RONA's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Feb.18.14 | About: RONA Inc. (RONAF)

RONA INC. (RONA) Q4 2013 Earnings Conference Call February 18, 2014 3:00 PM ET

Executives

Stephane Milot - VP, Finance and IR

Robert Sawyer - President and CEO

Dominique Boies - EVP and CFO

Analysts

Irene Nattel - RBC Capital Markets

Vishal Shreedhar - National Bank Financial

Jim Durran - Barclays

Mark Petrie - CIBC

Keith Howlett - Desjardins Securities

Anthony Zicha - Scotiabank

Derek Dley - Canaccord Genuity

Operator

[Foreign Language]

Good morning, ladies and gentlemen. Welcome to the RONA 2013 Fourth Quarter Results Conference Call.

[Foreign Language]

During the presentation, all participants will be in listen-only-mode. After, we will conduct a question-and-answer session and instructions will be provided at that time. As a reminder, this conference is being recorded.

[Foreign Language]

I would now like to turn the conference over to Mr. Stephane Milot, Vice President, Finance and Investor Relations. Please go ahead.

Stephane Milot

Thank you, operator, and good afternoon everyone. So, welcome to our fourth quarter and fiscal year end results conference call. With me are Robert Sawyer, President and CEO; and Dominique Boies, Executive Vice President and CFO. The agenda for today is as follows. Robert will provide a business update and Dominique will follow with specific comments on financial results. We will then be available to answer your questions.

Before we begin, I would like to remind you that the information provided during this conference call may contain forward-looking statements reflecting RONA’s objectives, estimates and expectations. As you know, such statements involve risks and uncertainties. For information on the nature of these risks, please see our MD&A. Moreover, RONA undertakes no obligation to publically update the forward-looking information discussed during this conference call, unless otherwise required by the Securities Authorities.

I will now turn the call over to Robert Sawyer. Please go ahead.

Robert Sawyer

Thank you, Stephane, and good afternoon, everyone. Today, I’ am very pleased to report on what has been a transformational year at RONA. It has also been a very exciting year and we put in place the foundation to become more efficient and focused organization with culture centered on performance, efficiency and accountability. Although sale and earning were down from last year, I am proud of the progress accomplished in 2013. '13 was a difficult year for our industry with a decline in housing starts across Canada and more specifically in Quebec, our most important market.

Market condition remained challenging in the fourth quarter and weather also affected the result. Still we limited the downside effect on the result with adjusted net income of $0.04 per share, compared to $0.05 per share in the fourth quarter of last year. Dominique will provide further detail in a few minutes. In June 2013, we laid out an ambitious restructuring plan to improve profitability. The main goal of the plan was to achieve run rate cost saving of 110 million by the end of 2013, while also divesting of noncore activities.

I am pleased to report today that we’ve achieved our 110 million run rate objective within the announced timeframe. We have eliminated 375 admin positions, we have reduced cost in admin, marketing and distribution, we have closed 11 underperforming stores and we closed four satellite distribution centers and as announced on October 20th, we also sold our Commercial and Professional Market division for 214 million.

Other important measures were put in place in 2013. We have increased our spending and promotional activity to face the challenging market condition. We have massively liquidated excess inventory and we have revised our pricing strategy in certain banner and certain provinces. In a nutshell, 2013 was about identifying and achieving saving as well as reorganizing our structure in commercial activity around our four main groups namely RONA Big-Box, Réno-Dépôt Discounter Store, RONA Proximity and Contractor Specialists.

We’ve rebuilt our management team in these four groups and our commercial operation to have the best talent executing our plan at all level of the organization. As we begin 2014, RONA is a more focused organization with a much stronger base. This year our main priorities are the improvement of the customer experience across our different type of stores and the increase in bottom line results and return to our shareholder.

