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HI News V3 No. 10: Bunnings Australia grows
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The development of Bunnings revenue and EBIT since 2010
Joe Galli, CEO of TTI Group, being interviewed on Bloomberg Asia
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Home improvement corporates dominate the latest issue of HI News: Bunnings, Techtronic Industries and GWA Group. We analyse their latest financial results and strategies.

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HI News V3 No. 10: Bunnings Australia grows

Tasmanian hardware retailer, Kemp and Denning posts a major loss in FY2016-17 and Home Hardware store owner Craig Stibbard continues his vocal protest against changes to retail trading hours in Queensland.

In terms of supplier news, fastener brand Senco has been bought by Kyocera and Mr Fothergill's buys a UK tool business. Closer to home, Adelaide Brighton said it will raise prices on pre-mix cement again.

Our regular section on statistics takes a closer look at the end of the effects of historically low interest rates on housing. We also launch the People section which features Paul Hoye, managing director of Kilingspor Australia.

European home improvement group, Kingfisher has taken over the Praktiker stores in Romania. In the UK, Travis Perkins has raised prices to help offset rising costs.

US-based big box retailers Home Depot and Lowe's compete directly for pro customers. Ace Hardware and True Value also report on their second quarter results.

Backpacks and other soft-side storage products are taking over the traditional metal toolbox. Other products in this issue include Boral Timber's newest flooring and Cub Cadet's brushcutter.
Bigbox
Bunnings-Wesfarmers results FY2016-17
Bunnings FY2016-17 results
HNN Sources
Bunnings revenue and EBIT
Store numbers and growth
Click to visit the HBT website for more information
The headline element in the full-year results for Australian big-box home improvement retailer Bunnings is its return on capital (RoC) ratio. For its Australian operations, this hit 41.8%, the highest it has been in eight years.

Masters Home improvement, the failed effort by Woolworths to compete with Bunnings, finally exited the market in December 2016. In 2017 Bunnings' heavy investment in expanding its network is tailing off, and some operational expenses, such as staff hours, have moderated.

For Bunnings as a whole, however, including its UK-based operations, RoC came in at just 30.3%, the lowest it has been since 2014. Those overseas operations lost $89 million, despite considerable investment in refurbishing Homebase, the retail operations Wesfarmers acquired from the UK's Home Retail Group.

The concern among investment analysts is that, in the wake of Masters' exit, Wesfarmers has conjured up an equivalent problem through an uncharacteristically poorly disciplined and hastily executed entry into the UK market. With conglomerate parent Wesfarmers facing the handover to a new CEO in November 2017 - one with banking experience, but no retail experience - there is a question if the loss-making BUKI operations can be restored over the year to come.
Wesfarmers

Meanwhile, Wesfarmers has produced what it describes as a "record level of earnings" for its FY2016/17. In results released on 17 August 2017, the company reported sales were $68,444 million, up by 3.7% on the previous corresponding period (pcp), which was FY2015/16.

Earnings before interest and taxation (EBIT) were $4402 million, up by 27.2% on the pcp. Net profit after taxes for the year was $2,873 million. This represents as increase of 27.6% on the pcp, if write-offs of $1844 million are excluded from the pcp results. (The FY2015/16 write-offs related to a revaluation of the company's Target retail operations and other assets.)

In comments reported in the Wesfarmers results news release, Mr Goyder stated:
The results achieved during the year demonstrated the strength of the Group's conglomerate structure, as well as our focus on cash generation and capital efficiency. A strong recovery in the performance of the Industrials division reflected higher earnings across all three business units, and was driven in particular by higher coal prices and increased coal production in the Resources business. Retail earnings were also above the prior year, supported by continued strong momentum in Bunnings Australia and New Zealand (BANZ), Kmart and Officeworks.

Coles overall saw revenue fall by 0.1%, with EBIT declining by 13.5% on the pcp. Its food and liquor business had returned a lift in revenue of 1.6%, but the convenience area recorded a loss in revenue of 8.2% compared to the pcp.

Kmart saw revenue lift by 7.5% on the pcp, with EBIT gaining by 17.7%. Target's sales fell by 14.6% on the pcp, while EBIT remained negative overall, but was positive by $3 million, with the omission of significant items. Meanwhile, Officeworks saw revenue lift by 6.1% on the pcp, with EBIT climbing by 7.5%.

In Resources, revenue increased from $1008 million in the pcp to $1746 million in the reported year, a lift of 73.2%. EBIT was $405 million, up from a loss of $310 million in the pcp.
Bunnings

Bunnings now operates in two divisions, Bunnings Australia and New Zealand (BANZ), and Bunnings United Kingdom and Ireland (BUKI). Michael Schneider is the overall CEO of the combined Bunnings, and also managing director of BANZ. Peter (PJ) Davis is the managing director of BUKI.

BANZ revenue came in at $11,514 million, up by 8.9% on the pcp, while EBIT was $1334 million, up 10% over the pcp. Total store sales growth was 8.9%, while store-on-store (comp) sales were 7.3%. BANZ delivered a return on capital (RoC) of 41.8%, up from 36.6% in the pcp.

The company noted that results for the fourth quarter of 2016/17 were particularly strong, with total sales up by 11.4%, total store sales up 11.7% and store-on-store sales up by 10.4%, as compared to the fourth quarter of 2015/16. During the reporting year, Bunnings opened 18 new trading locations in total, consisting of nine warehouses, eight small stores, and one trade centre.

BUKI reported revenue of $2072 million (GBP1229 million). This generated a loss of $89 million (GBP54 million). The company reports that for the fourth quarter of 2016/17 total sales decreased by 6.8%, with store-on-store (comp) sales down by 4.3%, as compared to fourth quarter 2015/16. However, transaction numbers for the quarter were up by 3.2%.

BUKI opened four Bunnings Warehouse stores during the reporting period, three in East England and one in South England. The company also closed nine Homebase stores, reducing the network size to 251.

Total revenue for Bunnings was $13,586 million, up by 17.4% on the pcp. EBIT was $1245 million, up by 2.6% on the pcp. The overall home improvement operations delivered a RoC of 30.3%, down from 33.7% in the pcp.
Comments

In his overall remarks on the company's performance, Mr Goyder stated:
Bunnings in Australia and New Zealand recorded strong earnings growth of 10% after expensing a number of matters relating to the store network. Homebase's trading performance in the UK and Ireland was affected by the pace of repositioning the business. Pleasingly, the four Bunnings pilot stores opened during the year have been trading well as has the fifth, just recently opened.
We continue to be excited about the opportunity in the UK and Ireland, albeit trading in the Homebase stores is weaker than we would like. We are strengthening the team and working hard to make this a good investment over time.
BANZ

In his comments on BANZ, Mr Schneider began by highlighting the retailer's progress in light trade sales:
Sales growth was strong in both our consumer and commercial segments, with very strong performance among our light commercial segments, reflecting the good work that's gone into product innovation and offerings relevant to the various trade segments we serve as well as improved pricing in digital engagement.

The subject of trade sales came up later in his remarks as well:
Our engagement of light trades as well as deeper relationships with larger builders ensures we're well-positioned to meet the needs of this sector of the market.

Mr Schneider also highlighted some of the extensive work that has been undertaken to significantly upgrade the existing store network:
The images on the bottom of this slide show the demolition work underway at Caringbah and an illustration of our new warehouse, which gives a sense of the scale of these sort of projects. As we continue to develop our network, it's likely that similar scale developments will become a feature of our network planning.

In the formal accounting documents accompanying Wesfarmers 4e report, it was mentioned that one negative offset to the good earnings growth was:
...higher store closure provisions within BANZ's trading results, arising from the agreement with Home Consortium for new sites, together with additional writedowns in the second half related to future network changes and in-store display assets.
Further investment in store upgrades and category refresh works was supported by a disciplined capital expenditure program.

In his remarks, Mr Schneider also said:
Of note is our expectation that we'll be able to finalise our lease arrangements with the Home Consortium later this year, which will enable us to develop the remaining Masters sites that we've indicated we'll move into during the second half. This will also see an increase in capital expenditure this year.

The formal documents stated:
Access to the majority of the former Masters sites remains dependent on the outcome of the valuation process between the two joint venture partners. In the meantime, agreements have been reached with landlords of two stores and conversions are well progressed.

Taken together, these remarks may indicate two things. The first is that Bunnings' expansion plans for the near future may be more concentrated on improving its existing store network, rather than in further geographic expansion. It is possible that, having had the opportunity to examine the higher amenity warehouse stores that Masters built, it may incorporate many of those features into its own future builds. That benefits consumer, of course, but it also benefits Bunnings staff. (Some of the older warehouses are not pleasant places to work in at the dead of winter or the height of summer.)

Secondly, there may also be a hint here that Bunnings is increasing its efforts in the trade area to some extent. With some of the turmoil generated by the acquisition of the Home Timber and Hardware Group by Metcash, and some significant independent hardware store closures over the past six months, Bunnings may see room for expansion.

Of course, it is also necessary to issue the usual Bunnings warnings: objects that appear in the mirror of the results announcement may be obscuring other strategies directly behind them. For example, Mr Schneider made no mention of a pending deal with GWA Group.

This was mentioned in that company's results announcement by its CEO, Tim Salt:
Finally, an area where we haven't been as focused and we're starting to wake up to the opportunity, is in assisted living, which some people call age care, but that's an area that Bunnings are certainly themselves looking to drive harder and we're partnering with them very strongly now to create growth opportunities both for us and for them in that space.
BUKI

It is hardly surprising that BUKI attracted a good deal of attention from analysts. Mr Schneider laid out a staunch defence of its operations and future prospects. He began by outlining those areas where BUKI had suffered setbacks:
Trading during the year was impacted by price deflation following the introduction of Every Day Low Pricing across the Homebase business as well as lower volumes of high-value kitchen and bathroom sales as those categories were significantly repositioned away from an installation and in-home services model.

