November 23, 2015 Volume xxxiv, #44

“When I grew up, what was interesting for me was that music was colour and life was grey. So music for me has always been more than entertainment.”
—Pete Townshend (British musician and songwriter, leader of the band The Who, 1945- )

IN THIS ISSUE:

• Home Depot profit soars on solid sales, digital growth

• Castle president talks competition, North American market

• Lowe’s Canada reports strong Q3 comp sales

• PM’s aging house could become Canada’s highest profile reno

• PLUS: Sears Canada sells DCs, new-concept Canadian Tire store a winner, Lowe’s ups “smart home” investment, rumoured Aussie merger, Wal-Mart sales, Tembec loss, IPG, U.S. housing starts —and more!

Home Depot profit soars on solid sales, digital growth

ATLANTA ― For its third quarter, Home Depot reported sales of $21.8 billion, a 6.4% increase from the third quarter of fiscal 2014. Comparable store sales for the period were up 5.1%. Net earnings for Q3 were up 13% to $1.7 billion, while diluted earnings per share increased 17.4%. The results include a pre-tax expense of $20 million related to the company’s 2014 data breach.

The company reported positive comps from all departments. Appliances, tools, plumbing, decor, lighting, hardware, building materials, and indoor garden were especially strong, while outdoor garden, kitchen and bath, electrical, millwork, flooring, lumber, and paint were positive, but below the company average. Home Depot continues to pursue the contractor customer, and reported that related categories, such as power tools and accessories, commercial lighting, HVAC, and fencing, all enjoyed double-digit comps.

Home Depot’s comp sales continue to show a spread between domestic (U.S.) business and the total business. While comps exceeded 5% for the entire company, U.S. comps were much higher, up 7.3%, suggesting much lower comps for operations in Canada, and to a lesser degree, Mexico. In a call to analysts, CEO Craig Menear mentioned Canada only briefly, noting that the variability in performance across regions “has narrowed considerably.” He added that “our Canadian business posted positive comps in local currency, making it 16 consecutive quarters of positive comps.”

Canada is also seeing some innovation on the digital front. Home Depot Canada’s website was “re-platformed” and went live earlier this month. Home Depot’s total online sales grew by about 25% in the third quarter and represent approximately 5.1% of overall sales. About 42% of all online orders are picked up in stores.

Castle president talks competition, North American market

TORONTO — Some of the best competition for independents in the last 20 years has come from big box stores, acknowledges Ken Jenkins. The president of Castle Building Centres spoke in October at the 20th annual Hardlines Conference to an audience of almost 200 retailers, wholesalers, and vendors. “The box made us better,” he said. “It made us better at what we do.”

He said the large-surface retailers had the ability to market the home improvement sector to the public. That raised awareness of home improvements and renovations, and helped educate homeowners, resulting in a more informed customer coming through the door—which has increased sales for everybody.

Jenkins also exhorted dealers and vendors to stay on top of the larger changes shaping this industry. “The industry needs to step outside of the day-to-day and work on their business.”

Lowe’s Canada reports strong Q3 comp sales

MOORESVILLE, N.C. ― Lowe's Cos. has reported third-quarter net earnings of $736 million, a 25.8% increase over the same period a year ago. Sales increased by a healthy 5.0% to $14.4 billion from $13.7 billion.

Comparable sales increased 4.6% for the quarter, while comps for the U.S. home improvement business increased 5.0%. For the nine-month period, sales were up 4.9%, and comp sales increased 4.9% year-to-date. Net earnings increased 12.8% for the nine-month period.

The company also reported “high single-digit comps” for its Canadian operations in Q3.
 

PM’s aging house could become Canada’s highest profile reno

OTTAWA — Mike Holmes and Bryan Baeumler are among the contractors making known their interest in fixing up the prime minister’s dilapidated official residence. Holmes announced his eagerness to take on the job on his Facebook page, while Baeumler has said he would “jump at the chance,” in response to media inquiries.

Prime Minister Justin Trudeau has delayed moving his family into the lodgings at 24 Sussex Drive. The residence, which was built in 1868, is in need of more than $15 million in long-delayed repairs. It’s also the home the young Trudeau grew up in during his father Pierre’s premiership. In the interim, Trudeau and his family have moved into Rideau Cottage, which is on the property of the governor general’s residence, Rideau Hall.

Although built just a year after Confederation, it did not host a prime minister until Louis Saint-Laurent moved in in 1951. A major overhaul that year stripped the house down to its studs, and the chandeliers are among the few original furnishings remaining intact.

The Globe & Mail surveyed several architects about their visions for the historic property. Paul Dowsett is principal architect at Sustainable.TO, which specializes in restoring historic buildings with an eye to sustainability. He suggests insulation from Roxul could help to address the residence’s energy woes. Roxul’s Milton, Ont., plant produces mineral fibre insulation.

