The past three years have forced all of us to face incredible challenges, while also providing unprecedented opportunities. Our industry rose to those challenges with untiring courage and maximized the opportunities with resoluteness and generosity.

The home improvement industry is one of the major drivers of the Canadian economy. Representing almost $59 billion in sales at retail, it accounts for almost nine percent of this country’s retail sales. Our industry is also an essential service, whether one is fixing a leaky toilet or building an entire house. (All figures and data here are drawn from either our Hardlines Retail Report or our Hardlines Market Share Report. — Editor)

There are nearly 5,000 stores in our industry. More than 1,000 of them are hardware stores and some 3,100 are building centres and home centres. At least 300 of them are large-format outlets, or big boxes, which despite their small numbers are retail powerhouses, representing almost 30 percent of all sales in the sector.

More than 500 of those almost 5,000 stores are Canadian Tire stores, which is almost a retail category of its own. Counting just the Tire’s sales of products that fall within the traditional hardware and home improvement sector (excluding sporting goods, automotive sales and services, and financial services), those stores manage to account for 13.5 percent of the sales generated by this industry.

The Big Four represent almost two-thirds of all sales generated in our sector. They are (in order of home improvement revenue) The Home Depot Canada, Home Hardware Stores, Lowe’s Canada, and Canadian Tire. Positions one and three are American-owned; positions two and four are Canadian-owned. Only Home Hardware is dealer-owned, although Lowe’s Canada serves some 210 dealer-owned RONA stores as well.

But despite the power of corporate owners, this industry rests largely in the hands of independent merchants. They are small businesses, typically family-owned and operated, comprising the backbone of the Canadian economy.

At the same time, the large chains are powered by the dedication and vision of the people working in those corporate stores. Whether overseeing a dozen people at a local, rural hardware store or a team of 200 at a big box, the managers of these operations exemplify a passion and leadership that could fill a dozen business books.

Today’s home improvement dealers and managers include some of the finest retailers in the country. And these stores are more than sellers of merchandise. They are hubs for their communities. Throughout Covid, the support they provided to those communities was nothing short of inspiring.

Hardlines is honoured to share these stories and is committed to uncovering and telling the stories that make this industry amazing throughout 2023 and beyond. We look forward to you accompanying us as we do.

Canadian Tire adjusts assortments as consumers tighten their belts

Canadian Tire has changed its product mix as the impacts of rising interest rates and inflation affect consumer behaviour.

Those changes were recognized as far back as last fall and were already making their mark on the company’s results by early November, when the company released its third-quarter results.

According to Greg Hicks, president and CEO of Canadian Tire Corp., the chain has been moving away from many higher-priced leisure products in the direction of its “essential” assortments, in the light of an anticipated recession.

“First, at CTR, there is evidence of more performance separation for essential and non-essential categories. Consumer demand is shifting to our essential product categories such as tires, automotive parts, plumbing, and pet,” Hicks explained on a call to analysts at the time. That shift was most pronounced among customers who were not using CTC’s Triangle Rewards program, “who have decreased their spend in non-essential categories such as outdoor cooking, exercise equipment, electronics, and furniture.”

In addition, Hicks noted that people were coming to Canadian Tire to shop for deals. “Customers at CTC are looking for discounted value as our percentage of baskets in which all items in the basket are discounted is on the rise.” 

The result? CTC has reduced inventories of big-ticket items such as barbecues and bicycles, and other “amusement” products within Canadian Tire’s non-essential basket

“Those are the types of categories that have been experiencing some declines,” said TJ Flood, president of Canadian Tire Retail. “They are down about 30 percent.” He added that one essential category, automotive, “more than offsets that.”

Commenting specifically on CTC’s pet category increases, Hicks cited an aggressive rollout of its Petco store-within-a-store program to 31 additional Canadian Tire stores during Q3, driving sales within the category by 19 percent in those stores, “as well as a 34 percent increase in customers shopping pet with us for the first time.” He said more than 80 percent of Canadian Tire stores will have the Petco department by the end of January.

“The essential product portfolio is a big part of our overall business,” Hicks said. “And you can expect us to adjust our resource allocation strategies to put more focus on this segment of our business going forward.”

Evolving Home Hardware involves culture and consistency, says CEO

Providing tools for independents to compete against large corporate chains is at the heart of efforts by Home Hardware president and CEO, Kevin Macnab, to update and change the systems and processes at the company. We continue here our conversation with Macnab that was conducted during the company’s dealer market last fall. (Part one of this interview appeared in last week’s edition.—Editor)

Macnab talked at length about the importance of finding the right mix of consistency and localization. “We need the dealers to help localize those assortments. So yes, we can build systems that will help us. But we’re very unique in our individual markets. So it’s really the dealers that feed back and say, ‘Actually, in this particular market, I know the data might say X, but can you take a look at my store, because really Y sells better?’”

The company will continue to move toward a more standardized offering overall, with core assortments in all the stores. Macnab noted that the information flow back and forth between the dealers and head office will help refine those assortments—and it’s paying off at the cash register.

“The localization is based on dealer knowledge.” Some standardization of systems is necessary, he admits, “because many corporations—I’ve done this myself—look to localize [assortments] using systems. And that’s good to a certain extent. But then the dealers know in some of the markets, things that we just won’t, unless we walk the store. If any of us walks the store, we know, ‘Yeah, that’s not going to quite work in that market.’”

At the end of the day, if the customers are happy, the dealers are happy, said Macnab. He referred to the many new category planograms that were being introduced at the Home Hardware Market. These programs are popular with the dealers, he said, because they are driving results.

“We can already see the benefit, because we’re using a lot more data now to make the choices on what we believe the end consumer is looking for. And then what we’re looking for the dealers to do is help localize it and present it in-store.”

Macnab talked about how important it’s been to build an effective management team at Home Hardware. That has meant continuing to tap into and build on the existing corporate culture.

“We’re bringing people who fit the culture. It’s a wonderful culture, a wonderful, warm supportive culture for the dealers.” He paused here to emphasize the point: “Culture means organization. Culture means everything. It’s all critical to success, organizational culture. You cannot execute successful strategies without the right organizational culture.”

That culture, he pointed out, must include the dealers and the corporate team, and here he offers his own language. “But more importantly, for us, and this is how I am looking at things, is at a more enterprise level. Okay, that’s a bit of a different terminology for the group, because we have a lot of dealer-owners in all the communities across Canada and we have a separate corporation.”

But despite these two factions, there must be an overriding approach or vision that binds them. “That’s the enterprise culture. That’s what drives us.”

Once considered a value-add or a way to stand out from competitors, loyalty programs have become increasingly central to retailers’ marketing strategies. As online sales have grown, so has the importance of keeping customers aligned virtually—and loyalty programs offer the means to do that.

In fact, long-standing loyalty partnerships were the norm for decades, and those relationships remain strong for many groups. For example, Kent and TIMBER MART continue their longstanding partnerships with the Air Miles rewards program.

But in recent years, loyalties (pardon the pun—Editor) have shifted. Lowe’s Canada took on Air Miles in 2015, a year before it acquired RONA, which already had the program. But Lowe’s Canada terminated the relationship at the end of 2021. The company said it was ending the partnership to focus on daily low prices, personalized offers, and its newly formed VIPpro program—a rewards program driven by an app available to contractor customers of Lowe’s, RONA, and Réno-Dépôt.

Last year, Home Hardware broke ties with Aeroplan and soon after announced a partnership with the Scene+ rewards program. Starting this summer, cardholders will be able to redeem points at Home Hardware stores. Home Hardware is in good company. Empire Co., parent of grocery chain Sobeys, also dropped Air Miles and actually acquired a stake in the Scene+ rewards program.

But the real advantage of a loyalty program is in the data, something that companies like Canadian Tire are counting on to drive its awareness of who its customers are and what they want.

