January 2, 2017 Volume xxiii, #1

“Be at war with your vices, at peace with your neighbours, and let every new year find you a better man.”
—Benjamin Franklin (diplomat, scientist, inventor, and writer, 1706-1790)

IN THIS ISSUE:

• IN MEMORIAM: Walter Hachborn, founder of co-op hardware retail in Canada

• Mark your calendars: a year ahead of learning and networking with Hardlines

• Home Depot and Lowe’s say Canadian stores are pulling their weight

• “Dynamic” pricing practices on the rise for online retailers

• PLUS: Central staff will keep their jobs at Kent, Lowe’s opposes Valspar sale, WRLA’s new president in place, Canadian Tire locations get tax breaks, and more!
  
  

IN MEMORIAM: Walter Hachborn, founder of co-op hardware retail in Canada

SPECIAL REPORT — It is nothing less than the end of an era. Walter J. Hachborn, founder of Home Hardware Stores and the man who brought the co-op hardware model to Canada, has died.

He passed away on the morning of December 17 at the age of 95. Yet his legacy looms large over the Canadian retail landscape. Though Hachborn had not been involved actively with the company for many years, his imprint on it—and on this industry—endures.

Hachborn was born in Conestogo, Ont., but moved with his family at the age of four to nearby St. Jacobs, the town with which he would become synonymous. The Hachborns lived behind Gordon Hollinger’s hardware store, where the young Walter got his start in the industry as a stock boy at the store at the age of 17, earning $8 a week. A decade later, after Hollinger’s death, Hachborn took over the store with partners Henry Sittler and Arthur Zilliax.

In 1956, Hachborn read an article in a U.S. trade magazine, Hardware Age, that would change everything. The article outlined a dealer-owner model for retail and he was convinced it could be imported into Canada. In 1964, Hachborn and Sittler founded what would become Home Hardware, beginning with just 108 stores. Today, the co-op boasts almost 1,100 stores across Canada.

The tiny town of St. Jacobs sits squarely in the middle of Southwestern Ontario’s large Mennonite farming community. Though not a Mennonite himself (he was an active Lutheran), Hachborn’s work ethic reflected much of the old world character of the region. He steered the company for the first 25 years of its existence with a firm hand and a warm smile. He retired from active involvement in the day-to-day business in 1988 and retained the title of President Emeritus.

But despite stepping back, he remained the face and personality of Home Hardware, a familiar sight at every dealer market, greeting dealers with a seemingly limitless ability to recall names, family members, and store locations. He remained a fixture at the markets until just a couple of years ago, as his health continued to deteriorate.

Hachborn was predeceased by his wife, Jean Marie (née Brown), a former township councillor, in 2014. The pair served on the board of St. James’ Evangelical Lutheran Church in St. Jacobs. He served on the board of directors of Wilfrid Laurier University, and Jean Marie on that of its affiliated Waterloo Lutheran Seminary. Hachborn believed that good ethics also made for good business. He was a regular volunteer on Habitat for Humanity builds, including one in Kentucky with former U.S. President Jimmy Carter.

Hachborn received a number of accolades during his lifetime, including an honorary Doctor of Laws degree from Laurier in 1985. Four years later, he was inducted into the Canadian Hardware Hall of Fame. Hardware Merchandising magazine named him Hardware Retailer of the Century in 1999. He was appointed a Member of the Order of Canada in 2000, and received the Queen’s Golden Jubilee Medal in 2003. In 2007 the Retail Council of Canada conferred on him a Lifetime Achievement Award in recognition of his business and community leadership, and in 2015 he was inducted into the Order of the Business Hall of Fame.

Mark your calendars: a year ahead of learning and networking with Hardlines

WORLD HEADQUARTERS, Toronto — Meetings with key buyers, networking with top executives, and major research initiatives to keep you better informed than ever are among the activities you can expect from Hardlines in 2017.

Be sure and mark your calendars for these important events:
February 16, 2017: Canada Night at the Orgill Dealer Market in New Orleans. This is a dealer-only event, with limited space for sponsoring vendors. Contact us if you’d like to get face to face with 250-plus dealers at this one!

April 26, 2017: Meet the Buyers Breakfast. Vendor-only event. Details to come, but we promise some great retail decision-makers at this one.

