Lowe’s Cos. has entered into a “definitive agreement” to sell its Canadian retail businesses to Sycamore Partners, a private equity firm based in New York.

The price was “$400 million in cash and performance-based deferred considerations,” according to the release. (figures are in USD.) For that, Sycamore acquires some 450 stores that include 70 Lowe’s big boxes in Canada; about 150-corporate owned RONA stores; the wholesale supply business of another 210 independent RONA stores; plus Reno-Depot’s 20 corporate stores, in addition to Dick’s Lumber.

Lowe’s Companies had acquired the vast majority of these stores on May 20, 2016, for US$2.4 billion, at the time valued at CDN$3.2 billion.

“The sale of our Canadian retail business is an important step toward simplifying the Lowe’s business model. While this business represents approximately 7 percent of our full year 2022 sales outlook, it also represents 60 basis points of dilution on our full year 2022 operating margin outlook,” said Marvin R. Ellison, Lowe’s chairman, president and CEO.

Sycamore Partners, based in New York City, specializes in retail and consumer businesses. Other holdings include Staples, Ann Taylor, Talbots, Dollar Express, and Aeropostale.

In a note to Canadian vendors, Lowe’s Canada president Tony Cioffi expressed his support for the deal saying, “We look forward to teaming up with Sycamore, with its in-depth knowledge of, and appreciation for, the Canadian market through its ownership of Staples Canada/Bureau en gros.”

Meanwhile, other Canadian home improvement retailers are watching the deal with interest, especially in light of the future of the affiliate, or independent, dealers flying the RONA banner. “It’s too early to say if BMR would be interested in acquiring the RONA business,” said Alexandre Lefebvre, CEO of BMR Group, “especially as we’re looking at the market ahead with concern.” 

Regardless of the future of the economy, however, he says his company can continue to have a strong appeal for RONA dealers. “This is an opportunity for BMR—100 percent.”

Sycamore Partners’ managing director Stefan Kaluzny, said: “We are honoured to partner with Lowe’s to establish Lowe’s Canada and RONA as a standalone company headquartered in Boucherville, Quebec.… We look forward to working with the company’s management team to build on its 83-year history as a leading Canadian home improvement business.”

(To read the full release from Lowe’s, click here!)

Following sell-off, Lowe’s Canada president says stores will switch to RONA

The news that Lowe’s Cos., based in Mooresville, N.C., is selling off its Canadian division to New York City-based Sycamore Partners, a private equity firm, has rocked the retail home improvement industry—and lit up the news feeds.

The news has also sparked sarcasm from some journalists and business analysts in Quebec, where RONA, acquired by Lowe's in 2016, had been a legacy brand in the province for decades. The business was sold to Sycamore yesterday for a mere US$400 million cash—plus unspecified performance payments—only six years after Lowe’s had paid US$2.4 billion (CDN$3.2 billion) for RONA inc. The new deal is expected to close early in 2023.

In a letter to vendors, Lowe’s Canada president Tony Cioffi stated, “Under our new ownership, we will maintain a strong commitment to our Canadian- and Quebec-based vendors, including through our ongoing involvement in the ‘Well Made Here’ initiative, meant to encourage the purchase of domestically manufactured quality products.”

Cioffi also shared that the Lowe’s big box stores will change names eventually. “There are no significant changes planned for the stores. We will eventually move away from the Lowe’s banner in Canada in favour of the RONA banner in a manner that ensures the least possible disruption to our business. Otherwise, you will see minimal change.”

A further clarification to the announcement of the sale was sent out the following morning, reaffirming that Lowe’s Canada will remain headquartered in Boucherville, Que., on the south shore of Montreal. It also notes that the deal includes “includes performance-based deferred consideration.”

Lowe’s Canada says it is working to make the transition to the new ownership a “seamless” one, “with minimal disruption for our 26,000 associates. It will remain business as usual, including unchanged compensation and benefits.”