A good loyalty program has to be integral to a retailer’s message. Canadian Tire’s overwhelming success with the Triangle Rewards program reflects that. The Triangle name was a way to do two things. First, it provides an online update and alternative to the storied Canadian Tire money. Second, it is a way to offer a unified loyalty points program across all of Canadian Tire’s retail banners, including PartSource, Helly Hansen, and Marks. Today, the retailer claims that 70 percent of Canadian households are Triangle members.

“In Q3, we effectively engaged our loyalty customers and loyalty sales grew to $2.7 billion, an increase of four percent,” said CTC president and CEO Greg Hicks following the release of the company’s quarterly results. “Overall, loyalty sales outpaced non-member sales in the quarter, a trend we expect to continue. So we are increasingly laser-focused on driving member engagement.”

W. W. Grainger has named Nancy Berardinelli-Krantz as SVP and chief legal officer, effective Jan. 30. She is currently SVP and deputy chief legal officer at Eaton Corp. Berardinelli-Krantz will succeed John Howard, who is retiring in July after 23 years of service.

Mike Meckley is starting a new position as U.S. national sales manager – national accounts, paint, plumbing and MRO at Henkel. He was formerly national sales manager for Canada.

Rolando Hernandez is now product development manager for Quality Craft, reporting to Dennis Hale, president. He was most recently with Home Products International.

Kevin Bradley has been promoted to the role of sales account executive at Uscan Industrial Fasteners, a division of Richelieu. He was formerly Uscan’s national sales manager.

DID YOU KNOW…?

… that our latest instalment of the Hardlines Podcast Series is now live? In this episode, we meet Derek Smith, VP of the Ace Canada division at Peavey Industries. He talks about the challenges of taking over the Ace business, especially as Covid hit, developing a wholesale hardware business, and forging a partnership to get building materials to the Ace dealers. Sign up now to get updates about the latest podcasts in your inbox!

Castle Building Centres Group is marking 60 years in business in 2023. The group got its start in 1963 when six Ontario independent lumber dealers formed BOLD Lumber (Buying Organization of Lumber Dealers). It adopted its current name in 1982. Today it boasts more than 300 locations and has a presence in every province as well as Nunavut. Its 2021 sales by all members, according to the 2022 Hardlines Retail Report, amounted to an estimated $1.9 billion. (Castle has marked its anniversary with a special video tribute: click here to view.)

Vancouver-based online LBM seller BuildDirect.com Technologies Inc. has closed a second round, or tranche, of sales of shares. The sale involved the issuing of a total of 1,121,622 common shares at a price of $0.37 each, for total gross proceeds of $415,000. BuildDirect says it intends to use the money from the sale “to continue to advance BuildDirect’s strategy and for general working capital purposes.” The issuing of shares was a non-brokered, private placement and subject to a hold period that ends May 4.

Gypsum Management & Supply has announced the acquisition of Tanner Bolt and Nut, founded in 1979 and based in Brooklyn, N.Y. Tanner president Jeffrey Tannenbaum and his team will continue to oversee the business, retaining the Tanner brand name. At the same time, GMS announced new greenfield locations in New York; Greenville, N.C.; and Chester, Va. It has also opened new stores under the AMES banner in Fresno, Calif., Palm Bay, Fla.; and Concord, N.C.

Gypsum Management & Supply has announced the acquisition of Tanner Bolt and Nut, founded in 1979 and based in Brooklyn, N.Y. Tanner president Jeffrey Tannenbaum and his team will continue to oversee the business, retaining the Tanner brand name. At the same time, GMS announced new greenfield locations in New York; Greenville, N.C.; and Chester, Va. It has also opened new stores under the AMES banner in Fresno, Calif., Palm Bay, Fla.; and Concord, N.C.

ECONOMIC INDICATORS

Investment in U.S. construction unexpectedly edged up by 0.2 percent in November, following an equivalent decline in October. The increase, however, was driven by activity in the non-residential sector, as residential construction spending was down 0.5 percent. That included a 2.9 percent drop in single-family projects, which outweighed gains in the multi-family sector. (U.S. Commerce Dept.)

NOTED

Small business owners are increasingly turning to data tools to grow their enterprises, the Globe and Mail reports. Those resources include My Main Street, a federally funded partnership between the Canadian Urban Institute and the Economic Developers Council of Ontario. It provides market research, data analysis, and funding assistance to small businesses. The Canadian Chamber of Commerce has its own program, the Business Data Lab, launched last year in conjunction with Statistics Canada. Patrick Gill, the lab’s senior director, said it aims to “democratize” data, giving small businesses access to the same tools major corporations enjoy.

OVERHEARD…

“Different from last quarter, the migration into our better, best price range of the architecture has slowed. It’s still up, but it has slowed. So, that has put some upward influence on our AUR … And so we certainly saw more COGS impact in terms of negotiating through line reviews and schedules, etc., with factories …  We have headwinds for sure, relative to the U.S. dollar, but there are tailwinds relative to the RMB depreciating … So, those would be kind of a number of the variables that we look at in determining what the right ECL is for the quarter.”
—The executive team at Canadian Tire Corp., TJ Flood, Greg Hicks, and Gregory Craig respectively, on a call with analysts following the release of the company’s Q3 results, explaining, well, their love of acronyms.

The past year was one of unique challenges and opportunities, and for many those forces were felt at both a professional and personal level. Here is a roundup of news stories that highlighted the business side of 2023.

One company managed to bookend the news cycle for the year. Early in January, Lowe’s Canada announced the appointment of Tony Cioffi (shown here at the 2022 Hardlines Conference) as president. It was a return to the role for Cioffi, who had served as interim president following the departure of Sylvain Prud’homme in the fall of 2019.

Fast-forward to November, when Lowe’s announced it was selling its entire Canadian business to Sycamore Partners, a New York-based private equity firm. Lowe’s Canada had performed solidly, but shareholders always struggled to understand how its distinctive multi-banner strategy fit into the wider Lowe’s business. Lowe’s Cos. CEO Marvin Ellison pitched the sale as a way of “simplifying” the company’s business model.

Lowe’s rival The Home Depot also announced a new leader early in the year. Ted Decker’s appointment as CEO, effective March 1, was made public toward the end of January. Decker, who took over from Craig Menear, had been with the business for more than 20 years. He had succeeded Menear as president in the fall of 2020, while also being named to the newly created role of COO. Menear stays on as chairman of the board.

The year also saw ownership changes on the buying group front. In June, TORBSA announced it was merging into AD Canada (Affiliated Distributors). The deal created a new division: AD Canada – Building Supplies, headed up by TORBSA president Paul Williams.

In October, Sexton Group’s parent company sold a majority stake to a private investor group. The group, led by PFM Capital, acquired 51 percent of the Sexton Family of Companies (SFOC). Under the agreement, SFOC chair Brian Kusisto retained a seat on the board, while Sexton Investments kept a minority interest in the business.

Home Hardware made headlines throughout the year with a series of senior appointments and promotions. In the spring, it named Carol Crystal as VP, merchandise LBM. Crystal had joined the company as director, merchandise hardlines, in the summer of 2020 after a career that included positions at Hudson’s Bay Co. and Lowe’s Canada.

That promotion was followed by a plethora of appointments in the fall. Marianne Thompson was promoted to the newly created role of chief commercial officer, while retaining her existing duties as chief merchandising officer.

The same month, the company announced a major spate of new VPs and directors, including both external hires and internal promotions. It wooed Bernie Gauthier from Taiga Building Products to serve as its VP of retail operations. John Pierce, hitherto VP of store operations at Loblaw Cos., was recruited as Home’s VP, retail business development.

At the same time, Chris Marinis was promoted to the role of VP, information technology; Melanie Beatty to director, e-commerce; Kristi Stemmler to director, brand management; and Chris Parsons to senior director, omni-channel marketing.

Personnel changes were also in the news at BMR. In June, Charles Grégoire-Béliveau was promoted to the post of vice president, merchandising. He joined BMR in 2016 as director, purchasing, for corporate stores before being named senior director, merchandising, in 2020.

