August 24, 2015 Volume xxi, #32

“The human race never solves any of its problems. It merely outlives them.”
—David Gerrold (American science fiction writer, 1944- )

SUMMER PUBLISHING SCHEDULE

There will be no weekly edition of HARDLINES on August 3, 17, or 31. The World Headquarters will remain open, however, during this time as we gear up for our incredible 20th Anniversary Hardlines Conference. The regular weekly schedule will resume September 7.

IN THIS ISSUE:

• Orgill to acquire Chalifour Canada from TIM-BR MART

• Home Depot now Canada’s largest home improvement retailer

• Orgill creates new entity to expand Canadian operations

• Lowe’s 40th store opens in Saskatoon

• RONA’s Q2 results indicate effectiveness of turnaround strategy

• U.S. housing recovery buoys Lowe’s, Home Depot’s results

• PLUS: RONA opens in Langley, Lowe’s opens in Saskatoon, Canadian Tire reports increase, Lee Valley’s newest store, Ace reports revenue rise, PIG partners with Bunker, Walmart cuts earnings outlook, Lowe’s updates pro site, Superior Plus’s Construction Products division, U.S. housing, Roxul and AFA partner —and more!

Orgill to acquire Chalifour Canada from TIM-BR MART

VAUGHAN, Ont. & MEMPHIS — TIM-BR MART Group has announced the sale of the hardlines assets of its distribution arm, Chalifour Canada, to Memphis-based hardware wholesaler Orgill.

Bernie Owens, president of the TIM-BR MART Group, says the strategic alliance resulting from the sale will offer his company’s membership and Canadian independents at large a competitive foothold against big box stores in Canada. “This will empower our membership. It will give them better buying power and the local consumer in turn will be able to buy better,” he says. “This is a win-win for the independent and a win-win for local communities. It will keep business from draining into larger metropolitan centres.”

The new company, Orgill Canada Hardlines, will not offer a separate banner. “Our goal is to be inclusive rather than exclusive,” says Ron Beal, chairman, president, and CEO of Orgill, “and we will focus on providing a unique mix of products, competitive pricing, and cutting edge services to help Canadian independent retailers compete in their local markets.”

Orgill Canada’s acquisition of the assets will include its complete ownership and operation of Chalifour Canada’s London, Ont., distribution centre, as well as the purchase of the hardware inventory in Chalifour Canada’s Surrey, B.C., facility.

TIM-BR MART will maintain ownership and operation of its LBM distribution centre in St-Nicolas, Que., and continue to operate the Surrey facility, including Orgill Canada’s hardlines offering from that location.

Home Depot now Canada’s largest home improvement retailer

TORONTO ― The Home Depot Canada is now Canada’s largest home improvement retailer, while a collection of independent dealers operating under a single banner weighs in at the number-two spot.

According to the 2015 Home Improvement Retail Report, produced by Hardlines Inc., years of consistent, steady growth following the worldwide recession, combined with changes in the competitive landscape, pushed The Home Depot Canada to top spot based on volume of sales. Home Hardware Stores Limited, with almost 1,100 independent dealers across Canada, is the second largest.

The Home Depot Canada had estimated sales in 2014 of $5.65 billion, bumping RONA inc. from the top spot, a position it had held for seven years. Home Hardware Stores moved from third place in 2013 to the number-two spot in 2014, with sales of $5.49 billion.

RONA inc., with retail sales of $5.48 billion, moves to third position, followed by Canadian Tire Retail, with $5.26 billion in home improvement-related sales. (Note: Canadian Tire’s numbers reflect estimated sales in its hardware, housewares, and home improvement categories only, and exclude automotive and sporting goods.)

RONA held the top spot for many years, but has undergone restructuring under a new executive team since 2012. As RONA has trimmed its business for future growth—including the sale of its Noble industrial division—Home Depot has focused on maximizing sales from its existing stores. The result has been a radical change in the order of the industry’s top four players in 2014.

Together, the top four companies accounted for more than half (52.1%) of Canada’s $42 billion retail home improvement industry, as measured by the Hardlines Retail Report.

Orgill creates new entity to expand Canadian operations

MEMPHIS — Orgill, the giant U.S.-based hardware wholesaler, has solidified its growing presence in this country with the announced acquisition of Chalifour Canada. Chalifour is the hardware distribution business of the LBM buying group TIM-BR MART Group. The sale is just one of the changes coming out of TIM-BR MART under the leadership of President Bernie Owens.

The new company, Orgill Canada Hardlines, was created by Orgill as part of the takeover move. Like its U.S. counterpart, it will not offer a separate banner. The company does offer a range of services and promotional programs for dealers, however, and hosts a dealer market in the U.S. twice a year.

