|In This Issue:
“I spent the afternoon musing on Life. If you come to think of it, what a queer thing Life is! So unlike anything else, don’t you know, if you really see what I mean.” —P.G. Wodehouse (Prolific British author and playwright, creator of characters such as the resourceful Jeeves the butler and dimwitted Bertie Wooster; 1881-1975)
| Weather, West affect RONA’s 1Q sales
|BOUCHERVILLE, Que. — In its first quarter, RONA inc., Canada’s largest home improvement retailer, had a 7.2 percent decline in consolidated sales (sales through its distribution centre plus sales or percentage of sales from stores owned wholly or in part by RONA). They went from $911.5 million in 1Q 2008 to $846.0 million. The decline was attributed largely to bad weather during the first two months of the year, coupled with the drop in housing starts in Western Canada. RONA blamed especially bad weather in Western Canada in March, where record precipitation levels fell on Alberta.The company experienced a first-quarter net loss of $2.5 million, compared with a net loss of $2.4 million in the same period in 2008, reflecting, the company said, downward pressure on sales in the renovation and construction industries, plus poor weather. Same-store sales fell 8.5 percent.
However, there was good news, as well, as inventory levels continued to decline, distribution sales were up, and commercial sales continued to grow:
Depreciation and amortization costs for the first quarter rose 6.7 percent to $24.9 million, from $23.3 million in 2008. This increase is due to new corporate store openings in 2008, store acquisitions, the renovation of existing corporate stores, and ongoing upgrades to RONA’s information systems.
(Note: RONA adopted revised accounting standards at the beginning of 2009, which affected its results as compared to the previous year. Click here for the company’s explanation of its new accounting standard.)
- distribution sales were up 0.2 percent through recruitment of new dealer-owners;
- higher sales to commercial and professional customers through the big-box stores network and RONA’s Commercial and Professional Market division in Ontario;
- an increase of 28 basis points in gross margin from 27.97 percent to 28.25 percent, and 72 basis points in adjusted gross margin;
- a $71 million or 7.3 percent reduction in inventories;
- a $222.3 million reduction in net debt, resulting in a 25.7 percent drop in interest expenses on long-term debt and bank loans, to $5.9 million from $7.9 million in 2008;
- ongoing store expansion, including the renovation of Réno-Dépôt stores in Anjou and Saint-Hubert, Que., the recruitment of six new independent dealer-owners, and a 180,000-square-foot expansion of its specialty plumbing distribution centre in Ontario.
| TruServ reports cautious optimism in first quarter
|WINNIPEG — Despite a slowdown toward the end of last year, hardware wholesaler TruServ Canada managed to see an increase in shipments to its dealers for the year. Sales by TruServ’s member dealers, who operate under the True Value Hardware, V&S Variety, and Country Depot farm and hardware banners, enjoyed an overall sales increase of between 2 and 3 percent, says company President and CEO Bill Morrison.The last quarter of 2008 was when the economic slowdown began to really hit his dealers, he says, although there were regional variations. Saskatchewan and Manitoba stayed relatively strong, while Alberta, subject to the vulnerability of the oil industry, was down for the period. The slowdown continued into the first quarter of this year, as well, as bad weather took its toll on much of the West.
TruServ dealers began to bounce back in the spring, although, says Morrison, they retained “a little bit of caution. A lot of dealers were either flat or up or down 1-3 percent,” he noted.
| Canadian Tire Retail sales up in first quarter
|TORONTO — Canadian Tire reported a drop in first-quarter sales of 2.7 percent vs. the same quarter a year ago. The decline was due mainly to lower prices at Canadian Tire’s gas bars. However, retail sales by the Canadian Tire Retail Division were actually up 4 percent, reflecting, says the company, strong sales through much of the quarter, especially in seasonal products. Net earnings were down 25.9 percent, while adjusted net earnings were down 10.9 percent for the period, reflecting higher distribution and operating expenses in the Retail Division, as a new eastern distribution centre was completed during the quarter.
Despite bad weather through much of the country during the first quarter, Canadian Tire stores enjoyed strong sales in automotive and leisure products. Mike Arnett, president of Canadian Tire Retail, said that consumers are “still behaving cautiously,” with “good” and “better” items selling more than “best” assortments. “But that’s what we’ve bought for,” he added, noting that the company was prepared for the shift. While seasonal product sales were very strong during the first quarter, the home core categories (hardware, plumbing and electrical, and tools) were down. The tool business worldwide has been soft, he said. “Our sales in tools have been flat, which means we’re likely getting an increase in market share, as the North American market is off by double digits.”
Same-store sales increased 2.5 percent over 1Q 2008.
In the first three months of the year, the retailer opened more of its new-concept formats. These included one Small Market store, which is part of an initiative to penetrate smaller markets with profitable retail footprints. In addition, it opened two Smart stores, which represent the new standard for Canadian Tire’s regular stores and replaces the previous 20/20 program.
The PartSource chain experienced double-digit growth, including, says the company, a strong same-store sales increase. One new hub store was opened during the first quarter, bringing the total number of PartSource outlets to 87.
At the company’s annual meeting last week, president and CEO Stephen Wetmore said his personal mandate is to strengthen a sense of customer service across the company.
Arnett and Wetmore
| Information, Networking Play Key Role at NHS
|LAS VEGAS — The National Hardware Show, held here May 5-7, featured a range of information sessions and seminars, providing a full education component in addition to the aisles of new products on exhibit.As part of a new International Sourcing Convention at NHS, our own editor, Michael McLarney, hosted a panel that talked about how to deal with Asian factories. This International Sourcing Session, sponsored by OnSpeX, the quality assurance and product testing organization, featured Larry Lucyshyn, vp sales for The MIBRO Group; John Tizzard, president of Tizzard Marketing; Greg Orloff, manager, new business development for OnSpeX, and Manuel Gonicman, president of California Air Tools and Goni.
The panel, all well-versed in the intricacies of specs, sourcing, and maintaining supply of product from suppliers in China, discussed how competitive factors in China are changing the way factories there do business. Issues like lead times, human rights, and the high cost of product recalls were all addressed.
The North American Retail Hardware Association (NRHA) teamed up with the show’s organizer, Reed Exhibitions, to create an All-Industry Summit. This ongoing event, located on a stage right at the entrance to the show, provided delegates with a wide range of seminars that included NRHA’s own research. Topics at the All-Industry Summit ranged from examining the impact of global economics on the home improvement industry to focusing on the impact of today’s green movement on the home improvement industry.
(If you missed the International Sourcing Session at NHS in Las Vegas, we’ve got good news for you. The session is being reprised in Toronto in mid June with a special industry update from 2Q HQR. Stay tuned.)
|Left to right, Michael McLarney, John Tizzard, Greg Orloff, Larry Lucyshyn, Manuel Gonicman
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