vol. viii, #27 July 8, 2002

* Independents lose ground to big boxes * Home Depot continues pro initiative in Canada * Hudson's Bay expands décor stores into British Columbia * Residential construction intentions slow in May  

"Set it down to thyself, as well to create good precedents as to follow them." - Francis Bacon (1561-1626)


Toronto, ON — Independent building centre retailers are losing market share and, according to a new study by Hardlines Quarterly Report, that share is being grabbed up by the big box stores. In 2001, sales of hardware and building materials products by all hardware stores, building centres, department stores and co-ops in Canada grew from 26.2 billion to $28 billion. During that time, big box market share grew from 17.4% of the market to 18.6%. but sales by Canada's home improvement buying groups, which represent the lion's share of sales by independents in this country, actually fell from 35.1% of the market to 31.9%. Over the past five years, big box market share has almost doubled in size, from $2.6 billion in 1997 to $5.2 billion in 2001. During the same period, market share by Canada's buying groups has fallen to less than one-third. Sales by all building centre dealers, including the buying groups, still comprise the largest single sector of the retail home improvement industry, however. (A more complete analysis of buying groups in Canada appears in the 3Q edition of Hardlines Quarterly Report, available soon. - MM)
Toronto, ON - A major growth initiative of Home Depot in the U.S. is now taking off in Canada. With Home Depot's pro initiative in 55 of its 83 Canadian stores so far, the company expects this segment to be a major growth opportunity. The pro initiative consists of a number of programs to boost Home Depot's appeal to the trades. They include adding up to seven sales people to each store, and offering services such as enhanced credit terms and accelerated order picking and delivery. Home Depot has also tested a program in its Ontario stores carrying the pro initiative that makes those stores points for filing insurance claims and getting the repair work executed. The program, in conjunction with State Farm Insurance, enables Home Depot to facilitate the claims process and provide the necessary contractors to perform the work to repair and restore the damaged property. Spurred by a strong economy and brisk sales, Verschuren expects sales to contractors to continue, despite the bad weather in the Spring. "Business is great. I'm amazed," she says. "The economy is strong - the strongest I've seen it for a long time."
Brampton, ON - With an eye to increased sales growth, CanWel is beefing up its inside sales forces across the country. The wholesale distributor of building materials keeps adding new products, requiring more customer service from the inside. Those products include an expanded range of proprietary brands, especially in the growing sector of specialty flooring. However, says Mike Piggott, inside sales manager for CanWel, the addition of new products is selective, with the emphasis on a few better quality products that will set the two-stepper apart - and give its dealers better margins. Expansion of the sales team has meant more time spent on training. But that training extends to the end users, as well. For example, contractor appreciation nights organized by CanWel are held at the dealer level, to educate the installers about the latest technologies in flooring and siding. CanWel, which is owned by Doman Industries and headquartered in Vancouver, BC, has 13 distribution centres and sales teams across Canada and annual sales in excess of $600 million.
At Roblynn Home Hardware Building Centre in Oromocto, NB, customers can get 10% off their purchase on St. Valentine's Day just by singing a love song over the PA system. This is only one of the many promotions that made store manager Tanya Hanson the only Canadian to win the National Retail Hardware Association's 2002 Young Retailer of the Year Award.
Canadian Tire 33.15 18.50 32.95
Canfor 11.70 8.08 11.09
Emco 12.77 3.71 12.24
Goodfellow 11.90 8.00 11.75
Home Depot 52.60 30.30 37.24
Hudson's Bay 20.10 12.50 13.58
Lowe's Cos. 49.99 24.99 44.89
Sears Canada 25.10 12.50 23.85
Sodisco-Howden 2.20 0.75 1.45
Taiga Forest 12.75 7.49 13.40
West Fraser 44.42 26.13 41.06
