Acquisitions drive RONA earnings in 2006
, Que. — RONA, Canadaâ€™s second-largest home improvement retailer, was able to increase its net earnings for 2006 by 8.8%, due in large part to its aggressive ongoing acquisition strategy. Net earnings for the year reached $190.6 million while consolidated sales (sales generated by RONA's distribution centres and corporate stores, as well as the companyâ€™s share of franchised sales) increased 13.1% to $4.55 billion.
The numbers, which mark the companyâ€™s 16th straight year of record results, reflect the recruitment of 37 dealers, representing close to $200 million in annual retail sales, as well as acquisitions representing more than $300 million in additional retail sales. Organic growth, i.e., consolidated sales excluding major acquisitions, was 6.0%.
RONAâ€™s sales by all its stores were nearly $6 billion.
Although results for the year were strong, the last quarter felt the impact of a slowdown in the economy in Eastern Canada and warm weather in November and December. Although sales were up 13.2%, on par with the annual result, profits were up only 1.3% to $38.1 million. Same-store sales for the quarter were actually down by 0.7%, being negatively affected by the softness in lumber prices, which fell about 11% during the quarter. For the year, same-store sales were up 1.3%.
Conference strengthens relationship with Home Depot installers
TORONTO — A three-day conference held last week by Home Depot Canada offered some 1,100 installers from across the country business and product knowledge seminars, as well as team-building exercises.
Even though the attendees are independent operators, Home Depot treats them like partners, providing information and tools to run their businesses better. The aim, says Mike Clements, director of Installation Services for Home Depot Canada, is to "drive a consistent quality experience in the home."
Results suggest that the strategy is paying off. According to Clements, the installed business grew by 28% in 2006 (vs. Home Depot Canadaâ€™s overall estimated growth of 9%). And 2007 is starting out strong. "In the first week of our fiscal year, (Home Depotâ€™s year-end was Jan. 28), we did 5,100 installs across Canada. Thatâ€™s phenomenal." For the first three weeks of the fiscal year, he adds, business was up 37%.
To support that growth in 2007, Home Depot has committed to add 54 service people in the field across the country. They will serve as the liaison between the stores and the installers.
Clements says a number of installation companies are growing as quickly as the Home Depot business. "Prime your business for growth," he encouraged the installers during a presentation. And, as these companies grow into strong regional players, he wants to buy them. He expects those acquisition opportunities to emerge within the next two years.
New members at Castle, Sexton boost ranks of independents
— While the industryâ€™s two behemoths (Home Depot and RONA) were announcing their annual results last week, Sexton Group and Castle Building Centres were making gains of their own. Winnipeg-based Sexton recruited Mackenzie Interiors in Mackenzie, B.C. and Moneys Worth Liquidators in Bible Hill, N.S., helping the group to maintain membership of 285 dealers.
Steve Buckle, vice-president at Sexton, admits that a number of members left last year, "but more people joined." Membership now stands at 285, five more than a year ago.
Castleâ€™s 10 new dealers are located in seven provinces and one territory, and reflect the companyâ€™s national reach. The new members are Leoâ€™s Building Supplies, Olds, Alta.; B.A.â€™s Carpentry & Building Supplies, Black Duck Cove, Nfld.; Home Choice Building Centre, Sydney, N.S.; Tricon Design, Morinville, Alta.; Centre de Renovation Baie-Comeau, Baie-Comeau, Que.; True Value Hardware, Valleyview, Alta.; Umingmak Supply, Rankin Inlet, Nunavut; The Home Improvement Warehouse, Calgary; and Perth-Andover Building Centre, Perth-Andover, N.B.
The recruitment of CSR Building Supplies in Concord, Ont., represents Castleâ€™s renewed efforts to grow its commercial dealers. "This is really the beginning of our effort to move into the commercial business," says Ken Jenkins, vice-president of Castle.