Atlantic association holds HR conference to examine hiring, retention issues

About a hundred dealers and suppliers gathered last week at the Halifax Convention Centre to hear from HR experts on the challenges of finding and retaining workers. The conference was put on by the Atlantic Building Supply Dealers Association (ABSA). 

One session outlined the opportunities to hire new Canadians, including immigrants and refugees. The need to do more of this type of hiring is clear because Atlantic Canada has the highest ratio in Canada of workers in the retail home improvement industry who are age 55 and over. 

Denis Melanson, ABSDA president, told attendees that salary is typically not the main reason why workers quit. “Money is typically number four or five on the list of why people leave,” he said, adding that employees are more likely to leave because of bad management. “Hey, they don’t like you. It’s rarely that fifty cents an hour.”

Another speaker, recruiter, author and former CBC broadcaster Pierre Battah (shown here), talked about what a leader needs to do to improve employee retention. “What have you learned over the past two years ab​out retention?” he asked. Stressing the importance of an inclusive workplace, he remarked, “people need to feel ‘I belong here.’”

(The ABSDA HR Conference offered some great speakers. Hardlines will feature more on their presentations in upcoming editions of our sister publication, Hardlines HR Advisor.—Your 50-cents-an-hour Editor.)

Peter Norman, one of the top land and housing economists in the country, took the economic pulse of the nation at last month’s Hardlines Conference in Niagara-on-the-Lake, Ont. “Uncertainty and caution are what we’re going to talk about,” he said at the outset of his presentation. “Uncertainty but also some good things.”

First, the good news. “If your industry involves construction, you’ll have found that business has been quite good lately,” Norman said. “But the economy is in transition and all sorts of stuff is going on.”

Inflation was the first topic that Norman tackled in his analysis of that “stuff.” The Consumer Price Index was up 6.9 percent in August, the most recent month for which stats were available at the time of Norman’s presentation. Transportation cost increases led the way at 10.2 percent in August, food was at a 9.6 percent increase, and shelter was up 6.6 percent year-over-year.

Norman predicted “one more 75-point change” in the Bank of Canada policy interest rate to come. He was slightly pessimistic. A week after his speech, on Oct. 26, the central bank raised its rate by 50 basis points. The Bank of Canada rate currently sits at 4.0 percent. Norman compared that to the three previous peaks over the past 20 years: 3.0 percent in October 2008, 4.5 percent in November 2007, and 5.75 percent in January 2001.

Norman prognosticated that the Bank of Canada rate will stay around 4.0 percent for “12 to 18 months … then we might see that rate come down.” The Bank of Canada’s stated goal is to bring inflation down but, as almost everyone has been observing, the economy is slowing quickly and may downshift into a recession.

And there’s more behind the Bank of Canada’s plan, Norman said. In addition to inflation control, the central bankers are worried about supporting the Canadian dollar. 

Still, the effect of the interest rate increases on retail sales are easy to predict. “If you’re taking out a mortgage right now you are paying roughly twice the rate you were about a year ago,” Norman said. “The market effect is that house prices come down. It is not a bubble bursting but the market is adjusting to these new rates.”

“People renewing their mortgages, who got them four or five years ago, have no choice but to renew at these new rates. And they will not be spending as much money in hardware stores.”

Norman had good news to share, as well. “500,000 more people have jobs than a year ago,” he said. However, the  peak employment month was June and employment has been flat since then. Firms have slowed their hiring because of risk, Norman said.

The overriding question is: “Are we going into a recession or not?”

Norman said yes. “Expectations are that the recession will last through the end of next year.” Ending on good news, the economy is being stimulated by lots of new consumers, Norman said. “We had almost 656,000 immigrants last year. That’s 703,000 new Canadians including the birth rate.”

DID YOU KNOW...?

... that Hardlines HR Advisor (HRA) can help your store with valuable information on hiring and retaining employees? Don't have an HR department, you say? Then you are the HR department—and you can build your HR skills with HRA. (If you’re not already receiving HR Advisor, click here to sign up for free!)

