BOLTON, Ont. ― Dealers are facing a mixed outlook for 2020, but for one buying group, some parts of the industry will maintain last year’s momentum, even if that momentum was modest at best.

The majority of TORBSA dealers are commercial, or heavily contractor-oriented, so their fortunes rely on housing starts more than traditional dealers. Bob Holmes, general manager of TORBSA, expects single-family housing starts to “struggle until the second quarter or even into the third quarter.” To make matters worse, says Holmes, “People are still not buying.”

However, he remains optimistic overall. “I expect it to be okay in 2020.”

Holmes recognizes that issues such as amalgamation among independents will only continue in the future. It’s being spurred by factors such as the increasing age of dealer-owners and their need for succession, which can be exacerbated by the lack of younger family members who are willing to take over the business.

His group has seen a couple of defections near the end of 2019. They included Rigney Building Supplies in Kingston, Ont., which was bought by WSB Titan, itself owned by U.S. dealer chain GMS. “However, I take pride in helping those businesses to be strong and profitable―and these are the ones being acquired.”

And while U.S. interests like GMS and Foundation Building Supplies expand their reach here, Holmes notes that domestic companies like BMR have deep pockets and are making moves to pick up dealers, as well.

Amidst all of these changes, Holmes still sees a role for the buying groups, and not just for rebates. Members have access to best practices and shared knowledge. For vendors, a buying group provides central billing and a ready conduit for new products. “I think the independent will always be around, but they will need the support of their larger group.”

CAMBRIDGE BAY, Nunavut — Depending on the mode of transport, freight costs can add significantly to the final price tag on products, especially special orders that demand quick turnaround. In fact, air freight is the most expensive form of distribution in Canada’s North.

Kitikmeot Supplies is a retailer that’s operated for 24 years in Cambridge Bay, a hamlet on Victoria Island in the Kitikmeot Region of Nunavut. According to the store’s general manager, Bill Killin, it’s the northernmost hardware store in Canada. Winter months are marked by 24-hour darkness and temperatures as low as -60 C. Those conditions are a far cry from southern Ontario, where he once worked for Home Hardware and Home Depot.

When Killin orders products freight on board from Yellowknife, which is 851 kilometres away, freight costs to fly those orders to Cambridge Bay average $3 per pound. (The store is about two kilometres from the local airport.) Killin says that freight costs are based on weight and volume, so he needs to be smart about having the right combination of light and heavy products in a given order to lower the freight costs and get maximum value at retail.

Kitikmeot Supplies—which gets 40% of its annual sales from government and institutional accounts, half of which are contractors—orders directly from manufacturers, as well from a specialty distributor in Edmonton, and through Igloo Building Supplies, also in Edmonton, and through Winnipeg-based Sexton Group.

NEW YORK — Executives at Lowe’s Cos. in the U.S. are looking for ways to simplify the array of businesses that operate under Lowe’s division in Canada. That included the intention to close another 34 locations here, most of them by the end of this month.

Saying that the Canadian business has “struggled”, the execs explained to analysts at the Morgan Stanley Global Consumer and Retail Conference in New York late last year how the investment north of the border is playing out and where the positives lie.

“As you can well imagine, just given the performance that we’ve articulated over the first three quarters of this year, the Canadian business from a top line perspective has struggled,” said David Denton, Lowe’s executive vice president and CEO. He added that the model for the Canadian business, which operates a variety of store formats, including wholesaling to dealer-owned outlets, is quite different from the U.S. one. The result, he says, is a business “that is performing from an operating profit perspective below the company average.”

President and CEO Marvin Ellison added that he is pleased with the execution at store level, however, noting that “we have great associates in Canada. We just gave them a very complex business model that inhibited their ability to serve customers well.”

Ellison laid out the relative complexity of the Canadian business with five banners, all with legacy systems and different back-end systems that hampered the initial integration process. “It made it very difficult to create synergies from a marketing, merchandising, sourcing perspective and even in IT systems infrastructure, so part of what we’re doing here, in addition to closing under-performing stores, is ensuring that we are just simplifying the business model so we can give the customers a great experience and give our associates a more simplified operational process to manage.”

Ellison expects that the decisions being made, including the pending store closures, “are going to put us in a really good position,” facilitating improvements for Lowe’s Canada that will bear out positively over the long term, something the executives at Lowe’s made clear they are committed to.

SPECIAL REPORT — Many retail segments have contracted in recent years, but dollar stores are on the rise. They compete with home improvement businesses in several categories, such as small hardware items, cleaning supplies and other consumables.

