Rona says it’s not losing sleep over Lowe’s addition of former Target stores

Rona isn’t worried that Lowe’s is expanding its Canadian presence by picking up several former Target locations across the country, with the Quebec-based home improvement retailer saying it will only match that effort if the price is right.

“They are present in all markets except Quebec so we are used to competing with Lowe’s,” CEO Robert Sawyer said after the company’s annual meeting Tuesday.

Lowe’s announced Monday that it had reached agreement to take over Target leases for an Ontario distribution centre and 13 former Target locations, almost half in Ontario and the rest in British Columbia as well as in Calgary and Regina.

Rona unsuccessfully bid on six sites, losing out to Lowe’s on two locations. Canadian Tire (TSX:CTC.A) is also taking over 12 Target locations.

However, Rona (TSX:RON) will be relocating its small store in Chilliwack, B.C., to a larger former Target location. It might also consider some of the 50 Target stores that have attracted no interest if property owners sweeten their deals.

“We are not an organization like Lowe’s with deep pockets so we have to be cautious,” Sawyer said.

Target stores are up to one-third larger than Rona’s big box outlets and rather than add such large locations Rona plans to upgrade existing stores and target opportunities that can be profitable in smaller communities.

While Lowe’s showed an interest in acquiring Rona a few years ago, Rona said it hasn’t since been approached by a potential buyer.

And board chairman Robert Chevrier said the company isn’t for sale, adding that management is focused solely on continuing to improve results, something that has driven up its share price by 47 per cent in the past year.

“Honestly, unless there is a knockout price I think people are satisfied to have a growth in the shares,” he told reporters.

Meanwhile, Rona’s network of home improvement stores has reported improved sales in the traditionally slow first quarter. Revenues increased 1.9 per cent from a year ago to $778.8 million. Same-store sales increased five per cent as the company added new product lines, including pet and automotive supplies.

Its net loss was trimmed to $11.7 million or 11 cents per share, down from $16.5 million or 14 cents per share a year earlier.

The adjusted net loss was $11.2 million or 10 cents per share, two cents lower than analyst forecasts and down from $14.4 million or 12 cents per share a year ago.

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