UPDATE 2-Rona aims for 10-15 pct EPS growth

* Seeks to lift market share to 20 pct from 17.5 pct

* Capex boosted to C$225 mln from C$170 mln in 2009

* Shares up 0.7 pct at C$16.68
(Adds analyst comments)

By Scott Anderson

TORONTO, Jan 25 (BestGrowthStock) – Rona Inc (RON.TO: ), Canada’s
biggest home improvement chain, said on Monday it plans to
boost earnings per share by 10 percent to 15 percent over the
next two years and bulk up its national presence by adding new
stores and bringing some of its other chains under one banner.

The Boucherville, Quebec-based company, which has about 700
stores across the country, said during an investor presentation
that it would also continue its aggressive growth strategy by
looking for further acquisition opportunities.

The overall aim of Rona’s “New World Program” is to boost
its share of the Canadian market to 20 percent from its present
17.5 percent, while increasing its EBITDA margin by 20 basis
points to 30 basis points during the period.

It also sees same store sales growth of about 2.5 percent.

This follows a disappointing quarter in which the company’s
results hit by weak consumer sentiment and a weak home
renovation market.

In November it reported that its quarterly earnings fell to
C$49.1 million ($46 million), or 38 Canadian cents a share,
from C$52.5 million, or 45 Canadian cents a share, a year

Revenue fell 4.4 percent to C$1.32 billion as same store
sales, a measure of the performance of stores open for at least
a year, dropped 5.3 percent.

Rona’s shares were up 0.7 percent at C$16.68 on Monday
afternoon on the Toronto Stock Exchange.

Brian Yarbrough, an analyst at Edward Jones in St. Louis,
Missouri, said he is skeptical that the consumer mood has
changed drastically enough for Rona to reach its goals.

“The consumer continues to be a little bit strapped for
cash, and while consumer confidence is improving, the hardest
part (for Rona) is going to be the sales and earnings aspect of
it,” Yarbrough said.

The company aims to focus on growing in the key Ontario
market as well as in Western Canada, through renovating and
expanding existing stores, as well as by acquiring other

It plans to open 10 stores a year for the next two years,
and will bring its Cashway and Lansing chains, which were
bought a number of years ago, under the Rona banner.

The plans will be supported by capital expense funding of
an average of C$225 million per year over the period, up from
C$170 million in 2009, said Claude Guevin, executive
vice-president and chief financial officer.

Guevin noted that Rona has a healthy balance sheet and
access to about C$650 million in credit facilities.

“We wanted to make sure we have no financial issues to
reaccelerate our development and restart the second phase of
our plan,” Guevin said during the presentation.

“We will not change the way we manage our balance sheet.
Our free cash flow will be used mainly for the development
projects and also to support our different financial ratios.”

The growth focus, especially on Ontario, comes as
U.S.-based home improvement chain Lowe’s (LOW.N: ) said late last
year that it expects to spend about C$200 million in 2010 and
open eight to 10 new stores as it pushes further into the
Canadian market.

Lowe’s, which currently has 15 Canadian stores, aims to
keep up a pace of opening about 10 new stores a year for the
foreseeable future.

Stock Market News

($1=$1.06 Canadian)
(Reporting by Scott Anderson; editing by Peter Galloway)

UPDATE 2-Rona aims for 10-15 pct EPS growth