HHIQ_1Q_18_complete

MARKET REPORT
F LE
DEALERS FACE
WIDE RANGE OF
CHALLENGES,
OPPORTUNITIES
GOING INTO 2018
YT
0.2%
BC
11.9%
NT
0.2%
AB
12.4%
SK
4.7%
Canada’s retail home improvement market grew
at a modest but healthy pace in 2016 thanks to Canada’s
red-hot housing market, low interest rates, and ageing housing
stock—all factors driving renovation sales. And that modest growth by and
large maintained itself in 2017. But will the momentum continue into 2018?
MB
4.1%
NU
0.2%
ON
34.1%
QC
21.4%
NB
3.5%
NL
3.0%
NS
3.8%
PE
0.6%
I
n 2016, the Canadian retail home
improvement market grew by
barely three percent, while 2017
has proven to be steady, if not exceptional,
for most regions. A few exceptions persist:
the Greater Toronto Area of Southwestern
Ontario has seen healthy growth over
the past two years, and despite changes
last summer to real estate laws in British
Columbia, that province’s Lower Mainland
also remains strong. As a result, the
industry is forecast to grow by a slightly
higher rate in 2017 of 3.5 percent. Sales
growth for the industry over the year
ahead is expected to remain at or slightly
below that level.
HOW DID THE INDUSTRY
MANAGE IN 2017?
Dealers are varied in their response to
business conditions across the country, but
the overall mood appears tentative. Flat to
positive growth is being reported in some
parts of the Maritimes, particularly Nova
Scotia, while Newfoundland and Labrador
is experiencing a slump. Ontario is a
mixed bag: many dealers are flat or down
over last year, with the exception being in
the Greater Toronto Area.
In the West, Alberta dealers report some
growth and an expectation to be up, or
at least flat, over last year, suggesting that
market has indeed “bottomed out” finally.
British Columbia is the only consistently
positive story here, with dealers in that
province expecting to see positive sales
growth by year’s end.
STORE FORMATS DUKE IT OUT
Big boxes continue to be the biggest threat
to independent dealers, thanks both to
strong incremental gains by Home Depot
Canada and to new stores being built
by Lowe’s Canada. In addition, Lowe’s
remains committed to converting its
RONA Home and Garden big boxes to the
Lowe’s banner.
However, buying groups and co-ops
continue to represent the lion’s share of
the industry, both in terms of sales volume
Home Improvement Industry Sales Growth Year over Year ($millions)
2014 2015 2016 2017 (fc) 2018 (fc)
$43.764 $44.620 $45.949 $47.535 $49.050
3.7% 2.0% 3.0% 3.5% 3.2%
and number of stores. Most independents
are grouped within LBM buying groups
such as Independent Lumber Dealers Cooperative,
with collective retail sales by
its members of $3.8 billion, and TIMBER
MART and Castle, with estimated sales of
$2.8 billion and $2 billion, respectively.
The co-ops, Federated Co-operatives Ltd.
in Saskatoon, Montreal-based La Coop
fédérée, and UFA in Calgary, maintain a
powerful presence, as well.
Hardware stores as a sector continued
to see their sales collectively shrink in
2016, but only by 0.4 percent. The decline
is due mainly to efforts by the likes of both
Home Hardware and Lowe’s, through its
RONA division, to support their dealers
to expand from hardware stores into fullline
building centres, with the addition of
LBM. This format remains viable, however,
and sales overall are slipping as store
numbers fail to grow at the rate of other
retail formats in the home improvement
sector. But expansion of the Ace banner
in Canada, under license to Lowe’s Canada,
has been focused on smaller dealers
and is expected to help hardware stores
keep viable. Ace Canada now has about
80 stores, most of them traditional hardware
stores and some with building materials,
as well.
10 FIRST QUARTER / 2018
Hardlines Home Improvement Quarterly
www.hardlines.ca