Neil Saunders, with data analytics company GlobalData, answered questions about why dollar stores represent a major growth segment for the NRHA’s magazine, Hardware Retailing.

Saunders calls dollar stores one of the top-growing segments in the U.S. market. “They’re outperforming retail market growth as a whole, growing at a faster clip than a lot of traditional segments.”

In the U.S., Dollar General leads the way, generating strong growth, now with more than 15,000 stores. “It’s an enormous operation, because you need that scale in order to make the low-margin business work,” Saunders says.

In Canada, Montreal-based Dollarama Inc. recently reported Q3 profits of $138.6 million, up from $132.1 million a year ago on higher sales. Sales of $947.6 million marked a surge from last year’s $864.3 million, while comparable store sales rose by a healthy 5.3%.

This tremendous growth is due to dollar stores carving out a niche as a convenient choice for picking up everyday products. “That has become especially important to value-conscious consumers following the worldwide recession of 2008,” Saunders notes.

“Dollar stores are very good options for them to get really good value for the money on consumables, household goods and food, as well as some hardware and home improvement products,” he adds.

Orgill has announced changes to its team of executive vice presidents. Randy Williams has been promoted to the role of EVP, distribution. Prior to this position, Williams served as Orgill’s general manager and senior vice president of distribution. John Sieggreen has been promoted to the role of EVP, retail and will also maintain his current role as president for Orgill’s Central Network Retail Group (CNRG). Greg Stine has been promoted to EVP, marketing and communications. Most recently, Stine headed up the marketing team for Tyndale Advisors. Brett Hammers continues in his role as EVP, sales and purchasing, while Eric Divelbiss will continue as EVP and CFO.

At AFA Forest Products, Angelo Campagna, previously division manager at the head office, has been named director of strategic development. Stepping into Campagna’s former role is Mark Henriques, previously sales manager at the Bolton, Ont., office. George McCart, previously director of AFA’s Eastern Allied division, is taking on the newly created role of director of marketing.

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TORONTO — A majority shareholder group led by Chairman Richard Baker has sweetened its offer to take Hudson's Bay Co. private. The group is now offering $11 per share, compared with its original bid of $10.30. The increase has overcome the objections of minority shareholder Catalyst Capital Group, which considered the original offer to fall short of HBC’s value. A vote on the deal is expected for February and would require 75% of shareholder votes, as well as a simple majority of votes by minority shareholders.

MOORESVILLE, N.C. — Lowe’s Cos. is seeking at least 53,000 new employees ahead of the spring season. The company says it will welcome applicants to job fairs at each of its 1,700 U.S. stores over the next three months.

SUPPLIER NEWS

LAS VEGAS — The International Consumer Electronics Show (CES) took place last week. Once again, smart home technology was a hot category, from baby monitoring systems to a robot that tracks toilet paper supplies. Meanwhile, Amazon was showcasing Echo Auto, an adaptation of its digital home assistant for cars.

MONTREAL — AQMAT has opened nominations for its eighth Gala of Recognition, taking place March 7 at Montreal’s celebrated railway hotel, Fairmont Le Reine Elizabeth. The 16 award categories honour retailers (individuals and businesses) and suppliers who demonstrate exceptional talent, passion and hard work. Click here to submit a nomination.

ECONOMIC CONDITIONS

The seasonally adjusted annual rate of housing starts was 197,329 units in December, a decrease of 3% from 204,320 units in November. The SAAR of urban starts decreased by 4% in December to 185,934 units. Multiple urban starts decreased by 5% to 138,049 units in December, while single-detached urban starts increased by 1% to 47,885 units. (CMHC)

NOTED

Canadian Gen Z consumers were taking things into their own hands this holiday season, with 21% admitting to typically returning some of their holiday gifts. That’s nearly double the number of Boomers who reported returning gifts (11%). These results come from the 2019 FedEx Returns Economy Survey, a poll conducted on behalf of FedEx Canada, a subsidiary of FedEx Corp.

OVERHEARD...

“... We talked a lot about our Canadian business, and we’ve made some tough decisions with store closures and leadership changes and simplification of all the multiple banners and SKU rationalization. Those things are ongoing, but we feel good about the potential of the Canadian business. So, positives [and] negatives, but all-in-all, we feel like we’re on track and we feel confident that we have a good plan in place.”
―Marvin Ellison, president and CEO of Lowe’s Cos. He presented recently at the Morgan Stanley Global Consumer and Retail Conference.