November 27, 2017 Volume xxiii, #45


“Success depends upon previous preparation, and without such preparation there is sure to be failure.”
—Confucius (Chinese philosopher, teacher, and politician, 551-479 B.C.)

IN THIS ISSUE:

  • Strategy of careful growth has enabled Patrick Morin to maintain its values

  • BuildDirect seeks cash, or buyer, as it enters creditor protection

  • German hardware show promises new products, new technologies

  • RCR seeks creditor protection to restructure finances and find buyer

  • PLUS: Lowe’s quarterly results, LBMAO celebrates, Loblaw’s new loyalty program, Drouillard honoured, Giant Tiger opens three stores, Suzanne Barwell now at Liteline, Ikea Canada sales soar, Kent to close a Central store, Wal-Mart’s results, acquisition of Tembec, U.S. housing starts, Canadian retail, and more!

Strategy of careful growth has enabled Patrick Morin to maintain its values

NIAGARA FALLS, Ont. — Meet Patrick Morin. The chain of building centres, based largely in and around the Montreal market, was started in 1960 by the eponymous Mr. Morin, and continues to this day as a family-run operation.

Daniel Lampron, the general manager of Patrick Morin, shared the company’s story at the Hardlines Conference, held recently in Niagara Falls. Although well known in its home province of Quebec, the company is less well known in other parts of the country, so delegates were eager to learn more.

“I have seven bosses, all named Morin, but the last name does not guarantee they will be put in charge,” he noted. Each of them had to begin in the business working at a range of jobs, working their way up and proving their ability to take on added responsibilities. Another important requirement was that they all work outside the company for two years.

All this careful structuring of the second generation of ownership is necessary for a dealer the size of Patrick Morin. With 21 stores and sales of about $300 million, the company is one of Quebec’s leading home improvement retailers. Stores range in size from 15,000 to 40,000 square feet of selling space and employ a total of 1,300 people. The stores stretch from Valleyfield to Trois-Rivieres, mainly on the North Shore, and centred mainly in the larger communities.

The company is also on a concerted expansion trajectory. Since 2012, it has added seven locations, in a strategy that makes sure each new store is working well before embarking on a new location. “We have control of our growth,” Lampron said. He added that certain categories—and customers—are currently getting more attention. Seasonal and outdoor living have seen strong growth, while the company has been looking for ways to attract more women customers. In fact, the two are complimentary, as outdoor has proven to be a category driven strongly by women.

Just a month before the conference, Patrick Morin introduced online sales supported by in-store pickup. “And in 2018, we will have more things to introduce.” The company, he admits, can’t compete against the likes of Amazon. “We don’t have the budget. So we have to do something different. I can’t give it away yet, so stay tuned.”

 

BuildDirect seeks cash, or buyer, as it enters creditor protection

VANCOUVER — Founder Jeff Booth resigned on October 31. That’s also the date that his online building materials company, BuildDirect, filed for creditor protection with the Supreme Court of British Columbia under the Companies’ Creditors Arrangement Act.

Established in 2012, the Vancouver-based company made headlines for selling large building products, everything from tiles and flooring to roofing, online. But over time, the company was a victim of its own success, and had difficulty keeping products in stock to keep up with demand.

In 2016, it moved from direct-to-consumer selling, with about 16,000 SKUs in stock, in favour of serving as an online marketplace, hosting products by other sellers. It raised its product offering to about 150,000 SKUs in the process. Companies can list for free, paying a commission to BuildDirect on each sale.

Today, a range of products, including decking, large appliances, bathtubs, moulding and millwork, and even heavy appliances, can be purchased on the BuildDirect website.

Since the October 31 CCAA filing, the company has managed to access US$7 million from an arrangement of US$15 million interim funding that had been negotiated before the bankruptcy proceedings. According to the latest details of the bankruptcy filing, the company has found investment assistance from Canaccord Genuity Corp. and Canaccord Genuity Inc., to help facilitate a sale or other refinancing.

A stay of proceedings has been extended until February 23, 2018.

 

German hardware show promises new products, new technologies

COLOGNE, Germany — Canadians who make the trek to Germany next spring for Eisenwarenmesse – the International Hardware Fair will find more than just products. The show, billed as the largest trade show for hardware and tools in the world, is beefing up its information program to offer vendors and dealers alike a glimpse into the next steps for the retail home improvement industry.

