June 6, 2016 Volume xxii, #23

“To be prepared is half the victory.”
— Miguel de Cervantes (Spanish soldier and novelist, 1547-1616)

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Despite challenges, home improvement industry poised for solid year

SPECIAL REPORT ― If the first quarter of the year has returned strong sales for a number of dealers, the warm weather may be only part of the story. In fact, the first quarter of 2015 was very slow, with much of the country buried under snow well into the first part of the year. That gave many dealers nowhere to go but up.

Adding to the uncertainty about what is in store for the rest of 2016 and beyond is the fallout from a couple of the largest deals to occur in this country in two decades: the acquisition of Chalifour Canada by Memphis-based hardware wholesaler Orgill, Inc., and the takeover of RONA inc. by the world’s second-largest home improvement retailer, Lowe’s Cos.

While the initial growth in 2016 may come with caveats, many dealers are optimistic about the remainder of the year, despite the meltdown of the energy-based economy in Alberta—further exacerbated by the fiery destruction of Fort McMurray—and CMHC’s forecasts for slower housing starts this year.

Initial statistics gathered by HARDLINES indicate that most regions reported at least some increase in sales for the first quarter, with the exception of Alberta and the far north. Even Ontario dealers reported mixed results for the start of the year, as job action by some trades has had an impact on sales by commercial dealers. However, most dealers―again with the exception of many in Alberta―anticipate an increase overall in sales for 2016.

While the good weather so far this year may have helped sales on the building supply side, it slowed seasonal sales for retailers hoping to move shovels and snow blowers and ice-melt products during the latter part of the winter. Canadian Tire dealers, for example, spent the first months of the year switching out winter products for patio sets, gardening supplies, and backyard categories as the weather changed around them, depending on the region they were in.

Meanwhile, both Lowe’s and Home Depot Canada continue to pursue a multi-pronged approach to sales, one in which e-commerce figures very strongly. Both companies are also focused on growing their contractor business, posing yet another threat to independents.

(HARDLINES will host our 2016 Annual Hardlines Retail Conditions Breakfast, June 21 at the Hilton Mississauga Hotel. This will be an intimate, interactive session with HARDLINES Editor Michael McLarney. Get help planning for 2017 in an intimate Q&A session where we’ll share how much the industry has grown, shed light on the Lowe’s/RONA deal, and discuss Orgill’s growing presence in Canada. Join us for HARDLINES’ forecasts for 2016 and beyond! Space will be extremely limited for this event, so click here to register today!)

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Patrick Morin to invest $25 million to expand DC, add stores

ST-ANCIENNE-LORETTE, Que. — At a time when many retailers are struggling to hold their share in the Quebec market, family-owned banner Groupe Patrick Morin has announced a bold plan to invest $25 million in strengthening its position through new stores—and possible acquisitions.

The project will expand the footprint of the company’s Saint-Paul-de-Joliette distribution centre by 50,000 square feet, as well as creating a new 300,000-square-foot DC for higher-tech materials. The expanded distribution network will serve the increased number of stores the company has planned, with its 21st store opening in Saint-Eustache next year and more in the works.

As more stores are added, says General Manager Daniel Lampron, “the distribution centre we have now will be too small.” He adds that the management team still sees opportunities for growth in Quebec. “For us, business is going well in a market that is not easy,” he told HARDLINES. “We’re still growing our piece of the pie. Our business model, our customer service—these are all things that help us.”

External factors also contribute to Patrick Morin’s positive outlook. With Lowe’s takeover of RONA, Lampron points to “confusion” in the market that is leaving merchants “a little bit scared.” The climate could be favourable for new acquisitions, in addition to the opening of new stores, he says.

The incentive to grow is as much stick as carrot: Canac, the banner’s similarly sized and closest competitor, is expanding its regional reach. “There are a lot of regions in Quebec where we aren’t yet,” Lampron acknowledges. “Canac is coming closer to the Montreal region; we see opportunities there, as well.”

As reported last month in HARDLINES, the banner, a member of the Independent Lumber Dealers Co-operative, has been expanding its product offerings in an effort to keep customers coming into stores as online competition continues to heat up. Lampron told HARDLINES at the time that Patrick Morin would be checking with other ILDC members to see how any new inventory it considers is selling before taking it on.

Last fall, Lampron and President Denis Morin hit back against reports that the banner was facing a takeover, reiterating the company’s growth strategy. For now, Lampron says the group is doing its bit for Quebec's economy by adding 100 new jobs by the end of this year—with more to come.

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Post-takeover, expect aggressive growth of both Lowe’s and RONA banners

TORONTO ― RONA is the dominant hardware and home improvement brand in Quebec, with close to a 30% market share (source: Hardlines Market Share Report). As a result, Lowe’s will think carefully about even introducing the Lowe’s name into the province. When asked about that possibility, Lowe’s Canada President Sylvain Prud’homme said, “I don’t think so.” But, he added, “We’re keeping the door open.”

