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MONTREAL - Rona Inc. (TSX:RON) called on the federal government Tuesday to extend its popular home renovations tax credit program to further stimulate much needed sales until the economy recovers.
The Quebec-based home improvement retailer said sales continued to fall in the third quarter, even though the pace of drop off has improved in recent months.
"We are trying actually to convince (Prime Minister Stephen) Harper to pursue this program (because) I think it's going to be very good for Canadian households," Rona CEO Robert Dutton said during a conference call.
Rona reported profits fell 6.5 per cent during the quarter despite cost-reduction efforts to $49.1 million or 38 cents per diluted share, from $52.5 million or 45 cents per share a year earlier.
Revenues totalled $1.32 billion the quarter, down from $1.38 billion a year earlier, while same-store sales for locations open more than a year dropped 5.3 per cent.
Analysts polled by Thomson Reuters had on average expected earnings of 40 cents per share on $1.355 billion of sales.
Rona said lower housing starts, lagging consumer confidence and poor weather were key factors in lower sales.
More than 80 per cent of the same-store sales decline was due to lower sales of forest products, building materials and seasonal items, Rona said.
Ottawa announced in January, as part of its stimulus budget, that a home improvement tax credit worth up to $1,350, until Feb. 1, 2010.
The company also intends to extend its own 10 per cent store rebates.
Rona expects to secure up to $100 million in sales resulting from federal and Quebec home renovation tax credits after more than 13,000 Canadians have signed up for a company discount associated with the programs.
While the store's rebate may increase revenues, Edward Jones analyst Brian Yarbrough fears it's not new money for Rona.
"I don't think it creates new demand, it just pulls demand forward," he said in an interview.
A spokeswoman for federal Finance Minister Jim Flaherty said the government would not comment on budget-related matters before it is announced.
Quebec said it has no plans to extend its program.
Yarbrough doesn't expect Rona will see a marked improvement in sales until consumer confidence picks up and lagging housing starts recover, perhaps by mid-2010.
Rona is set to launch new expansion plans amid initial signs of a recovery from the ill effects of the recession including a new concept for an interior design and paint store called Studio by Rona.
The new paint stores will cater to contractors, interior designers and consumers who prefer to shop in smaller boutiques, especially in Ontario and Western Canada.
The first three stores will open Thursday in the Montreal area. The company hopes to add nearly 100 locations within five to 15 years. Some may be located inside existing hardware stores.