Canada’s highest-profile reno is coming at a time when renovations are increasingly crucial to the industry. CMHC is expecting housing starts to slow in 2016 and 2017. A Scotiabank report released in late October values home renovations in Canada at $53 billion and states these will drive investment in residential construction in coming years.

FROM THE ARCHIVES: This week in 1995

Don Nash was president of Homecare Building Centres, the Ontario buying group that would later merge with TIM-BR MART in the West. In this issue from the archives, HARDLINES reports on Nash’s presentation to members of the Canadian Hardware and Housewares Manufacturers Association. Also in that issue: the ex-president of Canadian Tire takes over the ailing White Rose Nurseries chain and Weber Supply’s Jack Weber introduces more computerized innovation. Click here to read these blasts from the past!

DID YOU KNOW…?

RETAILER NEWS

VAUGHAN, Ont. — TIMBER MART is sending the grand-prize winners of its third annual SharpShooter photo contest to the IIHF World Junior Championships in Helsinki, Finland. Newlyweds Haley and Matthew Kinden from Lewisporte, Nfld., submitted photos of their hockey-themed wedding day, which won them round-trip airfare, accommodation, tickets to the World Juniors, and $500 in spending money. The SharpShooter contest asked Canadians to share what hockey means to them in a photo. More than 700 photos were submitted.

EDMONTON — A new-concept Canadian Tire store that opened in Edmonton last summer has become one of the top performers in the Canadian Tire network, reported CEO Michael Medline. He shared the insight during a call to analysts upon the release of Canadian Tire’s third-quarter results. The store integrates a digital experience into the bricks and mortar of a physical store. However, overall, Medline expressed concern about Alberta, saying he expected it to take a while before things get better there. On the other hand, Ontario delivered “extraordinary results,” while British Columbia “is booming,” he noted.

MOORESVILLE, N.C. — Lowe’s has announced the next generation of Iris, its “smart home” platform. Built with Microsoft’s Azure cloud technology, the system can support up to 75 connected devices and marks a shift from desktop to mobile operation. The release is accompanied by a new mobile app, and the various components are now sold separately, lowering the total cost of start-up by about 20%. Lowe’s has pledged that those early adopters who purchased the original system will retain its functionality.

MELBOURNE, Australia ― A rumoured merger between two players in Australia’s home improvement market is just the latest twist on the competitive scene in that country, which may give new headaches to the country’s largest DIY retailer, Bunnings. Mitre 10 is reportedly in talks with Home Timber and Hardware Group, which is owned by retail giant Woolworths. Woolworths has already partnered with U.S. retailer Lowe’s to create the Masters Hardware chain of big boxes, which are creating competitive pressures for Bunnings.

BENTONVILLE, Ark. ― Comparable-store sales at Wal-Mart were up 1.5% in its third quarter, as customer traffic continues to climb for the fourth consecutive quarter. Overall sales were up by 2.8%, while profits slipped to $3.304 billion from $3.711 billion. Online sales were up 10% during the quarter.

SUPPLIER NEWS
MONTREAL — Intertape Polymer Group posted net earnings of $15.7 million in Q3, while total revenue fell 4.1% to just over $200 million. Lower petroleum costs for raw goods drove down retail prices, accounting in part for the loss. At the same time, sales volume rose by about 3.4% or $7 million.

MONTREAL — Forest products producer Tembec reported a net loss of $32 million in its fourth quarter on sales that were up slightly, to $373 million from $371 million. Some of that loss included a non-cash loss of $38 million related to servicing USD debt. For the fiscal year ended September 26, consolidated sales were $1.4 billion, down slightly from $1.5 billion in the prior year. The company generated a net loss of $150 million, compared to net earnings of $9 million in fiscal 2014. The Forest Products segment generated adjusted EBITDA of $4 million on sales of $107 million for the quarter, while sales increased by $4 million due to higher SPF lumber prices and shipments.

ECONOMIC INDICATORS
U.S. housing starts in October fell by 11% after surging ahead in September, and were at 1,060,000 on a seasonally adjusted basis. Starts were down 1.8% from October 2014.  Single-family starts fell by 2.4% from September to October, but were up 2.4% year over year. Multi-family starts dropped 25.1% from the previous month, and were down 9.6% from October 2014. Building permits were up 4.1% from the previous month and up 2.7% year over year. (U.S. Commerce Dept.)

PEOPLE ON THE MOVE
Eugene Roman, chief technology officer at Canadian Tire Corp, has been named the 2015 Private Sector CIO of the Year. The award recognizes the quality, insight, direction, and leadership of Canada's senior technology executives and is presented annually by the Information Technology Association of Canada, Canadian CIO Magazine, and the Canadian CIO Association.

OVERHEARD…
“We think the store is still the nucleus of our relationship with the customer, but the store in and of itself is not enough. We really have to be there on an omnichannel basis for the customer.”
—Robert Niblock, chairman, president and CEO of Lowe’s Cos., speaking to analysts following the release of the company’s third-quarter results.

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