June 26, 2017 Volume xxiii, #26

“Great things are done when men and mountains meet.”
―William Blake (English poet, painter, and engraver, 1757-1827)

IN THIS ISSUE:

• BMR’s renovation of Potvin & Bouchard store part of a wider initiative

• First RONA conversion to the Lowe’s banner opens in Edmonton

• Home Hardware’s growth strategy: new members and larger store footprints

• As fortunes tumble, Sears Canada obtains bankruptcy protection

• PLUS: Home Hardware renews partnership with Blue Jays, new Ace store in Ontario, Boulanger celebrates its 75th, Lowe’s to open in Winnipeg, LBM retail up again in April, Beauti-Tone and the great outdoors, Tembec shares sold, house sales, and more!
  
  

BMR’s renovation of Potvin & Bouchard store part of a wider initiative

CHICOUTIMI, Que. — Potvin & Bouchard inaugurated its new store in Chicoutimi last week. The $3.1 million investment involved a complete renovation of the 50,000-square-foot store. The chain, which is part of Groupe BMR, is celebrating its 85th anniversary this year.

The work included the construction of a brand new and more modern facade, the installation of wood structures inside the store, and a completely new layout of the store’s departments, all designed to create a more intuitive shopping experience.

The goal of this renovation project was to improve customer experience in store. It’s part of a large-scale project to improve store design and customer service for all 15 of Groupe BMR’s corporate stores. The group has already renovated Beloeil at a cost of $1 million, and put $2.5 million into a reno of its outlet in Chambly. With Chicoutimi now fully renovated, BMR plans to invest next in the Potvin & Bouchard store in La Baie.

“I am very proud of the end result of this major transformation project! And more so, I am immensely proud of the Potvin & Bouchard stores that are not only celebrating 85 years of business, but also positioning themselves for the next 10 years by building stores that stand out from the competition,” said Potvin & Bouchard’s managing director, Michel Leclerc.

BMR owns a total of four stores under the Potvin & Bouchard banner, with estimated sales of almost $50 million (source: the 2017 Who’s Who Directory —your helpful Editor). The new look expands the range of products available to Potvin & Bouchard’s base of residential and commercial contractors.

First RONA conversion to the Lowe’s banner opens in Edmonton

BOUCHERVILLE, Que. — Lowe’s Canada opened the first of its new model stores last week, in Edmonton. The new Edmonton North Lowe’s was converted from a former RONA Home and Garden, and combines features from Lowe’s and RONA’s offerings, to create a new model of Lowe’s stores in Canada.

With DNA from both RONA and Lowe’s, the new store features a more locally oriented product offering than Lowe’s has typically carried in the past, and carry over RONA’s expertise in dealing with contractors. In addition, trademark Lowe’s categories, including appliances and outdoor furniture, will figure prominently in this new store.

Other aspects of a traditional Lowe’s store include its private labels, brands such as John Deere, Husqvarna, and Cub Cadet, and a broader selection of fashion plumbing products such as tubs, showers, toilets, vanities, sinks, and faucets with the introduction of brands such as Kohler and Grohe. The store’s flooring section was expanded beyond what it had before, as well.

The conversion involved 16 weeks of construction, departmental sequencing of new racking and re-merchandising, branding, and IT conversion. The second store to undergo the switch to Lowe’s will be the Langford RONA Home and Garden store in Victoria. That renovation began early in June.

The company has also announced the opening in early 2018 of a Lowe’s store in Winnipeg.

Home Hardware’s growth strategy: new members and larger store footprints

ST. JACOBS, Ont. — Home Hardware has been pushing growth by seeking new members and supporting existing dealer-owners looking to expand. “Our growth strategy is multi-pronged and focuses on banner conversions, store expansions, market consolidations, greenfield opportunities, and store acquisition,” says Dunc Wilson, national director of business development.
 
Home Hardware often helps to support expansion by purchasing the land for new sites and leasing it back to the dealer-owner. As CEO Terry Davis explained to HARDLINES last year, the co-op has “a big annual capital fund to help dealers grow their business.”

Home Hardware also has a history of buying retailers outright. Its first serious real estate acquisition was the 55 home centres of Calgary-based Crown Stores, which Home Hardware bought in 1988. The 2000 takeover of Beaver Lumber added another 90-plus properties to Home’s portfolio.
 