He went on to outline what BUKI was doing to mitigate these problems:
Our new range of kitchens is now in all pilot stores. A refresh and relaunch of this offer across the Homebase network is now underway. Whilst we are pleased with the new offer, we are conscious it will take some time to get traction with customers as they have become very used to a promotion-driven installation model across the market.

Expansion plans, according to Mr Schneider, include up to 20 Bunnings stores in the UK by the end of calendar 2017.
Our aim is to end this calendar year with between 15 and 20 Bunnings stores open or near completion. These will give us some important benchmarks to trading patterns and customer participation across the northern winter. As we've always said, further investment is predicated on successful pilots. Proof of concept is a very big area of focus for the business in the year ahead.

He concluded by admitting to the difficulties BUKI faces, but reiterated that this is a long-term project.
I expect trading to remain challenging for Homebase at least in the short-term as customers continue to adjust to the new offer. In addition, until we reach sufficient scale with the roll out of the Bunnings format, business performance will continue to be negatively affected by disproportionate non-operating costs and disruptions associated with the new store openings. As I said before, this is a significant long-term transformation project and PJ [Davis], the team and I are committed to driving the agenda hard in the year ahead.

Respected analyst David Errington of Merrill Lynch picked up on some of these points in his questions:
On BUKI, one of the most concerning things I've heard on this call was Mike saying that you're trying to convert UK customers to a non-promotional offer.
Now you've lost a lot of money in this business this year. You lost - the biggest trading period, you've lost nearly $30 million, and that's your best trading period. And you're going to try to convert a market. Now most of us who have covered whether it be wine companies or the UK retail is the whole UK market is a promotional market, that's what the UK customers are based - that's what they deal on, whether it's BOGOFs [buy one get one free] or whatever it might be.
You're going to try to convert the market to being non-promotional. That, to me, is a real worry, and I'd like to hear why you think that strategy is going to be successful going forward.

Mr Schneider responded to this criticism by saying in part:
We're seeing from the first five pilot stores that have been opened that when you're really clear on what EDLP is and you really strive to create breathtaking value for customers, they trust it and they shop with the store. So we're seeing that in the transaction sales [going] up ... in the pilot stores.

He went on to agree that EDLP was "no silver bullet", but said this was only part of the developments at BUKI:
The other thing that we've got is a whole lot of work happening now around different types of marketing collateral, both traditional and digital, to engage customers in the Homebase business. It's going to be a long slog, but certainly from what we're seeing in the way we've established the Bunnings pilots that they're performing well on an EDLP basis.

Mr Errington responded with an acute point:
But what's the worry, Mike, [is] that the Homebase stores, which is the bulk of the priority - the 260 Homebase stores that you're converting to being non-promotional. What's the risk that they turn into a real disaster?

Mr Schneider agreed that there was a risk, but sees it as being offset:
Well, I guess there is a risk. I think the challenge that the team have got in front of them and the work that we're doing is all about positioning the stores as a core home improvement and garden offer, and that's one of the big things that's sort of underestimated, I guess, in seeing the transition... It will take time for customers, irrespective of the pricing framework, to actually understand what those stores are there for, because that market's grown up with that business being something different.
Analysis

For what was a relatively tough year through at least three of its quarters, the results from BANZ are quite good. Not only did weather play a role in decreasing sales, but there was also, nearly a year ago, a high level of discount sales activity coming from the closing Masters stores.

If there remains an open question around Bunnings' future, it involves the company's commitment to digital, online engagement. While there has been something of a dismissal in the past of the potential effect the entry of Amazon could have on the home improvement industry in Australia, it is worth noting that analysts this year have been sounding a note of caution about home improvement retailers The Home Depot and Lowe's Companies as regards competition coming from the biggest online retailer in the world.

This has been partly fuelled by Amazon's move into selling larger home appliances sourced from Sears, but the greater point is that much of what Amazon currently stocks can suck sales away from home improvement: flashlights, lighting, batteries, light globes and so forth. Certainly, Amazon is better established in the US, but The Home Depot is headed for 2017 sales of USD100 billion and EBIT close to USD15.5 billion, yet is regarded as vulnerable.

However, what has really drawn most analysts' attention is the activity at BUKI, whose success or failure could have consequences for what BANZ does here in Australia. To understand why analysts are so concerned, and why the investment in BUKI - only 8% of total Wesfarmers capital, according to incoming CEO Rob Scott - is seen as so critical, it's a good idea to look at how the different Wesfarmers interact, and how this plays into Wesfarmers' competition with its main rival, Woolworths.
Segment overview

Understanding the interplay between the different activities at Wesfarmers is of particular importance at the moment, as Mr Goyder is set to be replaced by the person who has managed Wesfarmers' industrials segment, Mr Scott, at the company's annual general meeting in November 2017.

Speaking to a gathering at the Melbourne Business School in May 2017, Mr Goyder said:
I don't worry too much about legacy. I'll walk to the next challenge. Rob [Scott] will change things, and he should change things.

Mr Goyder went into particular detail about the importance of the Wesfarmers board:
I was lucky. I always had a board that was patient. When I started at Wesfarmers, the board were all farmers, and now I think I'm the only farmer. There's a culture of being patient.

This comment is notable, as some analysts have suggested Mr Scott could be overly influenced by the current chairman of the Wesfarmers' board, Michael Chaney. Mr Chaney was managing director of Wesfarmers immediately prior to Mr Goyder, and he was the primary instigator of setting up Bunnings, modelled on the US home improvement big box operator Home Depot.

There are two areas at Wesfarmers Mr Scott will need to consider seriously. The first is exactly how a conglomerate such as Wesfarmers can function most profitably in the modern era. To what extent does each business division remain in its own operational silo, and to what extent are resources shared?

The second is how the company manages its ongoing competition with Woolworths. At the moment the two companies are locked together in a duopolistic struggle over several retail markets - groceries, liquor and discount fashion - while, external to this struggle, the overall retail market continues to fragment, due to the entry of overseas competitors, and increased online competition.

These two areas interact in interesting ways. In fact, if you wanted a tagline for this year's annual results from Wesfarmers it might well be "Grant O'Brien got one thing right". That one thing that Mr O'Brien - former Woolworths CEO and author of its disastrous rollout of Masters Home Improvement - got right was that Bunnings posed a direct threat to Woolworths' grocery business.

This year, sales for Woolworths supermarkets in Australia rose by 4.5%, while EBIT fell by 2.4%. Coles, as mentioned above, saw EBIT decline by 13.5%. However, this represents less of a "winning" or "losing" situation, and is more an indication of how aggressive each retailer has become. As the managing director of Coles, John Durkam, put it in his remarks to analysts:
We saw significant investment from our competitors, combined with a subdued consumer market. In response to these conditions, we took the deliberate decision to use FY 2017 to invest in the long-term sustainable growth of the Coles business.

Wesfarmers can accept that kind of decline in Coles earnings as an investment in lower prices and gains in market share, because it has higher overall earnings, and more diversified depth, than Woolworths. Bunnings is an important contributor to that.

It is also worth remembering just exactly how badly Masters and the mismanagement of its grocery business has affected Woolworths. Woolworths' market cap in 2007 was about $33.3 billion, while Wesfarmers at that time was at $17.7 billion. Allowing for inflation, that would translate into over $40 billion for Woolworths in today's dollars, and $22 billion for Wesfarmers. Today, Woolworths is still at around $33 billion, and Wesfarmers is around $48 billion.

It's not really possible to make a straight comparison on a market cap basis over time (due to acquisitions and divestments, in part), but this does give something of a picture of what Woolworths has lost.

This does not mean, however, that Wesfarmers has "won", or even that it is currently winning. Woolworths remains a strong competitor. The current CEO of Woolworths, Brad Banducci, appointed 18 months ago to the role, has managed to move its grocery business in a positive direction. In discount fashion, Woolworths' Big W retailer remains a disaster, and last year, through a major writedown, Wesfarmers acknowledged its failure with Target. Both operations could not be sold in the current market, and neither company can shut down its fashion retailer, as this would instantly hand an advantage to their competitor.

The key strategy for Wesfarmers is to continue to fight what has become a war of attrition, between two competitors which are good at customer retention, but less good at increasing market share. Woolworths, in contrast, simply must innovate, potentially through increasing vertical integration in fresh food. That comes at the cost, though, of a higher risk profile.

In this context, for some analysts Wesfarmers' investment in BUKI is similar to seeing a long-distance runner sign up for a 400 metre sprint right before the main race. It's a distraction, requires capital, and has an uncertain outcome.
BUKI

Wesfarmers' own point of view is quite different. Far from being a possibly destabilising development, the BUKI expansion is seen as potentially providing a form of longer-term stability.

The expansion of the Bunnings store network in Australia in response to the launch of Masters was definitely an excellent strategic move, but it did open the company up to further risk in the event of a downturn.

That is because, once a store network has expanded, there is no simple way to diminish that exposure. While the housing market currently continues to perform well, there is little doubt that at sometime in the next decade the market will contract, ceasing to grow at its current accelerated rate. By expanding overseas to the UK and Ireland, Bunnings is gaining entry to an economy that is associated with the Australian economy in only a minor way. In the event of a downturn, it could provide a much-needed continuation of growth.

It is also a matter of timing: if Wesfarmers is to expand overseas, then late 2016 was a once-in-a-decade (at best) event. With Bunnings coming directly off a five-year campaign to reduce the impact of Masters, it was over-staffed with highly competent executives at the peak of their game, and teams existed which were used to working on aggressive expansionary tactics.

