June 6, 2016 Volume xxii, #23

“To be prepared is half the victory.”
— Miguel de Cervantes (Spanish soldier and novelist, 1547-1616)

IN THIS ISSUE:

• Despite challenges, home improvement industry poised for solid year

• Patrick Morin to invest $25 million to expand DC, add stores

• Post-takeover, expect aggressive growth of both Lowe’s and RONA banners

• Home Depot wants more online assortments, faster delivery times

• PLUS: Rodier gone from RONA, RONA’s Mont-Laurier store, Lowe’s opens in Regina, Cloverdale Paint expands, Topmar adds location in New Brunswick, Swinamer’s and Morden Home Hardware, Costco results, Louise Wendling awarded, Stihl buys into Globe—and more!

Despite challenges, home improvement industry poised for solid year

SPECIAL REPORT ― If the first quarter of the year has returned strong sales for a number of dealers, the warm weather may be only part of the story. In fact, the first quarter of 2015 was very slow, with much of the country buried under snow well into the first part of the year. That gave many dealers nowhere to go but up.

Adding to the uncertainty about what is in store for the rest of 2016 and beyond is the fallout from a couple of the largest deals to occur in this country in two decades: the acquisition of Chalifour Canada by Memphis-based hardware wholesaler Orgill, Inc., and the takeover of RONA inc. by the world’s second-largest home improvement retailer, Lowe’s Cos.

While the initial growth in 2016 may come with caveats, many dealers are optimistic about the remainder of the year, despite the meltdown of the energy-based economy in Alberta—further exacerbated by the fiery destruction of Fort McMurray—and CMHC’s forecasts for slower housing starts this year.

Initial statistics gathered by HARDLINES indicate that most regions reported at least some increase in sales for the first quarter, with the exception of Alberta and the far north. Even Ontario dealers reported mixed results for the start of the year, as job action by some trades has had an impact on sales by commercial dealers. However, most dealers―again with the exception of many in Alberta―anticipate an increase overall in sales for 2016.

While the good weather so far this year may have helped sales on the building supply side, it slowed seasonal sales for retailers hoping to move shovels and snow blowers and ice-melt products during the latter part of the winter. Canadian Tire dealers, for example, spent the first months of the year switching out winter products for patio sets, gardening supplies, and backyard categories as the weather changed around them, depending on the region they were in.

Meanwhile, both Lowe’s and Home Depot Canada continue to pursue a multi-pronged approach to sales, one in which e-commerce figures very strongly. Both companies are also focused on growing their contractor business, posing yet another threat to independents.

Patrick Morin to invest $25 million to expand DC, add stores

ST-ANCIENNE-LORETTE, Que. — At a time when many retailers are struggling to hold their share in the Quebec market, family-owned banner Groupe Patrick Morin has announced a bold plan to invest $25 million in strengthening its position through new stores—and possible acquisitions.

The project will expand the footprint of the company’s Saint-Paul-de-Joliette distribution centre by 50,000 square feet, as well as creating a new 300,000-square-foot DC for higher-tech materials. The expanded distribution network will serve the increased number of stores the company has planned, with its 21st store opening in Saint-Eustache next year and more in the works.

As more stores are added, says General Manager Daniel Lampron, “the distribution centre we have now will be too small.” He adds that the management team still sees opportunities for growth in Quebec. “For us, business is going well in a market that is not easy,” he told HARDLINES. “We’re still growing our piece of the pie. Our business model, our customer service—these are all things that help us.”

External factors also contribute to Patrick Morin’s positive outlook. With Lowe’s takeover of RONA, Lampron points to “confusion” in the market that is leaving merchants “a little bit scared.” The climate could be favourable for new acquisitions, in addition to the opening of new stores, he says.

The incentive to grow is as much stick as carrot: Canac, the banner’s similarly sized and closest competitor, is expanding its regional reach. “There are a lot of regions in Quebec where we aren’t yet,” Lampron acknowledges. “Canac is coming closer to the Montreal region; we see opportunities there, as well.”

As reported last month in HARDLINES, the banner, a member of the Independent Lumber Dealers Co-operative, has been expanding its product offerings in an effort to keep customers coming into stores as online competition continues to heat up. Lampron told HARDLINES at the time that Patrick Morin would be checking with other ILDC members to see how any new inventory it considers is selling before taking it on.

Post-takeover, expect aggressive growth of both Lowe’s and RONA banners

TORONTO ― RONA is the dominant hardware and home improvement brand in Quebec, with close to a 30% market share (source: Hardlines Market Share Report). As a result, Lowe’s will think carefully about even introducing the Lowe’s name into the province. When asked about that possibility, Lowe’s Canada President Sylvain Prud’homme said, “I don’t think so.” But, he added, “We’re keeping the door open.”

Prud’homme is keen to see more big boxes in that province, however. He says RONA is doing a lot of things right already with its big box stores, and cites the Reno-Depot banner as a winner. Even now, RONA is working on some new ideas for its big boxes, with a test store in Anjou being readied for a reboot.

Both Lowe’s and RONA have aggressive expansion plans: Lowe’s bought up 13 former Target stores, plus its distribution centre in Milton, Ont., in May 2015 and is working hard to convert those outlets to Lowe’s. In addition, it is continuing to develop greenfields sites of its own. At the same time, RONA has been spending the last four years getting its financial house in order. This included acquiring 17 big box stores in Quebec, all of which were owned by independent, or franchise, dealers. The company has also been active working with its independent dealers to help them grow their respective businesses.