In recent years, however, the focus has been on individual members’ operations to help their growth. Several store expansions or amalgamations have been announced in recent days. The grand opening of Morris Home Hardware (shown here), in the Manitoba town of the same name, brings together three buildings purchased in 2015 under a single footprint, expanded from 6,000 to 10,000 square feet. In Mackenzie, B.C., Mackenzie Home Hardware Building Centre and Hagen’s Home Hardware have joined forces in a single location with a 15,000-square-foot expansion.
 
Other stores are expanding on their own. Eskimo Point Lumber Supply Airport Services in Arviat, Nunavut, which joined the banner earlier this month, is in the market for a new and larger space. Roberge et Fils, in La Sarre, Que., which joined in May, is pursuing an expansion from 12,000 square feet to 14,500.
 
In the Muskoka region of Central Ontario, Parry Sound Home Hardware just celebrated a 50% expansion of its retail space. South of Quebec City, Groupe Brochu, which already owns two RONA-affiliated hardware stores and a farming supply store, purchased two Home Hardware stores, which it will continue to operate under the latter banner.

As fortunes tumble, Sears Canada obtains bankruptcy protection

TORONTO — Sears Canada has been granted bankruptcy protection by the Ontario Supreme Court under the Companies' Creditors Arrangement Act. Among other things, the Initial Order provides for a stay of proceedings in favour of the Sears Canada Group for an initial period of 30 days, subject to extension thereafter as the Court deems appropriate, and the appointment of FTI Consulting Canada Inc. as monitor in the CCAA proceedings.

The Initial Order also authorizes the Sears Canada Group to obtain debtor-in-possession financing of $450 million to provide the retailer with sufficient liquidity to maintain business operations throughout the CCAA proceedings.

The announcement comes as the giant retailer's shares continued their freefall last week, falling by more than 20% following a report by Bloomberg of the company's pending filing. Sears Canada says it “will work to complete its restructuring in a timely fashion and hopes to exit CCAA protection as soon as possible in 2017, better positioned to capitalize on the opportunities that exist in the Canadian retail marketplace.”

However, earlier this month, Sears Canada voiced “significant doubt” about its ability to pay its bills and keep operating after a shortfall in the financing it could line up. According to the Bloomberg report, it hired BMO Capital Markets to explore options—including a possible sale.

Sears Canada was spun off from its parent, Sears Holdings in the U.S., in 2012. However, that company, owned by billionaire Eddie Lampert, still retains a 12% stake in Sears Canada, while Lampert personally owns about 45% of the Canadian operation. The company is reportedly considering seeking court protection from creditors and could be sold off outright or pieced out.

In the meantime, according to the Toronto Star, Sears Canada is working to mitigate the bad news, reassuring shoppers that shelves will stay stocked and online orders will be shipped.

Sears Canada has 94 department stores, 23 Sears Home stores, and 10 outlets, with sales in 2016 of $3.42 billion. However, the company reported a first-quarter net loss of $144.4 million on revenue that declined by 15.2% to $505.5 million. It’s been bleeding red ink since 2014.

Despite the poor results in the first quarter, same-store sales for the period were actually up 2.9%. The company says it has invested heavily in upgrading a number of its anchor department stores in malls around the Greater Toronto Area in recent months. In addition, it rebuilt its front and back-end technology platform, redefined its brand positioning, revamped its product assortment, and upgraded its customer experience and service standards.

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RETAILER NEWS

ST. JACOBS, Ont. ― Home Hardware Stores plans to continue its support of major league baseball. The co-op signed a new deal with the Blue Jays this year, one that locks in for several years, according to Rick McNabb, Home’s VP of marketing and sales. “We see them as being a very key partner and they have a very young demographic across the country. We’re happy to align with that.” Home’s logo will remain behind home plate.

WINNIPEG — Ace Canada has announced the grand re-opening this past weekend of Andy’s Ace Hardware in Wikwemikong, Ont., at the eastern end of Manitoulin Island. Owned and operated by the Manitowabi family, the 10,000-square-foot store offers a mix of hardware, grocery, and general merchandise to serve the community. James Manitowabi and his five siblings took it over after their father Andrew retired in 1997. He had founded the business in 1966. “We were all put in charge of a different department,” explained James. He is responsible for grocery, hardware, and general merchandise, sister Jennifer is the office and administrative manager, and niece Shannon is the general manager. The grand opening kicked off on June 21 in conjunction with Aboriginal Day.