That said, there is little doubt that Bunnings did underestimate the depth of the task BUKI represented. One part of that was that Homebase turned out to be, operationally for Bunnings, in worse shape than thought. The more important aspect, though, was that Bunnings did not understand how difficult making the necessary adjustments to a different culture, and a different market position, would be.
Kitchens

The place where the need for this kind of adjustment has become clear was revealed by Mr Davis during a site visit by investment analysts to Bunnings UK in mid-March 2017. In a tense question and answer sessions with Mr Errington, Mr Davis admitted that sales in the kitchens and bathrooms had not performed as expected. In part Mr Davis said:
To be fair we didn't expect to lose the volumes in kitchen and bathrooms that we did. All right. So some of the strategic moves and the repositioning of the business have had impacts that we didn't project into the future. But we are reestablishing that right now.
...
Well kitchen and bath [originally] consisted of] five brands. Some of it is produced in Germany, some of it is produced by one of our key competitors in this market. Three of the brands have not come across from HRG [Home Retail Group, former UK owner of Homebase].
So we are going through a major transition in relation to kitchen and bath. Key principles are that we do not want to support one of our major competitors, in manufacturing, key principles are that we want a simple execution. We have closed installation down because we don't believe that it is key. We believe that, people will tell you can't sell kitchen and bathrooms unless you install them. We'll go talk to some other big players in the world that don't install kitchen and bath, including ourselves in Australia.

Mr Errington then asked:
But what about in the UK. Do they expect you to install in the UK?

Mr Davis replied:
But we had already had a large proportion of our business in this market that is not installed. What we want to do is to grow the non-installed part so that... Some of the issues we had were in remedials. So after a kitchen or bathroom is installed in someone's house, prior to us owning the business, we would've had to go back and repair it, and there are a lot of costs associated and a large team that were going back and fixing kitchens and bathrooms.

It would seem that BUKI's solution to the kitchen problem has been to get its Australian supplier, Kaboodle, to design kitchens it thinks are suitable for the DIY UK and Irish markets, with a slight rebranding to "Kit+Kaboodle". Marketing for these kitchens has been launched in a brochure and on the Homebase website.

As far as HNN can tell by looking at the illustrations, these seem as serviceable as any Kaboodle kitchen. The brochure goes to great lengths to assert the quality of the products, including a 10-year warranty, and a "lifetime advantage" extension of the warranty for customers who install kitchens in their principal place of residence.

The parts of the brochure that deal with the mechanics of kitchen selection and installation are well done as well, following the pattern of Kaboodle's Australian marketing.

However, much of the actual front-of-book display marketing is much less successful. This begins with a rather odd naming system. Two styles of kitchen are offered, classic and contemporary. The names for the classic styles are: steamer, roaster, griddle, poacher and baker. The names for the contemporary styles are glaze, simmer and miller.

The copy used to describe these kitchens seems less than entirely professional. This begins with the airy paragraph:
So, we found a way that families can save and still enjoy designer styling with high-end kitchen features. Imagine a kitchen designed by you, that comes in a box and is easily put together. The results? Take a look through our brochure and see for yourself!

Not great, but not awful. The actual descriptions of the kitchens are less successful.

For the "steamer" kitchen:
Steam up a new kitchen in your space with my solid timber doors! Our Shaker style doors come in natural oak and two painted finishes - just in case you want to tone me down. My classic style is adaptable to suit both traditional and modern style kitchens.

For the "griddle" kitchen:
Try using my light blue country styled doors in your kitchen for a modern take on traditional. My retro farmhouse look is sure to steal glances and will bring your space to life. You'll be able to cook up a storm in no time!

For the "poacher" kitchen:
I am country, classy and everything in between! My poached cream doors with stylish grooves are an everlasting look that won't date your space. I work wonders with a timber worktop and plenty of natural light.

("Poached cream", as far as HNN can tell, is a form of Polish moulded custard.)

Leaving aside the pronoun confusion in the first example, this copy seems to be emulating the text of a first-year reading primer. The marketing merit of conversationally inclined kitchen cabinets is somewhat questionable. It is not an approach that shows an effective track record elsewhere.

The contrast with kitchens offered by B&Q is quite strong. Cooke & Lewis Carisbrooke, Santini, Stonefield, Sandford, Chilton, and Cooke & Lewis Appleby are names of kitchens offered by B&Q. The description of the Chilton White Country Style kitchen reads:
Our Chilton White Country Style kitchen is tastefully traditional with modern updates for that easy, laid-back atmosphere. White units on white walls are a trend-led feature, anchored by a darker statement worktop, completing the look.

That is professional copy. Equally, the kitchen images from Kaboodle are adequate, but the images used by B&Q to promote its kitchens, to an existing, well-established market, are more professional, showing people in the kitchens, and adding key background elements.

As HNN has mentioned above, Kaboodle is generally a competent company when it comes to marketing, making a little go a long way. What seems to be happening in this case is that the company is being called on to manage a very difficult task - essentially the introduction of a new category of kitchen to a part of the market unfamiliar with the product - with only a very limited budget, limited means, and an imperfect understanding of the market it is approaching.
Structural problems

The point of this is not at all to criticise Kaboodle. It's that this minor misstep in marketing points to larger possible problems at BUKI. To really get to the roots of what that problem may be, it is helpful to go down a theoretical path.

A helpful source is one of the more popular market development books of recent times. Jobs to be Done: Theory to practice by Anthony Ulwick has been a very influential work, especially on Clayton Christensen, author of The Innovator's Dilemma, which gave us the modern business theory of "disruptive innovation".

To read the rest of this article, please download edition 3-10 of Hi News:
HI News Vol.3 No.10: Bunnings-Wesfarmers results 2016-17
Companies
TTI 2017 first half results presentation
Joe Galli, CEO of TTI Group, being interviewed on Bloomberg Asia
HNN Sources
Ryobi's best-selling ride on mower
Milwaukee Tool has entered the drain clearing business
Subscribe to HNN weekly e-newsletter
CEO of global power tool and floorcare manufacturer Techtronic Industries Group, Joe Galli, presented the company's results for the first half of FY2017 recently.

Following is a transcript of his presentation, edited for the sake of clarity.

It is a pleasure to share with you record breaking results once again. Sales in local currency were actually up over 8% for the first six months. That reflects our ongoing guidance of growing strongly at a single digit. The Milwaukee growth engine was up again, over 20%.

Our power tool equipment segment demonstrated outstanding growth and momentum. In the first half it was up 12.5%. I will share more detail with you in a moment about that. There are some fantastic highlights that made up that extraordinary level of growth.

Floor care down 12%. That number obfuscates a bit the momentum and the progress we are making in floor care. First of all we exited our shredder business which we were in last year. That was a significant business that we dropped completely.

Secondly, the floor care cordless stick-vac market, stick-vac business for TTI in a number of different brands was actually up over 50% in the first half. So our cordless floorcare focus area is growing like crazy. Of course the corded, the traditional legacy business, which was a big part of our floor care business in the past, is down sharply, and will continue to decline.

The good news is that our cordless growth will overwhelm that. We have a bright future in our floor care business as you will see in the coming years.

We were very excited about our first-half performance in gross margin. We were up another 50 basis points this year, which continues an extraordinary trend. Really it is a record-breaking trend. Our EBIT is up 15% on sales growth of 7.3%. That is after currency. This shows outstanding leverage.

We actually maintained SG&A at a flat level, although we are investing like crazy in research and development on new products, which you will see in a moment, we still were able to generate excellent leverage. EBIT growth up over 15% is something we were excited about.

Gross margin as we pointed out was up 50 basis points over last year first-half. This is encouraging. But when you look back for a moment on what we have been sharing with you for the past nine years, we have actually increased our gross margin as a percentage of sales over nine consecutive years from the 31.5% starting point in 2008, to this year's 36.6%.

This is a track record that we are proud of. I can assure you that this trend will continue over the next five years. We have so much high-margin, accretive new product on the way that we believe we can continue to drive gross margin to higher and higher levels, which will generate increased EBIT percentages as we go forward.

One of the basic productivity measurements we always use, is sales growth versus headcount, once again we grew sales 8% in change, while headcount grew by 2.7%. So, with all the investments we are making in geographic expansion, around the globe, with all the money, and all the heads we are pouring into research and development, and product management, to generate this kind of productivity and leverage in headcount is encouraging. I am very pleased with our team's disciplined performance in controlling these expenses.

We were able to grow our power equipment business in all regions. Actually, when North America has the slowest level of growth, you know that our geographic expansion efforts are gaining great traction. I was really excited about how our

European team performed in the first half. And, of course, rest of world means Australia, New Zealand and South Korea, and those numbers are exciting as well.

And then, when you shift gears and look at only Milwaukee, Milwaukee was once again up over 20% in the first half of 2017. That 20% is an exciting number on a small base, but when you have a significant base, which we now do in Milwaukee, 20% is not so easy to generate. And yet we are committed to a 20% growth level on Milwaukee this year, the next five years.

I don't think we have even scratched the surface yet in terms of the long-term potential of this vast cordless, industrial market that we are developing with our technology and our new products.

You know, the geographic performance of Milwaukee is also a highlight. Again, North America up almost 20%. I was really proud of our European team. The European theatre is a tough environment. And yet throughout Western Europe, actually Eastern Europe, including Poland and Hungary, Czech Republic, Slovenia, Bulgaria, Romania, etc., these Eastern European countries are really selling Milwaukee like crazy.

And of course once again, rest of world means Australia New Zealand and South Korea, where we are growing at rates that are unprecedented. It is very exciting where this is all going to lead.

Now in the first half, our largest competitor actually reported impressive results, in fact our largest competitor announced that their organic growth for the last six months of 2017 for their tool and storage business, which is comparable to our power equipment business, they were up 7.1% in the first half. And we were impressed with that. That shows good performance.

Certainly our competitor trumpeted that as an outstanding performance. Except that, we were up 12.5%. Of course, Milwaukee is up 21.5%, but if you take Milwaukee out, our DIY brand was up 10.4%. That is organic growth.

Even the tactical AEG brand was up almost 10%. So, while our competitor is doing well, you can see that there is nobody taking any market share from TTI. And I can tell you that there will be nothing but a continuation of this kind of trend, over the next five years with the new product flow that we have on the way.