To improve customer experience, we are currently doing a major innovation at our Réno-Dépôt store. We’ve launched a totally new concept in January at our Réno-Dépôt store in Saint-Hubert near Montreal. The reaction from our customers and the impact on sale trend has been encouraging so far. Our plan is to rollout that new concept in all stores of the banner in the coming month. Five locations on the island of Montreal will be launched by the end of the month. We are highly committed to make this new direction to make Reno-Depot successful and to expand the banner in due time.

In 2014 we will also continue to work closely with our dealers. Dealer satisfaction and that of their customer is important to our success. In this regard we've launched in January a new program aimed at stimulating their purchase and improved competitive positioning.

In closing, our goal to improve return for shareholders can only be achieved by focusing on our core competencies. While market condition will remain difficult we will continue to focus on element under our control. With the right product and the right price in the store providing the right experience for customers, RONA can gain profitable market share in any economic environment.

As a linear and more focused company and with a solid balance sheet, we are well-positioned to build a new RONA around our four pillars which is make the customer central of our decision, provide the best in-store execution, having the best team, and generate return and growth for shareholders.

This completes my part of the presentation. Dominique will now go over to financial highlights and after that we’ll be there for the question. Thank you.

Dominique Boies

Thank you Robert. I’ll first provide an overview of our year-end result followed by a more detailed review of the fourth quarter. After that I will go over our balance sheet position and cash flow at year end. Unless otherwise indicated all amounts expressed relate to continuing operations.

2013 consolidated revenues totaled 4.2 billion down from 4.4 billion in 2012. This decline is due to negative same-store sales to the loss of sales following the closing of underperforming stores and one fewer week in 2013 compared to 2012. On a comparable week basis, same-store sales declined by 1.9% as a result of challenging market condition and a slowdown in stores undergoing important transformation like Réno-Dépôt stores in Quebec, and our Proximity stores in Alberta earlier this year. It’s worth mentioning that we see some important regional differences as for example our network generated positive same-store sales in Ontario and Western Canada for both the full 2013 year and fourth quarter.

For the year, adjusted EBITDA stood at 185.1 million, versus 217.5 million last year. This 32.4 million decrease is a combination of the impact from the negative contribution of 96.3 million from the adjusted gross margin, which was partially offset by the reduction of 63.9 million in adjusted SG&A related to our plan.

More precisely, this gross margin dollar decrease reflected drop in same-store sales, liquidation of excess inventory and the competitive environment which required more promotion and finally store closures. On the other end, our efficiency effort yielded an important reduction in organic SG&A expenses in addition to savings attributable to store closures. In total those two elements relating to our cost reduction plan resulted in a net incremental EBITDA improvement of 34.3 million. These savings are in fact savings realized in 2013 as part of 110 million run rate cost reduction achievement. Adjusted net income reached 49.9 million or $0.41 per share in 2013 versus 73.5 or $0.60 per share last year.

Now turning to the fourth quarter. Consolidated revenues totaled $941 million over a 13 week period in 2013 versus 1.07 billion over 14 weeks in the fourth quarter of 2012. In addition to one less week in 2013 and the impact of store closures, this decrease also reflects unfavorable weather conditions in Ontario and in Québec in December that affected store traffic. As a result same-store sales declined by 3.5% in the fourth quarter of 2013 based on a comparable week basis.

Adjusted EBITDA decreased by $3.3 million in the quarter from $39.4 million or 3.7% revenues last year to $36.1 million or 3.8% EBITDA margin this year. As for the year these 3.3 million decrease is a combination of the impact from negative contribution of $38.7 million of the adjusted gross margin, which again was partially offset by the reduction of $35.4 million in adjusted SG&A related to our plan in the fourth quarter.

As planned, we were able to stabilize our gross margin by reducing pressure of liquidation of inventory and promotion. Most of the decrease was then attributable to the 3.5% reduction in same-store sales. Savings relating to the plan mitigated this decrease in gross margin. Adjusted net income reached 4.6 million or $0.04 per share compared to $6.4 million or $0.05 per share last year. Given the challenging market conditions, one could expect that we could continue to stimulate sales and protect profitable market share by way of promotional activity. Accordingly this could maintain a certain pressure on our gross margin in line with our indication that we could progressively reach an SG&A saving reinvestment rate of about 30%. As we move into a more constructive environment we should also get the positive effect of an increasing operational leverage.