At the same time, Antonio Di Pasquale was named chief operations officer. Having joined BMR Group in 2020 as vice president, supply chain and operational excellence, he now has oversight of all of BMR’s operations. Meanwhile, Jonathan Gendreau stepped down as VP of business development, marketing, and customer experience.

TIMBER MART started off the year by announcing additions to its trading team. Nathaniel Boyd was promoted from sales development agent to commodity trader early in January. At the same time, Milynn Bruneau joined the group as a commodity trader for Ontario. In March, TIMBER MART named CGC veteran David Rapini as VP of its commercial division, succeeding Mark Finucane on his retirement.

On the vendor side, there were two key mergers in 2022. At the end of April, Gillfor Distribution Inc. announced its acquisition of AFA Forest Products, solidifying its national reach. At the time, Gillfor explained the two businesses would operate “in parallel until a full operational assessment is completed and a seamless integration can be executed.”

A few weeks later, CertainTeed parent Saint-Gobain announced it had reached a $928 million deal to purchase Kaycan, a Montreal-based manufacturer and distributor of siding products. At the time of the announcement, Saint-Gobain pledged to retain Kaycan’s “locally well-established Canadian distribution.”

Going into 2023, your team at Hardlines will continue to keep you abreast of all the latest developments in the industry. And we love your feedback! If there’s an area of interest that you would like to see covered more, or you have some news to share, reach out to our editors, Steve Payne and Geoff McLarney.

Up close and personal with Home Hardware CEO Kevin Macnab

With just over four years under his belt at Home Hardware Stores Ltd., Kevin Macnab has been the author of big changes at the St. Jacobs, Ont.-based retail company. Despite the changes behind the scenes, Macnab has managed to stay out of the limelight, leaving much of the front-line activity to his executive team. Hardlines had the opportunity to sit with him during the company’s dealer market last fall.

Despite his low profile, Macnab’s own retail roots run very deep. Born in England, he completed a business degree there and worked for some of that country’s top brands. “I trained at Price Waterhouse, London,” he explains, “and then I went to Marks & Spencer.”

Those were the beginnings of a career in retail that started in 1987 and spanned 28 countries around the world, mainly at Toys “R” Us, where Macnab served in numerous countries before his last role there as president, international. This range of experience has given him what he calls “a view of world retailing.”

For Macnab, Home Hardware stands out as another leading retailer. “Home Hardware is just such a great, iconic Canadian brand. It’s such a great opportunity, it’s such a great company. The dealer-owned model,” he says, “is what makes the difference.”

In his efforts to update the company, he keeps the dealer-owner at the forefront. The transformation the company is undergoing can be done, he says, effectively within the dealer-owned model. “Our objective is to improve the programs and services they have so that they can offer better programs and services to their customer, all within a dealer-owned model of choice.”

A key challenge to that transformation is how to evolve and grow without undermining the strong corporate culture that makes Home Hardware unique. Here, Macnab relies on his expansive retail background. “I look at it as a business person and see that one of the key differentiators, if not the key differentiator, is the dealer model—because there’s an entrepreneur in every community across Canada who is a part owner of the company.”

Those dealers are typically an integral part of their respective communities and give back to those communities. “So it’s very community-based, and what we do—which was the original [vision] pictured by the founders to build this brand, and the incredible job they did building the brand—was to bring dealers together.” By combining forces, they can compete against the large retail chains.

Macnab invokes his evolving executive team as he stresses the importance of ensuring the company stays focused on dealers’ needs. “What I’m seeking to do with the team is just strengthen those programs and services, and still do it within a dealer choice model,” he says. “Because if we bring the majority of dealers along, we have a lot of volume and the dealer can choose: is it a better program or service or not? And if it is, they’ll choose it.”

Data is now more critical than ever to that effort. Macnab notes that sharing sales data from the stores helps Home Hardware in its transformation from a wholesale model—focused mainly on getting product to the stores—to a retail model that focuses on assortments that meet end customers’ needs.“We’re starting to gather that data so that we can look at it and make better decisions, more informed decisions about what programs and services really work. So it’s not just about the corporate shipments. It’s getting data on what is selling at point-of-sale. It’s really just sharing information.”

Top retailers make environmental accountability part of their business plans

Top retail companies are responding to the pressures of climate change and activist shareholders to make their companies more environmentally responsible. Those changes are becoming more and more integral to the business plans of every responsible business. And retail home improvement is no exception.

Lowe’s Cos. has announced a new goal to reach net-zero emissions across its value chain by 2050. To reach that goal, it will need to eliminate at least 90 percent of its greenhouse gas emissions and offset whatever remains, effectively driving its emissions footprint to zero, the company says. “Lowe’s takes pride in making homes better for all, and part of doing that is reducing our impact on the environment,” said Marvin Ellison, chairman and CEO, in a release.

This new goal signals a shift from a focus on operational emissions to “scope 3” emissions, which include all other indirect emissions in a company’s value chain. For Lowe’s, most scope 3 emissions are tied to the life cycle of the products the retailer sells. This includes the emissions associated with the manufacture and transportation of the products in their stores, continuing to how those products are used in customers’ homes.

The concept of assessing a product’s footprint based on its entire life cycle was pioneered over a decade ago at RONA under then-CEO Robert Dutton.

The Home Depot announced that 100 megawatts of solar energy purchased from National Grid Renewables at its solar and storage project in Denton County, Tex., will generate the approximate equivalent of nearly eight percent of The Home Depot’s total electricity usage.

Home Depot has pledged to produce or procure 100 percent renewable electricity equivalent to the electricity needs for all its facilities by 2030, expanding the company’s previous commitment of 335 megawatts of renewable or alternative energy by 2025.

“Solar energy is the most abundant energy resource on earth,” said Ron Jarvis, chief sustainability officer for The Home Depot. “With this purchase, we are getting a step closer to our goal to produce or procure 100 percent renewable electricity equivalent to the needs of our facilities. We anticipate about three-quarters of our alternative and renewable energy capacity will come from solar energy by the end of 2023.”

Since 2010, the company says it has cut electricity consumption in its U.S. stores in half. It currently operates rooftop solar farms on more than 80 stores and electricity-generating fuel cells in more than 200 stores.

BMR Group has appointed Marek Jankowski as VP, information technology. He reports to André Lavoie, EVP, shared services. With nearly 25 years of experience in IT, Jankowski joins BMR Group after having worked for over 10 years with TC Media and TC Transcontinental.

Larry Gregoris has been named senior national sales manager, pro channel, for Rust-Oleum Canada. He was most recently with The Hillman Group. Gregoris reports to Lawrence Genga, who has an updated title himself. He is now Rust-Oleum Canada’s director of sales, distribution, and pro channel.

At Kohltech Windows & Entrance Systems, Andy Moss has been appointed sales manager, to manage the growing Atlantic Canada sales team and market. A 21-year veteran at Kohltech, he was previously territory manager for Newfoundland.

Jerome Paul is the new warehouse and logistics manager for DAP Canada, reporting to general manager Frank Profiti. He was most recently with Ab InBev-Labatt Breweries.

Simon Masella has been appointed sales and brand manager for King Canada Inc. He was most recently a regional manager with Stihl.

Orgill has appointed Laura Freeman to fill the newly created position of EVP, human resources, and chief human resources officer. Also at Orgill, Chris Freader has been promoted to SVP, retail services. He was most recently VP, retail services. Myron Boswell is retiring as VP of dealer sales, Northeast. Todd Nowels is moving from management of the Southeast region to succeed Boswell.

At Walmart Canada, Gonzalo Gebara has been named president and CEO, effective Jan. 30, and pending authorization to work in Canada. He joined Walmart in 2000 and was most recently CEO of Walmart Chile.

DID YOU KNOW…?

… the latest edition of Hardlines HR Advisor is now out? In our latest issue, we talk about hiring gaps, the career advantages of self-checkouts, and “quiet quitting.” If you’re not already receiving HR Advisor, click here to sign up for free!