May 9 to 11, 2017: National Hardware Show in Las Vegas. Just be there. We will, and so will most of the Canadian industry.

June 21, 2017: Retail Conditions Breakfast Seminar. We release our annual Hardlines Retail Report, with top-line data unveiled and a chance to get the inside scoop on some of the changes going on in the industry (plus an incredible deal on the Retail Report itself for attending!).

August 24, 2017: Canada Night at the Orgill Dealer Market in Boston. This is a dealer-only event, with limited space for sponsoring vendors. Contact us if you’d like to get face to face with 250-plus dealers at this one!

September 13-15, 2017: The Second Annual Home Improvement eRetailer Summit in Orlando, Fla. After the success of this inaugural event, we have many of North America’s top eRetailers lined up to join us next year. Other retailers will want to learn from these business leaders and vendors will most definitely want to develop more business with them. Confirmed attendees include Sears.com, HSN.com, and Organizeit.com. Contact bev@hardlines.ca for more info.

November 14-15, 2017: The 23rd Annual Hardlines Conference. This is it—the big one. We’re holding it again in Niagara Falls, so please join us for two incredible days of learning and networking with some of the world’s leading retail experts. Plus, the Outstanding Retailer Awards will honour some standout retailers on the evening of the 14th!

Home Depot and Lowe’s say Canadian stores are pulling their weight

SPECIAL REPORT ― Even though they are the number-one and two retailers by sales in this country, the Canadian divisions of Home Depot and Lowe’s are small divisions for their parent companies, often with more than their share of challenges given their international status. Yet both businesses are flourishing here, despite a comparatively slower economy north of the border than in the U.S.

In a call to analysts following the release of its third-quarter results late in 2016, Home Depot chair and CEO Craig Menear admitted that the market has been slow in parts of the country, but was pleased overall with the Canadian performance.

“As it relates to Canada, clearly what you’ve seen in Canada and what we’ve experienced is in the province[s] of Alberta and in Saskatchewan, where they’re more dependent upon energy. Clearly we have seen pressure there that we haven’t seen in the balance of the country. But the team has worked hard to offset that pressure and grow the business overall,” Menear said, adding that “we’re very pleased with our business in Canada and the team has done an amazing job to offset that pressure in the West.”

While Home Depot does not break out its Canadian sales, Menear did admit early last year that sales here exceed $7 billion.

For Lowe’s, the addition of RONA’s sales were represented for the first time in its Q3 results. According to Bob Hull, CFO at Lowe’s, RONA will be included in Lowe’s comp sales calculation starting with the second quarter of 2017.

Lowe’s enjoyed a healthy 9.6% increase in sales in its third quarter. Approximately $900 million, or 6.3% of that sales growth, came from RONA. Total average ticket increased 2% to $68.68. The sales increase was driven by the addition of RONA, and an increase in comp sales and new stores. Lowe’s opened a dozen stores in Canada last year and combined sales following the takeover of RONA amount to more than $6.6 billion.

Lowe’s expects RONA to punch above its weight for year-end 2016. “We now expect a total sales increase of 9% to 10% driven by a variety of factors,” said Hull. “First, we are forecasting a comp sales increase of 3% to 4%. Second, we expect RONA to contribute 4% to sales growth.”

While neither as large nor as dramatic as the results from their domestic sales, the performance of the Canadian stores remains important to both Lowe’s and Home Depot. And the RONA business is already having a positive impact on Lowe’s topline and same-store performance.

“Dynamic” pricing practices on the rise for online retailers

TORONTO — Retailers are increasingly turning to “dynamic pricing” practices to manage online sales. This practice customizes prices on an ongoing basis, based on a variety of factors including timing, supply and demand, and the customer’s location and purchase history.

As the Toronto Star reports, this trend, also referred to as surge pricing, brings retail up to speed with already established developments in other industries. “Retailers are very much emulating where travel went five or 10 years ago,” said Jenn Markey of the retail data analysis firm 360pi. “In the electronics sector on Amazon, we’ve seen a price change eight times, nine times in one day.”

While experts tend to welcome the trend, they acknowledge that the practice, which is unpopular among consumers, needs to be handled in a way that doesn’t undermine confidence. Sears Canada announced this summer that it would revise prices on a daily basis for appliances and mattresses, with the option of branching out into other product categories later.

