May 23, 2016 Volume xxii, #21

“Nothing great in the world has been accomplished without passion.”
—Georg Wilhelm Friedrich Hegel, (German philosopher, 1770–1831)

IN THIS ISSUE:

• With final hurdles cleared, Lowe’s closes deal to buy RONA

• Ex-RONA CEO Robert Dutton joins board of directors of La Coop fédérée

• Outstanding retailers will be honoured at Hardlines Conference

• Canuck vendors keep busy at the National Hardware Show

• PLUS: Lowe’s and Home Depot turn in strong first-quarter results, Ace Canada opens two more stores, CanWel swings into the black in Q1, housing sales strong, Ace Hardware sales up on lower profits, CertainTeed partners with celebrity designer —and more!

With final hurdles cleared, Lowe’s closes deal to buy RONA

BOUCHERVILLE, Que. & MOORESVILLE, N.C. — The biggest deal in the history of Canadian home improvement retailing, and one that has been in the works in one form or another for the past five years, has finally closed.

Lowe’s Cos. has completed the acquisition of RONA inc. in a deal worth $3.2 billion. After securing shareholder support at the end of March, the deal got the final approval it needed on May 13 when the Canadian Competition Bureau deemed that the takeover will not limit consumer choice.

Lowe’s made a friendly, albeit controversial, takeover bid for RONA back in 2012 that was worth $1.8 billion. But that offer was made just ahead of a provincial election in Quebec, and got a lot of resistance from the Quebec government, which perplexed the executives at Lowe’s.

Lowe’s Canada intends to move its head office from Toronto to RONA’s headquarters in Boucherville, Que., with Lowe’s Canada President Sylvain Prud’homme in the lead role. Lowe’s plans to retain most of RONA’s current employees and maintain key executives from RONA’s leadership team. It also reaffirmed it will remain committed to Canadian vendors, expanding relationships that both Lowe’s and RONA have developed with domestic manufacturers and suppliers.

Ex-RONA CEO Robert Dutton joins board of directors of La Coop fédérée

MONTREAL ― Robert Dutton, former president and CEO of RONA inc., has joined the board of directors of La Coop fédérée, where he will help out with Groupe BMR.

Dutton joined RONA in 1977. Under the mentorship of then-chairman Henri Drouin, the young Dutton could not speak a word of English when he became CEO in 1992. But that was just one of the obstacles he overcame as he pushed his dream to create Canada’s largest home improvement retailer, one that, in his own words, would provide Canadians with jobs and become a role model for corporate sustainability.

Under his direction, RONA expanded beyond its original Quebec market, and did indeed become the country’s largest home improvement retailer, with combined sales from all points of sale at one point exceeding $6 billion. RONA’s consolidated sales under Dutton’s leadership increased from $450 million to more than $4.8 billion. He was finally ousted following a failed takeover of RONA by Lowe’s in 2012.

Outstanding retailers will be honoured at Hardlines Conference

WORLD HQ, TORONTO — Canada’s hardware and home improvement retailers are among the best in the country. At Hardlines, we honour the best of the best with the Outstanding Retailer Awards program.

The ORAs are the industry’s only independent awards program dedicated to celebrating the achievements of hardware, home improvement, and building supply dealers in Canada. In its 24-year history, the program has honoured more than 140 retailers. Any Canadian home improvement retailer that has operated under its current ownership for at least two years is eligible.

Individual owners and managers, as well as retail and buying group head offices, can nominate candidates in any of the following categories:
1. Best Hardware Store (any size)
2. Best Building Supply/Home Centre (under 15,000 square feet)
3. Best Building Supply/Home Centre (over 15,000 square feet)
4. Young Retailer Award (a store manager 35 or under; entrants may be owners or chain employees)
5. Marc Robichaud Community Leader (open to all stores, its purpose is to celebrate the outstanding contributions, events, charitable donations, etc., made by a store’s staff, managers, or owners to the community they serve)
6. Best Large Surface Retailer (over 65,000 square feet)
7. Best Contractor Specialist Store
  
Awards winners will receive:

• Admission to the 21st Annual Hardlines Conference;
• A trip for two to Niagara Falls, including one night’s accommodation at the Sheraton on the Falls hotel in Niagara Falls, Ont.;
• An inscribed plaque;
• A marketing package that includes a write‐up in Hardlines Home Improvement Quarterly Magazine;
• A customized video and photo ready to be sent to local media.

The awards ceremony and gala dinner will take place on Tuesday, October 18 at the Sheraton on the Falls Hotel in Niagara Falls, Ont.

Applications can either be submitted online by clicking here or they can be completed and mailed in to the Hardlines World Headquarters: 528 Queen Street East, Toronto, Ont., M5A 1V2. Applications must be received by Friday, July 29 at 5:00 p.m. More information can be found on our website.

Canuck vendors keep busy at the National Hardware Show

LAS VEGAS ― The National Hardware Show remains the must-attend event for Canadians in retail home improvement. The range of companies on hand, both exhibiting and walking the show, bore that out.

But not all exhibitors were on the show floor. Ames/Garant went all out with a private meeting room in the upper mezzanine (shown here), rather than taking a traditional booth on the show floor. There, the company was able to showcase a full range of new lines for its Ames and Garant brands. Product Manager Laurie-Ann Boivin pointed out a step-up line of rakes and hoes, along with a heavy-duty line of rakes for pros, all of which will be available to dealers in August. Also: a very cool hose reel in a deck box, so it can double as a coffee table on one’s deck.