Two Gravenhurst, Ont., families will get affordable homes this year thanks to a $70,000 donation from Chamberlain TIMBER MART and Home Building to Habitat for Humanity Ontario Gateway North. That support builds on gifts from the Rotary Club of Gravenhurst and Residents Against Muskoka Poverty. Ground-breaking on the pair of semi-detached, 869-square-foot homes is slated for June.

Lowe’s Canada held its second Vendor Forum event just before Christmas. Over 1,000 participants from close to 600 partner companies attended to hear about the company’s strategies and priorities for 2023 and to meet leaders from its banners. The event was also an occasion to recognize outstanding vendors, with honours doled out to Napoleon, EBSU, and Hoft.

Fredericton Direct Charge Co-op is the newest independent to join Castle Building Centres. Located in Fredericton, N.B., the consumer co-operative building materials business currently operates with over 10,000 member owners. That signing falls on the heels of the addition of Margaree Castle in Northeast Margaree, N.S. Under owners Nolan Brown and David MacLean, a grand opening is planned for the spring.

For its fiscal year ended Oct. 31, Costco reported net sales of $222.7 billion, an increase of 16 percent, with comparable sales up 14 percent. Net income for the year was $5.8 billion, an increase of 17 percent. Revenue from membership fees increased nine percent to $4.2 billion.

Gypsum Management & Supply reported Q2 sales of $1.43 billion, a 24.4 percent increase from the prior year’s quarter. Excluding the impact of an additional selling day, GMS’s net sales were up 22.5 percent. Earnings of $103.2 million represented a 38.7 percent increase. GMS has a growing portfolio of home improvement companies in Canada, including WSB Titan in Woodbridge, Ont., and Rigney Building Supplies in Kingston, Ont.

IN MEMORIAM: Bob Sutherland

Robert Dundas “Bob” Sutherland died unexpectedly last month while recovering from heart surgery. Through his business Solutions Training, Sutherland traversed the country instructing front-line staff from all banners on the use of plumbing and electrical wares. Sutherland began working in high school for the Dominion grocery chain, which sent him to Cornell University on a scholarship. He later worked in sales for Rutherford cigarettes, always keeping a few in his shirt pockets for potential customers even after quitting himself. Sutherland is survived by Ilse, his wife of more than 50 years; children Morrell and Richard (Maricel) Rutherford; and three grandchildren.

SUPPLIER NEWS

Trusscore has entered a recycling partnership with Return Polymers Inc. Through its Full-Circle Recycling program, Return Polymers will collect, grind, and recycle Trusscore PVC material to make new PVC products. Return Polymers has recycling facilities in Michigan and Ohio.

ECONOMIC INDICATORS

A slight decrease in inflation in November made little impact on Canadian households as food and shelter prices continue to rise. The Consumer Price Index was up 6.8 percent from a year earlier, slightly less than October’s 6.9 percent annual rate. The annual food inflation rate rose to 11.4 percent from 11 percent. The inflation rate peaked in June at 8.1 percent. (StatCan)

Sales of existing homes fell by 3.3 percent between October and November. The actual (not seasonally adjusted) number of transactions in November came in 38.9 percent below the near-record high for the same month last year and stood about 13 percent below the pre-Covid 10-year average for November sales. (Canadian Real Estate Association)

Investment in building construction remained stable in October, edging up 0.2 percent to $20.9 billion, with Ontario accounting for nearly all the gains. Residential construction spending was down slightly by 0.1 percent. Single-family home investment decreased 2.3 percent to $8.2 billion. (StatCan)

The annualized pace of housing starts in November edged down by 0.2 percent to 264,159 units. The rate of urban starts was also flat, with 242,644 units recorded in November. Multi-unit urban starts increased by two percent to 190,415 units, while single-detached urban starts fell seven percent to 52,229 units. (CMHC)

NOTED

Since its inception in 1922, Canadian Tire Corp. has grown to 13 businesses with 1,700 retail stores and gas outlets from coast to coast. The company claims that 1.8 million Canadians have worked at a Canadian Tire, Mark’s, or SportChek store over that time.

Whether it’s e-commerce, supply chain woes, self-checkouts, or drone deliveries, the retail home improvement industry will feel the impact of a number of important trends heading into 2023.

Some of those trends were presented by Hardlines’ own Michael McLarney at the 2022 Hardlines Conference, which was held in the fall. Drawing from the most recent Hardlines Retail Report, McLarney outlined some of the forces affecting dealers and suppliers.

#1. E-Commerce. This is the obvious one, said McLarney, but it’s impact must not be underestimated. He cited some of the incredible e-commerce gains retailers have made. Canadian Tire saw online sales increase 280 percent during Covid. Its online sales penetration through the middle of 2022 was around eight percent. Likewise, Home Depot saw online sales penetration reach more than 13 percent.

However, McLarney pointed out, independents are not capitalizing on their digital potential. Drawing on data from a Hardlines survey earlier in the year, McLarney shared that online sales by independents represent as little as one or two percent of sales, with many citing zero online sales. While some significant exceptions have emerged during Covid, those independent dealers doing double-digit sales in e-commerce are rare indeed.

McLarney challenged the industry to improve its online presence for independents, while stressing the need to maintain a physical retail space that provides a destination and solution centre for customers. In the end, he said, “It’s not how you tie in your e-commerce with your retail, it’s the other way around.”

#2. Improving the supply chain. Many retail groups have invested heavily in improvements to their own supply chains, including DC systems and processes. For example, at the time of the Hardlines conference, Home Hardware had just put the finishing touches on its new warehouse management system. The new system gives Home the ability to ship 150 dealer orders daily and 1,500 orders weekly through three distribution centres across Canada. And the retailer can now ship customer orders to the store or to their home.

Other groups made investments in their DCs, including Lee Valley Tools, at its main DC in Ottawa, while Federated Co-operatives Ltd. built a new LBM DC near Regina early in 2022.

Some major retailers made hacks of their own to get through, investing directly in the supply chain themselves. Canadian Tire invested in part ownership of a port in British Columbia, while Home Depot leased ships of its own to improve its supply of product from overseas.

#3. The last mile. The costliest and most logistically challenging part of the route from the DC to the customer’s front door is that so-called last mile, McLarney said. Smart retailers are making alliances with service companies that specialize in getting products to the customer’s door in innovative ways.

FedEx is using bicycle couriers to make deliveries in Calgary, Ottawa, Windsor, Toronto, and Vancouver. In the U.S., Walmart is using drones in 34 cities, while Amazon has been testing robots that travel along sidewalks to get parcels to customers.

#4. Loyalty programs. Once considered a value-add, loyalty programs are increasingly central to retailers’ marketing strategies. As online sales have grown, so has the importance of keeping customers aligned virtually.

Canadian Tire’s loyalty program, called Triangle Rewards, provides an umbrella for all of Canadian Tire’s banners, including Marks and PartSource. The retailer claims to have 70 percent of Canadian households as Triangle members. And Home Hardware made the news this fall when it switched to Scene+ after terminating its relationship with Aeroplan.

McLarney observed that a good loyalty program has to be integral to a retailer’s message. He referred back to Canadian Tire’s overwhelming success with the Triangle Rewards program. “Like e-commerce and customer service, a loyalty program can’t be a tack-on piece of your brand. It has to be a living part of it.”

#5. The contractor customer. “Many years ago the head of a buying group asked me why Hardlines reports on Home Depot so much. I told him it was to keep his dealers informed about all the ways the giant retailer is going after their contractor business,” McLarney said. “Pros account for only four percent of Home Depot’s customers, yet they make up 45 percent of its sales.”

Meanwhile, Lowe’s Canada has aggressive contractor programs of its own, such as its VIPpro program that offers special pricing and hours, supported by an app that lets pros keep track of their orders and billing with Lowe’s.

Home Hardware also has a dedicated pro program, while banners like Kent, Peavey, UFA, and Federated Co-operatives have all been making changes to better accommodate their contractor customers.