Now turning over to the balance sheet, we concluded 2013 in a very solid financial position with cash of $8.2 million and only $45 million drawn under our $700 million revolver. This reflects the user proceeds from the sale of the commercial and professional market division last October to reduce our credit facility. At year end RONA’s total debt to adjusted EBITDA ratio stood at 0.9 times versus 2 times at the end of the third quarter and 1.4 times in 2012.

With respect to inventories you may recall that we recorded a significant increase of $140 million in the third quarter. In the fourth quarter we voluntarily slowed down inventory reduction, given our decision to stimulate sales early in 2014 and the acceleration of certain merchandising strategies. Still we concluded 2013 with a year-over-year inventory reduction from continuing operation of $34 million.

As a result, cash flow from continuing operation activities was $75.1 million after changes in working capital. Constant efforts to optimize capital utilization by tightly managing capital expenditure allowed RONA to conclude 2013 with free cash flow of $30.6 million. This amount was mainly used to repurchase shares under our normal course issuer bid program initiated in mid-November. At the end of 2013, we had repurchased nearly 1.2 million shares for a consideration of $15.4 million.

As of today, we’ve repurchased a total of 1.5 million shares for a consideration of $20.1 million. The program is approved for a maximum of 8.6 million shares until November 17, 2014 and our financial position allows us to remain active on this front.

In conclusion, we begin 2014 with a very strong financial position. This flexibility combined with the increased benefit from SG&A saving should allow us to improve our bottom line and return on capital in 2014 as dictated by our financial priority.

This wraps up the financial section. We’re now ready to answer your questions.

Question-And-Answer Session

Operator

Thank you. We will now take questions from the telephone lines. [Operator Instructions] [Foreign Language]. Our first question is from Irene Nattel from RBC Capital Markets. Please go ahead.

Irene Nattel - RBC Capital Markets

Coming back to the $110 million and the reinvestment of 30% in gross margin, as you stand here and you look at the environment, do you think that you will need to reinvest more than the 30% or conversely do you think that you can continue to reduce the annualized run rate by more than $110 million?

Dominique Boies

So if I hear you correctly Irene, there are two parts in your question. So that first one is on the reinvestment. Right now we didn’t change the program. So we could reinvest up to 30% but no decision has been taken to increase this. Second of all, you’re asking if we could reach more than $110 million in savings. Our goal is always to be more efficient and we’re always looking for opportunity, but at this point as you know we have good control over our G&A usually. But, and this just to help you as well to wrap this up, I know it could be confusing but the $110 million, if we reinvest 30% that would yield about $80 million of incremental or net EBITDA addition. We’ve generated $34.5 million in 2013. So in your $185 million of EBITDA, you have $34.5 million, which could lead you to think that you would get probably an additional $45 million to $50 million of incremental EBITDA in 2014.

Irene Nattel - RBC Capital Markets

And there was a lot of numbers as you were talking. Unfortunately we’re finding it very hard to reconstruct the Q4 P&L from the releases. Could you please give us what the gross margin percentage was in Q4 of this year versus last year?

Dominique Boies

It was 27.02% versus 27.34%, but Irene we will post following the call on our website our Q4, our unedited Q4 financial P&L.

Robert Sawyer

Income statement and cash flow.

Dominique Boies

Adjusted gross margin.

Irene Nattel - RBC Capital Markets

And just another question. Obviously one of the big pieces of work that you were doing in 2014 was the category review, the adjustment of the offer, the rate -- sort of determining what sort of the optimal pricing is? Where are you in that process?