At the Gardena booth, one garden product embodied the latest technologies. Gardena’s Jay Sterling showed a robotic mower the size of a canister vacuum cleaner. It will operate non-stop all summer to keep a lawn trim. Sensors keep it safe around pets and children.

Other companies, like knife and flashlight maker Coast, are keen to grow their business north of the border. Marty Reardon, Coast’s national sales manager for Canada, said business is growing in this country, with both Canadian Tire and Lowe’s Canada doubling their SKUs. He said customers “recognize the value of paying up to $40 for a flashlight that offers durability and a warranty.”

Vendors overall found the show successful, as it let them connect with both existing Canadian customers and potential new customers from the U.S. “It reminds me of Chicago,” said Bob Shaw, VP of sales and marketing for Nour Painting Tools, referring to the halcyon days of the show at its former location. “Busy, busy, busy all day.”

DID YOU KNOW…?

RETAILER NEWS

WINNIPEG ― The Ace banner continues to gain traction in Canada with two recent store openings. Ace Peel Hardware & Supply in Caledon, Ont., is a 20,000-square-foot location owned by Bill Hewson, Joe Gray, and Bill Woodill; the general manager is Brent Bowen. In Leask, Sask., a new, 3,000-square-foot Ace Hardware store at 11 Main Street is managed by Bill McDonald. Both stores offer a range of hardware products typical of a local hardware store, including paint, hardware, and electrical. In addition, the Caledon store has a year-round garden centre, equine supplies, farm supply, bulk mulch, and aggregates.

MOORESVILLE, N.C. ― Lowe’s reported first-quarter net earnings up 31.4% to $884 million, on sales of $5.2 billion that were up a healthy 7.8%. Same-store sales for the quarter increased 7.3%, with comp sales for the U.S. up 7.5%. Canadian sales had double-digit comps again this quarter. The first-quarter results include an unrealized gain on a foreign currency hedge entered into in advance of the company’s pending RONA acquisition, which increased pre-tax earnings for the first quarter by $160 million. The company’s outlook for 2016 includes an expectation that sales will increase by about 6%, with the addition of a 53rd week accounting for 1.5% of that lift.

ATLANTA — Home Depot turned in a 9% rise in first-quarter sales. The company’s net income rose to $1.80 billion, or $1.44 per share, from $1.58 billion, or $1.21 per share, a year earlier. Revenue came in at $22.76 billion, up from $20.89 billion in the prior-year period. Home Depot’s Canadian business posted mid-single digit comps in local currency, experiencing pressure from Western markets in this country.

OAK BROOK, Ill. — Ace Hardware Corp. enjoyed first-quarter revenues of $1.2 billion, an increase of 4.3% over the same period a year earlier. However, net income slipped by $3.8 million to $26.1 million. According to the company, the decrease was expected and budgeted due to the timing of promotional events and income received from vendors. Same-store sales were up 2.2%, with a 2.9% increase in average transaction size. Total wholesale revenues were $1.19 billion, an increase of 4.1%. Increases were noted across a number of departments, with outdoor living, electrical, and tools showing the largest gains.

SUPPLIER NEWS
VANCOUVER ― CanWel Building Materials reported first-quarter net earnings of $912,000, reversing the net loss of $1.2 million a year earlier. Revenues for the quarter rose by 24% to $198 million.

MALVERN, Pa. — Celebrity designer and TV host Sarah Richardson is teaming up with CertainTeed Gypsum to endorse its current campaign, “Why Walls Matter.” The program lets homeowners select drywall that’s best suited to their needs. Richardson will have access to CertainTeed Gypsum’s range of products for possible inclusion an upcoming HGTV series currently in development. The partnership includes opportunities for CertainTeed Gypsum to be featured in Richardson’s magazine articles, as well as event appearances, social media, and collaborative website promotion.

ECONOMIC INDICATORS
National home sales in April rose to their highest level ever, with the number of homes trading hands via Canadian MLS Systems last month up by 3.1% month-over-month. Sales were up in April compared to the previous month in about 70% of all local markets, led by the National Capital Region and Edmonton. Following small declines the previous month, activity held steady in the Greater Toronto Area and edged lower in Greater Vancouver. (Canadian Real Estate Association)

Housing starts in the U.S. had a larger increase than expected in April, rising by 6.6% to a rate of 1.17 million units seasonally adjusted. Starts for single-family dwellings rose 3.3% to a rate of 778,000. Building permits increased by 3.6% to a rate of 1.12 million units. (U.S. Commerce Dept.)

NOTED
Light Up Guatemala is an initiative from Developing World Connections, an international development agency that is working to bring eco stoves to rural Guatemala. A number of home improvement and hardware industry members have been involved in the initiative. On May 31, they'll be hosting a fundraising golf tournament in Kleinberg, Ont., at the Copper Creek Golf Club. For more information, contact Marianne Thompson at golf@developingworldconnections.org.

OVERHEARD…
“The time is right to fortify our Canadian market presence to take advantage of the significant long-term potential we see.”
—Robert Niblock, chairman, president, and CEO of Lowe’s Cos., following the release of the company’s first-quarter results, on the imminent closing of the acquisition of RONA inc.

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