LEON’S FURNITURE LTD., $15.64, symbol LNF on Toronto, reported sales of $463.5 million in the three months ended March 31, 2016, up 7.9% from $429.7 million a year earlier. Same-store sales rose 7.7%.
Earnings jumped 89.0%, to $5.2 million, or $0.07 a share, from $2.7 million, or $0.04. The company increased its sales with effective promotions. The higher earnings came mostly from the increased sales, but also from cost controls.
Leon’s continues to successfully integrate the Brick furniture chain, which it bought for $700 million in March 2013. In October 2015, Leon’s converted the last sales region of the Brick to its computer system.
Growth by acquisition can be risky, especially with a deal as big as the Brick purchase. However, the move enhances the company’s long-term prospects. The stock trades at 14.9times this year’s forecast earnings of $1.05 a share. The stock also yields 2.6%.
OUR RECOMMENDATION: Leon’s is a buy.
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Canadian stock market: BMTC continues to buy back shares
BMTC GROUP INC., $13.03, symbol GBT on Toronto, is one of Quebec’s largest retailers of furniture, electronic goods and household appliances; it has 38 stores.
In the three months ended March 31, 2016, BMTC’s sales rose 3.8%, to $154.9 million from $149.3 million a year earlier.
The company lost $958,000, or $0.02 a share, in the quarter. It made a profit of $59,000, or nil per share, a year ago. The 2016 loss came despite the higher sales. That’s because BMTC earned less on its investments and spent more on marketing, renovations and improving its store websites.
The retailer bought back 7.0 million shares in July 2015 at $15.50 each for a total of $108.2 million. As a result, per-share earnings for the quarter rose 2.5%, to $0.41 from $0.40, on fewer shares outstanding.
BMTC’s website and store improvements are a big part of its growth plans. However, the cost of these upgrades—$25.6 million—will keep weighing on its earnings for the next year or two.
OUR RECOMMENDATION: BMTC Group is a hold.
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Have you ever invested in a stock that acquired a major competitor, successfully integrated the company, and significantly increased the value of its shares? Have you ever invested in one that made a similar acquisition that failed so badly that you lost substantial money in the stock?
This article was initially published in 2014 and is regularly updated.
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