#6. Private brands. Proprietary labels have been the cornerstone of good retail for decades. But their importance has sharpened through Covid. At Canadian Tire, private labels account for almost 45 percent of sales. The company plans to launch 12,000 new private-label products across all its banners by 2025.

Home Hardware relaunched its Benchmark label during Covid and has added more brands for everything from lifestyle and kitchenware products to power tool lines for pros. But most hardware and home improvement retail groups are making similar investments in their own brands.

#7. Human resources. “HR issues have loomed large during Covid. Your people are your biggest variable cost and the biggest investment you can make,” McLarney said. The critical importance of taking care of workers has been highlighted exponentially over the past two years. Hiring and wages remain major concerns, he observed, “while issues concerning worker well-being have come to the forefront during Covid.” Hardlines even launched a newsletter of its own to address HR issues within the industry.

(This info was pulled from our 2022 Hardlines Retail Report, a massive study of Canada’s retail home improvement industry. It gives proprietary data on the size and annual growth of the industry, along with analysis of the top players in the industry. A must-have for any marketer preparing for 2023! Click here now for more info!)

Independent dealers now testing self-checkouts in select stores

JL’s Home Hardware is a three-store operation in Guelph, Ont., about an hour west of Toronto. Those stores, a building centre and two hardware stores, are the first Home Hardware stores to get self-checkout technology. But dealer-owner Andre Belisle said that the store is not going to replace humans with machines.

“The self-checkouts are already tested and fully operational as an added service and option for customers who wish to use it,” Belisle said. “Our full-service checkout option will always remain. Our intention is to improve our service for our customers and that includes providing options for any customer’s preference.” The stores are continuing with full-service checkouts while the new format is tested.

Acceo, a retail technology provider based in Montreal, installed the self-checkout units at JL’s, as well as at RONA Matériaux Magog Orford, a building centre in in Magog, Que. While many Lowe’s Canada and RONA corporate stores have received self-checkouts from another supplier, this is the first RONA independent dealer to get the technology.

The installations both went smoothly, according to Marc Leblanc, Acceo’s senior vice president of home and building supply industry ERP.

Lowe’s seasonal and pro sales continue to buoy its quarterly results

Lowe’s growth in the third quarter of 2022, which ended Oct. 31, highlighted the strength of various segments of the business, including the inherent strength of the pro customer and the continued acceleration of online sales.

Sales were fed by both DIY and contractor customers, with comps up overall three percent for the quarter. According to Bill Boltz, Lowe’s EVP merchandising, the company expects that DIY momentum to continue through the fourth quarter as well. Pro business continued to surge, with comp pro sales up 36 percent over two years of Covid. He shared the details on a call with analysts following the release of the company’s Q3 results.

Comp sales of hardlines products at Lowe’s were down somewhat as the company saw spending return to more normal patterns. However, this does not mean homeowners were shifting their discretionary spending. In fact, selling events around holidays have remained strong, driven by product innovation in those categories. For example, consumers were spending $300 and up on specialty Halloween decorations. And Christmas is rolling out with more expensive trees as consumers show a willingness to trade up.

Strong sellers in the quarter were appliances, paint, kitchen and bath, and flooring. A deal with Sherwin Williams in the U.S. will result in the rollout of a new colour wall across all Lowe’s stores south of the border through 2023.

Lowe’s latest business outlook pegs total annual sales for the full 2022 fiscal year (which includes a 53rd week) at between $97 billion and $98 billion, compared with $96.2 billion in 2021. Comp store sales are expected to be flat to negative one percent.

The Western Retail Lumber Association has named Steve Buckle, CEO of the Sexton Family of Companies, as the recipient of its 2022 Industry Achievement Award. The award will be presented on Jan. 19 during the WRLA Building & Hardware Showcase in Winnipeg.

LM2 Marketing has announced the appointment of Mike Hachey as its newest partner and account manager, starting this week. Hachey brings 30 years of industry experience to the role including a series of merchandising leadership positions. At the same time, the company said that VP and account manager Richard Lépine will retire after 47 years in the hardware trade, while staying on in a consulting capacity.

At BMR Group, Caroline Dionne has been named VP, finance. A graduate of HEC Montréal, she continues to report to André Lavoie, EVP, shared services. Dionne joined the company in 2021 as senior director, corporate accounting, and was appointed senior director, finance, in August 2022.

At Home Hardware Stores Ltd., Chief Information Officer Gino Gualtieri has left the company. He’s been replaced by Chris Marinis, who has been promoted to the role of vice-president, information technology. He brings over 25 years of IT experience in the retail and transportation industry to this new role.

Michael Morris has been promoted to the position of SVP of sales at Derby Building Products. Morris started with Derby in January 2018 as a regional sales manager and was promoted to VP of sales in September 2019.

DID YOU KNOW…?

… the latest edition of Hardlines Dealer News is emailing to subscribers on Wednesday? Topics covered include the Canada Revenue Agency demanding to know from Kent Building Supplies which contractors spent more than $20,000 with them this year! Hardlines Dealer Newsis monthly and it’s free: click here to subscribe now!

AD Building Supplies – Canada (formerly TORBSA) is welcoming Velcan Forest Products as a new member, effective Jan. 1. Velcan has manufactured and supplied framing materials and prefabricated wood components for the building industry for some 30 years. It has two Ontario locations, in Ottawa and Oshawa.

Ed Bulley, owner of Ed’s Building Supplies in Fort Nelson, B.C., is the newest RONA affiliate dealer. Serving the area since 1955, the store will undergo a 10,000-square-foot expansion. The total retail space will be 17,000 square feet, with an 11,750-square-foot roofed lumber space and a 20,000-square-foot outdoor lumber yard. Over 400 SKUs will be added across different categories, such as lighting, flooring, and appliances.

Canac, the independent home improvement chain based in the Quebec City area, has received approval from the city of Magog, Que., for development of another store. It’s expected to open in 2024. Canac has more than 30 locations throughout Quebec.

The newest location for Wolseley Canada had its grand opening last week in Oakville, Ont. The 21,000-square-foot facility offers a full range of Wolseley Canada’s roster of plumbing and HVAC products. Vanessa Sawicki-Dunn is the manager of the Oakville branch. Burlington, Ont.-based Wolseley Canada has 220 locations.

Ace Canada has a new location in Arthur, Ont., as owners Doug and Barry Eidt opened their third Ace store this month. Under manager Brent Bowen, the 4,800-square-foot store includes a small farming section alongside pet categories and traditional hardware offerings. The Arthur location joins the Eidts’ Ace stores in nearby Mitchell and Exeter.

Lowe’s Canada’s PROvember campaign raised nearly $40,000. The campaign, held in most Lowe’s, RONA, and Réno-Dépôt stores, gave pro customers the opportunity to make a donation at checkout to support men’s health organization Movember Canada, which focuses on mental health, prostate cancer, and testicular cancer.

Home Hardware dealer-owner Kimberly Seguin-Gauthier is relocating her store in Essex, Ont., to a new, larger location. The store will involve a $13 million investment in the new site on 12 acres of land. According to AM 800, the local radio station, Seguin-Gauthier said she has plans to develop the surrounding parking area on the property with additional businesses.

Lowe’s Cos. has developed the next steps in its “Total Home” strategy. The retailer has plans for growth across five focus areas: deepening pro penetration, accelerating its online business, expanding installation services, driving localization, and elevating its product assortment. The moves are designed to enhance Lowe’s omnichannel capabilities and position it as a one-stop home improvement shopping destination. 

NOTED

Some 7-Eleven stores are testing licensed dining areas (Wow—your gobsmacked Editor). Seven locations in Alberta are expanding their “restaurants into licensed locations with dine-in seating areas” (according to the press release). The release assures us that 7-Eleven’s “adult customers can now enjoy freshly prepared meals from 7-Eleven Canada.” Those culinary delights [sic] include “7-Eleven’s Crispy Classic Chicken wings, ‘hot from the oven’ pizza, as well as Alberta craft beers.” Remember, you read it in Hardlines! 

