Forecasts by the leading public hardware and home improvement retailers have already sent a message that 2023 is going to be a slow year. Home Depot, Lowe’s, and Canadian Tire all expect sales to dip by as much as five percent. (See last week’s issue for the full story. —your helpful Editor)

The expectations of independent dealers across Canada indicate they are facing the same concerns.

Hardlines surveyed hardware and home improvement dealers earlier this spring and found that most are facing flat sales for 2023. The average for all dealers that responded is -0.7 percent. There were some highs—a few respondents in Ontario expect five or even 10 percent gains this year, and Saskatchewan dealers were most positive overall, on average expecting a two percent gain. In Nova Scotia, some dealers expect gains of seven, eight, and even 10 percent, despite their concerns about sourcing and product shortages.

However, most dealers in the survey anticipate zero growth in 2023. Dealers that expected a real drop in sales were typically forecasting a decline of 10 percent—and a few cited expected downturns of 20 and 25 percent. The dealers predicting the greatest anticipated losses are generally strong independents who had big gains in 2022, following a banner year for the entire industry in 2021. (None of the dealers can be named to respect the confidentiality of the survey.—your faithful fact-checking Editor)

In other words, dealers will have a hard time maintaining the momentum of the past three years. The slowdown began last year: after a strong first quarter, the industry saw sales drop off as interest rates and inflation sped up, coupled with falling LBM prices.

In fact, Hardlines has calculated a modest gain by the industry in 2022, but one that was still below the national inflation rate of 6.8 percent last year.

The flat forecast for the current year is not entirely bad news, then, but can instead be interpreted as a continued correction in the market. This cooling off can have a number of upsides, taking the pressure off hiring demands and easing the strain on the supply chain as product flow and pricing return to a new normal.

Under new owners, affiliate dealers will get a better deal, says RONA SVP

Without the leadership of Lowe’s Cos. in the U.S., the executive team at RONA inc. is wasting no time doing things their own way. The sale of the former Lowe’s Canada to a New York City-based private equity firm was finalized on Feb. 3.

Ads have become more humorous, the RONA brand is getting increased awareness, and the affiliate dealers are getting more attention. Hardlines reached out to Jean-Sébastien Lamoureux, senior vice-president, RONA affiliates, wholesale, and public affairs. “Lowe’s were great partners right across the board, but we’re very excited by what we’ve seen from our new owners, Sycamore Partners,” he says, “and it’s really resonating with the independent dealers.”

Out of a total of 445 stores, RONA has 333 RONA-bannered locations, of which about half are affiliate dealers. “The dealer RONA network is one of the growth vectors for the future. That’s our main theme here. We value the history that the dealer network has with this company.”

Asked about what that growth will look like, Lamoureux underlines three strategies. The company definitely wants to add more dealers and increase the number of independents flying the RONA banner. Lamoureux also wants to broaden the geographic reach of the dealer network. Its greatest concentration—outside of its home province of Quebec—is in British Columbia and Ontario.

And the opportunity for individual dealers that are already part of RONA is big, he adds, with support in place for those dealers to add stores or buy out competitors. “We want to be a partner in their growth, not only organically, but in terms of consolidating their markets.”

Will RONA focus mainly on larger building centres? Lamoureux says no. The company wants to recruit and develop every type of dealer from hardware stores to home centres and lumberyards. Each type of store represents a format that can position a retailer effectively to serve its local market.

“As RONA is getting back to its roots, it’s only natural that the independent dealers play a significant role in the company in the future.”

(Jean-Sébastien Lamoureux will be a keynote presenter at this year’s Hardlines Conference, Oct. 17 and 18 in Whistler, B.C. You’ll want to hear the latest about RONA’s plans for its affiliate dealers right from the source! So click here now to learn more and secure your spot at this incredible event!)

Despite lower Q1 results, Lowe’s makes healthy online sales gains

Lowe’s Cos., which reported first-quarter sales last week that were five percent below last year’s Q1, is feeling the pinch on big-ticket items now that the Covid-driven consumer frenzy for home improvements has abated.

The retailer posted Q1 earnings of $2.26 billion, down from $2.33 billion a year ago. Sales fell by more than five percent to $22.35 billion, compared to $23.66 billion in Q1 of 2022. Comp sales fell by 4.3 percent. The biggest drop was from DIY customers; Lowe’s contractor business was healthier with positive comps in some pro categories.

“Candidly, what we’re seeing is pressure across big-ticket discretionary purchases primarily,” Marvin Ellison, president and CEO of Lowe’s, said on a call with investors and journalists. “We’re seeing some pressure in small-ticket [items], but it’s more pronounced in big-ticket [items] and is almost exclusively discretionary in DIY.”

However, the company continues to make gains in its online sales, as part of its “Total Home” strategy. E-commerce sales were up six percent in the quarter, bringing the retailer’s online sales penetration to almost 10 percent of overall sales.

One of Lowe’s strategies to counter the new consumer thriftiness will be to introduce more private-label Lowe’s products, including a new line of closet organization products and an exclusive line of tintable paints formulated specifically for pros from Sherwin-Williams.

“Our private-brand strategy allows us to deliver value to DIY customers who are looking for high-quality, on-trend products at more affordable price points,” said Bill Boltz, Lowe’s executive vice-president for merchandising.

A brand new retail home furnishings and décor banner is coming to Canada, and it’s taking over at least 21 former Bed, Bath & Beyond locations after that chain entered bankruptcy protection. Putman Investments—already an operator of multiple retail brands—will launch a new retailer called rooms + spaces.

