RONA reports strong 1st quarter, continues to look to acquisition for growth
MONTREAL – RONA reported a 1Q profit increase of 15% at the company's annual general meeting last week, with sales of $16.4-million, compared with $14.2-million a year ago. Sales revenue jumped about 13% to $798.8-million. CEO Robert Dutton said that the results are a good for 2006, adding that the firm is ahead of schedule on plans to meet annual retail sales of $7-billion by 2007.
Increases were fuelled in part by RONA's recent spate of acquisitions, including Chester Dawe Ltd. in Newfoundland, the Quebec-based Materiaux Coupal Inc., Curtis Lumber Co. in British Columbia, and the Alberta-based Totem Building Supplies.
The company may continue to expand into Western Canada, where a surging gas and oil industry is fuelling record construction sales, according to Dutton. But RONA may also consider expansion into the United States when it can claim 20% of the Canadian market (currently, it holds 15% of the market in Canada.)
During the quarter, RONA brought 17 new affiliates into its store networks, with almost $100-million in annual retail sales. RONA has put aside $200-million to build 20 new stores this year and has plans to build another 20 in 2007. About half of those 40 stores will be big-box format.
Home Depot purchases home-improvement lender
ATLANTA – Home Depot has given contractors and remodelers one more reason to shop its stores. The retail giant has agreed to acquire the EnerBank USA subsidiary of CMS Energy, which provides loans for a wide variety of home improvement projects. In discussing the acquisition, Frank Blake, Home Depot's executive vp-business, development and corporate operations, said that because EnerBank specializes in offering loans through contractor referrals, it could provide an important service to smaller contractors that shop Depot's stores.
"This acquisition gives us the opportunity to offer our services to The Home Depot's large contractor customer base," said Louise Kelly, CEO of EnerBank, which is chartered in Utah and had loan assets of $76 million at the end of 2005. The company employs 37 people and its management will stay on to run the business for Home Depot.
The acquisition is subject to regulatory approval.
This deal represents the second move into financing that Home Depot has made this year. In January, the retailer partnered with IndyMac Bank to launch a nationwide program that offers contractors up to $2 million in bridge loans, with terms for up to 18 months, and the option to earn a 5% discount on building materials purchased from Home Depot for the project contractors took the loan for.
National Hardware Show attracts quality numbers
LAS VEGAS-This year's National Hardware Show proved once again that the industry is willing to come to this burgeoning desert city to check out the latest products in retail home improvement. Buyers came from all over the world and badges included company names from countries as diverse as Mexico and Argentina to Australia and Poland.
The show, which began on Tuesday, May 9, was widely considered busy the first day, with steady traffic during the late morning of the second day. Typically of most trade shows, the final day was considerably slower. While final attendance numbers weren't available as of press time, both quantity and buying clout of attendees were higher, says Robert Cappiello, president of the National Hardware Show for Reed Exhibitions, the company that owns the show.
"We're getting higher steady traffic’Äì-and higher quality," he said. He pointed out the attendance of buyers from many majors: "Ace had eight last year, they had close to 30 this year. Do it Best sent two or three people last year [the show conflicted with Do it Best's own show]. This year the entire team came, including Bob Taylor, CEO of Do it Best. Wal-Mart pre-registered at least 30 buyers. A lot of high-level people are coming from the top retailers," he added.
Canadian buyers were there in force, as well. Senior merchants from CanWel, Hardware Division, TruServ Canada, BMR The Group, Home Depot Canada, and many more were represented.
New look, new programs for PRO Hardware
Montreal – About 200 PRO dealers across Canada have approved a new banner initiative designed with TruServ Canada that includes a revamped flyer program, renovation and re-merchandising programs; and dealer incentive special events.
"We are very excited about the response and passion from the PRO dealer-owners," says Lionel Gagnon, national growth manager for Truserv Canada, who attended meetings in eastern Canada. "In Quebec alone, there are 29 stores signed up to enhance their PRO store by renovating and implementing many of the best practices we introduced. We have another 27 on our list to visit and plan for the fourth quarter. We also are prepared to announce another two new PRO stores for this market one which is in Ste-Anne-de-Beaupré and the other store is in Carleton in the next few months."
Furniture, live goods help Home Hardware regain share
ST. JACOBS, Ont. – Providing dealers with products and programs to create furniture and décor destination stores is a major platform in Home Hardware's plans to build sales and expand its network. The growth of the Home Furniture format indicates that the strategy is working.
