Hardware Retailing

DEC 2018

Hardware Retailing magazine is the pre-eminent how-to management magazine for small business owners and managers in the home improvement retailing industry.

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HARDWARE RETAILING | December 2018 42 C anada's retail home improvement industry grew at a healthier rate than anticipated in 2017, but conditions affecting the industry point to a slowdown through the end of 2018. That moderation is expected to continue into 2019, as well, according to the Hardlines 2018 Retail Report. Sales by hardware stores, building centers and big boxes; Canadian Tire; and related sales by Walmart and Costco; were up 5.1 percent year over year in 2017. But retailers' sales are forecast to slow down to below 4.5 percent annually to the end of 2019. All Retail Formats Experiencing Growth Retail formats aren't faring uniformly. Larger organizations, such as Home Hardware and Lowe's through its RONA division, have been supporting their operators by helping them expand services with lumber and building material divisions. This has led to expectations of higher growth levels for those companies compared to smaller independents. The smaller hardware store format remains viable, however, even though sales overall are slipping as store numbers stay pretty flat. Though their net sales slipped by 1.4 percent in 2016, home centers and building centers rebounded with 8 percent growth in 2017. Retailers across the country saw business increase dramatically. The home centers and building centers are most widely represented in Canada by the lumber and building materials buying groups, which support independent retailers with group purchases, mainly in key commodities such as lumber, plywood, roofing and insulation. Sales through the big boxes in Canada are holding steady and continue to account for about one-quarter of all sales in the retail home improvement market. This sector continues to grow despite no new stores from Home Depot. Lowe's Canada continues to invest in its RONA and Reno-Depot big-box stores. However, big boxes still have far less market share in Canada than their counterparts in the U.S. Top Retail Groups Continue to Make Gains Consolidation continues in Canada, with four retail groups composing far more than half of all sales in the Canadian industry. The retail groups are Home Depot Canada, Lowe's Canada, Home Hardware Stores and Canadian Tire. Lowe's takeover of RONA in 2016 has accelerated consolidation. The four retail groups' market share accounts for almost 60 percent of the market. On a regional basis, the greatest growth is forecast to come from the west, particularly in Alberta, as the economy there continues to gain steam. That province's retail home improvement sales are expected to grow by more than 5 percent annually. British Columbia is close behind, with anticipated annualized sales growth of 4.8 percent through this year and 2019. Saskatchewan will also perform well to the end of 2019. Modest Growth Forecast Retailers have faced headwinds, despite some positive developments, including a favorable start to 2018. Extreme weather conditions turned out to be one more challenge for retailers. The summer was too hot in most parts of the country to favor outdoor projects, while forest fires, especially in western Canada, had a further negative effect on the industry. That was followed by a cold autumn, furthering discouraging outdoor activities and projects. A weak housing market, rising interest rates and mixed consumer confidence heading into 2019 mean retailers should prepare for moderate growth in the coming year. The Hardlines 2018 Retail Report forecasts growth of about 4.2 percent in 2018, a dip from 2017's level, and stability in 2019 and 2020. Canadian Retail Repor t Canadian Retailers Will See Modest Growth Provided by Michael McLarney, managing director of NRHA Canada

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