vol. viii, #23 June 10, 2002  

*Independents report strong first quarter *Canadian Tire counts on new format stores for sales growth *Matériaux À Bas Prix will open its 13th store *Proposed Building Box gets nixed *Value of residential building permits up more than 10% in April  

"If you resolve to give up smoking, drinking and loving, you don't actually live longer; it just seems longer." — Clement Freud


National Report — Despite bad weather in many parts of the country, building centre dealers have been largely positive about sales so far this year. And despite the growth of the big box format in this industry, the lion's share of the business — almost 45% — still remains in the hands of independent dealers. No area got hit worse than Calgary in May, when snow dumped on the city, but Greg Davidson of Davidson Enman Lumber says the business is there; it will just get pushed into June, July and August. The company's increased focus on contractors and builders has served his company well. "We were very busy last month and expect to be busy right through to the Fall." Before the snow hit, many Ontario dealers reaped the benefits of a mild first quarter. Keith Moffatt, president of Moffatt & Powell, an ILDC member in Southwestern Ontario, says low interest rates teamed up with the mild weather to put his company far ahead of budget. Like Davidson Enman, Moffatt & Powell does a majority of its business with the trades. "We're talking to contractors, and they're very positive about the year ahead," Moffatt notes. Don Nash, president of Homecare, the Tim-BR Mart group in Ontario, echoes the good news in that province. His dealers, many of them facing big box competition head-on for the first time, are still showing same-store sales up 15% over this time last year. Québec dealers enjoy similar optimism. Groupe BMR's 120 members in that province have seen sales grow more than 38% in the first four months of the year. BMR's president, Yves Gagnon, expects to close the year 20%-25% ahead of last year, thanks not only to the addition of nine new members in 2001, but to stronger performance from existing members. Other groups are just as buoyant. Castle Building Centres Group, with 225 dealers across the country, added 21 new stores last year - and recorded its largest year-over-year increase in the group's 40 years, says Castle president Pro Wylie. While the West coast has suffered from a flat economy for the better part of the decade, observers believe some areas are picking up at last. However, says George Tracy of the Building Supply Dealers Association of B.C., the impact of countervailing duties on the province's economy is causing a big hit in unemployment. "I'm not as optimistic as I was last year," he admits. "There has to be a huge improvement in the economy, but someone has to pay." His outlook, which he calls "cautiously optimistic," calls for "some growth in 2002. Building supply dealers are not seeing huge breakthroughs — a little, but not a lot." Barrie Sali, president of Tim-BR-Marts Ltd., has dealers in every region west of the Lakehead. But in spite of both the weak B.C. economy and the loss of some key members last year, his group has ended 2001 with sales by all its dealers virtually on par with the previous year, at about $1.1 billion. Purchases through the group were also almost at a level with the previous year. Atlantic Canada, which traditionally flat lines through the highs and lows in other parts of the country, anticipates a healthy year ahead. "I expect nice, slow conservative growth," says Tom Smith, president of the AWARD buying group, which represents almost 90 dealers throughout Atlantic Canada. "I think it's going to be a good year."
Toronto, ON — Canadian Tire Corp. continues to pour money into the retrofit and replacement of existing stores. The new format stores not only boost initial sales volumes, but shore up same-store sales for the chain. Thanks to increased numbers of customer visits, coupled with a larger average sale per transaction, the new format stores generated average annualized sales of $14.8 million in the first quarter of 2002 (calculated on a rolling 12-month basis), up from $14.6 million in 1Q 2001. Traditional stores, by comparison, had average annualized sales in 1Q 2002 of $8.3 million, flat over the same period a year earlier. However, CTC is still learning to maximize the use of the extra space in the new stores. Sales per square foot in the old-fashioned stores remain higher than in their newer cousins: $526, compared with $415.
Canadian Tire 33.08 18.50 31.66
Canfor 12.00 8.08 10.90
Emco 12.42 3.71 12.15
Goodfellow 11.90 8.00 11.50
Home Depot 52.60 30.30 38.83
Hudson's Bay 20.10 12.50 14.25
Lowe's Cos. 49.99 24.99 46.35
Sears Canada 25.10 12.50 23.35
Sodisco-Howden 2.45 0.75 1.58
Taiga Forest 12.75 7.49 12.60
West Fraser 44.42 26.13 41.10