There is one other interesting thing. You know, a lot of investors have asked me about a new, flexible voltage launched by our largest competitor. I have been answering these questions for nine months. And it is interesting, that since our competitor launched this flexible voltage cordless system, our growth rate in Milwaukee cordless and Ryobi cordless have increased.

So, while our competitor are doing great with their program, I'm sure, we are doing even better than we were before they launched. So, I think it is obvious that there is going to be no slowdown in Milwaukee, or Ryobi cordless growth, based on competitive actions.

This is an example of our strategy at TTI. We don't worry about what our competition is doing. We don't worry about macro economic issues beyond our control. Or political issues that are brewing in various parts the world. What we worry about, is things that we can control.

New product development, hiring outstanding people, motivating our team, having a disciplined strategy that we focus on relentlessly. We have a geographic expansion program, that is not based on headlines, on geographic regions, but very specific countries, specific attacks in markets, where, like in South Korea, or like in Australia, we have focused and attacked with our strategy and we have achieved great results.

So, our competitors are doing a fine job, and we respect them. But we don't react to them, and I can assure you that we intend at TTI to, of course outperform our competitors for many, many years to come.
Ryobi

Let me show you why I feel so confident. First of all the Ryobi brand, the Ryobi brand has become the most common brand in the world for DIY tools. This is an amazing statement. You know there was a brand called Black & Decker, it is a company I worked at for 19 years. It was number one in the world, for 80 years. For Ryobi to overtake the former leader, and to become the number one DIY brand in the world, is pretty special. The interesting thing is that not only are we number one, but we are outgrowing any other DIY brand in the world, and it is because of this amazing flow of cordless products.

It is really the same strategy at Milwaukee and Ryobi. Ryobi One+ is now the number one brand of cordless tools in the world, and although we have over 100 One+ tools already, we are about to launch more in the next six months than at any former period in our company's history. So we have a new mitre saw, for Ryobi One+, that is the first ever cordless DIY mitre saw that performs like a corded tool.

We have a new brushless motor cordless angle grinder, same technology as we use with Milwaukee. We were able to adapt it at the right price point for our Ryobi family, and with brushless of course you get more power, less weight. This thing will actually outperform a corded version of the same tool. Same with the brushless motor cordless Ryobi circular saw, this is a cordless circular saw that is lighter than corded, and will actually cut faster and more accurately than the corded DIY saws with which we compete.

Then we have the metal shears, brand-new category, and then we have the pin nailer, brand-new category, then we have our second drain cleaning product. This drain cleaning is a technology that we have pioneered, in Milwaukee. The Ryobi team not wanting to be outdone, also wanted to have a DIY version of drain cleaning. The first one that we launched last year sold so well, that now we have a step-up drain cleaner in our DIY line.

This is a Ryobi cordless bolt cutter. Yes, a bolt cutter instead of using a manual bolt cutter you can now buy one of these devices. You can cut chains, you can cut rebar, and for the burglar, of course, it is a perfect choice. Now we don't have a lot of control of these things! We just make the products.

This is a fascinating product. This is a cooling cooler. So in warm climates we have a Ryobi cooler. You pack it with ice, your favourite beverage. And when you fire this up, it actually is an air-conditioner for the jobsite. So believe me, the contractor loves to stand in front of the cooler, not to only to enjoy the beverage now, but also to enjoy the cool breeze that comes from this unique cordless device.

On to outdoor. So one of the things that people tend to miss about the Ryobi program, is that we have the only overarching platform of cordless, to serve the global DIY market. Not only do we have all of these fabulous power tools you see on the wall [of the conference room], we also have outdoor power equipment that works off the same 18-volt battery as our power tools, and this gives us a unique way to bring people into our system.

When you walk into a Home Depot, no matter if you buy a drill, or a string trimmer or a chainsaw, doesn't matter, we serve that DIYer with the same Ryobi One+ battery. This is one of the reasons why we have been so wildly successful with this program.

In the outdoor business alone, we are rolling out the six new products in the second half of this year, and for 2018. This will give us 30 different outdoor products in the One+ system. So, 30 outdoor products in the One+ system, which now gives us over 130, total Ryobi products that all work off that same battery. The same battery that we had 15 years ago when we launched One+, which gives us a backward-compatible system that is unique around the world and is gaining traction like crazy.

In addition we have pioneered high performance cordless outdoor products. So in some applications, if you have a large yard, let's say in Australia, or Canada, or the US, you might require more runtime and therefore more power. That is why we developed the 40 volt platform of Ryobi outdoor.

This platform has actually taken off so well, that we are going to launch all these new products next year to feed that 40 volt platform, which will give us something like 30 products in just the 40 volt system, just for outdoor. One of the most exciting developments at Ryobi and TTI over the past six months has been the category of cordless mowing.

Not only have we pioneered the first ever DIY level, value-priced cordless riding mower - it costs USD2499 - we sold completely out of these last year. We intend to grow, we will probably triple our sales on this device next year, and we are just getting started adapting our unique technology to applications like this riding mower. So this is exciting, this is the flagship of the Ryobi brand.

However what may be the most exciting development over the past six months is the unbelievable stampede that is going on from petrol mowers, which have been around for a long time, to the Ryobi cordless mowers system. If you think about it, as exciting as cordless is in power tools, when you switch someone from a cord to cordless, it is, there is an even more obvious benefit to switching from petrol outdoor products, to a cordless product.

So, for example, a petrol mower has a pull cord that you have to pull, which is a challenging and frustrating process just to start the product. Then you have the issue of the fumes, because this is a petrol-burning engine. The fumes, of course, are not great for the environment, or that great for the user either. Of course with cordless, there are no fumes. Then you have heat, the petrol engine gets very hot, there is no heat in cordless. Then you have the noise.

Our cordless mowers are one third the decibel level that you have with petrol mowers. Then you have the annual trip to the lawnmower shop to have these tuned up, replace the spark plugs, clean the carburettor. You have none of that with cordless. And don't forget, the petrol supplied by people such as Exxon, we don't get any of that revenue. But on the cordless mower, we sell the batteries. So the aftermarket we have for the power source, is a revenue stream that most investors have not yet even thought about.

We were able to sell four times more mowers than our original forecast last year. I should say rather for the first half of this year. Four times more. Now you say, well, wait a minute, maybe the base was small. The base was not too small. But wait until you see what the base is next year.

This may well be the fastest growing new business area in all of TTI over the next five years. That is because the market for global petrol mowers is vast, and our competitors have not focused on this category in the way that we have. So I think you will see exciting things in the future here.

We were also able to develop a very exciting floorcare product in our Ryobi line. Floorcare at TTI is not just Hoover and Vax, we also in Milwaukee and Ryobi will sell floorcare products. This is a good example, this is a cordless pole-vac in the Ryobi system, that is going to be sold globally, and that will be a very significant contributor to the power tool business, although it really is floorcare.

That is one reason why we are so excited about floorcare, because the technology works in a lot of places. Here is another example, this is a cordless wet dry vac, using the 18-volt One+ battery system. This is more powerful, it has better suction than a corded wet dry vac. And it is cordless, there is no cord so there is no electrocution risk, and there is unbelievable convenience and benefit here with cordless.
Milwaukee

Okay, so let's shift gears and talk about Milwaukee. You see from the three-dimensional display in our triumphant arch over here that we are very excited about the momentum that Milwaukee has. Yeah, we grew 22% in the first half, however I think that investors continue to underestimate the long-term potential of Milwaukee. We have just begun here, we are just getting started, in converting the global industrial market to cordless. We are leading the charge, our competitors are also doing a good job, a rising tide will lift all boats, but I can assure you we are committed to being the global leader in industrial cordless, Milwaukee will be number one, as we implement our strategy.

We have so much new product on the way, that I cannot begin to get through it today, though I will try to give you some highlights of what we are launching over the next six months.

First of all we have two platforms in Milwaukee. We have 18-volt, and we have subcompact 12-volt. I have been in the power tool business since 1980, and the most important launch in the history of our industry, is Milwaukee Fuel. The reason is, this is a revolutionary platform, with a unique battery, a unique motor, and unique onboard electronics. The electronics are the key to everything in cordless. We are so far ahead here that we believe we are still three years ahead of our competitor in terms of Milwaukee Fuel.

So the Milwaukee Fuel range is set to expand a lot. This year and over the next six months we will roll out a whole new family of impact wrenches. These are heavy duty, heavy torque wrenches for driving lag bolts for infrastructure, bridge construction, tunnels etc.

There is also a version for the automotive market. Every auto dealership in the world, every auto repair shop in the world will shift from pneumatic to cordless - in our opinion - in some degree, and we will lead that charge. This is our family of impact wrenches, that's only impact wrenches. No one anywhere in the world has this kind of range of cordless impact drivers, and that is one of many, many categories.

We have in addition a brand-new 7 1/4 inch dual bevel mitre saw. Last March we shared with you our new 10-inch mitre saw, full-size. But to be honest cordless means lighter, more compact, easier to carry, easier to use. This 7 1/4 inch saw does something like 75% of the cuts you would do with the full-size mitre yet it weighs a lot less, the blade costs one third as much to replace, and it just works great. In addition we have a new hacksaw, a new full-size hacksaw utilising Fuel technology.

This is another breakthrough product it is called a mud mixer. What is a mud mixer? That is American slang for a device that mixes concrete, paint, epoxy, and various other compounds that you use on a jobsite. You use it in new construction, and what is the common theme of new construction?

There is no power, so having to operate one of these things corded is a real nuisance, because you need a generator and a long extension cord. That is over now, with the Milwaukee cordless mud mixer. And we have the same torque, the same power and torque with our cordless tool as traditional mud mixers had with the cord.