Robert Sawyer

I've been talking about Réno-Dépôt. Réno-Dépôt we put a lot of effort and time to arrive with a new store and we did that in all of the stores of Réno-Dépôt. The Rona Big-Box store, we’re into that process right now. We’re taking core category right now and we’re into the core category. It’s a longer process at Réno-Dépôt or Rona guidance [ph].

Irene Nattel - RBC Capital Markets

And then just one final question if I may. Dominique do you have your adjusted debt to EBITDAR handy by any chance?

Dominique Boies

We could provide it to you after but I just don’t have it with me right now, Irene.

Operator

Thank you. The following question is from Vishal Shreedhar from National Bank Financial. Please go ahead.

Vishal Shreedhar - National Bank Financial

Just on the restructuring plan that you've been implementing. As we get to, as we have gotten to the end of 2013 and even into early 2014, I was wondering what elements of that plan are going better than expected and what elements of the plan are not going as well as expected and perhaps you have to change elements of that? Any context will be helpful. Thank you.

Dominique Boies

Vishal, I would say on the plan is pretty much what we had expected. We have some plus and minuses but overall what we had planned on the admin side, we delivered. At the store level it’s the same thing. So we’re pretty much -- the savings came pretty much from where we had foreseen them coming from.

Vishal Shreedhar - National Bank Financial

Okay. And the market conditions are as expected?

Dominique Boies

Yes, it still is a very tough environment.

Robert Sawyer

January was a rough start. The weather was not being help at all and all over the country. The only portion that we can say that the weather was nicer or we appreciate more and more sale is on the Western part of Canada but the rest of the country in January was bad weather. And the economy is still the same. It hasn’t changed since the last few months.

Dominique Boies

If I may add Vishal on this, one key driver. As you know 50% of our sales in Quebec. We finished the year with single family housing starts of minus 24%. Q4 was minus 13% in housing starts. So this had an impact -- Ontario was minus 13% as well for the year. So the environment is still difficult from that front and until this changes, it doesn’t help.

Vishal Shreedhar - National Bank Financial

Understood. And even in a top environment, Ontario for instance; you noted that you had positive same store sales growth in the quarter in the year. Just wondering what was different about the Ontario market and even the West Coast market versus the Quebec market? The store closures that you had in Ontario, is that helping lift the same store sales growth in that market?

Robert Sawyer

You are answering your own question there. Yes we've shut down the stores in Ontario and we transferred sales from the existing ones that we haven’t shut down and the economy in Alberta and the Western parts of the country is much better than the other -- rest of the Canada.

Vishal Shreedhar - National Bank Financial

Okay. Just a quick one Dominique, I'm not sure if you have this handy but do you have the adjusted operating lease data for your upcoming payments?

Dominique Boies

Again same thing then for Irene. We’ll provide you with the -- -it will be part of the EBITDAR and I will provide you with that data after the call.

Operator

Thank you. The following question is from Jim Durran from Barclays. Please go ahead.

Jim Durran - Barclays

I'm just interested in understanding with respect to how you view your business, as to whether housing starts are more important than resale activity or vice versa.

Robert Sawyer

Dominique I will answer that question. The overall sale of our business; commodities is very important compared to some competitors. Some banners, the proxy store, some of them are doing almost 50%, 60% on their sale on commodities. So the overall sale of commodity is 38 in our businesses, but it really affects our business when there is a big decline.

Jim Durran - Barclays

And you attribute most of that than to contractors and to starts as opposed to resell activity and renovation work?

Robert Sawyer

Yes, for sure that the new housing, it’s a better business for us than the renovation.

Dominique Boies

And even then Jim, if I may add, if you look even at resell figures, Canada is plus 1%, Quebec is minus 8%, Ontario is relatively flat. And historically if you go back three, four years ago from what we could see, usually when people were purchasing an existing home, they would undertake major renovation within 18 to 24 months, but right now it seems that disposable income being lower, people are taking longer to undertake those major renovations. So that’s what, speaking to our customers we hear from them and so for us it’s really like how Bob mentioned the housing starts a key driver, more than resell.