BOUCHERVILLE, Que. — Lowe’s Canada has announced it will open a new Lowe’s store in Winnipeg. Slated to open in early 2018, it will offer more than 40,000 SKUs and represents a $34 million investment. The 115,000-square-foot store will be at the corner of Kenaston Boulevard and McGillivray Boulevard. It will also be the retailer’s first Lowe’s-bannered store in Manitoba.

TORONTO — An activist shareholder wants venerable retailer Hudson’s Bay Co. to sell off some of its real estate. According to the Globe and Mail, Land and Buildings Investment Management of Stamford, Conn., which owns 4.5% of HBC shares, sent a letter to the board, urging the sale of store sites, which would reportedly be worth as much as four times the value of HBC shares. The retailer suffered deepening losses in its first quarter.

BURFORD, Ont. — Beauti-Tone, Home Hardware’s paint division, is celebrating Canada’s 150th anniversary of Confederation with the launch of the National Parks of Canada Colour Collection, 47 colours inspired by the country’s National Parks. Each palette includes colour inspirations and room images, and many feature additional interactive content, including sights and sounds from national parks, attainable through Layar, an augmented reality app for Android.

ATLANTA — Wall Street continues to give the thumbs up to Home Depot stock, as housing prices continue to rise in the U.S., while its e-commerce strategy is generating 20%-plus increases in online sales annually. According to the U.S. Census Bureau, retail trade in May for building materials, garden equipment and supply dealers rose 10.82% compared with the same month last year.

SUPPLIER NEWS
WARWICK, Que. — Boulanger & cie celebrated its 75th anniversary this month. The family-owned maker of mouldings and decorative wood products combined a tour of its main facility with a picnic on the grounds of a noted local cheese maker’s farm. Since its establishment in 1942, the business has seen technologies and product ranges evolve and expand.

TORONTO — Fairfax Financial Holdings reported that it has sold, through its subsidiaries, 14,235,644 common shares of Tembec, representing approximately 14.2% of the issued and outstanding shares. The shares were sold on the Toronto Stock Exchange at an average price of about $4.30 each. The divestment, intended to take advantage of recent appreciation in the shares’ value, means that Fairfax no longer holds a stake in the Montreal-based forestry firm, which recently announced it is being bought in a friendly takeover by a Florida cellulose company.

CORRECTION: Last week we reported that RCR will bring its sales in house for British Columbia, Ontario, and Quebec. However, we omitted to include Alberta in the list of provinces that will bring sales in house. Accounts in Saskatchewan, Manitoba, and the Atlantic region will continue to be serviced by outside agencies.

ECONOMIC INDICATORS
Home resales across the country dropped sharply in May, driven by a plunge in transactions in the Greater Toronto Area. A 25.3% drop in Toronto-area sales from April to May contributed to a 6.2% national decline in the number of homes sold. The drop comes on the heels of changes to Ontario’s housing policy, including a 15% tax on foreign buyers. The national average price for homes sold last month in Toronto was $863,910 and in Vancouver the average price was $1,110,376. (Canadian Real Estate Association)

Retail sales rose 0.8% to $48.6 billion in April. Sales were up in nine of 11 sub-sectors, representing 71% of total retail trade. Excluding sales at motor vehicle and parts dealers, retail sales climbed 1.5%. Sales at building material and garden equipment and supplies dealers increased for the eighth consecutive month, by 3.5%. This sub-sector has been trending upward on the strength of higher sales of home appliances, hardware, and tools. This was the largest percentage increase since May 2015. (StatCan)

OVERHEARD…
 “Our Niagara Falls store will be our 20th store, and the fourth new format store we have opened in the last 24 months. We continue to be committed to bricks and mortar retail, and are focused on delivering destination-worthy experiences and further enhancing our value proposition, both in-store and online. We see a bright future for physical retail that complements a strong digital experience.”
—Robin Lee, president of Lee Valley Tools, on the catalogue and mail order retailer’s recent opening of a store in Niagara Falls, Ont.

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