LFL Group executives highlighted sales growth, margin expansion, and increased shareholder returns during the company’s fourth quarter and full-year fiscal 2025 earnings call, while also acknowledging a more cautious consumer backdrop and several fourth-quarter headwinds. Leon’s Furniture (TSE:LNF) reported system-wide sales growth and improved profitability metrics for the year, alongside a higher regular dividend and a newly approved special dividend.
Full-year 2025 results: revenue up, margins improved
President and CEO Mike Walsh said 2025 delivered “strong operational and financial performance,” pointing to system-wide sales growth of 2.8%, “expanded” gross margins, 16.5% growth in normalized, adjusted, diluted earnings per share (EPS), and a 20% increase in the quarterly dividend. Walsh also noted the board approved a CAD 0.50 special dividend.
SG&A as a percentage of revenue improved to 36.48% from 36.72% in 2024, primarily due to lower retail financing fees amid declining interest rates, along with cost discipline and leverage from top-line growth, Diab said. Net income for the year was CAD 157 million, or CAD 2.29 per diluted share. Diab added that after normalizing for a one-time gain from the CURO settlement, adjusted net income rose CAD 22.2 million, or 16.6%, and adjusted diluted EPS increased 16.5%.
Category performance: furniture strength and commercial appliance contribution
Walsh described furniture as the “standout category” in 2025, growing 6.3% for the year, supported by a focused assortment strategy that narrows selection where appropriate, goes deeper in best-performing SKUs, and selectively broadens into opportunities. He said the company’s execution contributed to “consistent market share gains.”
Appliances also contributed meaningfully, led by the commercial channel and the delivery of previously booked multi-unit residential projects. Diab said commercial performance reflected the completion of previously secured projects that moved through delivery in 2025, but he reiterated the company expects developer-related revenue to moderate, adding the company is beginning to see that trend emerge early in 2026.
Management also discussed geographic expansion for Appliance Canada. Walsh said the banner has historically focused builder and developer partnerships in Ontario, but with expectations of moderation in that market—and because many partners operate nationally—the company piloted a “store-within-a-store” concept in a Leon’s location in Richmond, British Columbia, intended to provide developers a dedicated destination for customer upgrades while leveraging existing infrastructure.
Fourth quarter: modest sales growth amid operational and macro headwinds
For the fourth quarter, Diab reported revenue of CAD 671.4 million, up 0.7%, with same-store sales up 0.6%. Gross margin in the quarter was 46.08%, improving year-over-year due to a favorable shift toward higher-margin furniture and better furniture and appliance margin rates tied to assortment and sourcing work. This was partially offset by a higher mix of lower-margin commercial sales, Diab said.
SG&A as a percentage of revenue was 35.51%, up 13 basis points versus the prior year, driven primarily by higher occupancy and amortization (including the lease commencement of the Edmonton Distribution Centre and other renewals), higher sales commissions, and slight deleveraging of fixed costs. Diab said those items were partially offset by lower point-of-sale retail financing fees as Bank of Canada rates moved lower.
Adjusted diluted EPS for the quarter was CAD 0.74, down from CAD 0.98 last year, which Diab said reflected a one-time CAD 23.4 million legal settlement recorded in the fourth quarter of 2024. Normalizing for that item, adjusted diluted EPS increased modestly to CAD 0.74 from CAD 0.73, up 1.3%.
Walsh said the company anticipated the impact of Canada Post disruptions on flyer distribution during key promotional windows, but the quarter also saw added headwinds, including increased promotional intensity in certain categories, selective consumer spending—particularly on larger discretionary items—and tougher winter weather comparisons. “In the context of the broader market, we’re satisfied with how we performed,” Walsh said.
Consumer and competitive backdrop: value focus, promotional intensity, and choppy demand
In the Q&A session, management attributed the fourth-quarter same-store sales deceleration to multiple factors, including the Canada Post strike affecting flyer distribution, weather disruptions around major selling days, and a broader consumer slowdown in December. Walsh said flyers remain one of the company’s highest return-on-investment channels and noted that roughly 50% of the network did not receive flyers, particularly impacting Ontario and Quebec.
Diab added that the company saw “a broader slowdown in December” across brands, with shoppers waiting for value and major promotional days outperforming average days. Both executives said this cautious behavior carried into January 2026, alongside severe winter weather affecting traffic.
On competition, Walsh said promotional intensity seen in Q4 carried into Q1 and that he does not expect it to abate throughout 2026 as retailers compete on value.
Capital allocation, investments, and 2026 considerations
Diab said the company ended 2025 with CAD 603 million in unrestricted liquidity, including cash, marketable securities, and a fully available revolver, and emphasized that maintaining that liquidity is a deliberate choice. Management reiterated a capital allocation framework prioritizing reinvestment where returns are attractive, a strong balance sheet, and returning capital to shareholders primarily via regular dividends, while remaining alert to acquisition opportunities.
For 2026, the company expects maintenance capital expenditures of approximately CAD 45 million to CAD 50 million, above its historical CAD 35 million to CAD 40 million range, reflecting planned renovations and category-level refreshes in addition to typical maintenance. The company also expects to open two new corporate stores and up to five franchise locations, weighted to the back half of the year.
Management also discussed distribution strategy, noting the February 2025 closure of the Mississauga warehouse delivered expected operational results, including SG&A savings and working capital benefits. Diab said the company is evaluating another phased, measured centralized distribution initiative in another region, with Ontario representing the most significant long-term opportunity.
Additional 2026 topics included:
- Buybacks: Diab said the company did not repurchase shares under its NCIB in the fourth quarter and intends to be opportunistic when volatility aligns with long-term strategy.
- Tariffs: Diab noted steel derivative tariffs implemented by the Canadian government on Dec. 26, 2025. Inventory already in transit was not impacted. For new orders after that date, the company is evaluating the impact and said it would adjust pricing “surgically” where appropriate.
- Comparisons: Diab flagged tougher year-over-year comparisons in 2026, particularly in the first half, including Q1, which benefited in 2025 from a timing shift that pulled some sales forward from Q4 2024 into Q1 2025.
- REIT initiative: Diab said the previously announced plan to create a real estate investment trust remains a strategic priority, with timing driven by market conditions and regulatory approvals, but did not provide further detail.
Closing the call, Walsh said the company is entering 2026 confident in its positioning, with a continued focus on value, disciplined merchandising and promotions, gross margin protection, cost discipline, and market share gains in core categories.
About Leon’s Furniture (TSE:LNF)
Leon’s Furniture Ltd is a Canada-based retailer which is involved in the sale of home furnishing, mattresses, appliances, and electronics. The firm is also the country’s commercial retailer of appliances to builders, developers, hotels, and property management companies. It generates maximum revenue from sales of goods by corporate stores.
