LEON’S FURNITURE $15.75 - Toronto symbol LNF

LEON’S FURNITURE $15.75 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243- 7880; www.leons.ca; Shares outstanding: 70.6 million; Market cap: $1.1 billion; Div. yield: 2.5%) has steadily opened new stores, growing from 27 stores in 2003, to 75 today.

But the company more than quadrupled in size overnight with the March 28, 2013 purchase of its main rival, The Brick, for $700 million. The Brick operates 234 outlets across Canada. Leon’s and The Brick will continue to operate as separate chains.

As a result of the acquisition, Leon’s sales jumped to $523.0 million in the three months ended December 31, 2013, from $188.5 million a year earlier. Earnings rose 61.5%, to $26.0 million, or $0.37 a share, from $16.1 million, or $0.23.

Leon’s ended 2013 with longterm debt of $416.2 million, or a manageable 38% of its $1.1- billion market cap. The stock yields 2.5%.

Growth by acquisition can be risky, especially with a deal this big. Leon’s will now need to successfully integrate The Brick and pay down its debt. However, the purchase continues to look like a good fit.

Leon’s is still a buy.

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