Weak Sales Caused Rona Home And Garden's Stocks To Tumble Down To 5-Year Low

Ontario, Canada (AHN) - Canada's largest home improvement retailer reported a 5.2 percent drop in sales for the first quarter of 2008, leading to an almost 90 percent slump in profits.

Rona Home and Garden's consolidated sales, which actually grew by 3.7 percent to $911.5 million, translated to a $1 million profit or $0.01 a share earning, way below forecast of $0.04 per share.

This development caused Rona's stocks on the Toronto Stock Exchange to tumble down by $0.50 to $12.95 per share, its lowest level in five years.

Claude Guevin, executive vice president and chief financial officer of Rona, in a conference call, told analysts the harsh winter, particularly in Ontario and Quebec, caused a 90 percent drop in its profits since construction and renovation activities were temporarily halted.

"The confidence is not there. No matter what happens with the weather, I think 2008 will be a very challenging year and we will have to deal with that," Guevin said, quoted by the Toronto Star.

One profitable area of operations for Rona is its sale of private labels which increased by 10 percent for the first three months of 2008. These home items are known for higher quality, are priced slightly higher than unknown brands, but are 5 to 10 percent lower than more known brands.