Again we have a heatgun, this is a first ever cordless heat gun. This is a heat gun, it uses no butane, no dangerous gas cartridges. It is strictly lithium technology that we have created. It works like a normal AC heat gun. There are tons of applications for heat guns on jobsites. And in automotive. The full-size 18-volt line of Milwaukee cordless is the broadest in the world, it is growing like crazy.

Okay, subcompact, 12-volt. We have pioneered finally full power 12-volt ratchets. These are for use in the automotive industry, and for other mechanical hand tool applications. So we are converting people here from traditional mechanics handtools, such as sockets and wrenches, to a cordless ratchet.

Today, in automotive, people either use handtools, or they used pneumatic, which is loud, noisy, needs maintenance and so forth. Ours is quiet, and actually has more torque than pneumatic tools. So this is a stapler, a brand-new cordless stapler. It is used for installation of carpet, or insulation, or other fabrics that you attach to wood. Here is a new soldiering iron, a soldiering iron that heats up enough with our 12-volt technology that it can replace a corded soldiering iron. Brand-new technology.

So it is interesting, our competitors talk about changing the market, in cordless, and leadership in cordless, and yet the fastest growing market for cordless is subcompact, the whole idea of cordless, just like your iPhone is smaller than payphone or a landline, the whole idea of cordless is smaller and lighter and more compact, more convenient, less unwieldy.

That is what subcompact gives us. We have the broadest line, we have over 80 subcompact tools. No one in our industry is even close to being this committed to the fastest growing segment of cordless which is subcompact.

But this keeps going. Let us talk about some new businesses that TTI is going to enter with our Milwaukee industrial brand. This is the drain cleaning market. Now I mentioned in Ryobi that we have DIY drain cleaners, but for the plumber, for the commercial plumber, or for the residential plumber, clogged drains are nasty business, right?

We are going to give the plumber a safe, as in you don't get electrocuted, safe and fast way to deal with these unpleasant challenges that come up at various times in restrooms around the world. This is an air snake, so that instead of firing a cable through the drain to unclog it, this actually builds up enough pressure to blow air, blast air through the drains and unclog them, without the unpleasantness of having to feed a cable through the system. Now however there are times when you do need a cable, we will have the first ever cordless cable drive drain cleaners, this is a drain snake that is cordless, and it will outperform a corded version of that drain cleaner.

Here is something that is called a switchpack, this is really cool. If you need 50 feet of cable to clean the drain, you can attach one drum to the switchpack and you can perform the application. If you need 150 feet, you can plug three of those drums together and you end up with a 150 foot cable.

Fired from a cordless delivery vehicle, first-ever, so you can now deal with drains that are longer than you can imagine. This is the full family of drain cleaning products in Milwaukee, so this is a category we have never been in, we are famous with plumbers, this is one of the key applications of any plumber, and we have gone from never being in this, to global leader in the cordless versions of drain cleaning.

So, the new businesses keep going. Another new business that we have shared with you is lighting. Lighting has become an immense opportunity for Milwaukee cordless. Why? Think about any construction site ever, a construction site needs light, whether you're working in the evening, or whether you are in a building that doesn't have light and power.

Cordless lighting is a vast opportunity. So we are going to bring some more products to market here. Here is a good example. This is a we call this a Radius light, so you fired it up, and it gets very bright on the jobsite, that is working off of our batteries, but this particular light can also be activated from your iPhone. So this is our One-Key system, so from 200 feet away you can turn on 10 of those, with the iPhone. So if you are the foreman at a job site, you can control when the lights go on and off.

In addition, that particular light also charges your battery. So if you can utilise the light and you can also put two batteries in and charge them so that you can use them later in your power tools. We think many users will also enjoy that application. Here's another cool light, this is an under-hood light for the automotive market. If you are repairing your car, let's face it, if you are in a garage even if the garage is well lit, under the hood, it is not very well lit. Now we provide the user with a cordless way, to work under the hood of the vehicle, and repair the car.

Here is a shot of the current lighting line, this will be our lighting program by the fourth quarter 2017. Once again, that slide is going to change a lot over the next three years, we have so many lighting ideas that it will blow your mind. Remember, selling lights, this is like selling a power tool without a motor, which means the gross margin here is highly accretive, and it means that the same battery operates in these lights, but we see it as a very very exciting new business area.

Okay another new area is personal lighting. We have had so many requests from end-users for lighting, that, say, a coalminer would use, or a contractor would use, or even DIYers, farm use, etc. There are thousands of applications for what we call personal lighting. We intend to have the Milwaukee brand become a leader in the space. This is what we're launching, in just our opening salvo. This is just our first step here. However it is quite exciting.

Okay. Now let's shift gears. Of course power tool accessories matter a lot to us, we have engineered a line of what we call carbide-tipped Torch blades. Torch is a sub-brand. So the Torch blade with its unique carbide tooth technology will out-cut existing reciprocating saw blades.

Torch cuts metal, with we also have a version of these blades that we call Ax, that is for cutting wood. In both cases we outperform anything in the market. The sales of high-priced, high-end blades are running right now about double what we had forecast. The margins are excellent. So we're very excited about our power tool accessory businesses, and this is a good example of that.

Okay, brand-new business for TTI. This is something that we have never been in. It is called storage. We have competitors that classify storage as something so important that they actually name the entire business segment "storage". So, we intend to participate aggressively in the storage arena.

This system is called "Packout", we rolled this out last month. This Packout is a revolutionary interlocking system, that is indestructible, it is convenient because you can interlock hundreds of different of storage devices eventually into the system, and you will be able to attach radios and lights and fans also to things.

We think we are going to sell so many tools to our users, that they are going to want to store our tools in our storage solutions. And this is a good example that. Do not underestimate the long-term impact of storage.

Every single user we sell to, has to store their tools. They either store them permanently, in a garage or workshop, or remotely in jobsites, or in vans, and they need wheeled storage solutions, much like your wheeled luggage through the airport. The reaction to this program has been just incredible.

Okay, another new area. We promised you, what, four years ago we said we would build a billion-dollar global handtools business. We had never been in handtools. Our largest competitor feasts on this category, because the margins are inherently higher, there are lower distribution and transportation costs, people don't return handtools so there is zero returns at the retail level, and we need to be there.

But we never said we are going to handle business with "me too", commodity boring traditional products. Every single handtool that we launch is designed to be innovative, a leading postion, priced at a premium, but it is designed to outperform our competition.

This is a great example. We just rolled out 29 new screwdrivers. These have ergonomic grips, and better business-end tips. You might not have thought that we could reinvent the screwdriver, but we did. I'm very proud of our team, and this program and we believe this is going to sell like crazy.

Another example, tape measures. We've been in this category now for three years. We are going to roll out 16 new tape measures over the next six months. 16 new tape measures. We have features here, and durability, that are unsurpassed in the handtool industry. This is a picture here of our hand tool range as of October. Four years ago that picture would've had nothing on it. Take a good look at it, because while there is a lot of stuff on it, believe me, a year from now it will be a very crowded slide and we will need two slides again.

Let me make another comment now about the floorcare space. So floorcare is obviously an area that is going through transition. Are we pleased with the revenue results, with the profit results from floorcare? Of course not, in the first half. But there is no alarm here, we are participating in, and we intend actually to drive the stampede, the revolution from corded to cordless. You have to remember when you look at our results, that floorcare is not just Hoover, Vax, Oreck and Dirt Devil, it is also Milwaukee and Ryobi.

In fact, these floor care products used to clean the surfaces of job sites and DIY areas and even around the home, these floorcare products in every single case are smash successes in our cordless family.

Because we have so many people in our cordless systems, in both Ryobi and Milwaukee, that we have a presold line of floor care. So anytime that we roll anything out in these two battery platforms there are legions of loyal customers that will buy our floorcare, because they have the battery.

And that means yes, they won't buy Dyson, won't buy Shark or any of the other competitors. In many cases they will go right to the power tool brand, which are really no longer power tool brands, these are broad power equipment brands, including cleaning devices for floors.

To read the rest of this article, please download edition 3-10 of Hi News:
HI News Vol.3 No.10: TTI results presentation by Joe Galli
Retailers
Indie store update
K&D is forced to tighten its belt as tough trading conditions result in $98m loss
HNN Sources
Craig's Highfields Home Hardware is not in favour of the changes to retail hours in QLD
The late Tim Starkey was inducted into the National Hall of Fame recently. The award was presented by HBT's Mike LoRicco and accepted by Tim's daughters, Maddison and Georgia.
Click to visit the HBT website for more information
Competitive pressures has forced K&D to tighten its belt and changes to store hours in Queensland will not benefit independent retailers, according to Craig's Highfields Home Hardware.
Trading conditions lead to K&D's $9.8m loss

Tasmanian-based hardware retailer Kemp and Denning Limited (K&D) has made cost cutting culture a priority after recording a $9.8 million loss in 2016-17.

A competitive environment resulted in an 18% reduction in revenue from $89 million to $67 million. The after-tax loss increased from $558,846 to $9.83 million.

General manager Jason Hutton said it had been a period of particularly tough and adverse conditions for retail and trade. He wrote in his report:
Both markets have been very competitive with challenges around sales and margin retention. In response, the Board and management determined that in order to remain viable we must simplify our operations and implement an aggressive cost reduction culture.

Chairman Greg Goodman said directors had taken decisive action to restructure the company with the closure of unprofitable operations in Devonport and Glenorchy and the sale of the trade division to Clennetts Mitre 10. He told The Mercury:
The sales have significantly strengthened our balance sheet and facilitated the repayment of all outstanding debt [$6.8 million].
The board decided to sell the trade business to eliminate ongoing operating risk and ensure shareholder value was preserved. Excellent progress has been made in the reduction of operating costs and working capital.

K&D also closed its Cambridge store, despite an ongoing lease going through until March 2018. It plans to sell the land and buildings at Kingston by the end of September.