Tanya Hanson, manager of Roblynn Home Hardware Building Centre in Oromocto, NB, was one of seven retailers to win the 2002 Young Retailer of the Year Award, and the only Canadian so named. She won in the over $2 million sales category, for increasing sales in the store by 70% since taking over from her father in 1997. The awards are co-ordinated by the National Retail Hardware Association in the U.S. and sponsored by the American Hardware Manufacturers Association, 3M Co. and American Tool. Goodfellow recorded its best quarterly results ever for the third quarter ended May 31. Net earnings rose to $4.3 million from $1.7 million a year earlier and included a reversal of a provision for softwood lumber duties of approximately $620,000 after tax. 3Q sales increased 14% to $144.7 million, from $126.6 million. Year to date, sales totalled $355.6 million versus $325.5 million, an increase of almost 10%. Net profit jumped 95%, from $2.8 million to $5.6 million. Hudson's Bay Co. will expand its Home Outfitters format into British Columbia with the addition of five new Outfitters locations across the province, bringing the total number of these specialty kitchen, bed and bath décor stores in Canada to 38 by the end of 2002. In its first quarter ended May 31, MAAX Inc. saw sales increase 20.2% to $161.9 million, compared with $134.7 million in the first quarter of last year. Income before amortization of goodwill rose 44.1% to $10.8 million, up from $7.5 million. Net profit margin reached 6.7%, up from 5.6% a year earlier. Home Depot Inc. has become the number-two retailer in the U.S., according to a new tally by Stores magazine. With US$53.55 billion in sales, Home Depot edges ahead of grocer Kroger Co., which had US$50.1 billion in sales. Wal-Mart Stores stays firmly ensconced in first place, with nearly US$220 billion in sales, according to the rankings for 2002.
The value of building permits issued by municipalities reached $3.6 billion in May, down 7.6% from April, according to Stats Canada. Despite this decline, construction intentions remained high, with the value of permits surpassing $3.5 billion for the fifth consecutive month. The value of residential permits dropped 12.6% to $2.3 billion, largely the result of a marked decline in multi-family permits. However, after three consecutive monthly declines, the non-residential sector recorded a 3.3% gain in May to $1.3 billion. This advance was fuelled by a marked increase in the institutional component. From January to May, municipalities issued $18.7 billion in permits, up 13.6% from the same period of 2001. A tremendous advance in the residential sector (+37.0%) explained this increase. Department store sales in May declined 2.5% from April to $1.73 billion seasonally adjusted, says Stats Canada. Even with this decline, department store sales for the first five months of 2002 were up 7.8% over the same period in 2001. Unadjusted for seasonality, department store sales advanced 6.3% in May from May 2001. During the same period, sales rose in all provinces. The largest increases were in Nova Scotia (+14.6%) and Newfoundland/Prince Edward Island (+11.6%). Alberta, Québec, and British Columbia and the territories followed, each posting a year-over-year increase of at least 7.0%. Canada's rate of unemployment fell to 7.5% in June from 7.7% in May, thanks to the addition of 66,000 new jobs, says Stats Canada. Since the job rebound began in January, employment has increased by 2% to 303,000. Full-time employment is up 199,000, or 1.6%, while part-time employment is up 104,000, a 3.8% increase. .
"Having a variety of formats has always been the strength of Rona and Home Hardware," said Beverly Allen, head of marketing at the industry publication, Hardlines. "Home Depot is now coming in to challenge them." - Our very own Bev quoted in the Financial Post on Friday, after the Post picked up the story that we ran in last week's edition of Hardlines.
The Spring issue of Hardlines Quarterly Report, available now, features: The Three Billion Dollar Club — find out which home improvement retailers dominate the Canadian scene...Who's winning the big box war? Big box expansion in Canada..... CLICK HERE to find out more!
****HARDLINES MARKETPLACE**** Check out Hardlines Classifieds on the web: https://hardlines.ca/html/classifieds_new.asp HELP WANTED EXECUTIVE DIRECTOR, WRLA Simpson McGrath Inc. has been commissioned by the Western Retail Lumber Association (WRLA) to assist in the appointment of a new Executive Director as the incumbent moves to retirement in early 2003. The effective date of the appointment will be November 1, 2002. The WRLA is a Not-for-Profit Association whose mission is to serve the needs and promote the common interests of the Canadian Lumber Building Materials and Hard Goods Industry on the Prairies (See www.wrla.org for additional detail). Founded in 1890, and now with 472 Retail Members and 431 Associate Members, WRLA is poised for a new era of growth. It is expected that the Annual Prairie Showcase, Trade Show and WRLA Convention will continue to be dynamic cornerstones of the Association’s future along with its scholarship and educational initiatives. 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