Throughout the Home Hardware network, lumber dealers are warming to the idea of building sales through an expanded furniture offering, according to Patty Uhrig, dealer development facilitator for Home Hardware. "Sales of furniture and appliances are running 35% higher this year than last," she says. The company has also added four more furniture stores already this year and expects to add a total of at least 12 by the end of 2006.
Enjoying particular success is the emerging "combo store" format, which includes a mix of home décor and interior design hardware and home goods, including appliances, mattresses and home décor accessories including lamps, throws, pillows and area rugs with traditional lumber and building materials.
The new format, examples of which can be found in Moncton in eastern Canada and in St. Thomas in central Canada , are becoming increasing popular with consumers, says Bruce Hammer, operations manager for the Home Furniture division. "They offer a total home solution," explains Hammer, "because they are places where homeowners can get what they need to build, supply and furnish their homes."
Home Hardware also continues to carve out space in the garden category, with an expanding line by celebrity gardener Mark Cullen. Introduced last year, Mark's Choice consists of higher-end garden tools with an emphasis on ecologically sound products.
Increased focus on home and garden categories will enable Home Hardware to stand up to growing encroachment by other retail channels, according to Bill Ferguson, director of dealer support for Home Hardware. "We're beginning to steal back the business that went to the grocery stores," he says.
Kingfisher shares brand strategy at NHS
LAS VEGAS – Kingfisher, the largest home improvement retailer in Europe, has developed its own range of private label products. Details of the line were explained at a Hardlines seminar held last week at the National Hardware Show. Kingfisher, which has 650 stores worldwide, generated ¬£8.0 billion (US$13.8 billion) in sales in fiscal 2005. Its store banners include B&Q, Castorama, Screwfix and Casto Depot.
According to Ted Leavitt, national brand director for Kingfisher, 22% of the company's sales come from what he calls "own brand" products. Although that number falls far short of other industries, namely grocery, which typically sells more than half its products under private label, it far exceeds the level of private label generated by Home Depot (around 15%) or RONA (about 12%).
It's important, said Leavitt, to distinguish between a label and a brand. While a label is a name on a package, a brand, he said, carries with it a set of values and a promise of performance for consumers. That promise must be maintained across all the products carrying the brand.
For example, one of Kingfisher's tried and true brands is "Colours", a range of décor items and accessories. "Colours is about accessible, achievable style transformation," said Leavitt. Another is "MacAllister," a mid-price range of power tools, which gives Kingfisher the key private-label advantage and Leavitt described as "a margin performer."
New study tracks home buyer and renovation patterns
LAS VEGAS – The Home Improvement Research Institute (HIRI), has announced findings from a study of America's housing industry. Conducted in March of this year, the study examined the home improvement planning and purchasing project behaviour of approximately 600 recent purchasers of new homes and 600 purchasers of existing homes.
The findings suggest that buyers of new and existing homes have a disproportionately large impact on the home improvement market. "Clearly, those that do the best job of serving this market will be very successful,' said Fred Miller, managing director of HIRI.
Motivation for recent homebuyers includes the desire to move from rental to ownership, or to upgrade, but the number of families downsizing is also growing. In 2006, 22% of respondents said they purchased homes because they wanted to own and live in their own house (down from 27% in 2004), while 16% felt their current home was too small (down from 19% in 2004).
The recently moved are big spenders; homeowners that have lived in their home for less than two years spend an average of US$2,300 yearly on their home, while those there for between three and five years spend an average of US$2,000 annually. Those who have lived in their homes more than ten years spend an average of US$1,700 each year.
The average cost for home projects is US$2,576, with "house appeal" being sited as the primary motivation. Sixty-six percent of new homeowners do at least one project right away, while 57% plan to do at least one project in the next two years. Landscaping is top with buyers of new homes followed by deck/patio work, while kitchen, bath and landscaping are key areas for improvement by buyers of existing homes.
DIY is the most common way projects are done. But there are some key behavioural shifts there, with an overall growth in the use of pros to ensure a good project outcome.
Men lead in initiating projects for a home being sold, while women dropped to second place in this scenario. Women still lead in initiating projects for the current home, but have shifted more to joint initiation. Women also lead in initiating planning for future projects (now, there's a surprise!’ÄîEd).