Jim Durran - Barclays

Okay, and in Q4 you talked about positive comps in Ontario and Western Canada. Is that after adjusting for the weather impact in Ontario?

Dominique Boies

Yes, it's net -- it's net of no adjustments for the weather impact. Net, we were in the positive same store sales for Ontario, both for the quarter and for the year.

Robert Sawyer

We shut down many stores Jim.

Jim Durran - Barclays

And so when you look out to next year, I know you don’t provide guidance but are you reaching a point now where with inventory cleared and store closures largely done, that you’re hopeful that even within -- what’s still a tough housing market obviously, that positive comp store sales are realistically achievable in the 2014 year?

Robert Sawyer

Yes, well we hope saw hope so, but I cannot predict. We’re working hard to make it happen.

Dominique Boies

And even in this environment -- the big idea behind the $110 million plan was really to make sure that those are elements under our control like Robert mentioned in his notes, that we control; same-store sales we control to a certain extent by bringing traffic and merchandising theme and marketing theme. That’s their job, but that’s we focused on making sure we’re very -- as efficient as we can.

Jim Durran - Barclays

Okay, so my last question’s just, based on the investments you’ve made, both to clear inventory and to try and get your pricing in the right buckets, at a more competitive level, do you feel now that the price differential between you and competition in the key categories that are important has narrowed sufficiently? Is it now at parity on a sort of regular basis or how would you describe where you’re at on that front?

Robert Sawyer

I think we’re in line in every market. Wracking, we’re measuring, we’re taking a price survey on a weekly, biweekly basis and I can say today that we’re line with our competitors depending on which market and which competitor we’re talking.

Jim Durran - Barclays

And do those price audits include the affiliate network?

Robert Sawyer

Yes.

Operator

Thank you, the following question is from Mark Petrie from CIBC, please go ahead.

Mark Petrie - CIBC

Just a follow up on that last, that last question and your answer, Robert. Do you feel like in line pricing position is where you need to be and where you want to be or do you feel like there’s certain sectors or store types where you want to be pricing at a discount?

Robert Sawyer

We have a discount banner for your information. I was talking of Réno-Dépôt. Réno-Dépôt is a discount banner. So for sure Réno-Dépôt should be the leader in this market, which is where she is right now and I’d like you to visit the store on the [indiscernible] or the island of Montreal by the end of the month. But the other market we compete with, the banner that we compete, either it’s a big competitor or smaller competitor independent, we adjust, but we don’t want to overkill and margin for nothing. So we’re there to compete and we do have a discount banner, which is Réno-Dépôt.

Mark Petrie - CIBC

Sure, I understand, okay. And then you spoke about your relationship with the dealers as a priority for 2014. Wondering if you could just talk a bit more about that and then the health of the dealer network overall?

Robert Sawyer

If you recall, midyear we talk about dealers that they were just arriving the end of April and dealers were complaining about the relationship with Rona. So we’ve put into place many mini committee or subcommittee that are meeting on a monthly, quarterly basis, getting their feedback, adjusting and listening to what they’re saying and on top, hearing that some commodity or some category, we were two pricely in terms of wholesaling to them. So made investment and margin for them and I think right now, if we talk about independent dealers, they’re more happy than they were in the month of June of last year.

Mark Petrie - CIBC

So from a relative position standpoint, do you feel like the dealer network is positioned to once again outperform the corporate and franchise stores from a same-store sales basis?

Robert Sawyer

No, depend; it’s always comparing apples to apples. Same-store or good operator are over performing and you have some activity independent or your corporate store. I would say when I look at the end result or comparison of margin or comparison of same-store sale, depending if there is new competition or not in the market, I would not say that corporate or affiliate over perform one or the other.