From March 4 to 7, 2018, more than 2,600 vendors from dozens of countries will showcase their latest products across a whopping 1.5 million square feet of exhibition space. Up to 44,000 manufacturers, buyers, and business leaders will gather to discover the latest home improvement products and explore the economic trends shaping the industry.

Some highlights of the fair:

  • A two-day e-commerce forum;
  • A stage in the middle of the show floor that will feature speakers, including representatives from Ali Baba, eBay, Google, and Amazon;
  • In conjunction with the German procurement and logistics association, BME, information sessions to help vendors work together to better streamline their logistics and distribution processes;
  • A number of awards programs to recognize the best and most innovative new products.

Organizers point out that the day has returned to its four-day format to better accommodate the desires of exhibitors to fulfill all their meeting needs. The show is held every two years.

(For more information about the fair, contact Darrin Stern: d.stern@koelnmessenafta.com or 1-773-326-9925.)

 

RCR seeks creditor protection to restructure finances and find buyer

BOUCHERVILLE, Que. — RCR International has entered into creditor protection under the Companies’ Creditors Arrangement Act. The filing was made on behalf of RCR International Inc. and its sister company in the U.S., W.J. Dennis & Company. Effective November 21, the companies have commenced restructuring proceedings and expect a similar filing in the U.S. through Chapter 15.

According Mario Petraglia, president and CEO, in a customer bulletin dated November 22, “We are pursuing this course of action in order to provide the companies with time to restructure their finances, while continuing normal operations. We have secured a $3 million debtor-in-possession financing facility from the Bank of Montreal, providing us with adequate liquidity to operate while we restructure our debt.” That includes seeking a buyer and Lincoln Partners Advisors LLC has been engaged as financial advisor “to perform a sales process of the companies to ensure the survival of the business as a going concern.”

In an interview with HARDLINES, Petraglia says the 70-year-old company was the victim of falling sales and an increasing debt load, “which resulted in tighter cash flow.” The company has cut costs, and its manufacturing facility in Longueuil, Que., has been closed temporarily since October.

Petraglia stresses that RCR and W.J. Dennis remain “very much in business and focused on securely positioning the companies and their stakeholders for a stable and successful future.”

RCR, and W.J. Dennis are owned by Austin, Tex.-based Peak Rock Capital, which will continue to support RCR through the process of finding a buyer. “We know there are interested parties. There are a people who have manifested their interest,” Petraglia says.

In the meantime, he stresses that it’s business as usual. No customers have been lost since the announcement, including the important Lowe’s business. “We continue to operate. We continue to take care of our customers.”

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RETAILER NEWS

MOORESVILLE, N.C. — Lowe’s has reported Q3 net earnings of $872 million and diluted earnings per share of $1.05. The results represent a dramatic gain compared to net earnings of $379 million and diluted EPS of $0.43 a year ago, as hurricanes in the U.S. Southeast drove consumer demand. Sales for the quarter rose 6.5% to $16.8 billion from $15.7 billion a year ago, with comparable sales increasing by 5.7%. Hurricane-related sales in the quarter were approximately $200 million.

OTTAWA — Giant Tiger, the junior department store chain, has opened three new stores across the country. The company “roared” into Mississauga and Owen Sound, Ont., and Winnipeg, and will hold grand openings in each city today. The stores range in size from 19,000 to 27,000 square feet.

 

 

BURLINGTON, Ont. — Ikea Canada announced total sales of $2.17 billion in Canada for the financial year ending August 31, an increase of 5.9% over the previous year. Retail sales in this country have increased by 33.5% for the giant furniture and home accessories company over the past three years. It claims to now account for almost 10% of Canada’s furniture sector. Online continues to do well: Ikea Canada had 95 million online visits in fiscal 2017 and e-commerce sales were up 26.7%.

GUYSBOROUGH, N.S. — Kent Building Supplies is set to close a store it took over less than a year ago. Central Building Supplies joined Kent at the end of last December, when the Irving family purchased it from Antigonish entrepreneur Steve Smith. The store was founded in 1999 as County Building Supply by Dorian Harnish, working with his son Mark, who told the Guysborough Journal that he is dismayed by the closure. He told the Journal the store’s fate was clear when Kent took over from Smith. “They don’t understand the culture of running a small business in Nova Scotia.”