The company's annual report says K&D has a strong balance sheet, assets of $38 million compared with liabilities of $14 million, and a clear strategy to get more value out of its real estate holdings. The directors report to shareholders said:
To maximise our impact we will increasingly look for opportunities to maximise the benefit of these properties.

The report also indicates that K&D's continuing operation in Melville Street, Hobart earned $22 million revenue but contributed $4.5 million to the loss.

The discontinued operations, including Glenorchy and Devonport, earned $44 million in revenue in the year to May but lost $5.2 million.

Related:
Indie store update: K&D store closures - HNN
QLD trading hours changes: Not happy

Craig's Highfields Home Hardware owner Craig Stibbard has criticised the Queensland Government's changes to trading hours, saying it would put more pressure on small businesses.

The amendments to opening hours for hardware stores, butchers, shops at international airports and tourist areas were passed through the Queensland Government recently, after Labor secured the LNP's support through extra changes.

But Mr Stibbard said allowing all hardware stores to open at 6am every day would only benefit large chains like Bunnings. He told The Chronicle:
I think it's crazy - most of the hardware stores are already open at 7am. It's just ludicrous. The big guys are just trying to squeeze the little guys out, there won't be any small ones left.
I probably don't think it's achieved a lot - you might be able to attract people outside of the normal trading hours, (but) with your overheads, your electricity prices, labour prices, opening a door is all a cost.

Toowoomba Chamber of Commerce CEO Jo Sheppard had a mixed reaction to changes which were designed to give small businesses more flexibility with their opening hours to help attract customers.

She said it was unlikely to be the last time the state government reviewed opening hours, considering the changing nature of business in Australia. Ms Sheppard said:
A couple of points I'd make is we need flexibility for businesses to have extended trading hours. Customers' expectations are that they are wanting extended hours for those bigger regions.
Toowoomba is one of the biggest online shoppers in the country, so to compete with that side of shopping traders need to be able to open more often. I don't think any government should look at this and say that's final.

Mr Stibbard said he was also unlikely to extend his opening hours.

Related:
Indie store update: Impact from new QLD retail hours - HNN
Products
Alt-toolboxes for tradies
Stanley 4-in-1 toolbox
HNN Sources
Irwin tote bag
Milwaukee Tool's bucket bag
Click to visit the HBT website for more information
It's no secret that, for most trades, the number of tools each tradie needs to tote around increases every year. Whether its hand tools, power tools, or measuring and inspection tools, designers and manufacturers keep coming up with better ways to accomplish construction and maintenance tasks.

With great power comes ... well, the need to tote around a lot of gear, actually.

While for many the traditional style of toolbox continues to work well (pull up in ute/van, put tools in box, go to work), for many, especially those who find themselves working on multi-unit dwelling construction, tool transportation has become a bigger issue.

Depending on the task at hand, there are two potential paths for this need breed of tradies to follow: they can go for the big, pull-along toolchest, which means they can take everything with them, or they can go for more easily transportable solutions, such as backpacks.

Backpacks have been growing in popularity in part because they've become so much a part of our culture - it's what you carry your sporting kit in, your groceries, photography equipment, and so forth - and because they are a great solution when your workday begins with a kilometre walk, followed by a long climb up scaffolding and ladders to reach your worksite.

What HNN is presenting here might be called the "alt-toolboxes", some well thought out solutions to new ways for tradies to keep their tools about on the different sorts of work environments they encounter.
Veto Pro Pac's Tech Pac

One of the best made and best designed (and more expensive) solutions, this backpack is specifically designed for use by tradies who need to walk a fair distance to the jobsite, or who need to work doing tasks such as servicing equipment on a ladder or elevated platform. The backpack has 56 pockets for tools in total, and is designed for quick and easy access to all of those pockets.

The design was tested in the field, and resulted from a great deal of research.

According to the designer of the pack, Roger Brouard:
We wanted to see first hand how tradesmen in the field deal with those conditions, so I spent weeks with them on the job observing them - from looking at OSHA standards of three points of contact on ladders, hauling tools up with a rope, to the need for a backpack that would fit through cages and stand up when being used, to a backpack that is comfortable and won't get wet when placed down in wet or muddy conditions.

Like better hiking packs, the pack features a thermo-formed EVA padded back panel that helps cushion the load, and also provides structural stability. A padded load displacing shoulder strap system with multiple adjustment strap points makes it easy to wear the pack for long periods. It's designed to not tip over when stood upright on the ground, and is the right size to fit through safety cages on construction sites.
Veto Pro Pac's Tech Pac
Milwaukee Jobsite Backpack

While this is a smaller pack, with just 35 pockets, its designed to suit most builders and construction workers. It features a total of 35 pockets, and six elastic straps to hold tools. On the inside it has a large pocket in the centre, two medium pockets to either side of that, a further 10 small pockets, and three zippered storage pockets. On the exterior, there are two side pockets, and another zippered pocket on the back, as well as four straps. Finally there is one very large pocket on the back, which could hold a hard hat.
Milwaukee Jobsite Backpack
Stanley Fatmax 4-in-1 Mobile Work Station

This is a unique product from Stanley. Packed up for transport, it's the usual tall and wide toolbox we're all used to. Deployed for use, however, it transforms into a four-area tool access stand, including a toolbox, parts bin, portable flat tray, and an oversized lower bin for items such as power tools. It comes with its own built-in wheels, and includes a telescoping handle. The designers even thought to include a V-groove in the top of the work station, making it easy to hold materials such as lumber and pipes steady for cutting. The whole box of tools can be locked at a single point.
Stanley 4-in-1 toolbox
Stanley Fatmax Tool Back Pack

With 50 pockets, the Stanley offering provides extensive flexibility for storage. It also features an internal sleeve for tool storage that can be lifted out of the backpack to provide ease of access to a wide selection of the tools. The backpack has a separate pocket for the storage of a laptop, or power tool.
Stanley Fatmax Tool Back Pack
Irwin Centre Tote Tool Bag

Something like a combination of a backpack and a more traditional toolbox, This tote bag offers 42 pockets for storage, along with a separate power tool holder. It features an open design that makes it easy to find and access tools. Comes with a padded shoulder strap, making it easier to carry tools and leave hands free.
Irwin tote bag
Milwaukee Bucket Organiser Bag

A great idea from Milwaukee, this is a like a tool belt for a bucket. It's a nylon belt that wraps around a standard bucket, and provides storage via 30 exterior pockets, plus two large zippered pockets.
Milwaukee Bucket Organiser Bag
Milwaukee Bucketless Organiser Bag

Like the above, but without the need for a bucket. Provides an additional 20 storage pockets, bringing the total to 50. Includes a hammer holder that keeps the hammer upright, and easy to grab a hold of.
Milwaukee Tool's bucket bag
Companies
Supplier update
Kyocera has purchased Senco
HNN Sources
Adelaide Brighton will increase prices on pre-mixed cement for the second time in 2017
Mr Fothergill's expands with Darlac purchase
Subscribe to HNN weekly e-newsletter
Kyocera's acquisition of Senco has strengthened its position in the fastenings category; Adelaide Brighton is expecting to raise prices again; Mr Fothergill's Seeds has bought garden tools and equipment supplier Darlac; and Tenaru is actively supporting the Master Painters association.
Multinational takes Senco from private hands

Japan-based Kyocera Corporation has acquired Senco Brands, a fastening tools and fasteners maker since 1948, for an undisclosed sum. This will expand Kyocera's fastening tools business in the residential, commercial, manufacturing and construction sectors.

As a result of the acquisition, Senco will now operate as a part of the Kyocera Global Tool Cutting Division. Renamed Kyocera Senco Industrial Tools, the company will continue to be headquartered in Cincinnati, Ohio (USA).

Kyocera takes on Senco in a move that takes the business out of private ownership. Ben Johansen, CEO of Senco Brands, told Pro Tools Review:
We expect this acquisition to strengthen our new product development capabilities, bolster our ability to provide innovative fastening solutions to a wider range of customers and enhance our global distribution network.

Senco is known for its product quality and diverse line, which includes pneumatic and electric nailers, staplers, screw systems and compressors, as well as nails, staples, screws and specialty fasteners.

Kyocera first entered the industrial tools market in the 1970s with a line of high-speed metal processing tools, and has steadily expanded into precision tools for electronics, aerospace, automotive, medical and woodworking applications. Kyocera's 2011 purchase of the Unimerco Group in Europe added a fastening tool product line that should have synergies with Senco's expertise in the fastening tools and fasteners market.

With the acquisition of Senco, Kyocera plans to increase its sales of fastening tools and fasteners to JPY40 billion by the fiscal year ending March 31, 2021.
Price increases from Adelaide Brighton

As Australia's largest cement maker, Adelaide Brighton is set to lift prices for pre-mixed concrete a second time later in 2017.

It announced recently a 10.9% drop in net profit after tax to $68.7 million for the six months ended June 30, 2017. Revenue increased by 4.7% to $718.4 million.

The housing and infrastructure boom on the eastern seaboard is triggering price rises for pre-mixed concrete and aggregates used in construction.

Adelaide Brighton chief executive Martin Brydon said that demand was continuing to rise, particularly in Melbourne and Sydney and a second round of prices increases for a range of products was anticipated later this year.

The company had already instituted a round price rises for various products on April 1.

Mr Brydon said rival companies had already signalled to the industry that they would implement "meaningful increases" on October 1. He said no final decision had been made but Adelaide Brighton was also expecting to raise prices again later in calendar 2017.
I think it's likely we will follow the market.

Mr Brydon declined to comment on the likely amount of the price rise. He said 2018 was looking very strong for the property construction industry, while the growing number of big infrastructure projects on the drawing board augured well for future demand.
Mr Fothergill's expands through Darlac acquisition

According to a report in Horticulture Week, Mr Fothergill's Seeds has bought UK garden tools brand Darlac. The company hopes that by adding the 50-year-old brand it will make its business less seasonal. It is also aiming to double turnover through this acquisition, and intends to keep its main focus on seeds.

