Leon’s Furniture Sales, Earnings Decline in Q3: Report

Citing a challenging macro-economic environment, Leon’s Furniture Ltd. (LFL) has reported lower sales, revenue and earnings for the third quarter of 2023, while noting an uptick in written orders that continued into the opening weeks of Q4.

For the three months ended Sept. 30, system-wide sales totalled $791.7 million for the country’s largest full-line furniture retailer — a 1.2 per cent slide from the $801 million reported for the same period last year.

Revenue from the company’s corporate store chain accounted for $661 million, slipping 0.2 per cent from last year’s $662.2 million, as same store sales fell 0.6 per cent.

However, sales by its 101-unit franchise network fell 5.7 per cent to $130.7 million, compared with $138.8 million for the same period.

While the company doesn’t break out sales from its six e-commerce capable websites — leons.ca, thebrick.com, furniture.ca, midnorthern.com, transglobalservice.com and appliancecanada.com — analysts believe they fell to an estimated 10 per cent of sales this year from 11 per cent of sales in the 2022 period. In dollar terms, the platforms are believed to have contributed approximately $66 million to corporate revenue this year compared to $72.8 million, a drop of 8.6 per cent on a year-over-year basis.

Net income for Q3 2023 was $52.3 million or 76 cents per diluted share, compared to $61.3 million or 90 cents per diluted share, a 15.6 per cent decline on a per share basis.

LFL’s senior management also noted the company received $20 million in connection with Questrade’s recent acquisition of point-of-sale financial specialist Flexiti from its parent company. Further, the retailer repaid $50 million of its long-term debt during the period.

“The combination of lower cost inventory and targeted marketing enabled us to drive sales momentum while balancing gross margin within an acceptable range,” LFL president and CEO Mike Walsh said in a statement.

“We expect to see better leverage on our operating costs over the next two quarters despite higher ongoing retail point-of-sale finance costs,” he added.

For the nine months also ended Sept. 30, LFL system-wide sales totalled $2.13 billion, down 5.1 per cent from the comparable period’s $2.25 billion.

Corporate store sales were $1.77 billion, a drop of 4.8 per cent from $1.86 billion, as same store sales also declined 4.8 per cent on a year-over-year basis.

Franchise network sales for Q1-Q3 were $367.1 million, falling 6.4 per cent from last year’s $392.1 million.

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

Net income for the first three quarters of 2023 was $92.6 million or $1.35 per diluted share compared to net income of $136.2 million or $2 per diluted share in 2022 — a decline of 32.5 per cent on a per share basis.

At the end of September, LFL operated a total of 303 stores in Canada under five banners: Appliance Canada, Leon’s, The Brick, Brick Outlet and The Brick Mattress Store.

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