Leon’s Furniture Ltd. reported Thursday higher second-quarter net income despite lower revenue and system-wide sales, as the retailer pointed to cost management, cash generation and continued investment in store expansion during a consumer environment marked by cautious discretionary spending.
The Toronto-based company said net income for the quarter ended June 30 rose to $35.0 million, or 51 cents per diluted share, from $31.8 million, or 46 cents per diluted share, a year earlier. Revenue fell two per cent to $631.2 million from $644.1 million, while system-wide sales declined two per cent to $756.2 million. The company also opened four new franchise locations during the quarter.
The results reflected lower average selling prices as consumers continued to prioritize value, although the company said the number of retail units delivered increased compared with the same period last year. Same-store sales declined 2.2 per cent.
Sales soften across key categories
Revenue declined by $12.9 million from a year earlier, with furniture delivered sales down 4.2 per cent against what the company described as a strong prior-year comparison. Appliance sales also declined as builder activity slowed in the commercial channel and retail competition remained highly promotional. Those declines were partly offset by growth in the mattress category, which the company attributed to changes in its product assortment.
Margins pressured by foreign exchange
Gross profit totalled $281.7 million, down from $288.7 million a year earlier, while the gross profit margin slipped 19 basis points to 44.63 per cent from 44.82 per cent. The company said the margin was affected by foreign exchange revaluations tied to U.S.-dollar payables, partially offset by improved margins in its mattress business and higher revenue from insurance and delivery services.
Selling, general and administrative expenses fell to $232.6 million from $234.3 million, but increased as a percentage of revenue to 36.85 per cent from 36.38 per cent. Leon’s said the higher ratio reflected lower revenue, increased marketing costs related to promotions and new product partnerships, higher fuel and occupancy costs, and was partly offset by lower retail financing fees resulting from lower Bank of Canada interest rates.
Adjusted earnings fall despite higher reported profit
Adjusted net income, a non-IFRS measure used by the company, declined to $34.8 million from $39.4 million a year earlier. Adjusted diluted earnings per share fell to 51 cents from 57 cents. Leon’s said the year-over-year decline reflected lower sales, changes in the valuation of U.S.-dollar payables and the absence of a $1.4-million one-time benefit recorded in the second quarter of 2025 related to CURO Holdings Corp.
CEO says company remained disciplined during quarter
Mike Walsh, president and chief executive officer, said the company delivered results that aligned with expectations despite continued pressure on discretionary consumer spending.
“During the second quarter, our team executed with discipline in an environment that unfolded largely as we anticipated, with consumers remaining selective on larger discretionary purchases. Against that backdrop, the mattress category was once again a standout, as our focused-assortment playbook continued to deliver. Gross margin came in at 44.6%, higher than the prior year when excluding a prior year accounting-related foreign exchange gain. This performance reflects our consistent focus on thoughtful merchandising and an optimized promotional strategy. Combined with ongoing cost management across the business, these efforts contributed to adjusted diluted earnings per share of $0.51.”
Liquidity strengthens as company expands store network
The company ended the quarter with unrestricted liquidity of $560.1 million, up from $454.5 million a year earlier. The balance included cash, cash equivalents, debt and equity instruments, and available capacity under its revolving credit facility. During the quarter, Leon’s repurchased about $3.0 million worth of shares.
Dividend maintained
The board declared a quarterly dividend of 24 cents per common share, payable Oct. 7, 2026, to shareholders of record as of Sept. 9, 2026. The company had previously paid a quarterly dividend of 24 cents per share on July 8.
Company focused on market share and growth
Leon’s said its principal objective remains increasing market share and profitability through cost management and continued investment in growth initiatives, including its e-commerce operations and retail network, which now includes 301 stores across Canada.
Outlook remains cautious
Walsh said the company is preparing cautiously for the remainder of the year while continuing to invest in expansion.
“Looking ahead, although we have seen encouraging signs, the operating environment remains challenging and we are planning the balance of the year prudently. Comparisons ease through the back half, and our focus remains on gaining share through this cycle and coming out of it in an even stronger leadership position as conditions normalize. We generated solid cash flow, repurchased approximately $3.0 million of shares and ended the quarter with $560.1 million of unrestricted liquidity. At the same time, we kept investing in growth, and the four new stores we opened during the quarter are off to a strong start. Our scale, national distribution network and rock-solid balance sheet position us to continue delivering value to Canadians, outperforming in our core categories, and delivering long-term returns for our shareholders.”
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