Rona said Thursday it will close 10 big box stores by the end of this year as the Quebec-based home improvement and gardening retailer tries to stop mounting losses and appeal to more consumers.
“We will redeploy the sales volume of 10 big box stores to 25 stores,” CEO Don Dutton said after Rona posted a fourth-quarter loss of more than $151 million, one of its biggest ever.
“We expect by the end of 2012 that the 10 big box stores will be fully redeployed into new locations,” Dutton told analysts during a conference call.
The rollout of the 25 smaller stores includes retrofitting 13 big box stores and making them smaller, Dutton said during the call.
“On average, this store will be 35,000 square feet. It will provide a more personalized service for customers and a higher return on investment for us,” Dutton said.
Dutton said the smaller-store concept has been tested in locations such as Georgetown, Ont., and Granby, Que.
Rona’s big box stores are often cavernous and suited to contractors buying supplies and to do-it-your-self renovators and may not appeal to those with a more hands-off approach, including women.
Competitor Home Depot has revamped stores to appeal to more to women, often the key deciders in the look of renovation projects.
Meanwhile, Rona will also introduce a new website this spring that it believes will be more appealing to consumers.
“Our research indicates that proximity continues to be the most important factor considered by consumers when they’re selecting a store to shop at,” Dutton said.
“We want consumers to be from one click to 10 minutes away from a Rona store.”
Retail analyst Ed Strapagiel said stores are closed when they’re not making money and Rona is adjusting its operations to the environment it’s facing, noting there’s a market for smaller stores.
“As the population gets older there are more people around who would rather hire somebody to do it as opposed to doing it themselves,” said Strapagiel, executive vice-president of Kubasprimedia in Toronto.
In its financial results, Rona said its fourth-quarter loss compared with a profit of about $20 million a year earlier.
Rona said its quarterly sales rose 2.6% to $1.17 billion though same-store sales dropped as the company dealt with poor weather, tough competition from other retailers and a slowing economy.
The company took $187 million in restructuring charges in the quarter for amortization, depreciation and asset and goodwill impairments as well as nearly $10 million for bond repurchases.
Rona’s full-year results showed a loss of $78.4 million, reversing a $137.4-million profit in 2010. That compares with a profit of 38 cents per share on $1.3 billion of revenues a year ago.
The new stores are expected to add $40 million in EBITDA (earnings before interest, taxes, depreciation and amortization) by 2014.
The announcement by Rona left it unclear how many net jobs might be affected by the closures, since it also plans to start opening 25 smaller stores focusing on more personalized customer service and that are a short drive away. But Rona said few job losses are expected because employees at the big box stores slated to close will be offered positions at the 25 new stores, with the bulk of jobs providing full-time work.
“We’re taking steps to relocate our people as much as possible and then we’ll provide assistance to the others who cannot take the opportunity,” Rona spokeswoman Michelle Laberge said.
“We think by the end of next year that our head count will be roughly the same at 30,000 employees,” Laberge said in an interview.
Two new smaller stores will open in a market where there’s one big box store that will close, Laberge said. There are about 190 employees at a Rona big box store with about 60 per cent of these employees working part-time, she said.
