RONA posts strong 4Q profits

BOUCHERVILLE, Que.-RONA inc. managed to post strong results for both its sales and profits in the fourth quarter and for the year. Consolidated sales for Canada's second-largest home improvement retailer and distributor grew by 9.1% in its fourth quarter to $1.02 billion, while profits were up 26.1% to $37.6 million, from $29.8 million last year. (Consolidated results refer to RONA's combined performance of its distribution business, along with any retail operations owned in whole or part by the company.) Retail sales for corporate and franchised stores, net of intersegment sales, advanced 13.2% to $739.3 million in the last quarter of 2005, as RONA's same-store sales were actually down 2.7%. For the full year, consolidated sales reached $4.07 billion, an increase of 10.5% over $3.68 billion in 2004. Excluding Totem's contribution, consolidated sales advanced only 4.2%. RONA's net earnings were $175.2 million, up 26.8% over $138.2 million in 2004. Operating income for the full year rose 19.9%. Retail sales by corporate and franchised stores, net of intersegment sales, advanced 12.5% to $2.90 billion in 2005. However, same-store sales for the year were essentially flat, up 0.1%. While this follows spectacular same-store growth of 9.0% a year earlier, "To beat those numbers was quite a challenge," admitted Sylvain Morissette, national director of corporate communications and public relations. "While our same-store sales did plateau in fiscal 2005, this performance has to be carefully analyzed in the context of 2004, which was an exceptional year by any standard," said RONA president and CEO Robert Dutton. "In spite of the deflationary effect the price of building materials will have, we expect same-store sales to rebound in 2006 thanks to a number of important initiatives, including more than 100 major renovation projects at RONA stores across the country, a significant expansion at our key Boucherville distribution centre and the construction of an all-new trans-shipment centre to serve the Montreal region, close to 200 new entries in our very successful RONA private-label line, an increase of more than 10% in our advertising and promotion budget, plus enhancements to our already successful staff training programs," he added. Dutton expects RONA to benefit from an economic climate that will favor sector growth in our sector, and he is confident of the overall viability of the RONA business model. "The future for RONA looks better than ever in the year ahead, as far as I'm concerned." During 2005, RONA added 31 affiliate stores totaling $191 million in annual retail sales and 335,000 sq. ft. of retail space. Of those, 16 are in the West, eight are in Ontario, six are in Quebec, and one is in Nova Scotia.

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Acquisitions drive growth for Home Depot in'05

ATLANTA — Home Depot last week released details about its financial performance for fiscal 2005, which was impacted significantly by investments that are transforming the retailer's business model and taking it into new, uncharted waters. According to the report it filed with the U.S. Securities and Exchange Commission, Home Depot's revenue for the 12 months ended Jan. 28, 2006 was $81.511 billion, representing an 11.5% increase over the same period a year ago. The company's earnings for the year rose 16.7% to US$5.838 billion. Same-store sales were up 5.5%. Home Depot used last year to fortify its position on several fronts, mostly through the acquisition of 21 companies for which it paid an aggregate $2.5 billion. Its boldest purchase was Hughes Supply, the $4 billion building materials distributor, which Depot plans to fold into its burgeoning business-to-business Home Depot Supply division once that deal is finalized. The retailer's stores' average transaction rose 5.6% to a record $57.98 per customer, which looks even more impressive when one considers how aggressively Home Depot has been adding margin-boosting proprietary brands to its inventory. The company's web site, which now offers more than 30,000 items, averages 3 million hits per week. The company reported that its services business, which encompasses installed sales, rose 21.4%. The company did not release corresponding dollar amounts. By the end of its fiscal year, Home Depot operated 2,042 stores in North America, and employed 345,000 associates. During the year, the company opened 179 stores, including five relocations, a pace that company president and CEO Bob Nardelli has stated will be scaled back to around 100 stores per year over the next five years, as the company refocuses on building its business with professional and commercial accounts. Company officials are hoping that broadening its business into related home-improvement and construction sectors will have a positive effect on its stock price, which swung between $34 and $43 per share last year. Since 2002, the company has repurchased 277 million, or over 12%, of its outstanding shares and spent $9.7 billion. Its board of directors this week authorized the company to repurchase another $1 billion in stock, raising its limit to $12 billion.