Both groups have been vulnerable to the recruiting efforts of RONA. Last year, Sexton gave up Curtis Lumber, a major player in British Columbiaâ€™s Lower Mainland, while Castle just lost Stephens Building Supplies, which has three locations in Nova Scotia. However, the group continues to develop services to support the independent, including its new Castlecare program, which bundles the groupâ€™s non-retail services under one brand. "Weâ€™ve got a lot of good things going on in the marketplace," says Jenkins.
Both Sexton and Castle are members of the umbrella group, Reliance. The other members are Delroc, IRLY, Co-op fÃ©dÃ©rÃ©e, Federated Co-op, and TORBSA. Together, they represent more than 1,200 members and about $4.4 billion in sales at retail.
TIM-BR MARTS builds retail team with new hires
— TIM-BR MARTS Ltd. has created a new position — director of marketing — that will be filled by Dave Morton, who was Castle Building Centresâ€™ national marketing manager for eight years.
Morton will focus on building the TIM-BR MART retail brand through development and delivery of marketing and advertising tools and initiatives nationally, regionally and in local retail member markets. Morton will also manage TIM-BR MARTS Ltd.â€™s Ontario office.
At the same time, Jake den Hollander comes aboard as manager, Southern and Western Ontario. Heâ€™ll work with TIM-BR MART retail members to maximize marketing resources, including the dealer intranet, gift cards, private label credit cards, Air Miles, Homeplans, SpanCan and other merchandising initiatives. Den Hollander joins TIM-BR MART from RONA.
"Both David Morton and Jake den Hollander will play integral roles in our new Retail Services Division," Steve Stremecki, vice-president, retail for TIM-BR MARTS Ltd., said in a prepared statement, adding that this would be the first of several new appointments and initiatives.
Home Depot reports earnings decline in 2006
—Home Depot reported last week that its net income for the year ended Jan. 28, 2007 declined by 1.3%, to $5.76 billion, on revenue of $90.8 billion that was up 11.4% over the same period a year ago.
In the fourth quarter of that fiscal year, Home Depotâ€™s earnings plummeted by 28%, to $925 million, primarily due to lower gross margins and the impact of the downturn in the U.S. housing market. For example, the company incurred double-digit declines in same-store sales in markets that were hardest-hit by that downturn, such as Los Angeles, Miami and Sacramento.
However, most of the plusses in Home Depotâ€™s financial performance last year came from its pro-oriented HD Supply division, which the company previously announced it wants to sell or spin off. HD Supplyâ€™s sales jumped by 162%, to $12.1 billion, and its operating income soared by 151% to $800 million. In contrast, sales from its 2,147 retail stores increased only 2.6%, to $79 billion, the storesâ€™ operating income was flat, and their comp-store sales were off 2.8%.
Despite opening 105 stores last year, its total customer transactions were flat at $1.33 billion.
Frank Blake, the companyâ€™s chairman and CEO, said that long-term improvement in Home Depotâ€™s financial performance at retail would rest with its renewed focus on associate development, customer service, upgrading the shopping environment and product assortment, and "becoming the number one destination for our pro customers," who account for just 2% of its transactions but 30% of its revenue. To that end, the company recently added two regions and has placed greater operational authority in the hands of its local regional managers, says Joe DeAngelo, the companyâ€™s COO.
Blake reiterated that Home Depot is primarily a retail business, and some positive glimmers came from the appliance category, in which Home Depotâ€™s market share nationwide increased to 10.5%. Less positively, the company continued to see softness in other big-ticket items, like kitchens, flooring and millwork.
Atlantic Wallboard and CGC form alliance
SAINT JOHN, N.B. — Atlantic Wallboard LP and CGC Inc., a subsidiary of USG Corporation, have formed an alliance. Under the partnership, Atlantic Wallboard will operate a new 300,000-square-foot gypsum wallboard plant here that will have a production capacity of 390 million square feet. The facility is expected to begin production in fall of 2007.
United States Gypsum Co. will also allow AWL to exclusively manufacture USG Sheetrock brand wallboard products for sale and distribution throughout the Maritime Provinces, Quebec, and the northeastern United States. CGC will also purchase all of the output from this plant to bolster its leading market position.