Mr Fothergill's joint managing directors, John Fothergill and David Carey took over the company shares held by their fathers in March 2017. Regarding the purchase, Mr Carey said:
This is a significant step for our business. We remain committed to being one of Europe's largest seed houses...However, Darlac offers us wonderful opportunities to expand our portfolio in the UK and abroad.

Turnover for Darlac is currently under GBP1 million. Horticulture Week believes the take over of Darlac is part of a growing trend for large garden centre and general retail garden suppliers to expand ranges. Larger suppliers have been buying several niche companies recently.

These acquisitions make the most of existing head offices, websites, catalogues, warehouses, merchandising, transport and trading relationships.
Tenaru partners with Master Painters association

Tenaru Timber & Finishes has become a silver sponsor of Master Painters Australia (NSW), the peak industry body for the surface coating sector in NSW. Tenaru is the exclusive Australian distributor of brands that are the preferred choice for professionals, including Sikkens, Hammerite, Mirka and Dynamic Paintware.

The sponsorship provides Tenaru with opportunities to engage with the association's members through awards programs, events and training sessions.

Tenaru will be sponsoring a category and be a guest presenter at the Master Painters Awards for Excellence in October, and via product demonstrations at member networking events.

According to Brian Hamilton, Tenaru managing director, as the Tenaru portfolio evolves there is a growing need to have a direct communication channel to the professional painter. He said:
Tenaru's portfolio includes the globally established, premium products Sikkens, Hammerite, Dynamic Paintware and Mirka. Each brand complements the others and provides a full suite of surface coating solutions for our customers and trade professionals.
Tenaru has a very experienced team, passionate about problem solving and providing the best advice for projects. We are keen to share our expertise by working more closely with MPA (NSW) members.

Master Painters Australia (NSW) CEO, Therese Lauriola, said, "We are excited to have Tenaru partnering with us and look forward to some great times ahead."
Retailers
Europe update
Kingfisher buys DIY retailer Praktiker in Romania
HNN Sources
Travis Perkins, owner of Wickes, hikes prices amid profit slump
Travis Perkins also owns Toolstation stores in the UK
Click to visit the HBT website for more information
Kingfisher is adding the Praktiker DIY stores operating in Romania to the group and Travis Perkins chief executive John Carter said the company delivered "pleasing" results as it protects its margins through implementing higher prices. He also believes there will be continuing pressure on the business as householders choose overseas holidays instead of weekends at home sweating over time-consuming DIY projects.
Kingfisher set to buy Praktiker chain

European DIY retailer Kingfisher will acquire its rival Praktiker in Romania for an undisclosed sum. Kingfisher is the owner of French-based Brico Depot which already operates in Romania. Adela Smeu, CEO of Brico Depot Romania, said the deal will allow the company to expand its market share on the back of a growing market for DIY and interior design.
Romania is an attractive, growing home improvement market and we have always been clear about our intention to expand our business over the medium term. Subject to competition approval, the strategic acquisition of Praktiker Romania, combined with our existing Brico Depot business, gives us a strong presence right across the country.

Kingfisher purchased the DIY chain from Turkish businessman Omer Susli who is an active investor in the construction sector. He said:
We are satisfied that we have managed to grow the business up to this level, where Praktiker is one of the main players on the DIY retail market, reaching a turnover of about EUR140 million in 2016 - up 3% from the previous year - with a network of 27 stores...

Praktiker has invested EUR1.2 million in the revamp of two of its stores in Ploiesti and Oradea and the company aims to reach 20 redesigned outlets by the end of 2017.

Brico Depot has 15 stores and around 900 employees in Romania.
Travis Perkins hikes prices as profits dip

British builders' merchant and home improvement retailer Travis Perkins has raised prices to help offset rising costs from the weakened sterling as it posted a 4.5% drop in half-year profits.

For the half-year period ending June 30, the parent company of DIY retailers Wickes and Toolstation reported pre-tax profits of GBP168 million, compared to GBP176 million in the same period last year.

It said it was also affected by weakening housing transactions and consumer confidence during the period, but group sales grew 3.5% to GBP3.2 billion, and by 2.7% on a like-for-like basis.

Travis Perkins said trading volumes were impacted by price rises that were implemented to offset soaring costs brought about from the post-Brexit depreciation in the pound and rising commodity prices. Despite this, the company said raising costs has helped protect profit margins (at the expense of volume).

Its consumer division, which includes 642 Wickes, Toolstation and Tile Giant stores, was also buoyed by a 2.3% increase in underlying earnings to GBP45 million and like-for-like sales increasing by 4.7%. Overall sales in this division rose 7.3% to GBP822 million.

During the period, Wickes continued with its store refurbishment program, completing a further 18 refits. The retailer also bolstered its online proposition, with range extensions and same-day, one-hour delivery slots.

Travis Perkins also continued to expand its Toolstation network, opening 19 new UK stores in the period, as well as five in the Netherlands. It said its newly improved digital customer experience, including reduced click-and-collect times, better product reviews and personalised offers, drove a "significant step up" in sales growth.

However these results were weighed down by the company's plumbing and heating arm, where earnings crashed by 32% to GBP13 million.

As a result, Travis Perkins revealed a turnaround plan for the division, including integrating its City Plumbing and CTS branches to be run by one management team. The turnaround plan also includes changes to the company's ranges, pricing and online offering, while setting up a dedicated supply chain.

Chief executive John Carter said the company's overall performance was "solid" against a "challenging market backdrop of pronounced input cost inflation and market volatility".

Mr Carter also believes British consumers are preferring holidays to DIY. He said:
With DIY you are competing against holidays, sofas and new cars. In the past few years we have been successful because if they can afford it, consumers want to improve their homes. But with consumer confidence and worries about the economy, they are leaving doing up the kitchen or bathroom because they work hard and definitely want to go on holiday - that's almost a given.

The core business supplying builders reported revenues 1% higher at GBP1.055 billion, though it is facing similar issues. He said:
People are looking at repairs, and those have to be done, maintenance, which leads to repairs if not done, so they are spending there, but improvement is being put off.
Bigbox
USA update
Lowe's trails Home Depot in the second quarter of 2017
HNN Sources
Ace Hardware reports its second quarter results
True Value said it has progressed in the most recent quarter
Click to visit the HBT website for more information
Professional renovators have provide growth for Home Depot and leaves Lowe's behind; Ace Hardware has its biggest revenue result of USD1.5 billion; and True Value CEO said he is encouraged by the company's "strong achievements" in the second quarter.
Pro customers deliver for Home Depot, less for Lowe's

Home Depot and Lowe's have both been beneficiaries of the improving housing market in the US. But there has been a stark divergence in their results, with Home Depot consistently beating out Lowe's, including the latest quarter.

The difference largely comes down to how they serve the "Pro" customer.
Q2 results comparison

Home Depot's net income for the second quarter grew to USD2.7 billion compared to USD2.4 billion, one year ago. Revenue came in at USD28.11 billion for the period, a 6.2% increase from the same time last year.

Sales at stores open for more than one year rose 6.3%, while comparable sales at US stores increased 6.6%, Home Depot said.

Lowe's said that its net profits rose to USD1.4 billion in the second quarter from USD1.2 billion in the same period last year. Its second quarter sales increased 6.8% to USD19.5 billion compared to the prior-year period.

Comparable sales were up 4.5% and hit a peak of nearly 8% in July, executives said in a statement.
Pro customers

Home Depot has catered more aggressively to the professional customer, which includes renovators, general contractors (tradies) and small business owners. In fact, 40% of Home Depot's sales come from this customer category, which tends to spend more, take more trips to the store and conduct bigger projects.

In contrast, Lowe's only gets about 30% of sales from this category.

This is a notable gap, especially as Home Depot's professional comparable sales growth was 9.6% in its most recent quarter compared to 4.6% comps in its DIY category, according to Wedbush Securities analysts. Meanwhile, Lowe's pro comps were estimated to be roughly 4%.

Importantly, the professional customer spends more on big-ticket items, which has dominated sales growth. This category includes appliances, roofing and special-order kitchens.

At Home Depot, comparable store sales for purchases of USD900 and above were up 12.4% last quarter. This has helped to lift overall results, as big-ticket items make up 22% of sales at Home Depot.

Serving pros with big-ticket items has been in focus as these areas are seen as more immune to encroachment by online retailers. Home Depot has continued to drive share in these categories with more exclusive products, more financing options, and delivery alternatives. The big box retailer recently beefed up this business with its acquisition of Interline Brands in 2015.

All of this is aided by a superior online strategy, analysts say, which is critical given increased concerns about Amazon getting into the home improvement category.

Last quarter, Home Depot e-commerce sales grew 23% year-over-year and now account for 6.4% of total revenue. The company has emphasised its order-online, pickup in store option, with 43% of online orders still being picked up inside stores.

Lowe's online business, while also growing rapidly, represented just 3.5% of sales as of the end of 2016.
Ace Hardware reports Q2 sales increase

Ace Hardware Corp. posted net income of USD51.1 million for the second quarter of 2017, down USD12.3 million from the 2016 period. In the second quarter, it recorded a USD7.8 million of one-time pre-tax charges primarily related to the future closure of certain warehouse and distribution facilities. The charge and higher expenses hit net income.

The retailer also reported a 3.2% increase in comparable store sales from the 3,000 of its affiliated retailers who share daily retail sales data. This is a gain it attributed primarily to the combination of more favourable weather and strong retail execution.

Net revenues for the second quarter were USD1.5 billion, up USD66 million or 4.6% from last year's period. Increases were noted across most departments with outdoor living, housewares, impulse and tools showing the largest gains.

Retail revenues from Ace Retail Holdings -- Westlake Ace Hardware stores -- were USD90.3 million versus USD87.4 million in the second quarter of 2017. This represents a 3.3% increase from the second quarter of 2016, and was the result of new retail stores added over the period.

