Leon’s Furniture Ltd. said its profit last quarter was 26% lower than the same time last year as the Toronto-based retailer and its franchise affiliates felt the impact of the economic slowdown.
Leon’s net income was $8.62 million in the second quarter or 12 cents per share, down from $11.6 million of 16 cents per share in the same period of 2008, the company announced Tuesday.
Total sales including franchise stores fell to $209.9 million from $224.7 million, a decline of $14.7 million. Franchise sales fell to $44.7 million, down 6.8% or $3.3 million compared to the second quarter of 2008.
“In order to help offset declining consumer confidence, we continued running a very active marketing campaign to coincide with the company’s 100th anniversary. Although same-store corporate sales were down 6.5% compared to the prior year, based upon a competitive analysis of the marketplace, we feel confident that we did increase market share,” Leon’s said.
The company said its profit margins had been eroded, mainly because of higher costs for imported furniture that weren’t entirely passed through to consumer.
“In addition, we increased the levels of promotional pricing in order to entice consumers to come into our stores in what has been a weak retail economy,” Leon’s said.
Advertising expenses increased by $1,039,000 or 13% for the second quarter compared to the prior year.
Leon’s said it would continue a “robust” marketing campaign linked to its 100th anniversary and expected third-quarter revenues and thereafter will be boosted by a new store in Toronto.
“However, even with these measures in place, growing sales and profits for the balance of this year will be very challenging,” the company said.