So the market can expect both sides of the business to continue parallel expansion strategies―at least for the near term. “We’re tackling the future retail network,” says Prud’homme, “and growth is important.” But, he adds, the integration will not be a one-size-fits-all approach. “It’s not a consolidation. It’s a co-ordination.”

Home Depot wants more online assortments, faster delivery times

ATLANTA — Home Depot executives are anxious to grow the company’s online business, and see its exclusive range of products, as well as rapid delivery times, as keys to that success.

Speaking at the recent RBC Capital Markets Consumer and Retail Conference, Richard McPhail, SVP of finance, noted the importance of vendors to getting product into customers’ hands. “From a product perspective, we have incredible vendor partners and we are incredibly important to each other. They support our online business with great product that you can only find at The Home Depot.”

He added that many of those exclusive products are aimed at pro and contractor customers.

DID YOU KNOW…?

RETAILER NEWS

BOUCHERVILLE, Que. ― RONA’s Mont-Laurier, Que., store celebrated the conclusion of its renovations at the end of April. Thanks to an investment of more than $750,000, the store saw its retail space increase by 5,000 square feet to a total of 25,000 square feet. The Deslongchamps family, owners of the RONA Mont-Laurier store, have been with RONA for 40 years and own a second store in Rivière-Rouge. Together, these two stores offer more than 30,000 products spread over 50,000 square feet of retail space, in addition to a lumber yard covering 500,000 square feet.

TORONTO — Lowe’s Canada will hold the grand opening newest store in Regina on June 9. It’s located in North Regina at 355 Albert Street N. A contractor “VIP” event will be held June 12. This is the company’s 44th Lowe’s-bannered store in Canada and its second location in the city.

SURREY, B.C. ― Cloverdale Paint has announced the expansion of its store operations into Ontario. The new facility in Cambridge brings the total number of wholesale and retail locations to 70. The largest Canadian-owned paint manufacturer primarily serves professional customers in the industrial, protective coatings, and architectural segments. Cloverdale Paint transferred store manager Stephanie Guitard from Surrey, B.C., and enlisted additional local employees with paint and coatings experience.

MISSISSAUGA, Ont. ― Castle Building Centres Group has added a new member, a second location for the Mahar family, which owns and operates Topmar Building Supplies. The new store is in Nackawic, N.B., along the Saint John River Valley. Topmar was founded in 1964 as a construction company and later established the building supply operation to serve Fredericton’s contractors and homeowners with the lumber, building materials, and hardware. Castle now has more than 300 member locations across Canada.

ST. JACOBS, Ont. ― Swinamer’s Home Building Centre in Windsor, N.S., and Morden Home Hardware in Morden, Man., both under new ownership, are hosting grand re-opening celebrations. Swinamer’s has almost doubled its inventory since Doug Harris took the reins a year ago, and has hired a new home installations manager. The Morden store has been renovating for several months in order to offer customers more space and wider product selection.

ISSAQUAH, Wash. ― Costco Wholesale Corp. reported net sales of $9.23 billion for the month of May, an increase of 3% over the same period last year. For the 39-week year to date, net sales reached $87.18 billion, up 2%.

SUPPLIER NEWS
MOORESVILLE, N.C. ― The Stihl Group has acquired a minority stake in Globe Tools, a Hong Kong-based manufacturer of corded and cordless garden tools, air compressors, pressure washers, and generators. “This move enables us to quickly expand the Stihl cordless product line for the customers of our servicing dealers in the entry-level segment and offer high class products in Stihl quality at competitive prices,” explains Stihl executive chairman Bertram Kandziora.

PEOPLE ON THE MOVE
Luc Rodier, executive vice president of retail at RONA, is no longer with the company. Rodier was there for 11 years, most recently as one of the key senior executives on the turnaround team, under CEO Robert Sawyer, leading up to RONA’s takeover by Lowe’s.

The Retail Council of Canada conferred Awards of Distinction on 13 retail innovators last week at RCC’s STORE 2016 conference in Toronto. The Lifetime Achievement award was presented to Louise Wendling, former Costco Canada country manager, “for demonstrating outstanding business success and community service throughout her career.”

ECONOMIC INDICATORS
U.S. construction spending in April was $1,133.9 billion at a seasonally adjusted annual rate, down 1.8% from March, but up 4.5% from April 2015. Both private residential construction and private non-residential construction were down 1.5% from the previous month, while public construction spending fell by 2.8% month over month. (U.S. Commerce Dept.)

OVERHEARD…
“They know how to deal with dealers; they know how to deal with different parts of the country. We can learn from what they’ve learned over the last 75 years.”
―Sylvain Prud’homme, president of Lowe’s Canada, on being asked what his company can learn from its acquisition of RONA inc.

CORRECTION: In our May 23 issue, we reported on Garant’s new product lines at the National Hardware Show. Garant is launching a new heavy-duty push-broom line under Garant Pro series, but not a heavy-duty rake line.

OUT AND ABOUT
Our very own Marketing Director Katherine Yager is back in the office this week after running 120 kilometres in 20 hours on May 28. Yes, you read that right! 120 kilometres. We know a lot of you have been following her ultramarathon running accomplishments and we’re very excited to share this latest feat!

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