Walmart Canada insisted through a spokesperson that it differentiates prices only on a regional basis. “We don’t adjust prices frequently throughout the day for an item—we lower prices, online and in-store simultaneously,” said Alex Roberton, spokesperson for Walmart Canada. “Typically this is done overnight.”

DID YOU KNOW…?

... that our sister publication, Hardlines Home Improvement Quarterly, is mailed to more than 11,000 retailers and store managers across Canada? Or that the next issue will be in the mail in mid-January? If you’re not getting this amazing magazine, click here for more information now. Dealers get it free and so do advertisers!

RETAILER NEWS

SAINT JOHN, N.B. — Central Supplies’ 400 employees can breathe easy, says a spokesperson from J.D. Irving. The family-owned conglomerate’s Kent Building Supplies bought out Central’s six hardware stores and its truss operation for an undisclosed sum. “All of the existing employees have been offered jobs and the majority of them have accepted,” Mary Keith, VP communications at Irving, told the Halifax Chronicle-Herald. She would not disclose the salaries being offered, but pledged that workers would retain their seniority. Employees at the two Atlantic Windows outlets, which are not included in the purchase, will remain with Central Supplies.

CLEVELAND — The U.S. Federal Trade Commission is seeking input from Lowe’s on Sherwin-Williams’ proposed $11.3 billion acquisition of rival Valspar. The FTC wants Sherwin Williams to divest some of Valspar’s assets to conform with anti-trust regulations. In a rare step, FTC chair Edith Ramirez turned to Valspar’s top customer for its view, and is prepared to back that request up with a subpoena if Lowe’s is not forthcoming, especially as Lowe’s reportedly opposes the sale. (Lowe’s accounts for 20% of Valspar’s sales.) Sherwin Williams CEO John Morikis, however, is holding out for Ramirez’s replacement, expected to be put in place following President-elect Donald Trump’s inauguration on January 20, according to the New York Post.

TORONTO — Canadian Tire has reached a deal with the body that assesses property taxes in Ontario to reduce the value of their properties, with taxpayers making up the difference. A Memorandum of Understanding with the Municipal Property Assessment lowers the retailer’s tax liability, ultimately leading to tax refunds. “These big box stores go vacant, they tend to stay on the market for a long time,” MPAC’s VP and COO, Rose McLean, explained to the CBC. “They’re not easy to repurpose. That’s why we’ve made a decision to increase the depreciation on the stores, because they don’t hold their value.” The amount of the refund will vary by municipalities. Other retailers who have applied for similar breaks include Lowe’s, Home Depot, and Costco.

PEOPLE ON THE MOVE
Gary Hamilton is about to retire. The outgoing president of the Western Retail Lumber Association has been in place since taking over the WRLA in December 2002. His replacement is Liz Kovach, who was formerly president of the Manitoba Camping Association. Hamilton is assisting with her transition and will exit at the end of this month, following the WRLA’s Buying Show in Calgary, January 18 to 20. Until then, you can reach him at ghamilton@wrla.org or mobile: 204-791-5370. Liz can be reached at lkovach@wrla.org or 1-800-661-0253 ext. 1. 

ECONOMIC INDICATORS
U.S. housing starts in November were at a seasonally adjusted annual rate of 1,090,000, falling 18.7% below October’s rate of 1,340,000 and 6.9% below November 2015’s rate of 1,171,000. Building permits were at a SAAR of 1,201,000, down 4.7% from the previous month and 6.6% from the previous year. A surge in starts in October created a disparity between the rate of starts and permits. (U.S. Commerce Dept.)

OVERHEARD…
"The eRetailer Summit was a resounding success. Suppliers, retailers, bloggers, and industry experts gathered to share their experiences and insights about how to flourish in the dynamic digital environment ... Overriding everything was a friendly and casual vibe that fostered a social and very interactive environment among the participants. I met some very hard working and impressive folks who were all very knowledgeable and willing to share their own experiences. Truly a productive visit and time well spent!”
—Mike Hargrave, DMM Online Tools for Sears.com, on the benefits of attending last year’s Home Improvement eRetailer Summit. (Click here for details of this year’s Summit.)

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