January 9, 2017 Volume xxiii, #2

“Always read something that will make you look good if you die in the middle of it.”
— P. J. O'Rourke (American journalist and political satirist, 1947- )

IN THIS ISSUE:

• Our top stories of 2016: the news that most attracted our readers’ attention

• CITT upholds gypsum tariff, stands by dumping ruling

• Stanley Black & Decker to buy Craftsman brand from Sears

• Canadian retail looking up in 2017: Desjardins

• PLUS: New hires at King Marketing, Cologne Fair back to four days, Hitachi wants to sell off power tools business, Menards under scrutiny, Sears to close more stores, J.C. Penney gets into HVAC, Spectrum Brands’ new facility, Stanley Black & Decker sells off door lock business, retail sales up, Husqvarna to buy Swedish company, and more!
  
  

Our top stories of 2016: the news that most attracted our readers’ attention

SPECIAL REPORT — The year was filled with milestones. Mergers, buyouts, and personal loss abounded as some high-profile companies and people made the news in 2016. Here are the stories that attracted our readers’ attention—and online visits to the Hardlines website. Some of them will surprise you!

Lowe’s completes acquisition of RONA preferred shares: All things Lowe’s related were guaranteed to drive traffic to our website, including this confirmation of final steps in Lowe’s takeover of RONA. Another big hit among readers were the updates on the reorganization of the executive team.

CEO replaced at Canadian Tire: The sudden departure of Canadian Tire chief executive Michael Medline in mid-July took everyone by surprise.

Groupe BMR joins ILDC: Early in July, this was big news, as the second-largest group in Quebec joined one of the largest buying groups in the country.

Industry honours Outstanding Retailers: honouring our own made for good reading, as winners were announced at the 21st annual Hardlines Conference in Niagara Falls at the end of October.

Media shakeups: both Lowe’s in the U.S. and Home Hardware in Canada announced they were shopping for new agencies of record. In both cases it means big business for some lucky “mad men” and in Home’s case, it meant the end of a 25-year run with one ad agency.

Gypsum tariff dispute: We began covering this story in the late summer when the mainstream press wasn’t even aware of the issue. It was to have a huge impact on dealers’ margins in Western Canada.

Lowe’s aligns offices in GTA, Boucherville: Trying to figure out the roles at the newly restructured Lowe’s Canada after head office moved to Boucherville kept us on our toes. The Toronto office remained the seat of operations for the Lowe’s bannered business.

Dealer stories: While the corporate news is high profile, the stories of local dealers expanding or selling always draws lots of traffic. Two examples were the change of ownership of McNaughton’s Home Hardware in Newbury, Ont., after 70 years; and the opening of Fisher River Castle store on a Cree reserve in Manitoba.

BMR updates banners: Groupe BMR unveiled a new banner strategy for its member dealers. Starting in 2017, BMR stores will gradually be segmented into four banners.

Kent buys up Central Home Improvements: Central’s seven Nova Scotia stores were added to Kent’s existing network of 43 stores throughout Atlantic Canada at the beginning of this year. A year ago, Central’s Steve Smith went on record denying any notion that his company was being sold, but others considered it the worst-kept secret in Atlantic Canada.

Castle buying expo has a winning formula: We had an invitation to see first-hand what all the excitement was about concerning Castle’s regional buying shows. These “speed-dating” events put vendors face to face with every single dealer in attendance—a winning formula for both sides.

Orgill consolidates buying functions: The Memphis-based hardlines distributor announced the consolidation of all purchasing functions to its Memphis home office. The move closed down the buying office at Orgill’s Canadian operation in London, Ont.

Readers’ interest in personnel changes reflects the importance of the personal side of the business: Formerly the number two at Home Depot Canada, Gino DiGioacchino had moved to bigger and better things at Walmart. When he left Walmart in early June, the news drew lots of eyeballs. His move came only days after RONA EVP Luc Rodier told HARDLINES he was leaving, and a month after Robert Dutton, former president and CEO of RONA inc., joined the board of La Coop fédérée.

Lowe’s buys RONA: That was our single biggest headline of 2016. The news went live on February 3 at 7:18 p.m., and had attracted thousands of readers within hours.