OVERHEARD…

“Technology is a huge accelerator. We can’t react to change anymore; we have to get ahead of the curve. And if you want to know what’s next, get to that young generation to teach you.”
—Tony Cioffi, president of Lowe’s Canada. He spoke at the 26th annual Hardlines Conference earlier this fall.

The Canadian Labour Congress (CLC) and the United Steelworkers union (USW) have filed a complaint with a federal watchdog about the alleged treatment of garment workers in factories in Bangladesh that make clothes for Mark’s, a division of Canadian Tire Corp.

The Nov. 21 complaint to the Canadian Ombudsperson for Responsible Enterprise, in Ottawa, claims that the garment workers are paid “poverty wages.” The factories in question employ thousands of workers. The complaint states those workers should be making up to five times more in salary to represent a living wage.

In a joint press conference by the USW and the CLC, Marty Warren, Canadian national director of the USW, said the organizations have brought evidence that reveals that “Mark’s and Canadian Tire Corp. have failed to ensure the workers in its supplier factories are paid living wages. The complaint alleges that this is a contravention of the international human rights standard.”

Warren added that the two associations have made “repeated attempts to engage with Canadian Tire to acknowledge that they have failed to take meaningful action to address human rights harms it causes and contributes to in the supply chain.” He said the company has the resources and influence to assure that rights be respected. “They need to be pushed to live up to their core responsibilities.”

In the same press conference, Kalpona Akter, executive director of the Bangladesh Centre for Workers Solidarity, said garment typically workers live in overcrowded housing conditions. They are working six days a week and up to 12 hours a day, Akter said, making much less than a dollar per hour. “Any garment worker will tell you that isn’t enough.”

Canadian Tire responded to a query from Hardlines with a statement saying the company adheres to the law. “Canadian Tire Corp. works to ensure that its suppliers comply with all local laws; this includes compensation. As part of our activities to ensure compliance, CTC regularly tracks wage rates and works with reputable third parties to audit factories that manufacture our owned brand products.”

But the disparity underlines the need for western companies to understand their supply chains beyond just price and top-line safety concerns. Doug Stephens, retail consultant, speaker, and author, zeroed in on this concern in his presentation at last month’s Hardlines Conference in Niagara-on-the-Lake, Ont. Most firms, Stephens said, have a pretty good mental map of their first-tier vendors. But “by the time you get to their second-tier vendors, it gets a bit murky. By the time you get to their vendors’ vendors’ vendors, it’s a black box.”

This disconnect within the supply chain goes beyond simply price, Stephens said, and has been an issue for decades. An article in Harper’s magazine more than 20 years ago followed a pair of IKEA buyers on their visit to a Chinese furniture factory. The buyers insisted on a price cut of 50 cents off the price of the product being manufactured. But the factory owner complained that such a cut would force him to eliminate the lunch program that enabled him to feed his workers each day.

The lines blur when suppliers try to pass the responsibility for accountability down the line of the supply chain. But the model of shifting risk needs to be replaced with risk sharing, Stephens insisted during his presentation. “Shared risk needs to become a core business objective,” he said, in order to avoid “data silos or deserts.”

Stephens pointed out that intelligence will be key to rebuilding supply chains more comprehensively. “Surprisingly, most supply chains today operate on a few microscopic pieces of info: what is our sales velocity, what is our on-hand, what is in transit, what’s our turnaround?”

Dealer recruitment, product reviews are all part of the mix at BMR, says VP

Delegates at last month’s Hardlines Conference got a tour of the latest initiatives and innovations at BMR Group, thanks to a presentation by Charles Grégoire-Béliveau, VP merchandising. Self-quarantined due to Covid protocols, he appeared on a video screen from his home in Quebec, offering what he referred to as “BMR 2.0.”

Based in Boucherville, Que., BMR is a buying group with full distribution facilities for both hardware and LBM. A subsidiary of Sollio Cooperative Group (formerly La Coop fédérée), it has more than 275 stores in Quebec, the Atlantic Provinces, and Ontario.

Grégoire-Béliveau explained to conference delegates that the company is continuing to sign new dealers in Ontario and the Atlantic Provinces, all the while pursuing expansion in its home province. It offers four store formats: the “full featured” BMR store, BMR Pro for contractor-oriented dealers, a convenience format called BMR Express, and AgriZone, which exists as either a standalone or a store-within-a-store, specializing in the farm market, including the maple-sugar industry.

“We are building BMR 2.0 and our vision is to be the leading independent retailer [in our industry] in Canada.”

The company has done a thorough review of its product assortment over the past 14 months, Grégoire-Béliveau revealed. “We are going to be investing in specific categories: building materials, plumbing—where the number one project is kitchen and bath, flooring, and seasonal.”

In addition to listing these categories as opportunities, Grégoire-Béliveau didn’t shy away from mentioning “a number of challenges” that the industry faces. He cited inflation, consumer-spending patterns having changed so much after the pandemic, the difficulty of attracting labour, the housing market slowdown, and interest rate increases.

Retailers now stretch Black Friday sales online and in-store over several days

Black Friday, the shopping holiday that follows American Thanksgiving every third week of November, used to be a one-day shopping blowout, similar to Boxing Day in Canada. With the advent of internet sales, Black Friday was soon followed by Cyber Monday, an opportunity for retailers to continue offering sales, this time online.

Now, thanks to the borderless nature of online selling, Black Friday has become an international phenomenon—and a protracted sales opportunity. Home Depot Canada’s Black Friday started last week and is advertised to continue until Dec. 4.

At Lowe’s Canada, big sales started last Thursday, with Cyber Monday featuring more sales, though mostly through online orders. The Lowe’s Canada website promises great deals in categories that include appliances, snowblowers, tools, flooring, and lighting.

In a throwback to the mania of bricks-and-mortar holiday sales, Canadian Tire’s latest flyer promises “Doorcrashers” with discounts of up to 70 percent. Not to be outdone, it also offers “Red Thursday” specials, to entice Canadian shoppers to open their wallets a day early. The retailer’s Black Friday event runs to Nov. 30, offering everything from tech gadgets to outdoor sportswear.

A check of Home Hardware’s website shows that its sale will also run to the end of the month. Early Black Friday specials from Home Hardware include deals on heavy appliances, snowblowers, and, of course, Christmas decorations.

As Canadians begin travelling to shows again, the National Hardware Show at the end of January will be a big draw for many. The show is co-locating with the NAHB International Builders’ Show and NKBA’s Kitchen & Bath Industry Show at the Las Vegas Convention Center.

The Canadian Home Products Trade Association (CHPTA) is taking advantage of this triple show to host a booth of its own. The CHPTA will have a 10-by-20-foot space on the show floor. Members can share some of the space in the group stand, either with a table-top or with a company’s own floor merchandisers. Chairs and a meeting table will also be available.

In addition, a representative from each participating company will be required to spend a certain amount of time in the booth during show hours.

“It’s something we’re piloting,” says Sam Moncada, president of the CHPTA. “And going forward we’d like to have more Canadian participation.” He says there’s room for a total of 10 companies to participate, adding that three have signed up already. If the response to the group stand is greater than expected, the association has the option to secure more space for a bigger booth.

“We want to give all Canadians who want exposure in Vegas the chance to get that in an affordable way,” says Moncada.

Participation in the group stand will cost each participant CD$1,500. That price includes two tickets to CHPTA’s “Canada Night” event, which will take place on Jan. 31 from 6 p.m. to 8 p.m. In addition, participating members have the option of buying a listing in the NHS show directory for an extra cost of US$350.

The booth will be available to all members, Moncada says, by offering space for them to gather. Many of his members will be walking the show, and this gives them a location to host meetings of their own on the show floor.

“I think there’s value for our members. When an exhibitor can spend $20,000 or $30,000 for their own booth, this provides more value and demonstrates that the association can collaborate to help them.”

