Eagle Quits Canada, Sells Edmonton Stores To Rival -- Money-Losing Edmonton Stores Sold; B.C. Plans Off

Eagle Hardware & Garden has decided to exit the Canadian market and sell its two money-losing stores there to a competitor.

The Tukwila-based hardware and home improvement chain said yesterday that it will close its two stores in Edmonton, Alberta.

Eagle agreed to sell them to the parent company of Revelstoke Home Centers Ltd., which has two competing stores in the Edmonton market. The Canadian company will acquire all outstanding shares of Eagle's Canadian subsidiary and most of its assets for an estimated $17 million to $22 million.

Eagle's stock was down 25 cents, to $9.25, in late trading today.

The Canadian move reduces the total number of Eagle stores from 19 to 17. It also ends Eagle's plan to put two stores in the Vancouver, B.C., market.

While Eagle had been losing money in Canada and competition was increasing, most analysts had not been predicting its exit from the Canadian market.

Eagle estimates the sale will require the company to take a one-time, after-tax charge of about $11.5 million during the fourth quarter of fiscal 1994.

Eagle said the move would improve the company's overall strength.

"Exiting the Canadian market, which has accounted for approximately 7 percent of fiscal 1994 year-to-date revenues, will improve the company's overall profitability because the subsidiary has been operating at a loss," said Richard Takata, Eagle's president and chief operating officer. The sale will make about $65 million available to expand U.S. operations, Takata added.

In the most recent quarter, ended July 29, Eagle reported record second-quarter sales of $144.8 million, up 70 percent from $85.3 million in the year-earlier period. It also reported a record profit of $3.4 million, up 28 percent from $2.6 million.

But same-store sales growth was only 1 percent, which Eagle said reflected competition in the Seattle and Edmonton markets.

Beth Heming, an analyst at Piper Jaffray Inc., said the Canadian move will allow Eagle to reduce costs, realize higher margins on sales and free up capital for use in the U.S.

But the competition that Eagle backed away from in Canada - notably Home Depot - still confronts it in the U.S.

"So they still have a tough competitive battle ahead of them, even in the U.S.," Heming said.

Following its exit from the Canadian market, Eagle's operations will be consolidated in Washington, Utah, Oregon, Alaska and Hawaii.