Home Hardware co-founder Walter Hachborn dead at 95: This story touched hearts across Canada—and well beyond—as we got comments and emails from round the world about the loss of this industry giant, who passed away just before Christmas.

(HARDLINES readers get breaking news as it happens. But are you subscribed to our free Daily News Service? Yes, it’s free! Click here right now to sign up!)

CITT upholds gypsum tariff, stands by dumping ruling

OTTAWA — Canada’s international trade regulator has upheld complaints made by domestic drywall manufacturers about the dumping of U.S. gypsum in the Western provinces.

The Canadian International Trade Tribunal found the dumping injurious to the domestic industry and recommended imposing final duties, putting an end to the provisional duties which have been collected to date.

In an olive branch to the community of Fort McMurray, where fears have been voiced that the finding could lead to higher construction costs, the tribunal suggested that the government could grant a special remission to alleviate the effect of the tariffs on rebuilding efforts in the wildfire-affected area.

The finding by the CITT is reportedly a recommendation only. The Tribunal will issue the reasons for its findings and recommendations on January 19, 2017. A final ruling is expected to be made by Finance Minister Bill Morneau.

Stanley Black & Decker to buy Craftsman brand from Sears

NEW BRITAIN, Conn. & HOFFMAN ESTATES, Ill. ― Stanley Black & Decker has announced it will purchase the Craftsman brand from Sears Holdings. The company will acquire the rights to develop, manufacture, and sell Craftsman-branded products outside of Sears stores in the U.S. and in other countries.

Sears Holdings will continue to sell Craftsman products, sourced from existing suppliers, through its current retail channels via a perpetual license from Stanley Black & Decker. For the first 15 years, the license will be royalty free, then 3% thereafter.

Under the terms of the acquisition, Stanley Black & Decker will pay Sears Holdings $525 million at closing and $250 million at the end of year three. Annual payments will then be made on new Stanley Black & Decker Craftsman sales through year 15 (2.5% through 2020, 3% through January 2023, and 3.5% thereafter). The net present value of all these cash payments is about $900 million. 

Currently, about 10% of Craftsman-branded products are sold outside of Sears Holdings―much of that through Ace Hardware in the U.S. Those sales were valued at about $200 million in 2016. Stanley Black & Decker intends to significantly increase sales of Craftsman through retail, industrial, and online channels.

The news comes on the heels of further closures of Sears stores across the U.S. and another cash infusion by Sears CEO Eddie Lampert (see Supplier News in this issue. ―Editor). Sears has reduced its store count by 60% over the past six years.

Canadian retail looking up in 2017: Desjardins

TORONTO — Canadian retail is looking at a strong year, according to a new forecast from Desjardins Securities. Growth in the GDP and employment will be a boon to retailers, and incursions from American competitors are less likely.

“The spectacular failure of Target in Canada and the collapse of oil prices are, in our view, the two primary reasons for this change in perception about Canadian retailing,” says the report by Desjardins’ Keith Howlett. “A few new retailers continue to enter Canada, such as Nordstrom, Saks, and Uniqlo, but generally in a tightly controlled and measured manner.”

At the same time, Sears’ continuing weakness will benefit an array of retailers, including Home Depot, Lowe’s, Canadian Tire, Sleep Country, Ikea, Leon’s, Brault Martineau, and Home Hardware for appliances. Likewise, the report says, its clothing business will likely be eaten into by Winners, Reitmans, Mark’s, Hudson’s Bay, Shoppers Drug Mart, Sephora, Walmart, and Real Canadian Superstore.

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 is in the mail in right now? If you’re not getting this amazing magazine, click here for more information now. Dealers get it free and so do advertisers!

RETAILER NEWS

HOFFMAN ESTATES, Ill. — Sears has announced it will close more than 30 Kmart and Sears stores in the first quarter of 2017 in response to poor third-quarter earnings. Eight Sears stores and 24 Kmart locations are reportedly slated to begin the liquidation process in early January and will be closed by late March or mid-April. If those stores close as scheduled, then Sears will have shuttered more than 200 locations within the current fiscal year and will have reduced its total number of stores by 60% since 2011. Sears CEO Eddie Lampert, through his investment firm ESL Investments Inc., will offer a $200 million letter of credit to the struggling retailer.