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Independents confront challenges of retention, education

WINNIPEG-While the news has been on the country's two largest home improvement retailers of late, more than half the industry is still in the hands of independents. And the challenges of those independents, in the face of mounting competition from the big players, remains remarkably consistent no matter where you go in Canada. Those common issues have become the glue that holds together the industry associations that represent those independents across the country. Collectively, the BSDA of B.C., the Western Retail Lumber Association, the Lumber and Building Materials Association of Ontario, ADMACQ, and the Atlantic group, ABSDA, meet regularly under the Canadian Retail Building Supply Council. "The key is education in the industry," says Gary Hamilton, who is both head of the WRLA and standing chair of the CRBSC. "We're trying to enhance the skill level and try to address the shortage of people entering the industry." He admits that the industry has to do a better job making the sector appealing as a career option for young people. In fact, the WRLA has begun attending career fairs in Winnipeg as a test, and its sister associations are watching with interest. Hamilton says he's also in talks with community colleges across the West to raise awareness. Hamilton's counterpart in Atlantic Canada, Don Sherwood of the ABSDA, has been making efforts, as well, to increase the entry points for new workers in home improvement retail. But his latest program focused on the mature workforce-people who are semi-retired, currently part-time or out of work. A 24-week course is currently being held in conjunction with the Nova Scotia Community College in Dartmouth, N.S. The college is offering the training on safety, etc., while ABSDA can offer industry specific seminars on estimating, inventory management, and training. After a year to perfect the curriculum, Sherwood expects the program to be expanded to other community colleges in the Atlantic region. In addition, his fellow associations are interested, too. "We are encouraging a national program in the future, because we are going to share the curriculum," Sherwood adds.

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New Canadian show begins overcoming industry concerns

TORONTO-A new hardware show being introduced to Canada has already booked one-quarter of its exhibition space. The show is a spin-off of the National Hardware Show in Las Vegas, and its owner, Reed Exhibitions, wants to present the new event in the positive light of the Las Vegas show, not the dim shadow of two failed Canadian Hardware Shows that preceded it. Hence the new name, National Hardware Show Canada, new dates (Oct. 17-18, 2006), at the Toronto Congress Centre, near Toronto's international airport. The show will have a large contingent of Asian manufacturers, from countries such as China, Thailand and India. But a strong contingent of American companies, many of them already involved with Reed through the Las Vegas show, will also exhibit. According to Rob Cappiello, vice-president of the National Hardware Show, Reed Exhibitions has sold 9,100 sq.ft. of space for the new show, making it already half the size of the former hardware show, H2X. That show, mounted by the German trade show organization Messe Frankfurt, was held one time only in February 2005. It, in turn, succeeded the Canadian Hardware Show, which expired just two years shy of its 100th birthday. Cappiello has talked with many of Canada's major retailers to secure the attendance of their buyers. He's also invited HARDLINES to move its annual Conference to "co-locate" with NHS Canada. Our Conference will be held Oct. 16-17, 2006, overlapping for part of the day on the 17th with the show itself. The industry's awards for dealer excellence, the Outstanding Retailer Awards, will also move to the same time and place as the new show. Those awards, presented by Hardware Merchandising magazine, will spearhead the Industry Awards Gala on Tues. evening, Oct. 17. In addition, the North American Hardware Association is expected to participate with dealer education seminars. For more information about the new show, go to www.nationalhardwareshowcanada.ca; for the HARDLINES Conference, click here.