Prud’homme is keen to see more big boxes in that province, however. He says RONA is doing a lot of things right already with its big box stores, and cites the Reno-Depot banner as a winner. Even now, RONA is working on some new ideas for its big boxes, with a test store in Anjou being readied for a reboot.

Both Lowe’s and RONA have aggressive expansion plans: Lowe’s bought up 13 former Target stores, plus its distribution centre in Milton, Ont., in May 2015 and is working hard to convert those outlets to Lowe’s. In addition, it is continuing to develop greenfields sites of its own. At the same time, RONA has been spending the last four years getting its financial house in order. This included acquiring 17 big box stores in Quebec, all of which were owned by independent, or franchise, dealers. The company has also been active working with its independent dealers to help them grow their respective businesses.

So the market can expect both sides of the business to continue parallel expansion strategies―at least for the near term. “We’re tackling the future retail network,” says Prud’homme, “and growth is important.” But, he adds, the integration will not be a one-size-fits-all approach. “It’s not a consolidation. It’s a co-ordination.”

While he may be using more nuanced language to describe the merger of the two companies, his meaning quickly becomes clear: both sides will learn from each other, cross-pollinate with retail ideas, and encourage mutual growth. For example, he says, Lowe’s will lend its expertise in selling appliances, and its sophistication in online sales to the RONA side of the business.

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Home Depot wants more online assortments, faster delivery times

ATLANTA — Home Depot executives are anxious to grow the company’s online business, and see its exclusive range of products, as well as rapid delivery times, as keys to that success.

Speaking at the recent RBC Capital Markets Consumer and Retail Conference, Richard McPhail, SVP of finance, noted the importance of vendors to getting product into customers’ hands. “From a product perspective, we have incredible vendor partners and we are incredibly important to each other. They support our online business with great product that you can only find at The Home Depot.”

He added that many of those exclusive products are aimed at pro and contractor customers.

McPhail said Home Depot’s goal is be able to deliver products within two days to about 90% of the population. “That's not all [the] SKUs that we offer on Homedepot.com, but we are the destination where people expect Home Depot to carry the dominant brands and dominant product. We are going to deliver speed as part of the value proposition too.” (With transcripts from Seeking Alpha)

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Luc Rodier, executive vice president of retail at RONA, is no longer with the company. Rodier was there for 11 years, most recently as one of the key senior executives on the turnaround team, under CEO Robert Sawyer, leading up to RONA’s takeover by Lowe’s.

The Retail Council of Canada conferred Awards of Distinction on 13 retail innovators last week at RCC’s STORE 2016 conference in Toronto. The Lifetime Achievement award was presented to Louise Wendling, former Costco Canada country manager, “for demonstrating outstanding business success and community service throughout her career.”

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CLASSIFIED ADS

HOME HARDWARE STORES LIMITED
RETAIL SALES AND OPERATIONS MANAGER – NORTHERN ONTAIRO

About Home Hardware:
Home Hardware Stores Limited is Canada’s largest Dealer-owned cooperative with close to 1,100 Stores and annual retail sales of nearly $5.8 billion.  Located in rural St. Jacobs, Ontario, Home Hardware remains 100% Canadian owned and operated.  Home Hardware has received designations as one of Canada’s Best Corporate Cultures and Best Managed Companies and is committed to providing local communities with superior service and expert advice.

Job Description:
Responsible to the Director, Retail Operations Northern and Eastern Ontario for the implementation of Home Hardware’s strategic growth plan, as well as, developing, expanding and supporting company programs in the area by providing store assistance, recommendations and standards, by encouraging profitable store expansion and growth, by seeking Dealer and company growth opportunities and initiatives in both new and existing markets and across all banners, and by making recommendations concerning product selections.
Assists and educates new and existing Dealer-Owners.
Prepares and submits quarterly industry updates and objectives.
Evaluates stores on an annual basis.
Conducts Sales and Dealer meetings.
Visits Dealers on a scheduled basis providing guidance and assistance, serving as a liaison between them and Home Office and building strong valuable relationships with Dealer-Owners and store Staff.
Maintains an up-to-date knowledge in retail methods and systems.
Coordinates occasional direct ship buys between area stores.
Assist with special projects as requested.

Qualifications:
Results-oriented individual with a strong understanding of retail operations and the strategy needed to succeed in a highly competitive market.
Must be self-motivated, results-oriented and organized, with excellent time management skills.
Post-secondary education or equivalent.  Business financial knowledge would be an asset.
Retail or sales experience at a supervisory or managerial level.  Home Hardware experience preferred.
Willingness and flexibility to travel extensively and work varying hours.
Excellent communication and leadership skills.
Knowledge of Account Management an asset.
Good computer skills including MS Outlook, Word and Excel.
Successful applicant must be willing to locate centrally within the area.
Bilingual candidate an asset.

Interested applicants, please submit your resume to:
Dayna Weber, Recruitment, Human Resources
hr@homehardware.ca

Fax: 519-664-4711
Phone: 519-664-4975
34 Henry St W, St. Jacobs, ON, N0B 2N0
Deadline:  Monday, June 13, 2016

*While we appreciate all applications received, only those to be interviewed will be contacted.

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