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Frustrated store owners turn up heat on Rona CEO

00:00 EDT Wednesday, September 11, 2013

RETAILING REPORTER

Tensions between Rona Inc. and its store owners are simmering over complaints from the merchants about their diminishing returns and the home-improvement retailer's weak performance.

In a letter to Rona chief executive officer Robert Sawyer late last month, a group of Rona merchants expressed their growing frustration.

"Several members were solicited by the competition and are seriously considering leaving Rona. Several decisions made by Rona in recent months have only aggravated their frustration," said the letter, dated Aug. 28. "In addition, while many competitors are announcing an increase in profitability, at Rona, the results continue to decline and the promised recovery fails to materialize."

Mr. Sawyer is taking steps to address the merchants' concerns. The CEO of the Boucherville, Que.-based chain met Sept. 6 with the store owners - or dealers - who are now waiting to hear back from him after he pledged further consultations. The dispute has surfaced as Rona is struggling with its turnaround efforts. Since November, it has parted ways with former CEO Robert Dutton, laid off hundreds of employees and moved to close unprofitable stores.

While the new CEO agreed at last week's meeting to be more receptive to the store owners' grievances, he will feel the pressure to follow through, while cutting costs and improving the bottom line.

"We reminded him that our mission is to promote, protect and defend the collective interests of our members who have now been dissatisfied and impatient with the situation for many months, and in some cases for years," Martin Lacasse, president of the Rona Merchants Association, said in a letter to his dealer-members on Tuesday.

"We also added that merchants want to feel they're a part of the ongoing turnaround," wrote Mr. Lacasse, who owns three franchised Rona stores in Quebec, including one in Gatineau. "Our opinions have been overlooked in the past, but your association is here to make sure that doesn't happen again!"

Rona spokeswoman Valerie Lamarre said in an e-mailed statement: "Rona's management will continue to keep its dealer-owners across Canada informed regularly. We've always privileged open communication lines and we'll continue to interact directly with them."

Rona is grappling with tough competition from big-box U.S. rivals Home Depot Inc. and Lowe's Cos. Inc. amid soft housing starts and its own missteps, including an overly ambitious expansion over the past few years. In its second quarter, Rona missed profit expectations, while same-store sales at outlets open a year or more - an important retail measure - dipped 1 per cent.

A former executive at grocer Metro Inc., Mr. Sawyer has said he needs time to revive Rona's fortunes. Besides the retailer's own troubles, "market conditions are difficult," he told analysts last month.

Mr. Lacasse said in an interview that he would not elaborate on the Rona merchants' grievances beyond what he said in his letter. But he said he is optimistic about Mr. Sawyer's latest response. "He understands the urgency of the dealers, which he didn't grasp before."

The association was formed last January, four months after Rona revealed that Lowe's had made an informal $1.8-billion offer for Rona, which the company flatly dismissed. Industry sources said the Rona merchants were upset that they hadn't been told about the bid before it was disclosed publicly.

As well, they faced the threat from Rona late last year that they would lose the rebate of about 6 per cent that they get for purchasing goods from Rona, sources said. Ultimately, the company did not follow through with the proposal, they said.

The dealers' biggest concern today is their contention that they aren't benefiting from various discounts and rebates granted to Rona by suppliers. The group, which consists of franchisors and store owners who purchase their goods from Rona, "have the right to have access to any relevant information regarding supply costs," the letter says.

The company has agreed to set up a "bipartisan" committee with the association "in the near future" to address its issues, Mr. Lacasse said.

Wendy Evans of Evans & Co. Consultants, said the spat underscores the retailer's complex corporate structure. It encompasses franchised and store-owned independent merchants, as well as company-owned outlets. "It's very difficult to manage an organization like that," she said.

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