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Retail giants eye China, but B&Q dominates

BEIJING-China's largest DIY home improvement retailer, UK-based B&Q, intends to open more than 100 stores between now and 2010. The company already has 48 stores, including 13 purchased last year from rival DIY retailer, German-based OBI. While B&Q's results in the UK are soft due to a weak economy there, it remains the dominant DIY retailer in the Chinese market, where the company is also enjoying its fastest growth. Meanwhile, the industry's two largest players, Home Depot and Lowe's, have yet to make a beachhead in China. Home Depot has established an international business office there, in addition to its buying offices, but has yet to make a purchase or open a store of its own, although, according to Shanghai Daily, it lost out to B&Q in an attempt to purchase the OBI stores in China. At the time, said Home Depot CEO Bob Nardelli, the value of the USD was not favorable for an international acquisition. The latest rumors have Home Depot in talks with Orient Home, a homegrown chain there, to purchase 49% of that chain. Lowe's, on the other hand, has made its first international move in Canada, where it intends to open up to 10 stores next year. Now, Lowe's is rumored to be in talks with Kingfisher, the largest retail DIY company in Europe, and the parent company of B&Q. While these North American companies continue to focus on domestic expansion, B&Q keeps looking for new ways to stay on top in China. It will begin selling heavy appliances there in an effort to draw more customers into its stores. Even if it can't make any profit on the products at first, B&Q wants to offer the appliances, including washing machines, refrigerators, and air conditioners, in tandem with its home décor products for its Chinese customers.

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North American exporters learn of DIY opportunities at UK show

INTERNATIONAL REPORT-While much of Western Europe's economy remains somewhat soft, consumers in Eastern and Central Europe are anxious to upgrade their homes and apartments, creating opportunities for manufacturers of DIY products. That was the cheering message relayed to members of the Worldwide DIY Council by leading retailers and wholesalers from the United Kingdom, France, Italy and Russia at the group's annual meeting held recently in London. The meeting was held in conjunction with the 12th annual DIY & Garden Show. That event played host to more than 200 exhibiting companies. They, in turn, attracted 2,600 visitors, including not only the range of the UK's home improvement retailers, but a lot of non-traditional retailers such as Tesco, Argos, and Marks & Spencer. At the AGM of the Worldwide DIY Council, its membership of exporting companies from the U.S. and Canada learned about market opportunities in Europe. Those opportunities vary by country, depending on income and home ownership levels, but the desire for increased standards of living is universal, speakers said. In some countries, culture may not encourage "do it yourself", but rather prefer to have work done by others. Still, home centers are benefiting by providing the products and home improvement inspiration via in-store displays, advertising and product exposure. In the United Kingdom, high home ownership means that the amount spent on DIY products is three times higher than that spent by renters in DIY shops. And with 85% of homes at least 20 years old, said Colin Petty, publisher of DIY Week, there is a constant need of repair, not just refurbishment. Kingfisher, UK's largest and the 3rd largest home center chain in the world and the one most active internationally, sees China as a tremendous growth opportunity, according to Ted Leavitt, international brand director. Turkey, Poland, and Taiwan also are fast-growing. In Western Europe, DIY consumers are now being classified into five groups, based on pioneering research conducted by the Federation of European DIY Associations (FEDIYMA.) Each participates in DIY activities to varying degrees and has different expectations from the retailers selling to them. Active DIYers seek quality products and are constantly making home improvements, while "Smeasers", the least active segment, tackle only small jobs and are extremely price-oriented when buying. Russia, with a population in excess of 144 million, may represent the most important future European market, according to Peter Partma, head of Castorama Russia, a division of Kingfisher. He says Russia is a $10.5 billion market now and expects 10-12% growth rate annually for the next decade as consumers make up for the past, when decorating and home improvement simply wasn't being done. Half of the projects are do-it-yourself and the other half are by hired help. He expects his company to be a billion-dollar retailer there in a few years. What that means for American and Canadian companies, speakers concluded, is that they must be aware of the needs of multi-national retailers and be prepared to serve them with innovative, easy-to-use products, helpful instructions and multi-lingual packaging. (For more information about the Worldwide DIY Council and these speakers, contact Tom Delph at tdelph@indy.net . For more info about the 2007 DIY & Garden Show in London, contact Paul Grinsell, p.grinsell@hgluk.com)

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