UPDATE 1-Canada's Rona cuts more jobs, closes stores in restructuring
TORONTO, June 27 (Reuters) - Rona Inc, Canada's biggest home-improvement retailer and distributor, will close stores, cut jobs and reduce costs in the second phase of a restructuring plan designed to return it to profitability, the company said on Thursday.
Rona said it plans to close 11 unprofitable stores; reduce administrative, marketing, merchandising and distribution costs; and cut a further 125 administrative jobs.
The job cuts are on top of the 200 that Rona announced in February, when it also outlined plans to expand its distribution business and scale back its big-box store strategy outside the province of Quebec. Rona hopes the new strategy will help it counter the threat from U.S. competitors Home Depot Inc and Lowe's Cos Inc .
Rona transformed itself from a modest Quebec hardware distributor to a national retailer in the 1990s, making a string of acquisitions as big-box home-improvement retailers like Home Depot arrived in Canada. But its sales have languished since the 2008-09 recession and Rona has struggled.
The company, which rebuffed an unsolicited C$1.8 billion ($1.72 billion) takeover proposal from Lowe's last August, has come under intense investor pressure due to its weak results. It reacted by shuffling its board in January and promised drastic moves to improve performance.
In March, the company named former Metro executive Robert Sawyer as its new chief executive. And earlier this month it announced the sale of its plumbing, heating, ventilation and air conditioning business to Emco Corp.
Rona said it plans to use the proceeds from the sale of its commercial and professional division to reduce debt. The move will also allow the company to focus on its core retail and distribution business in the construction and renovation market.
SAVINGS FROM LATEST CUTS
Rona said it expects the latest cuts to save about C$70 million annually. The new measures will require the company to book pre-tax restructuring costs, asset impairment and other non-recurring charges of about C$95 million in the second quarter of 2013.
This is on top of the pre-tax charge of about C$125 million tied to the sale of its commercial and professional division announced earlier this month.
As a result, a total of C$220 million in adjustments, of which about C$195 million represent non-cash items, will be recorded in the second quarter, Rona said.
Despite the recent moves, shares in Rona have fallen nearly 20 percent over the last six months. The stock, which closed at C$9.71 on Wednesday on the Toronto Stock Exchange, rose 1 percent to C$9.81 in early trading on Thursday.