Putman Investments is an Ancaster, Ont.-based company that already owns Toys “R” Us, Sunrise Records, FYE (For Your Entertainment), HMV UK, and T. Kettle (formerly Davids Tea). Hardlines interviewed the 39-year-old investment firm’s founder, Doug Putman, and found him bullish on the future of—not just his rooms + spaces brand—but bricks and mortar retail in Canada in general.

Putman Investments is all family money, Putman said, with sales from the 25 companies it owns approaching $4 billion. In addition to its flagship retailers, the company owns distribution, manufacturing, and real estate. “We take no outside investment, so everything we buy, we own 100 percent.”

“They are just companies that are out of fashion, or not doing well, and they’re just kind of at the end of their life,” Putman said. “People say to me, why did you get into the distressed [retailer] business? The answer was simple, I didn’t have enough money to buy a good business!”

Putman’s first investment was troubled Sunrise Records, which he bought for not much money at all. Now he is a significant global player in the recorded music bricks-and-mortar space (HMV UK is a top 10 retail brand), confounding sceptics who thought that Spotify, iTunes, and other digital music vendors would drive his record shops out of business.

“They are unfashionable businesses, for sure, but they do fantastically well,” Putman says. “We hit it perfectly with vinyl… and with an explosion in pop culture products in general, whether it’s T-shirts or paraphernalia.”

Putman once said that he didn’t want to invest in anything that didn’t have “unlimited upside.” Does rooms + spaces have that upside? To Putman it does: “We’re starting with about 30 stores [Putman is in negotiation to take over more Bed Bath & Beyond leases beyond the already-announced 21 locations] in a market that’s billions of dollars, right? I think we’ve got this potential. Are we going to have a large market share in certain areas? No. But I think we can have a good share.”

Walmart Canada has made changes to its lineup of senior executives. Mohammed Abdool-Samad has joined as CFO. He was group CFO at Walmart's Massmart business in South Africa. John Bayliss has been named chief administration officer. He was formerly an EVP. Michon Williams has been promoted to chief technology officer from the role of VP technology. Joe Schrauder has joined as VP, operations and chief of staff to the CEO. He is relocating to Canada from Walmart’s Bentonville, Ark., head office, where he was VP, international operations and realty for Walmart International.

DID YOU KNOW...?

… that the 2023 Hardlines Conference will take place Oct. 17 and 18 at the Fairmont Chateau Whistler Resort in Whistler, B.C.? The two-day program includes speakers from leading home improvement organizations such as RONA, Home Depot, Taiga Building Products, Federated Co-op, and Ace Canada. Hardlines Weekly Report subscribers can take advantage of a 20 percent discount on registration, while special pricing is available to dealers!

RETAILER NEWS

Gow’s Home Hardware in Bridgewater, N.S., held a celebration recently for its 175th anniversary. Dealer-owner Amanda Fancy accepted the Outstanding Retailer Award for Best Hardware Store at the 2017 Hardlines Conference. Since then, the store has moved to a new location and added furniture and appliances to its offerings. During the pandemic, the store’s annual sales exceeded $18 million.

A Castle dealer is planning the opening this spring of a new store on Prince Edward Island. Brudenell Building Centre in Montague is the latest expansion for long-time Castle member Mike James. James owns Spring Valley Building Centre in Kensington, near Summerside, and O’Leary Building Centre in O’Leary, on the west side of the island. His new partner is Adam Baird, who will serve as the store’s general manager.

SUPPLIER NEWS

The Retail Council of Canada will hold its flagship event, RCC Store23, on May 30 and 31 at the Toronto Congress Centre, near Pearson International Airport. Speakers include Retail Prophet founder Doug Stephens, Holt Renfrew CEO Sebastian Picardo, and Danyal Syed Ali, head of consumer and customer insights at IKEA Canada. (Check out the complete agenda here or click here to buy tickets.)

Doman Building Materials Group, the owner of CanWel Building Materials, reported a big decline in revenue in the first quarter compared to Q1 of 2022. Revenues were $609.1 million, compared to $851.3 million in the prior year—a 28.5 percent drop. Net earnings for the first quarter were $14.91 million, down 64.5 percent from $42.03 million a year prior. The drop in revenue was “largely due to the impact of construction materials pricing, which peaked in the comparable period in 2022,” said the company in a release.

Aliaxis SA, which operates in North America under the Ipex brand, has reached an agreement to acquire the manufacturing business of U.S.-based Valencia Pipe Co. The $250 million transaction will bring two production facilities and one distribution centre into the Ipex fold, in the states of Arizona and Washington. In a release, Alex Mestres, Aliaxis’ divisional CEO of the Americas, called the acquisition “an excellent opportunity to expand our reach into the western United States.”

ECONOMIC INDICATORS

Retail sales decreased by 1.4 percent to $65.3 billion in March. Sales fell in five out of nine subsectors, representing 55.5 percent of retail trade. The biggest declines were in automotive and fuel categories. Core retail sales for the month rose by 0.3 percent in March, the fourth consecutive increase. The gain was led by higher sales at building material and garden equipment and supplies dealers, which were up 1.6 percent. (StatCan)

NOTED

Martha Billes, daughter of Canadian Tire co-founder A.J. Billes, and her son, Owen Billes, own 61.4 percent of all common shares of Canadian Tire Corp. According to CTC’s 2022 annual report, they “beneficially own, or control, or direct the shares through two privately held companies, Tire ‘N’ Me Pty. Ltd. and Albikin Management Inc. Both Martha and Owen are members of the CTC board. Martha was invested as an Officer of the Order of Canada in 2022.