Lowe's reports strong growth in '05

MOORESVILLE, N.C. - Lowe's Cos., the industry's second-largest retailer, reported a 27.3% increase in net income, to US$2.771 billion, for the fiscal year ended Feb. 3, 2006. During that 12-month period, Lowe's revenue rose 18.6% to US$43.243 billion. Sales from stores opened a year or more increased 6.1%, the third consecutive year that the company's same-store performance was 6% or better. The company's 37% increase in fourth-quarter profit, to US$695 million, was its highest gain in three years. For the full year, the company's gross margins, as a percentage of sales, rose to 35.14% from 34.96% in 2004. Company officials pointed to three areas - installed sales, special orders and its business with commercial accounts - as the company's primary sales drivers last year. Installed sales alone increased by 22% to US$2.6 billion. In addition, Lowe's opened 63 stores in 2005, bringing its total for the fiscal year to 1,234 units in 49 states, and 140.1 million sq.ft. in retail space, representing a 13.2% increase over fiscal 2004. Lowe's expects to sustain its growth in 2006, when it projects that it will open 155 stores that add another 12% in retail square footage to its portfolio. The company expects its sales to increase by between 13 and 14%, and same-store sales to grow by 5 to 7%.

	Home Depot	Lowe's
Revenue (US$bil.)	$81.511	$43.243
% inc. v. '04	11.5	18.6
Net income (US$bil.)	$5.838	$2.771
Percentage increase over '04	16.7	27.3
Same-store sales growth (%)	5.5	6.1
Store count (# opened last year)	2,042 (179)	1,234 (147)
Employee count	345,000	185,000
Sales per store (US$mil.)	$39.9	$35.0
Sales per employee (US$)	$238,363	$233,746
Income per employee (US$)	$16,933	$14,978

Source: company reports

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RONA plans big investment in acquisitions, recruitment in 2006

BOUCHERVILLE, Que.’Äì-RONA inc. has aggressive expansion plans for the coming years, and store construction, affiliate recruitment and acquisitions all figure into the mix. The anticipated result, says RONA CEO Robert Dutton, is sales growth by all dealers in the RONA network in excess of $7 billion by the end of 2007. Retail sales in 2005 reached $5 billion. RONA plans to invest $310 million to build almost 20 stores in 2006 and plans the same number in 2007, bringing the total number of corporate and franchised stores to over 200 by the end of 2007. Half of these stores will be big boxes, while the others will be either "proximity" or specialized stores, i.e., RONA Home Centres or RONA Building Centres. Already this year, 14 stores are under development, mainly in Ontario and Western Canada, nine of them big boxes. In all, RONA plans to add more than two million sq.ft. of retail space within two years. It also plans to invest in existing stores. Following the renovation of 117 stores last year, $40 million will be invested in 122 corporate sites, in keeping with a strategy to renovate approximately 20% of its network each year. Installations will get a lot of attention this year, with the service being added to almost all RONA big-box and proximity stores. Initially, services will be restricted to kitchens, doors, windows and floors. Canada remains highly fragmented, says Dutton, with 6,000 independent dealers and "dozens of quality businesses" that may be ripe for acquisition. These may include not just traditional home improvement retailers, but related specialty retailers and distributors. RONA wants to increase its dealer base here by $400 million in retail sales over the next two years. In 2005, RONA increased its retail sales by $300 million through acquisitions, of which Totem Building Supplies in Alberta accounted for $250 million. Already, this year, RONA has announced the acquisition of two chains, Matˆ©riaux Coupal and Chester Dawe, which will boost retail sales by another $205 million. RONA will also invest $35 million in its distribution system in 2006, with the addition of 250,000 sq.ft. to the Boucherville warehouse, bringing its total size of to 900,000 sq.ft. A 380,000 sq.ft. cross-docking facility is being built in Terrebonne, in the Montreal area, to handle containers of imported products.

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Declining housing starts weaken construction industry profits

OTTAWA’Äì-Strong non-residential and engineering construction in 2006 will offset a long-anticipated decline in housing starts to maintain industry profits this year, according to the Conference Board's Canadian Industrial Outlook: Canada's Construction Industry’ÄìWinter 2006. "Housing starts appear to have peaked in the second quarter of 2005," said Louis Theriault, director, Industrial Outlook. "Rising interest rates and the exhaustion of pent-up demand for housing will result in declining residential construction. The good news over the short term, Theriault added, is that lower vacancy rates and rising commercial and public spending-along with solid employment growth-are bolstering non-residential construction. "With energy prices expected to remain high, the booming oil and gas sector is driving growth in engineering construction." Industry profits rose 55% in 2005 to a record $2 billion. Profits are expected to again surpass $2 billion in 2006, but both material and labor costs are on the rise. As a result, costs are forecast to increase faster than revenues this year and next. Profit levels will weaken in 2007 and will range between $1.4 billion and $2 billion annually through 2010.