(Interested companies can contact CHPTA’s Michael Jorgenson at 416-282-0022, ext. 134; or mjorgenson@chpta.ca.)

Edyta Drutis has been promoted to vice president, brand and marketing for Blanco North America. In this role, she will lead integrated marketing, branding and communications efforts for the company across the U.S. and Canada. She started at Blanco Canada in 2014 as marketing manager. Most recently, she served as the director of brand and communications for Blanco North America.

At Intertape Polymer Group, Peter Durette has been appointed CEO and a member of the board of directors. Prior to joining IPG, Durette served as president of the Corrugated Packaging business at WestRock Corp. He is replacing Gregory Yull, who spent 30 years with IPG, including 12 years as CEO and president. Yull will continue on as a board advisor to help with the transition. Clearlake Capital Group, LP acquired IPG in June 2022 in a take-private acquisition.

DID YOU KNOW…?

… that the latest edition of Hardlines HR Advisor went out to subscribers last week? In this issue, Sexton Group’s Eric Palmer shares his insights into investing in your people; and Taiga’s Zaida Fazlic talk about finding your own leadership style. If you’re not already receiving HR Advisor, click here to sign up for free!

Home Hardware is testing self-checkouts at JL’s Home Hardware, a three-store operation in the town of Guelph, Ont., about an hour west of Toronto. Those stores, a building centre and two hardware stores, are the platform for the new self-checkout technology, initiated with tech partner Acceo. Staff at the stores monitor and assist at the self-checkouts while continuing to operate their full-service checkouts.

The Canadian Tire store in Vernon, B.C., was hit by a fire recently and the RCMP is investigating the suspicious circumstances of the blaze. No one was injured, but it did cause extensive damage. The fire appears to have been started outside in the store’s garden centre. It quickly spread and did damage to an adjacent exterior wall.

Steve’s Hardware and Variety Store in Montreal’s West Island is the process of closing. The store has operated since 1983 in the Pointe-Claire Plaza. Steve Naday and his wife Toni have decided to retire, and have spent the past month selling off inventory to patrons who had benefited from the store’s expertise for almost 40 years.

The importance of small-town retail is borne out by the fate of a hardlines retailer in the Prairies. Last Mountain Coop has been closed since August, disrupting residents in the town of Nokomis, Sask. It closed its doors because of staff shortages, but it’s the town’s only gas station and farm and ag centre and locals are feeling the pinch. The store, a member of Federated Co-operatives, has been actively trying to hire new team members and hopes to open in the near future.

Three out of four locations of Money’s Worth Renovation Center are closing, the regional business website Huddle reports. The budget chain’s Bible Hill, N.S., store will be the last one standing with the closure of the stores in Dieppe, N.B.; Amherst, N.S.; and Summerside, P.E.I.

RONA Fort Erie in Fort Erie, Ont., last week presented $46,600 to Community Outreach Program Erie (COPE). In support of the Lowe’s Canada Heroes Campaign, the store team under manager Jeff Hill held a benefit performance called “Fort Erie Rocks!” on Sept. 17. It featured Juno-winning rock band Honeymoon Suite.

Canac, the independent home improvement chain based in the Quebec City area, has received approval from the city of Magog, Que., for development of a new store. Canac applied for the approval a year ago, and the new location is expected to open in 2024. Canac has more than 30 stores throughout Quebec.

Employees at Lowe’s Canada’s offices and distribution centre in Boucherville, Que., have found their access to work severely limited by ongoing closures of the Louis-Hippolyte Tunnel-Bridge that joins the south shore with the island of Montreal. However, since the end of October employees have been provided flexible work options. The work considerations apply to all workers, regardless of whether they rely on the Tunnel-Bridge to get to work. Closures are expected to continue until the end of 2025.

SUPPLIER NEWS

Aluminum railing system maker Regal ideas Inc. was at this year’s DeckExpo in Las Vegas. The company was awarded “Best in Show” in the Outdoor Living category for its innovation and Crystal Rail system. Along with its newest products, Regal ideas also launched its 2023 Look Book, aimed at inspiring homeowners and designers. The look book can be found here.

ECONOMIC INDICATORS

In the ninth straight month of falling sales, existing home sales in the U.S. dropped 5.9 percent in October to a seasonally adjusted annual rate of 4.43 million. That’s the lowest that sales have dropped to since December 2011, with the exception of a very brief fall at the beginning of the pandemic. However, prices continue to rise, along with interest rates, keeping housing affordability low. (National Association of Realtors)

OVERHEARD…

“In truth, our supply chains today are not sophisticated and they’re not advanced. We haven’t learned much about supply chains in at least 160 years.”
—Doug Stephens, aka the “Retail Prophet,” speaker, consultant, and author. He spoke at the 27th annual Hardlines Conference last month in Niagara-on-the-Lake, Ont.

The world’s two largest home improvement retailers released their third-quarter results last week. Both provided strong numbers, especially given the big gains enjoyed by them—and pretty much the entire industry—over the past two years.

But if their respective financials are any indication, the days of crazy Covid-fuelled growth are definitely easing.

Home Depot’s Q3 profits rose 5.1 percent to $4.34 billion on revenues that were up by 5.6 percent to $38.87 billion. Strong numbers on their own, but by comparison this was more normal growth compared with an increase of almost 10 percent in the same quarter of 2021. Home Depot’s comp sales for the latest quarter were up by 4.3 percent, also down compared to 6.1 percent a year ago. Canadian comps were below that average and U.S. comps were up 4.5 percent.

Lowe’s reported profits of $154 million, which included a pre-tax non-cash asset impairment charge of $2.1 billion related to its Canadian retail business, compared to profits that more than doubled in the third quarter of 2021. Sales reached $23.48 billion, up from $22.92 billion a year earlier. Comp sales for the quarter grew by 2.2 percent, while comp sales for the U.S. home improvement business increased three percent, boosted by revenues from pro customers, which were up 19 percent.

On a monthly basis, Lowe’s and Home Depot saw their strongest comps in August, which then slowed in September and October (both retailers have Jan. 31 year-ends).

Both companies reported that DIY sales were back up, helping drive results. Through Covid, contractors represented the main sales driver, especially for Home Depot. While that customer base continues to be the strong growth vector, the retail customer is definitely making a comeback.

Online sales have also come more in line with traditional growth rates. Lowe’s saw its online business grow by a healthy 12 percent, on top of the 25 percent growth realized last year. Home Depot’s online business was up almost 10 percent compared to the same period a year earlier. About half those sales were fulfilled through its stores.

Looking ahead to the rest of the year, Home Depot has forecast annual growth for 2022 of three percent. Lowe’s expects similar yearly growth of between two and three percent.

U.S. analysts not as interested in sale of Lowe’s Canada as you’d think

Lowe’s executives shared more details about the sale of its Canadian business during a call with analysts last week. The analysts’ call is a Wall Street tradition: after the company’s results are posted, usually by 8 a.m. that morning, the top execs hold a phone conference with the analysts who guide decisions for the investment community.

These calls typically start with prepared comments from key executives, followed by questions from the analysts. (Journalists can listen in but not ask questions on these calls.)

Marvin Ellison, chairman, president and CEO of Lowe’s Cos., led his company’s call last week. He was joined by Bill Boltz, EVP merchandising; Joe McFarland, EVP of stores; and CFO Brandon Sink.

Ellison offered a viewpoint that housing starts and interest rates won’t affect Lowe’s as much as some investors might think. Ellison’s claim was that the DIY and pro business that drives most home improvement retailers, including Lowe’s, is not directly linked to those data sets.

Ellision then moved to the sale of Lowe’s Canada to private equity firm Sycamore Partners. That deal was announced at the beginning of this month and is expected to close early in the new year. The problem, Ellison admitted, wasn’t what was wrong with Lowe’s Canada—aside from how it didn’t fit in with the mother ship or the profit levels of a U.S. company.

