Leon's Third Quarter Sales Increase By 8 Percent

Furniture World Magazine

For the three months ended September 30, 2005, total Leon's sales were $187,055,000 including $45,070,000 of franchise sales ($173,221,000 including of $42,076,000 franchise sales in 2004), an increase of 8.0%. Net income was $13,630,000, 76 cents per common share ($13,947,000, 75 cents per common share in 2004), an increase of 1.3% per common share. The third quarter 2004 includes a net after tax gain from sale of property of $850,000 or 4 cents per common share. For the nine months ended September 30, 2005, total Leon's sales were $496,008,000 including $118,508,000 of franchise sales ($461,896,000 including $110,385,000 of franchise sales in 2004), an increase of 7.6% and net income was $29,306,000, $1.62 per common share ($29,014,000, $1.56 per common share in 2004), an increase of 3.8% per common share. Revenues and Expenses For the three months ended September 30, 2005, total Leon's sales were $187,055,000 including $45,070,000 of franchise sales ($173,221,000 including $42,076,000 of franchise sales in 2004), an increase of 8.0%. Leon's corporate sales of $141,985,000 in the third quarter of 2005, increased by $10,840,000, or 8.3%, compared to the third quarter of 2004. The increase in sales was attributable to many factors such as: an additional new showroom and warehouse stored opened in Edmonton, Alberta in October, 2004, a new showroom and warehouse stores opened in Quebec City, Quebec in November 2004 replacing our Vanier, Québec store and a new showroom and warehouse opened in Beauport, Quebec in August, 2005 replacing the Ste Foy, Quebec store. Leon's also saw sales growth from newly renovated stores, with the most recent renovated showroom and warehouse reopened in Windsor, Ontario in the spring of 2005. Merchandise volumes sold for the quarter and the year continued to rise at a higher pace than sales dollars as the trend of bringing in lower priced offshore furniture products especially from Asia continued to increase. Leon's has been able to pass these savings to customers through lower priced merchandise. For the quarter, all regions were up in sales with the strongest sales growth taking place in Western Canada. Same store corporate sales were up by 2.6% in the quarter when compared to the prior year. Leon franchise sales of $45,070,000 in the third quarter of 2005, increased by $2,994,000, or 7.1%, compared to the third quarter of 2004. The sales increase is the result of two new franchise stores opened in the fall of 2004, Simcoe, Ontario and Truro, Nova Scotia. Regionally we saw some marginal sales growth in Western Canada, with flat sales in Central Canada and lower sales in Eastern Canada. Gross margin for the third quarter 2005 of 40.61% was down just over one quarter of a percentage point from the third quarter 2004. This was mainly the result of offering sales value to customers in order to increase sales. Net Operating expenses of $36,850,000 were up $3,357,000 or 10% for the third quarter 2005 compared to the third quarter 2004. Payroll and commission costs were in line with higher sales of 8.3% for the quarter compared to the prior year. Leon's saw advertising expenses increase by $870,000 or 15.2% for the third quarter compared to the prior year. Additional advertising dollars were used to help drive higher sales and the retailer incurred incremental marketing costs associated with the grand opening of a new showroom and warehouse in Beauport, Quebec, in August 2005. Delivery and utility costs were up just over $1,000,000 for the third quarter 2005 compared to 2004 mainly as a result of increased fuel and hydro rates. As a result of the above, net income for the third quarter 2005 was $13,630,000, 76 cents per common share ($13,947,000, 75 cents per common share in 2004), an increase of 1.3% per common share. The third quarter 2004 includes a net after tax gain from sale of property of $850,000 or 4 cents per common share.