the recent global financial crisis and recession might have. Accordingly, RONA will remain vigilant in terms of scrutinizing costs and spending and prudent in its assessment of market conditions. However, despite lingering uncertainty, "we have been seeing some positive signs in recent months indicating that the recovery is taking hold and giving us reasons to be optimistic about the future."

A strong financial position

Claude Guévin, Executive Vice President and Chief Financial Officer, reiterated some of the key financial objectives of the 2008-2011 strategic plan. They include:

  • Growing RONA's share of the Canadian market from 17% to 20% by the end of 2011;
  • Achieving single-digit annual growth in earnings per share during Phase 1 of the plan and double-digit growth during Phase 2;
  • Improving return on capital; and
  • Maintaining a strong, investment-grade credit rating.

Mr. Guévin told the meeting that a combination of strict financial discipline, numerous efficiency improvements introduced under the PEP program, and successful merchandising initiatives enabled the Company to mitigate the impact of difficult business conditions and wind up 2009 in a strong position, poised for growth.

He noted that RONA was able to reduce its capital expenditures by close to $72 million over the past two years, without seriously impeding expansion plans. In fact, the Company added 900,000 square feet of retail space over that same period, which helped increase its market share from 17% to 17.5% by the end of 2009. Thanks to the managerial discipline and rigour, the Company ended the year with close to $250 million cash on hand and access to $650 million in untapped lines of credit.

"The fact that we were able to successfully complete a $172.5-million share issue last June in the context of an adverse economic climate reflects investors' continued confidence in RONA's strategic plan," Mr. Guévin said. "RONA today is a well-oiled machine with the financial flexibility required to support renewed growth and capitalize on the opportunities that are likely to come with recovery."

Olympic flavour

This year's annual meeting had a special Olympic flavour, thanks to the presence of 10 RONA-sponsored, elite-level athletes, five of whom won medals in Beijing or Vancouver. Lauding the Olympic athletes as role models of perseverance, Mr. Dutton said RONA, its merchants and its employees can be very proud of their contributions to the successful staging of the Vancouver 2010 Olympic and Paralympic Winter Games, of which RONA was a major partner. 

As well as providing financial support to 100 Canadian athletes, the Company contributed to the construction of a dozen Olympic venues, helped 64 disadvantaged young people acquire valuable skills training through the RONA Vancouver 2010 Fabrication Shop, and sent close to 100 RONA employees to serve as volunteers at the Games. One of the Olympic podiums crafted at the RONA Fab Shop was displayed at the meeting.

FORWARD-LOOKING INFORMATION

This press release contains forward-looking statements reflecting RONA's objectives, estimates and expectations. Such statements may be marked by the use of verbs such as "believe," "anticipate," "estimate" and "expect" as well as the use of the future or conditional tense. By their very nature, such statements involve risks and uncertainty. Consequently, results could differ materially from the company's projections or expectations. For information on the nature of risk factors not specifically discussed in this press release, please consult RONA's 2009 Management Report under the heading "Risks and Uncertainties."

ABOUT RONA

RONA is the largest Canadian distributor and retailer of hardware, home renovation and gardening products. RONA operates a network of nearly 700 corporate, franchise and affiliate stores of various sizes and formats. With close to 30,000 employees working under its family of banners in every region of Canada and more than 16 million square feet of retail space, the RONA store network generates over $6 billion in annual retail sales. Visit rwww.rona.ca.

Contact Information

  • Media
    RONA inc.
    Julie Seidel, Director, External communications
    514-599-5114
    Cellular: 514-237-8738
    julie.seidel@rona.ca
    or
    Financial community
    RONA inc.
    Stephane Milot, Senior Director, Investor Relations
    514-599-5951
    Cellular: 514-213-1045
    stephane.milot@rona.ca