Mark Petrie - CIBC

Okay, thanks. And then just I just wanted to clarify the reinvestment Dominique. I'm just a little bit confused. So, I know the savings in 2013 were $67 million. The benefit to EBITDA was $34 million. So you basically reinvested $33 million. And that’s the 30% of $110 million. So there is no sort of reinvestment in 2014. Is that the idea?

Dominique Boies

No, so basically what you should see is that when you look at it, it should be in your margin going forward but you should look at the net EBITDA line. So what I'm saying is that net going forward you should see an incremental $45 million to $50 million net of reinvestment in your EBITDA next year.

Operator

Thank you. The following question is from Keith Howlett from Desjardins Securities. Please go ahead.

Keith Howlett - Desjardins Securities

Yes, when you give that $45 million to $50 million, is that -- you're assuming constant same-store sales I guess, lot same-store sales or all things equal or how do you?

Dominique Boies

The $110 million is out of system. So of course all things being equal, you would see that you are going to be net in terms of cost saving. It’s roughly $80 million. So 70% of $110 million will flow into the EBITDA line. Of course the portion that we don’t control is the same-store sales and depending on where we land on same-store sales this will have an impact on the overall EBITDA line.

Robert Sawyer

And this is still there and in fact from a modeling point of view, what you should look at is make your own assumption for same-store sales and apply the typical, we used to say in the 15 to 20 basis point per 1% of same-store sales, you use the one that you want for that. But that’s really something beside the $50 million, the $45 million to $50 million that Dominique was talking about. So that $45 million to $50 million is kind of the base case and then you get to make your own assumptions for same-store sales and how much will flow to the bottom line.

Keith Howlett - Desjardins Securities

And then just a question on the contribution of new stores, net of dispositions. These were helpful charge to put it. But I didn’t understand the sales from new stores. The net contribution was sort of $8 million but the gross margin contribution was $9 million. Does that mean you sold some money losing stores to others or how do you get those numbers?

Dominique Boies

I am not sure. Can we get back to you after the call on that?

Keith Howlett - Desjardins Securities

Sure, sure. And what about new store plans for next year and the capital program for next year?

Robert Sawyer

Very few. I would say more spending into realigning some store and some banners. In fact Réno-Dépôt, we're spending a lot of money to get them back where we want. I think there is three store planned to be opened. I think there is one new one and two relocation in the course of the 2014.

Keith Howlett - Desjardins Securities

And in terms -- so will the capital spending be in the same sort of?

Robert Sawyer

Réno-Dépôt, like I did mention and after that some realignment or I would say major renovation across the country in some store.

Dominique Boies

So you should use probably $85 million as our CapEx budget for 2014.

Keith Howlett - Desjardins Securities

And then in terms of the tax rate, any change expected there or?

Dominique Boies

No.

Keith Howlett - Desjardins Securities

And then just finally on the RONA stores, the Proximity RONA stores in Alberta; how do they do and how -- what’s your plans for 2014?

Robert Sawyer

Keith, we have talked about Totem a few times in the past and Totem was for us a concern because we transport them from Totem to Brunoy in 2013 and we've lost market share and some market of Totem banners. When we look at the Alberta region, overall we're gaining market share but still we are work in progress. Totem is one of our priority base and some geographic market that we need to work on.

Operator

[Operator Instructions] The following question is from Anthony Zicha from Scotiabank. Please go ahead.

Anthony Zicha - Scotiabank

Robert, can you please give us more of a progress report on your Réno-Dépôt concept stores? Like could you give us some more confidence and metrics and what kind of same-store sales have you been achieving and what kind of CapEx have you been?

Robert Sawyer

Anthony, you are asking me a lot of details. On same-store sales you won’t have an answer but let’s say Réno-Dépôt was for the last three years really underperforming to our level of expectation. So we did initiate a major renovation without enlarging the size of the store, but it was a transformation from I would say entrance of the store to the end of the store, spending CapEx close to $1.5 million, $1.6 million or whatever, close to $2 million in certain areas. We have reduced dramatically the amount of skews, introduced novelties and we’re all excited. From a negative same-store sales effect, we are right now experiencing positive same-store sales, which this was and plan too. So we’re satisfied with the result but it's early.

