Leon's Furniture Ltd. shrugged off both a downturn in the housing market and reluctant shoppers to post a growth of 7.4 per cent in fourth-quarter profits and higher overall sales.
The company said Thursday that it turned out earnings of $23.2-million during the last three months of 2008, an increase from $21.6-million in the same period last year.
Profits were worth 33 cents per basic share, up from 31 cents a share in the comparable time frame.
Revenues were also higher, up to $269.9-million from $185.9-million, partly on the acquisition of Appliance Canada in January 2008, which primarily sells appliances to apartments and offices.
Sales at Leon's corporate stores open at least a year fell 1.7 per cent, due to a weaker economy.
"We believe the first quarter is going to be the worst," company president Terry Leon said in a recent interview ahead of the earnings report.
"The second quarter is probably going to improve, but very slightly, and we probably won't see a significant improvement until the second half" of the year.
For the full year, Leon's profits were $63.4-million, up from $58.5-million in 2007. Sales rose to $740.4-million from $637.5-million.
The company also announced a quarterly dividend of 7 cents per common share payable April 6.
The results come as furniture retailers face the double-whammy of both a slowdown in consumer spending and weaker housing numbers.
Canada Mortgage and Housing Corp. said Thursday that home building slowed 7.5 per cent per cent in 2008, and will fall another 24 per cent this year.
In 2010, housing starts are expected to stay relatively flat.
"The largest declines will be seen in Western Canada and Ontario," CMHC said in a release.
Leon said that furniture sales don't necessarily mirror the housing market, even though he conceded that there would be "some impact" on the industry.
"We get comments that when housing is booming it means furniture is booming ... (but) most people when they're purchasing furniture don't furnish the entire house," he said.
Instead, Canadians tend to move their old furniture into the new home and gradually pick away at redecorating over time, he suggested.
Leon's Furniture recently celebrated its 100th year in business, and its president says the company has survived several economic downturns.
"History has taught us to be cautious," Mr. Leon said.
"We reinvest our profits and we stay very strongly capitalized and that's the position you have to be in when times get tough. Those companies (that) prepared for it are in a better position than those that did not."
On Thursday, the income fund of Leon's biggest competitor, The Brick, suspended its dividends in order to preserve cash.
The Brick Group Income Fund said that preliminary unaudited results suggest that on a year-to-date basis same store sales fell by 3.6 per cent, though it hasn't officially reported its earnings.
Executives at the Brick fund did not return calls for comment.
Furniture retailers are also facing ramped up competition from industry outsiders like big box store Costco, and low-priced alternatives like Ikea.
"People have gotten used to certain expectations of prices and that's what they want," said Wendy Evans, head of retail consultancy Evans and Co. Consultants Inc.
The furniture industry's "growth isn't going to be anything like it was before. But if they are buying carefully... I don't see carnage - I see them pulling in their horns and looking to adjust their assortments in inventory."
Leon's Furniture shares fell 14 cents to $8.75 on the Toronto stock market in afternoon trading.