Leon’s reports sales, earnings drop for first half of 2023

TORONTO – Citing macro-economic factors that led to a decrease in consumer demand, Leon’s Furniture Limited (LFL), this country’s largest full-line furniture retailer recently reported declines in both sales and earnings for both the second quarter and first half of 2023.

The publicly held parent company of both Leon’s and The Brick – among others – reported system wide revenue of $717.6 million for the three months ended June 30, 2023. That’s down 8.5% from the $784.6 million for comparable period last year.

Corporate store sales were $593.8 million, down from $647.0 million – an 8.2% decline as same store sales fell 8.1%. “The decline is primarily driven by a macro-economic environment that has continued to pressure consumer household spend, along with comparing to a very strong quarter in Q2 2022 where same-store sales were up 10%,” the company maintained in its report to shareholders.

While LFL management didn’t address the segment directly, second quarter e-commerce sales are believed to have fallen 15.8% from an estimated $77.6 million last year to $65.3 million – that is, from an estimated 12% of sales in 2022 to 11% this year. Observers note this is still much higher than 5% pre-pandemic.

Sales by its 101-unit strong franchise network were $123.8 million, down 10% from the previous quarter’s $137.6 million.

Adjusted net income for the three months ended June 30, 2023 was $28.0 million or 41 cents per share, compared to $47.5 million or 71 cents per share – a decrease of 42.3% on a per share basis.

“While macro-pressures remain and have impacted our results in the quarter including lower sales and higher financing costs, they seem to be stabilizing. Exiting Q2 we began to see some improvement in consumer demand, which has carried over into early Q3, giving us a more positive outlook for the second half of the year,” LFL president and chief executive officer Mike Walsh said in a statement.

“LFL is very well positioned going into the balance of 2023. Our team’s efforts to manage the cost of incoming inventory despite continued inflationary pressures contributed to solid gross margins while allowing us to offer value to our customers,” he continued, adding, “Our organization has a long history of leveraging challenging environments to gain share, emerge stronger and drive results as cyclical pressures abate.”

For the six months also ended June 30, 2023, LFL system-wide revenues were $1.34 billion, down 7.2% from $1.45 billion for the same period last year. 

Corporate stores contributed $1.11 billion, down 7.3% from $1.19 billion as same store sales declined 7.2%.

“Despite the overall reduction in revenue, the mattress product category has shown encouraging results for the first six months of 2023, which can in part be attributed to our partnership with Resident, the largest direct-to-consumer mattress company in North America,” the company noted.

Franchise sales were $236.4 million, down 6.7% from the previous year’s $253.3 million.

Net income for the first six months was $40.3 million or 60 cents per share, compared to $74.9 million or $1.09 per share – a 45.0% decline on a per share basis.

Despite the drop in both sales and earnings, Walsh told shareholders LFL’s management remains optimistic about the company’s performance in the second half of 2023 and beyond.

“Despite the prevailing consumer environment during the second quarter, the market is showing resilience and the company began to see a more constructive demand picture emerge during the final weeks of Q2 that has continued into early Q3, giving the company a more positive outlook for the second half of 2023,” he said. “Over the long-term, we remain focused on our commitment to effectively manage our costs but to also continuously invest in the business to drive growth initiatives that will drive more customers to both our online e-commerce sites and our 304 store locations across Canada.”

At the end of June 2023, the company operated under the following banners: Leon’s; Appliance Canada; The Brick; Brick Outlet; and The Brick Mattress Store. It also operated six e-commerce sites: leons.ca, thebrick.com, furniture.ca, midnorthern.com, transglobalservice.com and appliancecanada.com.

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