PLANO, Texas — J.C. Penney, which recently took up the home appliance business again, is now piloting a partnership with HVAC systems manufacturer Trane. The Dallas Morning News reports that the retailer has installed a Trane display next to the appliances department at its Collin Creek Mall store in Plano, where its head office is based. J.C. Penney rolled out major kitchen and laundry appliances in 500 stores this past fall.

SUPPLIER NEWS
COLOGNE, Germany — In 2018, Eisenwarenmesse–the International Hardware Fair will be held in Cologne from March 4 to 7, returning to a four-day format. The show, which is run every two years, attracted some 44,000 trade visitors to Cologne in 2016. This was the first time the show moved to three days. However, the reduced schedule led to a strong concentration of the business activities of the trade fair participants, encouraging organizers to return to four days.

MADISON, Wis. — Spectrum Brands is gearing up for a swift transition to its new facility in Dayton, Ohio, according to the Dayton Business Journal. The production lines are slated to be running by January 9, just a few months after construction began. The 600,000-square-foot facility will centralize functions currently spread across the U.S.

TOKYO — Hitachi Ltd. and U.S. investment group KKR & Co. are in talks over the sale of Hitachi’s power tools business, Hitachi Koki. The deal could be valued at as much as $1.2 billion. If finalized, the sale would permit the Japanese conglomerate, which is majority owner of Hitachi Koki, to focus on its core business units.
 
NEW BRITAIN, Conn. — Stanley Black & Decker will sell the bulk of its door lock operation to Swiss company Dormakaba Holding in a $725 million cash deal, according to Bloomberg. CEO James Loree said the sale of the business “will allow us to deploy capital in a more accretive and growth-oriented manner” and will make for a better fit in Dormakaba’s holdings. The deal includes only mechanical security brands: Stanley Black & Decker will retain ownership of its commercial electronic security and automatic door lines.

STOCKHOLM — Husqvarna Group’s Construction Division has reached a deal to acquire Pullman Ermator AB, a maker of dust and slurry management systems. The acquisition is expected to be finalized mid-January. Sweden-based Pullman Ermator’s products include dust extractor systems, dry/wet vacuums, and air scrubbers for the light construction industry.

PEOPLE ON THE MOVE
King Marketing has added to its ranks. In British Columbia, Jennifer King has joined as brand ambassador calling on Home Depot, RONA, and Lowe’s stores in the Lower Mainland and the northern part of Vancouver Island. In the Edmonton area, Nelson Villena and Donna Heidel will call on Home Depot, RONA, and Lowe’s stores in Northern Alberta. In Thunder Bay, Gerald Sas has joined in a part time capacity. In southwestern Ontario, Annette Cormier is now brand ambassador covering Home Depot, Lowe’s, and RONA stores. In the Ottawa region, Paula Wilkins joins King, bringing more than 20 years of experience in the retail and hospitality industries. In Quebec, Gilles Landry joins the team in the Montreal area.  

ECONOMIC INDICATORS
Retail sales rose for the third consecutive month, increasing by 1.1% to $45 billion in October. Higher sales at gasoline stations and general merchandise stores were the main contributors to the gain. Excluding sales at motor vehicle and parts dealers, retail sales were up 1.4% in October. Sales at building material and garden equipment and supplies dealers edged up 0.9% year-to-date, a 7.4% hike from the previous month. (StatCan)

Construction spending in the U.S. in November was $1,182.1 billion at a seasonally adjusted annual rate, up 0.9% from October and up 4.1% from November 2015. (U.S. Commerce Dept.)

NOTED
The latest StatCan info suggesting Canadian retail bounced back in October may overstate the case, according to analyst Ed Strapagiel. Retail sales only rose 0.4% from the previous year without seasonal adjustment, he says, an unusually small increase. The weakness affects a variety of store types and appears set to continue into the near future.

CLASSIFIED ADS