RONA reports record earnings in 2Q

BOUCHERVILLE, Que. — In the second quarter ended June 25, RONA inc. recorded net earnings of $80.0 million, an increase of 13.7% over the comparable period last year, due to the expansion of its dealer network. That growth came largely from the integration of recent acquisitions, notably St. John's-based Chester Dawe, acquired in March 2006, and the Quebec chain Matériaux Coupal Inc., of which RONA acquired a 51% stake in April 2006. Consolidated sales (sales through distribution, in combination with retail sales from corporately owned stores and the company's share and royalties from franchised store sales) in the second quarter climbed to $1.35 billion, a 12.1% increase over last year. Half that growth came from acquisitions; organic growth was 6.0%. Same-store sales increased by 1.1%. After factoring in the affects of deflated lumber prices during the quarter, RONA says its same-store sales would have been up by 2.2%. For the first half of the year, RONA's net earnings reached $96.4 million, up 14% over the same period last year. Consolidated sales for the period advanced 12.4% over last year to $2.145 billion During the last quarter, RONA opened three new big-box stores and brought its total number of new dealer recruits to 20 since the beginning of the year. These dealers have added $122 million to RONA's top line retail sales.

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On 2Q results, Home Depot's board to investigate options practices

ATLANTA — Home Depot used the reporting of its second-quarter financial results to announce that it has asked its board of directors to look into the procedures governing how the company has issued stock options to key executives. Those procedures are now under scrutiny by the U.S. Securities and Exchange Commission, and have already involved Home Depot in lawsuits. However, the company does not believe that the results of litigation or inquiries will materially impact its operations or balance sheet. The impact of its options practices, though, has not been positive. Its stock price has been sliding steadily over the past few months, and analysts continue to question its business model and strategy in light of its recent financial performance. For the three months ended July 30, the company's net income rose by 5.3%, to $1.86 billion, on revenue of $26.03 billion that was up 16.7% over the same period a year ago. Those results included a $69 million charge against earnings for retroactive taxes and interest Home Depot had to pay the government of Quebec, whose legislature recently rewrote certain tax laws. On the other hand, sales from its retail operations rose 5.1% in the quarter, while same-store sales actually fell 0.2%, compared to the same quarter last year, when they rose 4.0%. On the plus side, the company's Home Depot Supply business increased by 325% to $3.5 billion in the quarter, during which Home Depot acquired the distributor Western Fastener, the designer and installer Rice Planter Carpets, and millwork supplier Forest Products Supply. Another bright light was Home Depot's services business-essentially its installed sales program-which grew by 9.7% to $1.03 billion in the quarter. During the quarter, the company opened 30 stores, bringing its total to 2,079. Other highlights included: a 1.3 percentage point boost in its share of the retail appliance market, to 10.1%; and a 0.6 percentage point gain, to 24.4%, in share of the outdoor power equipment market; and the launch of a $30 million program, called "Orange Juiced," to motivate its employees to provide better in-store customer service. Through the first six months of its fiscal year, Home Depot generated $47.49 billion in revenue, up 15% over the same period a year ago, even though its retail transactions increased by only 0.3%. First-half earnings rose 11% to $3.35 billion.

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TIM-BR MARTS adds packaged house maker to ranks