Orgill will consolidate its current warehousing operations, in Brampton, Ont., into the London facility over time. Service out of Surrey, B.C., will continue, however. “Our focus is to ensure that service to both Orgill Canada and Chalifour customers is maintained during and after our transition to a single company,” says Ron Beal, chairman, president, CEO of Orgill. “Our plans are to maintain both of these facilities for as long as they are needed to provide this service.”

Lowe’s 40th store opens in Saskatoon

SASKATOON — Lowe’s opened its 40th store in Canada last week in Saskatoon. The latest opening reflects the retailer’s concentration on smaller footprints with about 86,000 square feet of retail space plus a 15,500-square-foot garden centre.

The store has been built with a number of energy-saving features, including photocell-controlled low consumption LED lighting fixtures, a white TPO “cool roof” roofing membrane to reduce urban heat island effect, and high-efficiency heating and air conditioning systems.

With 40,000 SKUs, the store features an extensive lineup of appliances and a year-round selection of barbecues. Reflecting its focus on pro customers, the store is hosting a VIP contractor appreciation event this afternoon.

RONA’s Q2 results indicate effectiveness of turnaround strategy

BOUCHERVILLE, Que. ― RONA’s second-quarter results announced earlier this month painted a picture of a successful turnaround underway. RONA saw same-store sales increase by 5.4% in the second quarter, its fourth consecutive quarter of growth. Consolidated revenues totalled $1.26 billion, up 5.9% from $1.19 billion.

The increase mainly reflects 6.7% higher revenues in the retail segment due to the success of merchandising strategies and a repositioned Reno-Depot banner in Quebec. Same-store sales saw a fourth consecutive quarter of growth, rising by a healthy 5.4%.

But the company is reaping the fruits of other strategies, as well. It is restructuring its stores by moving franchisees within the corporate fold, allowing it to consolidate 20 different operating entities with differing business models into a leaner and meaner operation. Meanwhile, RONA is engaged in what CEO Robert Sawyer called a “resetting” of its core business in the big box and proximity stores.

The acquisition of franchisees will put the 79 RONA L’Entrepôt, RONA Home & Garden, and Reno-Depot stores under the corporate banner, and lift retail margins, while adding some expenses to the bottom line. Six of eight Coupal stores, which were contractor-oriented outlets, have been converted to the Marcil banner, increasing traffic with greater retail offerings.

The weak loonie forced a more aggressive approach in the latest quarter, with some new store openings and the elimination of some products. Asked about the effect of the home renovation tax credit expiring in Quebec, Sawyer observed little change was expected either way in the sluggish economy.

U.S. housing recovery buoys Lowe’s, Home Depot’s results

MOORESVILLE, N.C. & ATLANTA ― Buoyed by a strong housing market in the U.S., the world’s two largest home improvement retailers posted solid second-quarter results.

Lowe’s had strong net earnings of $1.13 billion for the second quarter, an 8.4% increase over the same period a year ago. Sales increased 4.5% to $17.3 billion from $16.6 billion, and comparable sales increased 4.3%.

Sales for the six months were $31.5 billion, up 4.9%, and comparable sales increased 4.7%. Year-to-date net earnings increased 8.2%. The company reported strong growth in big-ticket categories such as appliances and outdoor power equipment.

DID YOU KNOW…?

…that the 2015 Home Improvement Retail Report features exclusive research on the growth and market shares of the key sectors and retail companies in the industry? To learn more and to order your copy today, click here.

RETAILER NEWS

BOUCHERVILLE, Que. — RONA inc. has opened a new store in Langley, B.C., on the Langley Bypass, east of Vancouver. A corporate store, it has 60 employees, led by Manager John Gatti, offers 45,000 square feet of retail space with 20,000-plus SKUs. Services offered at the new location include installation, cutting services, delivery, and pro sales.

TORONTO ― Canadian Tire reported an increase of net income to $186.2 million, from $178.9 million last year, a result which fell short of analyst expectations. Total revenues of $3.26 billion represented a 3% rise and exceeded estimates by about $7 million. The retail division, which includes Canadian Tire, along with SportChek and Mark’s, accounted for almost $3 billion of that figure.

OTTAWA ― Lee Valley Tools’ newest store is under construction in Kingston, Ont., the Ottawa Business Journal reports. The store, Lee Valley’s 16th, will open in the fall. The purveyor of high-end woodworking and gardening tools has retail locations ranging from Halifax to Victoria, as well as its own line of tools, Veritas.

OAK BROOK, Ill. ― Ace Hardware Corp. reported second-quarter revenues of $1.4 billion, a 6.5% increase. However, net income was $57.5 million, down $9.0 million from last year. Same-store sales year to date were also up 6.5%.

BENTONVILLE, Ark. ― Walmart cut its earnings outlook for the year as Q2 profits fell short of expectations, declining by 11.4%, while revenue exceeded them. The retail giant continues to battle tough competition, especially on the online front from Amazon. Revenue from stores open a year or more increased by 1.5%, much of which is attributable to a 7.3% spike at the smaller Neighborhood Markets.
 
