Leon's Reports Same Store Sales Increase

Furniture World News Desk on 11/16/2014

Statement from Leon's:

For the three months ended September 30, 2014 , total Leon's system wide sales were $629,152,000 including $97,467,000 of franchise sales ( $628,619,000 including $100,017,000 franchise sales in 2013). Same store sales were up 1% compared to the prior year third quarter. Net income was $27,287,000 , 38¢ per common share ( $21,760,000 , 31¢ per common share in 2013), an increase of 23% per common share. We are pleased to announce that our earnings per share were a record high for a third quarter.

For the nine months ended September 30, 2014 , total Leon's system wide sales were $1,698,991,000 including $266,780,000 of franchise sales ( $1,405,555,000 including $233,936,000 of franchise sales in 2013) and net income was $45,611,000 , 64¢ per common share ( $42,058,000 , 60¢ per common share in 2013), an increase of 7% per common share. These figures include The Brick Limited results since March 28, 2013 .

Despite a difficult start in the first quarter of 2014, there was an increase in profits for the second and third quarter of 2014 versus the prior year.   Integration and synergies between The Brick and Leon's divisions are progressing as planned. As well, we are making good progress on a new computer system to be implemented over the next 15 months that will result in improved efficiencies in the operations of both divisions.

Revenues and Expenses
For the three months ended September 30, 2014 , total system wide sales were $629,152,000 , which includes $531,685,000 of corporate sales and $97,467,000 of franchise sales, ( $628,619,000 , which includes $528,602,000 of corporate sales and $100,017,000 of franchise sales for the three months ended September 30, 2013 ). Overall, same store corporate sales increased by 1%.

Our gross margin for the third quarter 2014 of 43.0% was up from the 42.9% gross margin experienced in the third quarter of 2013. The increase in gross margin was driven by the change in our sales mix as we saw a slight increase to furniture and appliance sales versus electronic sales.

Net operating expenses of $187,987,000 were down $3,700,000 from the third quarter of 2013. The decrease compared to the comparative period was mainly due to lower payroll costs at the Brick division and a reduction in marketing expenses in the Leon's division. Excluding these factors, operating expenses were in line with the prior comparative period.

As a result of the above, net income for the third quarter of 2014 was $27,287,000 , $0.38 per common share ( $21,760,000 , $0.31 per common share in 2013), an increase of $0.07 per common share or 23% from the prior year quarter.

For the nine months ended September 30, 2014 , total system wide sales were $1,698,991,000 including $266,780,000 of franchise sales ( $1,405,555,000 including $233,936,000 of franchise sales in 2013) and net income was $45,611,000 , $0.64 per common share ( $42,058,000 , $0.60 per common share in 2013), an increase of $0.04 per common share or 7% from the prior comparative nine month period. These figures within the MD&A reflected these restated amounts which include The Brick results since March 28, 2013 .

Subsequent to the finalization of the purchase price allocation for the March 28, 2013 acquisition of The Brick, as previously disclosed in the Company's interim condensed consolidated financial statements as of and for the three months ended March 31, 2014 , management discovered that certain of the values allocated to property, plant and equipment, intangible assets and finance lease liabilities were incorrect, as further described in the third quarter interim condensed consolidated financial statements. Accordingly, Management has restated the purchase price allocation and goodwill recognized on acquisition, and also disclosed the impact on the statements of financial position and income statements for the related periods in Note 5 of the third quarter interim condensed consolidated financial statements. The figures within this MD&A reflected these restated amounts.

About Leon's: With The Brick acquisition, Leon's Furniture Limited is now the largest retailer of furniture, appliances and electronics in Canada . Our retail banners now include: Leon's; The Brick; United Furniture Warehouse; The Brick Mattress Store; and The Brick Clearance Centres. Finally, the addition of The Brick's Midnorthern Appliance banner alongside with Leon's Appliance Canada banner, makes the Company the country's largest commercial retailer of appliances to builders, developers, hotels and property management companies.

As a result of this major acquisition, Leon's now has approximately 300 retail stores from coast to coast in Canada under various banners, which also includes over 100 franchise locations.