Anthony Zicha - Scotiabank

Can you give us a range in the same-store sales achievement?

Robert Sawyer

No.

Anthony Zicha - Scotiabank

Okay. How much does Réno-Dépôt represent in all over sales?

Robert Sawyer

It’s not what they represent in overall sales. I don’t know if we did mention that in the past.

Dominique Boies

No.

Robert Sawyer

The 16 Big stores, but the idea behind Réno-Dépôt is to expand it outside the provinces and the 16 will become 20 or whatever. We think it’s a growth engine.

Anthony Zicha - Scotiabank

Okay, but you didn’t give us the revenues of.

Robert Sawyer

If I'm starting to give you all of these details everybody is on the line will take note and I don’t want.

Operator

Thank you. The following question is from the Keith Howlett from Desjardins Securities. Please go ahead.

Keith Howlett - Desjardins Securities

Yes, just a question on the British Columbia market. I think you’re looking at renovating some of the proximity stores there I think some of the lease terminations was hard to renew, some of the stores. I'm just wondering where your plans are for 2014 in BC now?

Dominique Boies

We don’t have leases coming up for renewal in 2014 or 2015 but we need to lookout. We need to position ourselves for 2016. So it’s a market where as you know the real estate is very expensive, the rents are very expensive. So as we look the tough part is finding the real estate that works in the pro forma. So we still have a lot of time ahead of us but we need to be creative on that front.

Keith Howlett - Desjardins Securities

And when you look at bringing Réno-Dépôt and I realize it’s probably a year maybe or so on to Ontario, would it be to replace a RONA store or would it be a new store?

Robert Sawyer

It could be an empty box that we still have on our hand. It could be a transformation from RONA Home & Garden to Réno-Dépôt or it could be a Greenfield Park.

Operator

Thank you. The following question is from Derek Dley from Canaccord Genuity. Please go ahead.

Derek Dley - Canaccord Genuity

Can you comment on the traffic at your stores? Out west and in Ontario was traffic up or was the fact that you had positive same-store sales in those regions more of a function of less promotional environment??

Robert Sawyer

Primarily the basket doesn’t change quickly, I don’t have the numbers. Did you have it?

Dominique Boies

Yes, so you where - in some banners or in store formats we moved into positive territory from a transaction perspective; so from a number of transactions perspective, which has not been the case for a long time. So we’re trending upward and moving close to positive territory overall in terms of number of transaction. Basket is relatively stable depending on the store format that you’re looking at and the Big-Box is stable in Proximity, there is an effect of lumber in building material.

Derek Dley - Canaccord Genuity

And just on guys inventory position heading in Q1, where do you guys stand on that? Are you comfortable with the inventory position or is it going to have to be some more markdowns on that?

Dominique Boies

We’ve done what we had to from an inventory position perspective. Of course we have our seasonal goods still coming in. Most of them will be here by the end of the month or mid-March. And that’s as usual -- we’ve even faced more than in the past. It usually would be very bulky in one big shot. Now the team has worked on pacing this way better into quarter. And we’ve done what we had to do at yearend also to make sure we were in stock in Q1. So all of the steps have been taken and as we look ahead, our goal is still to produce better inventory turns both at the retail and wholesale level in 2014.

Operator

Thank you. There are no further questions registered at this time. I would like to return the meeting to Mr. Milot.

Stephane Milot

Thank you, Operator. And thank you everyone. So for your information, our next conference call for first quarter results will be held on Tuesday, May 13 at 3 PM. That same day we invite you to our AGM at our head office in Boucherville at 10:30 AM. So as always, we are always available to answer your questions. So please call me to get additional information or set up a conference call if need more. So thank you for your participation on this call and have a good day.

Operator

Thank you. That concludes today’s conference call. Please disconnect your lines at this time. And we thank you for your participation.

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