While non-residential intentions continue to decline, the value of residential building permits in April reached $2.6 billion, up 10.1% from March and 8.9% higher than the previous record reached in February. In April, construction of 19,800 residential units was authorized. On a year-to-date basis, all 28 census metropolitan areas have shown gains in the residential sector. On the other hand, 16 have posted declines in the non-residential sector.
The Governments of Canada and Ontario have signed an Affordable Housing Program Agreement. The deal will provide $489.42 million over the next five years to help increase the supply of affordable housing in the province. The Feds will kick in $244.71 million, which will be matched by the provincial government, municipalities and other private and nonprofit partners. The agreement is expected to result in the creation of an estimated 10,500 units in Ontario during the next five years.
Ferlac Inc. is enjoying a boom in Northern Québec. Despite the closure of one outlet last year, the remaining four have netted the company a 5% increase in sales in 2001, especially due to business with native peoples around the hydroelectric development in James Bay, which is creating a brisk business for Ferlac's Chibougamou outlet. A Home Depot store has been announced for Kamloops, BC. This is only the second store for Home Depot in the British Columbia interior (one went into Kamloops almost a year ago) and it's scheduled to open on or around June 19, 2003. A Building Box planned for Oakville, ON has been nixed by the town council there. The city-owned site will remain vacant until another use can be approved. Matériaux À Bas Prix, a.k.a. Bargain Building Materials ("Nobody beats our prices!") will open its 13th outlet on June 13. This one is in Beauharnois, QC on the south shore near Montréal. Sales for Sears Canada in May decreased 2.6% to $483.2 million, from $496.2 million for the same period last year. Merchandise sales decreased by 2.7% and same-store sales fell 4.3%. Cool weather affected lawn and garden sales, but furniture, major appliances, bed and bath, and installed home improvement products enjoyed double-digit increases. Castorama shareholders have voted to accept an offer of 67 euros per share by Kingfisher, which already owns 55% of the French DIY company. The purchase price was not supported by Castorama's executive team, which sought a higher price and expressed concerns over possible conflict of interest between Kingfisher and the bank brokering the deal. This year alone, Home Depot in Atlanta needs to hire 40,000 people, so it's making a deal with various levels of government in the U.S. to create a pipeline to the labour pool. Working closely with state labour departments and local work-force boards, Home Depot will provide weekly lists of job openings that will be made available to a variety of workers, including unemployed whose welfare benefits have expired, ex-military personnel, laid-off workers and people looking to change careers. Sears, Roebuck & Co. posted a drop in May's store sales of 1.5% to US$2.26 billion, down from from US$2.29 billion. The Sears Hardware outlets performed better, with sales up about 5%. Same-store sales for the chain fell 4.4%. Wal-Mart Stores reported sales in May of US$18.337 billion, an increase of 11.5% over May 2001. Profits year to date were up 12.7% and same-store sales rose 7.5% About 320 jobs will be lost when Sears Canada closes three call centres: Kitchener Credit and HomeCentral, Toronto HomeCentral and Ottawa Travel. Call centres in Vancouver, Ottawa, Montreal, Calgary and Regina will take up the slack. The changes will be implemented by the end of July 2002.
Steve Johns has left his position as president of the Lumber and Building Materials Association of Ontario. The board of directors made the move before finding a replacement; an executive search for a new president will begin in a couple of weeks. (905-625-1084) Barrie Brooks is no longer at Coleman Powermate division of Sunbeam Canada. Formerly director of national accounts, his duties have been taken over by Bonni McChesney, vice-president of business development. (905-501-0146) Jerry Kaell, formerly president of Wilton Industries Canada, has left the company following a restructuring. His duties will now be handled out of Wilton's head office in Chicago. The sales function in Canada is still headed up by Jeff McLauchlin, vice-president of sales. (416-679-0790) Dan Olsen, vice-president international sales for Ace Hardware, has left to start his own company, Global Assistance. Olsen was the first Ace guy to ever come up and check out the Canadian market, back in 1990 when he first established the international division for Ace.
The Spring issue of Hardlines Quarterly Report 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!
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