BENTONVILLE, Ark. — Wal-Mart Stores posted its 13th consecutive quarter of U.S. same-store sales growth in Q3, while online sales swelled by 50%. The retailer, which recently negotiated a deal to offer Lord & Taylor-branded products through its online channel, beat expectations on several fronts. Revenue came to $123.2 billion and same-store sales in the U.S., excluding fuel, rose by $2.7%.

TORONTO — Loblaw has introduced a priority members’ program for its online sales. Called PC Insiders (for its President’s Choice brand), it offers additional rewards points, plus free home delivery for online purchases. Initially, the program is being made available to PC Plus credit card holders.

 

SUPPLIER NEWS
NIAGARA-ON-THE-LAKE, Ont. — Dealers and suppliers alike gathered in this historic town in Southern Ontario last week to celebrate the 100th anniversary of the Lumber and Building Materials Association of Ontario. LBMAO president Dave Campbell welcomed more than 200 people at a gala dinner, thanking the dealers who have devoted their time through the years to make the association successful.

MONTREAL — Rayonier Advanced Materials has completed the previously-announced acquisition of Tembec. The combined cellulose businesses will operate under the Rayonier name. Chairman, CEO, and President Paul Boynton welcomed the integration of Tembec in a release, calling the two companies “not only a good strategic fit but … also an excellent cultural fit.”

MONTREAL — Intertape Polymer Group reported Q3 earnings of $19.2 million, an increase of $13 million thanks in large part to lower costs and the non-recurrence of expenses associated with flooding in South Carolina last year. Revenue increased by 17.9% to $243.4 million, a result the company attributed to its acquisitions of Cantech and Powerband.

 

PEOPLE ON THE MOVE
Greg Drouillard, owner of Target Building Supplies in Windsor, Ont., has been honoured with the Industry Achievement Award by the Lumber and Building Materials Association of Ontario. In addition to operating a successful building centre, Drouillard, who is a member of the TORBSA buying group, has been a staunch supporter of the association through the years.

Derby Building Products, formerly known by the name of its flagship Novik brand, has announced the appointment of Ralph Bruno to succeed François Giroux as CEO. Bruno joined the company in 2014 as president. He was national sales manager at Trex Co. in the early ’90s and started Azek Building Products in 2000 with backing of owner Clearview Capital, now the stakeholder of Derby. He remained with Azek as president until 2009.

Suzanne Barwell has been appointed national account manager at Liteline Corporation in Richmond Hill, Ont. She was formerly at Osram Sylvania, where she spent a decade in a similar role. In her new role, she is managing major national retail accounts, including Home Hardware, Wal-Mart, TruServ, Federated Co-operatives, RONA, and Coop fédérée. (sbarwell@liteline.com)

Lowe’s has appointed Richard D. Maltsbarger, currently chief development officer and president, international, as chief operating officer effective February 3, 2018. In his new role he will continue to report to Robert A. Niblock, chairman, president, and CEO. Maltsbarger succeeds Rick D. Damron, who is retiring.

 

ECONOMIC INDICATORS
Sales at building material and garden equipment and supplies dealers rose by 2.6% in September, more than offsetting August’s decline. Overall retail remained relatively flat, edging up 0.1% to $49.1 billion but declining by 0.2% when gasoline is discounted. Hurricanes in the U.S. South, including Texas, led to higher prices at the pump. (StatCan)

U.S. housing starts in October rose by 13.7% to a seasonally adjusted annual rate of 1.29 million units, the highest level since October 2016 and second-highest in 10 years. Recovery from the negative impact of hurricanes and increased activity in the major Southern markets contributed to the boost. Building permits for the month were up 5.9% to a rate of 1.297 million units, the highest since January. (U.S. Census Bureau)

 

OVERHEARD…
“You can grow, or you can get bigger.”
—Daniel Lampron, general manager of Patrick Morin, on the strategy of careful growth his company follows to ensure that its values are preserved at each new location. He spoke recently at the 22nd annual Hardlines Conference in Niagara Falls, Ont.

“We have been in productive discussions with our lenders regarding refinancing and it has become apparent that the best way to address our financial challenges is to undertake a formal restructuring process.”
—Mario Petraglia, president and CEO of RCR International and W.J. Dennis & Company, in a bulletin to customers, on seeking creditor protection for the companies under the Companies’ Creditors Arrangement Act.


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