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Leon's Q1 profit falls 16.4% PDF Print E-mail
Written by HGO Staff   

TORONTO (14 May 2012) - Despite a healthy 4.7% uptick in sales, Leon's Furniture reported a 16.4% drop in net earnings, which it attributed directly to increased marketing expenses and the cost of opening four new stores in late 2011.

For the three months ended March 31, 2012, total Leon's sales were $200.6 million, compared to $191.6 million for the comparable period of 2011 - an increase of 4.7%.

Sales by Leon's corporate stores totalled $157.4 million, an uptick of 4.4%. The publicly held and family managed full-line furniture retailer attributed the uptick to opening four new stores in the latter part of 2011 as same store sales fell 0.7% year-over-year.

Meanwhile, its franchise network had sales of $43.2 million, up 5.9% over the $40.8 million sold in the first quarter last year. Same store sales for these merchants increased 1.6%. Leon's opened two new franchise stores in late 2011.

Net income was $8.6 million or 12 cents per share, a drop of 16.4% from the comparable period's $10.3 million or 15 cents per share.

The company also reported a gross margin decline of 0.8% to 40.8%, which was mainly attributable to the decline in margins on the sales of consumer electronics.

Net operating expenses climbed 8.1% to $53.3 million when compared to the first quarter of 2011, due to increased marketing, payroll and occupancy costs that resulted from the opening of corporate stores in Guelph, Ontario; Mississauga, Ontario; Rosemère, Quebec; and Regina, Saskatchewan. Leon's expenses all new store opening costs as they are incurred.

Leon's said major renovations are well underway in its Sudbury and Sault Ste. Marie, Ontario corporate stores.

Its Kentville franchise recently opened a new and larger replacement store in Coldbrook, Nova Scotia while a new franchise replacement store is currently under construction in St. John, New Brunswick store.

The company also announced it has secured sites for four new corporate stores in: Orangeville and Brantford, Ontario; Sherbrooke, Quebec; and Rocky View County, Alberta - all of which are scheduled to open in the latter part of 2012 and 2013.

In a statement to shareholders, company president and chief executive officer Terry Leon said he doesn't anticipate an immediate pick-up in sales.

"The slowdown in the economy which began in 2009 continues to affect our results and we do not see signs of any immediate improvement," he said. "As such, we anticipate that consumer discretionary spending will remain soft throughout 2012. To help counter this, we plan an even more robust marketing and merchandising campaign for the balance of 2012."

However, he expects the four new corporate stores will give sales a boost in 2012. "Even with these measures in place, growing profits in 2012 will be challenging, but our strong financial position coupled with our experience in adjusting to changing market conditions, provide us with the confidence to adapt to the prevailing economic conditions," Leon said.

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South Shore Furniture will introduce it’s first-ever piece of pet furniture at the upcoming summer edition of the Las Vegas Market. This contemporary-style dog bed features a storage drawer, safe-to-chew wooded moulding, an eco-fill cushion, metal drawer slides and a carrying handle on each side. This pure black bed is perfect for medium-sized dogs.



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