MOORESVILLE, N.C. ― Lowe’s has updated its LowesForPros.com site in a bid to boost its appeal among contractors and other professional customers. The company said it built on feedback from professional users, including property management companies. The newly revamped site continues Lowe’s trend over several quarters of wooing professional customers, who are currently a small but lucrative segment of Lowe’s base. New features include custom catalogue building and a “buy online, pick up in-store” option.

CALGARY — Superior Plus saw sales in its Construction Products Distribution division grow to $12.7 million from $8.0 million a year earlier. Results benefitted from ongoing improvements in U.S. markets, as well as more normal weather in the latest quarter compared to the bad weather of the prior year. Total gross profit of $59.5 million was $8.9 million higher than the prior-year quarter due to improved sales volumes, higher average selling prices, higher average sales margins, and the impact of a stronger U.S. dollar.

MOORESVILLE, N.C. — Lowe’s has introduced a line of Hitachi pneumatic nailers and fasteners, which will be exclusive to Lowe’s stores and online at Lowes.com. However, the new lineup is only available in U.S. stores, and not in Canada.

SUPPLIER NEWS
DELSON, Que. ― Building materials wholesaler Goodfellow has signed an agreement with Groupe Lebel Cambium to form a treated wood manufacturing company. The two companies will be the joint shareholders of the new company, which will consist of seven wood treating plants serving markets in Ontario, Quebec, and Atlantic Canada. Lebel’s four plants in Bancroft and Caledon, Ont., and in Dégelis and St-Joseph, Que., will be combined with Goodfellow’s three plants in Delson, Que.; Elmsdale, N.S.; and Deer Lake, Nfld. The combined entity is expected to create one of the largest and most geographically broad producers of treated wood in Eastern Canada.

MILTON, Ont. — Roxul, the North American operations of Rockwool International, which produces stone wool insulation, has entered into an agreement with AFA Forest Products Inc. to distribute Roxul Residential products in Western Canada effective September 1, 2015. Roxul customers in British Columbia, Alberta, Manitoba, and Saskatchewan will now be able to source AFA products from one of its six warehouses in Western Canada.

MISSISSAUGA, Ont. ― Stanley Black & Decker Canada’s employees participated in Habitat for Humanity’s Adopt-a-Day Challenge in the Greater Toronto Area, working on a building site in Brampton, Ont., and then donating the DeWalt and Stanley tools used on the project. Joe Di Ilio president of SBD Canada, called the challenge “a significant part of the company’s 100 Days of Giving campaign.”

FRANKFURT ― German consumer goods manufacturer Henkel fell short of expectations for its Q2 profits, as demand for its adhesives business weakened in North America and China. The company reported organic group sales up 2.4%, as opposed to the forecasted 3.4%. North American sales suffered from heavy competition, while China’s slower industrial growth led to lower demand. “This is not a Henkel problem, this is a market problem,” said CEO Kasper Rorsted, who added that he did not foresee significant gains before Q4.

MONTREAL ― Intertape Polymer Group has reached an agreement with Florida’s Bunker Industries, under which it assumes responsibility for all U.S. retail distribution of Bunker’s tape products. As the exclusive distributor, IPG will incorporate Bunker Industries three main product brands into its retail line. IPG's distribution services will include all major retail locations as well two tier distribution and the implied web resales for Bunker's brands.

PEOPLE ON THE MOVE
Jeff Boyd has been promoted to the role of vice president, real estate, construction, and store design at Lowe’s Canada. He joined Lowe’s Canada in October 2007 in the company’s real estate and construction division. In his newly created position, Boyd will continue to oversee Lowe’s Canada’s real estate, development, construction, and facilities management functions. He will also assume responsibility for market research, store design, and procurement.

ECONOMIC INDICATORS
The New Housing Price Index rose 0.3% in June, largely as a result of gains in Ontario. This was the third consecutive monthly price increase. The biggest gains came from Ontario, and particularly the Greater Toronto Area and Oshawa, up 0.6%. Saint John, Fredericton, Moncton, and Winnipeg were up 0.5% in June. For the first time this year, new housing prices were up in Calgary (+0.1%), where higher land prices were largely offset by builders reducing prices because of market conditions. On a year-over-year basis, the NHPI rose 1.3% in June. (StatCanada)

U.S. housing starts in July were 1,206,000 seasonally adjusted, 0.2% above June and 10.1% above the July 2014. (U.S. Commerce Dept.)

NOTED
Wal-Mart takes top spot as the world’s biggest retailer for 2015. The ranking was determined by Planet Retail, based on companies’ sales forecasts for the year. Wal-Mart is expected to reach $527.8 billion in sales this year.

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