According to Leon’s (The Canadian home furniture store), the company was able to increase its market share despite a decrease in sales.
Leon’s Furniture Ltd. said its profit last quarter was 26% lower than the same time last year as the Toronto-based retailer and its franchise affiliates felt the impact of the economic slowdown.
Leon’s net income was $8.62 million in the second quarter or 12 cents per share, down from $11.6 million of 16 cents per share in the same period of 2008, the company announced Tuesday.
Total sales including franchise stores fell to $209.9 million from $224.7 million, a decline of $14.7 million. Franchise sales fell to $44.7 million, down 6.8% or $3.3 million compared to the second quarter of 2008.
“In order to help offset declining consumer confidence, we continued running a very active marketing campaign to coincide with the company’s 100th anniversary. Although same-store corporate sales were down 6.5% compared to the prior year, based upon a competitive analysis of the marketplace, we feel confident that we did increase market share,” Leon’s said.
This case illustrates the problem with analyzing multi-variable problems. It is difficult to ascertain why Leon’s sales dropped at a slower rate than its competitors.
- Was it because of the reported 13% increase in advertising spending in the quarter?
- Was it because Leon’s has successfully ingrained the positioning (over many decades) that they have the lowest prices?
- Did shoppers who were looking at buying furniture naturally migrate to the large format stores and by-passed the local boutiques in order to save money?
- What is the nature of the decline in category sales?
- Is this a temporary issue, or have buyer preferences changed? (i.e. are people generally willing to hold onto old furniture longer)
- What will the make up of the category be once the recession is over?
- Is Leon’s current business model still valid?