Calgary — TIM-BR MARTS Ltd. has announced the signing of MMH Prestige Homes, a factory based home builder based in Sussex, N.B., as its latest member. The giant buying group also announced the closing of its recruitment of Parliament Building Supplies (for details see our July 3/06 issue-MM). Prestige Homes joins the growing ranks of home fabricators, alongside existing TIM-BR Mart members like Nelson in Alberta. Owned by Sussex, N.B.-based Shaw Group-and named one of the 50 Best Managed Companies in Canada-Prestige is one of Canada's factory-based home builder pioneers. It serves a network of builders throughout the Maritimes and Northeastern U.S. It also does a brisk business exporting homes all over the world, including to Germany, China, and Japan. Parliament, meanwhile, is slated to become the TIM-BR MART flagship urban store and will expand this fall from 1800 square feet of retail space to 10,000 square feet. "We have a very unique opportunity at this store and chose TIM-BR MART because of their vision of how to meet the needs of both contractors and urban homeowners in one retail space," said Vip Jain, General Manager of Parliament Building Supplies. Focused on contractors, the Jain family, who purchased the store three years ago, is a significant condo developer in the downtown Toronto area. The Ontario government recently announced a $10 billion redevelopment fund for the Port of Toronto area, putting Parliament Building Supplies in the epicenter of a massive boom of dense housing over the coming years.

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Report reveals slight slowdown in industry growth

WORLD HEADQUARTERS, TORONTO — Canadians's passion for repairing, renovating and improving their homes continued unabated last year, according to a new study by Hardlines. And the performance by its leading retailers so far this year provides positive indications of another strong year ahead. Sales by all hardware and building supply dealers, plus related sales by leading mass merchants and Canadian Tire, totalled $36.8 billion last year, a healthy increase of 5.5% over the previous year. This finding is just part of "Home Improvement Retailing in Canada", the latest report from the World Headquarters of the weekly newsletter Hardlines. "While this year's real growth seems modest by comparison, deflation of lumber and plywood prices last year downgraded overall sales," said Michael McLarney, Editor and Publisher of Hardlines. "Adjusting for lumber deflation, the industry's volume of growth in 2005 was actually up by about 7.5%". (For more information about this year's incredible Retail Report, Click here. -Michael)

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WTO again rejects U.S. lumber tariffs

GENEVA — The United States could be subjected to nearly $4 billion in sanctions after the highest court of the World Trade Organization here rejected America's tariffs on Canadian lumber imports. Last November, a WTO panel had rejected Canada's complaint about those tariffs. Those tariffs are being imposed because the U.S. claims the Canadian government subsidizes its lumber industry to the competitive detriment of U.S.-based lumber companies. The recent ruling, though, asserts that the U.S. omitted certain price data when it charged that Canadian imports were a competitive threat. Next Monday is the deadline for Canadian lumber suppliers to accept or reject a trade agreement the two countries struck on July 1, which, if accepted, would put an end to this four-year-long dispute.

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Canadian housing will stay strong as U.S. begins faltering

OTTAWA — Housing starts will register another strong year in 2006, according to Canada Mortgage and Housing Corp's latest report. Starts will reach 227,900 units in 2006, before decreasing to 209,100 units next year, marking the sixth consecutive year in which housing starts exceed 200,000 units... "Housing starts this year will be stronger than previously forecast, mainly due to persistent strong demand in Alberta where starts will increase by 20 per cent in 2006," said Bob Dugan, Chief Economist at CMHC. "Higher mortgage carrying costs, due to modest increases in mortgage rates and rising house prices, will temper housing demand in Canada in the latter part of this year and next." Existing home sales, as measured by the Multiple Listing Service (MLS ®), are forecast to register their second best year on record with 481,700 units in 2006. However, in the U.S., buyer demand for homes is softening more than many industry officials and observers had anticipated. Inventory of homes that are either unsold or under construction for the months of January through June rose by quadruple digits in some markets, compared to the same period a year ago, according to research by Hanley Wood Market Intelligence, the research arm of Hanley Wood LLC, which publishes Builder magazine. For example, in the Los Angeles-Ventura metropolitan area, 2,222 homes were standing (i.e., unsold or under construction), compared to just 40 in the January-June 2005 period, a 5,455% increase. Inventory levels, while not as dramatic in other markets around the country, grew precipitously: In Washington D.C., standing inventory was up 118.9% to 3,750 units; in Las Vegas, up 634.9% to 3,072 units; and In Tucson, Ariz., up 530.4% to 725 units.

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