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Atlantic show "raises the bar"

MONCTON, N.B.’Äì-Confronted with growing entrenchment of dealer services and buying within the ranks of retail co-ops and buying groups, the Atlantic Building Materials Show remains the best venue for buying in Atlantic Canada. However, that role does not come without its challenges. According to Don Sherwood, president of the Atlantic Building Supply Dealers Association, which owns and operate the show, a number of steps have been taken this year "to help raise the bar." The show, being held March 23-25 in Moncton, should offer more ways to help dealers be successful besides show specials, says Sherwood. Technology is one front that the show is expanding this year. Communications technologies, such as cell phones that can double as walkie-talkies, have great potential in lumber yards and fleets. "It's really ideal for dealers' trucks, because there's no cost for using walkie-talkies," Sherwood points out. "But dealers need to know about it." One idea that has proved successful in years past will get reprised at the upcoming show. Retail buyers will be able to walk the show before the doors open, giving them the opportunity to meet with vendors in a private, one-on-one scenario. The show, says Sherwood, will also be a showcase for the various banners and buying groups as they vie for new members.

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Lanoga to acquire Wolohan Lumber

WINONA, Minn.-The need for a broader capital source to provide services to an increasingly demanding builder customer was the primary motivation behind the decision of officials at Wolohan Lumber to sell their company to Lanoga Corp. The Redmond, Wash.-based Lanoga proposed last week to acquire Saginaw, Mich.- Wolohan Lumber, a 42-year-old company that operates 18 locations in three Midwestern states. The deal, which should be completed by the end of this month, will combine Wolohan with Lanoga's United Building Centers division, based here. The result will be a 200-location operation that is expected to add $140 million in annual sales to UBC this year and give it a stronger foothold in Michigan, Indiana, and Ohio. The terms of the agreement were not disclosed. In a prepared statement, Paul Hylbert, Lanoga's CEO, welcomed Wolohan's team of 400 employees to his company. In an interview with HARDLINES, Wolohan's president and CEO, Jim Wolohan, and COO John Sieggreen, said they wouldn't be involved in the daily operation of their company after the acquisition is completed, but would serve as consultants for an unspecified period of time. In that interview, Wolohan said his company, while profitable, needed a better-financed partner "to take our enterprise to the next level. When you look at how the industry is moving forward, things are accelerating rapidly, and we'd need to make a commitment in capital to [expand] value-added services and technology. There are things that a multi-billion-dollar company like Lanoga can do that a company like Wolohan Lumber can't."

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Spending will stay strong in Quebec

MONTREAL’Äì- Retail sales in both Quebec and Canada showed significant growth in 2005 for the tenth consecutive year. According to the latest annual study by the Retail Council of Quebec, retail sales in the province increased by 6.2%, to $83.1 billion. In Canada, sales increased by 6.3%, to $368.7 billion. Low interest rates, relatively stable inflation, and job creation kept consumer confidence up, says the report, especially in sectors such as home furnishings (15%), furniture (5.9 %), and home improvement (11.9%). That growth is closely linked to the vitality of the construction sector, new construction starts, and residential real estate in Quebec in 2005. Quebec households saw their personal disposable income grow from $21,631 in 2004 to $22,261 in 2005. The disposable income of Canadians was $24,067 in 2005. The gap in disposable income between Quebec and Canada was ’Äì7.5%. The Canadian and Quebec economies will continue to grow in 2006 and consumers should see an increase in their personal disposable income. Job creation is also expected to grow, but at a slower rate. While a slight decline in the unemployment rate is anticipated, inflation should remain stable.

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Barbecues top list of luxury home enhancement expenditures

STEVENS, Pa.-Luxury consumers are investing in their homes in unprecedented numbers, says a new report. According to Pam Danziger of Unity Marketing, about two-thirds of luxury consumers were involved in major home redecorating or remodeling projects in the past year and even more, 69%, have plans for major home work in the coming year. When it comes to the luxury appointments in their homes, the most popular indoor luxury is a fireplace, either wood or gas-burning, a feature in 65% of affluent consumers' homes. Fireplaces are followed by home offices (64%) and whirlpool baths, indoor spas and/or steam rooms (34%). Outdoors, luxury barbeque grills are the top luxury home appointments, owned by some 70% of luxury consumers, followed by patio and outdoor lighting (49%) and luxury patio and lawn furniture (38%).

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