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    Home »  News »  Business

    Leon's Furniture Q3 profit drops as expenses rise while sales unchanged

    TORONTO - Leon's Furniture Ltd. (TSX:LNF) says it had $13 million of net income in the third quarter, a 15 per cent decline from the same time last year as the addition of four stores last year added overhead expenses during a period of flat sales growth.

    Net income for the quarter was equal to 19 cents per common share, down 13.6 per cent from 22 cents per share or $15.3 million in the comparable period of 2011.

    Leon's issued its report two days after announcing plans to acquire The Brick, an Edmonton-based rival, in a friendly deal they say will help the Canadian retailers cope with U.S.-based competitors such as Target and Walmart.

    Toronto-based Leon's says overall sales throughout its system, including franchised locations, totalled $223.68 million in the three months ended Sept. 30.

    That was barely changed from the third quarter of 2011 when overall system sales totalled $223.65 million.

    Net operating expenses rose three per cent from a year ago to $54.2 million mainly due to higher marketing costs and administration expenses due to the addition of four stores last fall.

    A weakening Canadian dollar eroded Leon's gross margin to 40.9 per cent from 42.2 per cent last year.

    "The slowdown in the economy continues to affect our results and we do not see any immediate signs of improvement. As such, we anticipate that consumer discretionary spending will remain soft for the balance of 2012," the company said in a statement Tuesday.

    "To help counter this, we will continue our strong marketing and merchandising campaign. The opening of four new stores in the latter part of 2011 should also aid our sales in the fourth quarter of 2012. Even with these measures in place, growing profits for the remainder of 2012 will be challenging."

    The Canadian retail landscape has been shifting in recent years as more American chains, in search of growth opportunities, make their way north. Target is preparing to its first expansion outside the U.S., opening the first of between 125 and 135 Canadian stores in March and April.

    As well, many Canadian retailers from Loblaw (TSX:L) to Canadian Tire (TSX:CTC.A) have moved to compete and offer their customers one-stop-shopping by diversifying their offerings, including through furniture sales.

    Leon'), century-old family-run business with its roots in industrial Ontario, said Sunday it would pay a $5.40 per share for Brick (TSX:BRK) stock, a premium to the Friday closing price of $3.50 per share.

    Leon's shares traded Tuesday at $11.60, down 20 cents since Monday's close but up from the pre-announcement price of $11.57 on Friday at the Toronto Stock Exchange. Brick shares (TSX:BRK) were $5.33, up from Friday's close at $3.50.


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