Marc Chevalier Inc. in Bedford, Que., has joined TIMBER MART as the group’s newest member dealer. Marc Chevalier Inc. opened earlier this year and offers an array of building materials like roofing materials and exterior cladding. It occupies a large acreage which includes a 3,000-square-foot store and a 1,500-square-foot warehouse, with room for future expansion.

Lowe’s Canada is launching PROvember in most of its Lowe’s, RONA, and Réno-Dépôt stores, through Nov. 23. PROvember, an event directly linked to the VIPpro program, includes a vendor tour, in-store breakfast meetings, exclusive offers and rewards, several contests, as well as a partnership with the Movember Canada organization. Additional offers and discounts will complement existing VIPpro benefits. Pro customers will also get the opportunity to make a donation at checkout to support Movember Canada, which is dedicated to men’s health with a focus on mental health and suicide prevention, prostate cancer, and testicular cancer.

The Royal Canadian Mounted Police are investigating after a fire at a Home Hardware store on Pender Island, B.C. Security camera footage appears to show a woman with short brown hair breaking into the store and setting the blaze, which caused some $10,000 in damage. According to police, the suspect travelled to the island by ferry on Oct. 8, the night before the incident.

Giant Tiger Stores will hold the grand opening on Saturday, Nov. 12 of a fourth location in Windsor, Ont. The 17,500-square-foot store is located at 1745 Huron Church Road. Giant Tiger stores are stocked with affordable, on-trend home and family fashions, brand-name groceries, and everyday essentials at low prices.

IKEA Canada is expanding its network of plan-and-order points with a location in Brossard, Que., on Montreal’s south shore. The Quartier DIX30 retail and leisure complex will be the newest site for the concept, which allows customers to design custom home projects. They can make appointments for one-on-one consultations with IKEA specialists and test out products from a selection of home furnishings. The Brossard location will join existing plan-and-order points in Kitchener, Ont., and Boisbriand, Que.

W. W. Grainger reported Q3 sales of $3.94 billion, up 16.9 percent from the comparable period in 2021. Net earnings soared by 43.4 percent to $426 million, or $8.27 per diluted share, compared with $297 million a year earlier. The results exceeded the expectations of analysts surveyed by Zacks, who projected earnings of $7.19 per share on revenues of $3.88 billion.

SUPPLIER NEWS

The Monarch Group of Companies, a supplier of siding, roofing and building materials in Alberta, has been acquired by ABC Supply of Beloit, Wisc. The Monarch Group operates Monarch Siding Centre Inc., Monarch Exterior Centre Inc., and Monarch Metal Systems Inc.

This is the first international move for ABC Supply. The five Monarch locations in Calgary, Edmonton, Acheson, Red Deer, and Lethbridge will continue to operate under the Monarch brand. No financial terms of the acquisition were released. Last month, ABC Supply acquired the U.S. operations of siding supplier Kaycan Inc.

ECONOMIC INDICATORS

Total U.S. construction spending for September reached $1,811.1 billion, up 0.2 percent from August’s level of $1,807.0 billion. (U.S. Commerce Dept.)

NOTED

The latest episode of our podcast series What’s In Store is now live! In this edition, we talk to Geneviève Gagnon, CEO of Groupe Gagnon, a flourishing chain of stores in Quebec. She talks about her trajectory from law school to the multiple businesses she now manages and her passion for supporting palliative care. (Sign up now to get updates about the latest podcasts in your inbox!)

OVERHEARD...

“The Eisenwarenmesse – International Hardware Fair is the most important platform for our industry. It’s both a barometer of trends and a trendsetter. In other words, it’s the networking platform for the global hardware trade. I’m very happy to be in Cologne, meeting so many colleagues from all over the world.”
—John Herbert, general secretary of the European DIY Retail Association and the Global Home Improvement Network, on the success of the show, which was held in Cologne, Germany, last month.