“Over the last few years, we focused on the retail fundamentals of our Canadian operations, which brought the Canadian business to profitability and improved its operating cash flows,” Ellison said. “However, for this business to achieve the profitability in line with the U.S., significant incremental capital investments would be required to streamline the banners and improve operating margins.”

The Canadian business provided too much complexity for the U.S. head office. The Lowe’s/RONA/Réno-Dépôt multiple banners and various ownership models were unlike anything Lowe’s operates south of the border. While no analyst on the call said so, they are constantly comparing Lowe’s performance against its rival Home Depot, which operates in Canada the same way it does in the U.S.

Ellison noted that complexity and the importance of sticking to the core U.S. business and growing market share there. “This transaction will simplify our business model, improve our operating margins and return on invested capital, while enabling us to deliver sustainable value to our shareholders.”

Reality check: while the deal has rocked the Canadian market, igniting the national media and even warranting air time on CBC radio morning shows across the country, the topic of the Canadian divestiture elicited a grand total of zero questions from the analysts on that call.

Kent must open books to CRA to share its pro accounts, court rules

The Federal Court of Canada has given the Canada Revenue Agency the green light to comb through the records of Kent Building Supplies’ pro and commercial customers.

A division of J.D. Irving, Kent has 48 building centres and big boxes in Atlantic Canada.

In its latest push against the underground economy in construction, the tax agency had applied to the court to obtain “significant data” on pro customers’ purchases from Kent dating back to Jan. 1, 2019.

Kent is now required to forward to the CRA the name and contact information, CRA business number or SIN, and total transaction amounts for all contractors belonging to the retailer’s Kent Pro loyalty program who have spent more than $20,000 annually.

Hardlines contacted Kent but was referred to the only statement parent company J.D. Irving issued, to the National Post, calling CRA’s action a “common and routine practice for home improvement retailers in Canada, where select contractors are concerned.”

They’re right—and it seems to happen regularly in November when the year is coming to a close. Home Depot Canada faced the same battle at this time in 2019. A court order was required, forcing Home Depot Canada to turn over records of sales to its contractor customers for the years 2013 through 2016.

Two years earlier, RONA went to court to attempt to block CRA from doing the same thing. At that time, the feds investigated RONA’s trade customers at some of its stores for the years 2012 to 2015.

In 2018, CRA estimated that the underground economy exceeded $50 billion, with residential construction accounting for about half of that.

Concerns about shrinking housing markets in this country have been borne out by the latest numbers indicating slowdowns in both new and resale housing.

Sales of existing homes actually edged up by 1.3 percent between September and October, according to the Canadian Real Estate Association. But that’s the first monthly gain since February. These numbers are adjusted for seasonal variations in housing markets, but the actual number of transactions in October plummeted by 36 percent compared to the same month last year.

About 60 percent of all local markets saw sales rise in October, although both gains and declines were generally small across the board. The largest gain, a six percent increase in Greater Vancouver, was offset by a 2.4 percent decrease in activity in Montreal.

New housing is softening as well. October’s annualized rate of housing starts came in at 267,055 units, down 11 percent from September’s high of 298,811 units. The rate of total urban starts also declined by 11 percent, falling to 245,234 units.

Multi-unit urban starts decreased 13 percent to 188,189 units, while single-detached urban starts fell by four percent to 57,045 units. Rural starts were estimated at a seasonally adjusted annual rate of 21,821 units.

Investment in building construction declined 0.6 percent to $20.9 billion in September, StatCan reports, all due to residential spending. The residential sector decreased 1.3 percent to $15.4 billion. Conversely, the non-residential sector rose 1.6 percent to $5.4 billion.

The Lumber and Building Materials Association of Ontario has announced the appointment of Trevor Small to succeed David Campbell, who stepped down as president effective Nov. 1 after 20 years in the role. Small grew up in his family’s building supply business and also owned and operated one of his own in Bowmanville, Ont., in addition to his experience on the vendor side of the business.

Paul Wood resigned last week as CEO of Giant Tiger Stores Ltd. Gino DiGioacchino, a member of the board of directors and a former senior VP at Home Depot Canada, has been appointed to the role on an interim basis.

DID YOU KNOW…?

… The latest edition of Hardlines Dealer News went out last week? In this issue, we talk to some top RONA dealers for their take on the Lowe’s Canada sale; plus an expanded interview with Home Hardware’s chief marketing officer, Laura Baker. If you’re not already receiving Hardlines Dealer News, click here to sign up for free!

The 2022 BMR Buying Show was held at Quebec City’s Centre des congrès. The event returned to a fully in-person format this year following last year’s primarily virtual show, enabling dealers and vendors to gather in the historic city to network and trade. BMR Group’s gala capped off the event.

Walmart Inc. has posted an increase of nearly nine percent in sales for the third quarter, as Americans turned to its groceries to stretch their budgets. In Canada, net sales were up 5.5 percent while comp sales rose by 5.2 percent. The retail giant’s net loss of $1.8 billion was driven by settlement of litigation related to opioid sales in its pharmacy business.

Ace Hardware Corp. reported record third-quarter revenues that reached $2.2 billion, up 10 percent from the third quarter of 2021. Profits were up slightly to $100.6 million, an increase of $1.3 percent. Ace’s 3,600 retailers reported a 5.8 percent increase in U.S. retail same-store sales. Estimated retail inflation of 11.2 percent helped drive a 9.5 percent increase in average ticket. Same-store transactions were down 3.4 percent. 

BuildDirect Technologies Inc., the Vancouver-based internet LBM seller, reported Q3 revenues of $22 million, down from $22.3 million in the comparable period of 2021. Profits declined to $6.9 million from $8.1 million a year earlier. Revenue from pros reached $19.4 million, representing 88.2 percent of the company’s total revenue and a 5.6 percent growth from the previous quarter.

Wolseley Canada held a grand opening last week for its newest branch, located in West Kelowna, B.C. The 17,000-square-foot facility offers a full range of Wolseley Canada’s plumbing and fire protection products, with HVAC products to be added over time. Jarett Smith is the store manager.

IN MEMORIAM

Jim Gillies has died at the age of 76 after a prolonged illness. Gillies held senior sales and marketing positions with Newell Companies and Fiskars Garden Tools. He served for several years on the board of the CHHMA (now CHPTA). Gillies is survived by his wife Marlene, son Jeff and daughter Kim, and four grandchildren.

ECONOMIC INDICATORS

Housing starts in October were at an annualized pace of 267,055 units, down 11 percent from September’s high of 298,811 units. The rate of total urban starts also declined by 11 percent, falling to 245,234 units. Rural starts were estimated at a seasonally adjusted annual rate of 21,821 units. (CMHC)

Investment in building construction declined 0.6 percent to $20.9 billion in September, dragged down by a 3.4 percent drop in Quebec. The residential sector decreased 1.3 percent to $15.4 billion. (StatCan)

U.S. housing starts in October were at a seasonally adjusted annual rate of 1,425,000, representing a 4.2 percent drop from the previous month, and down 8.8 percent year over year. Single‐family starts fell by 6.1 percent.

NOTED

We noted in People On The Move that Gino DiGioacchino has taken over the interim leadership of Giant Tiger Stores following the departure of CEO Paul Wood. DiGioacchino was well known in this industry for many years as second in command at Home Depot Canada during the growth era under then-president Annette Verschuren. How did spelling-challenged Hardlines consistently get DiGioacchino’s name right on such an uncharacteristically regular basis? Our over-worked editor used Auto Correct; when he typed “Gino D” the full name inserted automatically, thereby ensuring the highest editorial standards that you, our Faithful Readers, encounter here several times a year.

OVERHEARD…

“I would like to thank our entire Canadian team for their hard work and dedication to our customers, and we look forward to collaborating with Sycamore Partners in executing a seamless transition.”
—Marvin Ellison, chairman and CEO of Lowe’s Cos., on a call to financial analysts last week, when he gave a few more details of the sale of Lowe’s Canada.

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.