Operating income was USD53.6 million versus USD67.3 million in the year-prior quarter.

Ace added 27 new domestic stores in the second quarter of 2017 and cancelled 28 stores. This brought the company's total domestic store count to 4,357 at the end of the second quarter of 2017, an increase of 42 stores from the second quarter of 2016.

On a worldwide basis, Ace added 52 stores in the second quarter of 2017 and cancelled 31, bringing the worldwide store count to 5,024 at the end of the second quarter of 2017.
Amazon-proof?

In an interview with Business Insider, Ace Hardware CEO and president John Venhuizen, said of Amazon:
[It] is quite arguably the most disruptive company in the history of business and they impact everybody without question.

That Amazon can lose money to help its customers and still hold Wall Street's support is "terrifying," he said. The online retailer recently forecast its first quarterly loss in two years.

Investors have sent Amazon's stock up 31% this year, compared to a 10% gain for the S&P 500. The US iShares home construction exchange-traded fund, which includes major players like Home Depot and Lowe's, is also surging, up 26% year-to-date.

But home-improvement retailers won't enjoy endless favour from Wall Street. Home Depot shares fell after Sears announced it planned to start selling its Kenmore-branded appliances on Amazon, and was launching a line of appliances that can be voice controlled with Amazon's Alexa.

Longer-term, however, stores like Home Depot and Ace Hardware have three key attributes that can protect their market share from e-commerce giants: what they sell, service, and location.

The nature of the products they sell lends itself to human interaction. Buyers still want to ask a person how things work, or how to mix paint, or which colours to select in the first place.

And the more exceptional the service, the better. Mr Venhuizen said:
When a local business provides an irrational level of service to their local neighbours, that's hard to compete with on a big-box or a dotcom national scale. Every small business can do that.

Although free shipping is convenient, having thousands of stores near the neighbourhoods that customers live in is also a big advantage, Mr Venhuizen said.

Ace Hardware, like other hardware retailers, has billions of dollars worth of inventory sitting in its stores across the USA. One way to exploit that is by promoting online pick-ups (online orders that are picked up at a store), essentially blending online and offline strategies.

Mr Venhuizen said Ace Hardware's online sales grew 61% in the second quarter. Ninety-three per cent of those transactions were picked up in the store. The company is also starting to experiment with home delivery, he added.
Many people like to still physically see and touch and have the five senses. We had a big 5,000-store celebration...Many of them were out there smoking meat on a grill. You can't smell that on Amazon.
Progress and expansion in Q2, says True Value

True Value Company saw its comparable store sales edge up in the second quarter, as the hardware retail co-operative said it progressed with its multi-year strategic growth plan.

Total comparable store sales were up 0.9% for the quarter ending July 1, 2017, with increases in seven of twelve regions in the US and in six of the company's nine product categories.

Targeted initiatives and investments led to a 22% increase in visits to TrueValue.com and a 19% increase in online sales. Destination True Value format comparable store sales were up 1.8% in the quarter and 1.1% year-to-date.

Revenue was USD430.4 million, a decrease of 1.9% or USD8.3 million.

The company posted a net margin of USD16.7 million in the second quarter, up 28.1% from a year ago. The increase in net margin was primarily driven by good gross margin rates and tight monitoring of overhead expenses, according to the company. President and CEO John Hartmann said:
We are now in the third year of our multi-year strategic plan and I'm very encouraged by the strong advancements we are making. After a record-breaking year for ground-up and remodelled stores in 2016, we have continued to make good progress in building a stronger business.
Our retailers are benefiting from strategic initiatives in areas such as omnichannel, retail excellence and product assortments that improve the customer experience and generate sales growth. And we are doing all of this at the same time as delivering strong net margin expansion.
Looking forward, we will continue to look for ways to accelerate our strategic growth plan to ensure that True Value is helping our stores to remain relevant in their communities and supporting their long-term growth, profitability and independence.
Products
Equipped for adventure
The new spade from Rhino-Rack is useful to bring on outdoor adventures
HNN Sources
It is detailed with slip resistant grip that provides optimum handling
Rhino-Rack's Facebook page
Click to visit the HBT website for more information
When off-roading, overlanding or adventuring with mates, the quality of tools is an important consideration. Quality that ensures they are in working condition every time that they needed, and minimises maintenance.

The new spade from Rhino-Rack wants to be one such tool. It is crafted using heavy duty, heat treated hi-carbon steel, and finished with zinc plating and a powder-coating.

It is detailed with slip resistant grip that provides optimum handling. The spade is designed for comfort, ease of use and convenience.

It is a compact 42-inch in length for increased manoeuvrability under vehicles. The size also aids in storage, whether it is stored inside the vehicle or utilising a mounting bracket.

The versatile spade can dig out the vehicle when it gets stuck in the mud, or assist with other outdoor adventure related events.
News
HI News V3 No. 9: Yarra Junction H Hardware
Download the latest issue of HI News Vol. 3, issue no. 9
HI News
The story of how Chris Moorfoot gave a community back its hardware store
Comparison of growth in hardware retail revenue over recent financial years reveals a trend
Click to visit the HBT website for more information
Yarra Junction H Hardware has a starring role in the latest edition of HI News. It is a store run by smart, savvy and enterprising independent retailers.

Simply click on the following link to download this edition:
HI News V3 No. 9: Yarra Junction H Hardware

In other retailer news, Beaumont Tiles has launched two exclusive collections of Italian design and manufactured tiles.

Stanley Black & Decker reports its first half 2017 results that are focused on the sales of its FLEXvolt power tools. Hitachi Koki is also preparing for a buying spree with the help of US buyout firm and new majority owner, Kohlberg Kravis Roberts.

We take a look back on the last financial year of hardware retail statistics. In Europe, Bunnings UK & Ireland posts another loss as it opens more stores and Kingfisher's B&Q experiences a sales slump.

US-based hardware retail co-op True Value may be up for sale and its rivals, Ace Hardware and Do It Best have expressed their interest in buying it.

Back in Australia, renovations are taking on an increasing number of environmentally friendly features.

Lasers levels are moving beyond the traditional tradie market and into the DIY consumer market. Other products in this issue include Milwaukee's Packout modular tool storage system and Makita's new plunge cut saw.
Bigbox
Europe update
Sales declines and losses at B&Q and Bunnings
HNN Sources
Bunnings Warehouse store in Folkestone, Kent
Australian homewares specialist House is planning to launch in the UK
Click to visit the HBT website for more information
Big box retailers, B&Q and Bunnings experience losses; a Bunnings store opening in Kent; Australian retailer House is launching in the UK; and a Homebase store in Somerset will turn into a Bunnings Warehouse.
B&Q sales fall in Q2, losses at BUKI

British and European consumers appear to be turning their backs on DIY as B&Q reported a slump in sales and Bunnings UK & Ireland (BUKI) posted a loss of more than GBP50 million (AUD81.2 million).

B&Q owner Kingfisher said sales at the home improvement chain were down 8% in the second quarter, or 4.7% on a like-for-like basis.

Meanwhile BUKI reported a GBP54 million (AUD87 million) annual loss in its first full year of ownership of the DIY chain.

Kingfisher said ongoing problems in its French business had continued over the past three months, with sales declining 3.8% to GBP1.2 billion (AUD1.9 billion).

In the UK, Kingfisher said B&Q was affected by a tough comparison with last year, as total sales fell by 7.8% to GBP967 million. The decline was partially offset by the Screwfix business, where sales rose 10.8% thanks to new specialist ranges and its "digital capability".

The company is undergoing an GBP800 million overhaul of its business, which it hopes will bring in around GBP500 million more in profit each year by 2021. But Kingfisher warned that the transformation was causing "business disruption".

Chief executive Veronique Laury said there was a "significant amount of change" planned for the second half of the year. She added that she was "well aware this year would be challenging given the step up in transformation activity" and that Kingfisher remained "cautious" on the outlook for the second half of the year.

BUKI said that onerous costs related to its purchase of Homebase as well as work to overhaul stores had affected trading, with sales of kitchen and bathroom products particularly affected.

BUKI owner, Wesfarmers said the first four Bunnings pilot stores were opened in the UK and Ireland during the year with a format that was "resonating well with customers". Outgoing managing director Richard Goyder added:
While significant transition, separation and integration activity was undertaken throughout the year to progress the acquisition agenda, the volume and pace of repositioning Homebase affected store execution and consequently trading performance.

The company warned that "trading is anticipated to remain challenging, particularly in the short term, as customers continue to adjust to the new offer".

(Editor's note: HNN will take a more extensive look at Bunnings and Wesfarmers latest results in the next edition.)
Kent gets more Bunnings stores

The fifth Bunnings Warehouse in the UK opened its doors to customers in Folkestone, Kent recently.

The new store at Park Farm Retail Park is the first Bunnings Warehouse in Kent. It is over 74,000 square feet and stocks over 30,000 products including a mix of international and British brands - from Purdy's paintbrushes to Ryobi and DeWalt power tools. There is also a colour wall with more than 3,000 colour tiles and paint mixing from Johnstone's Trade, Crown and Dulux.

British skeleton Olympic champion Lizzy Yarnold MBE joined a welcome breakfast for team members.

The big box retailer also confirmed two more Bunnings stores will be opening in Kent this year. Following the opening of the Bunnings Folkestone outlet, there will soon be branches in Broadstairs and Sittingbourne.
Basildon launch this year

The town of Basildon, Essex, will also be a location of a Bunnings Warehouse later this year. However it is not known if it will be converted from the Homebase store on London Road in nearby Vange, or launched on a different site.

The big box retailer said the move was inspired by positive feedback from customers to two new Hertfordshire warehouses.
Aussie retailer House in UK launch

Australian homewares specialist House has plans to open 75 stores in the UK market in the next three years, according to Retail Week. It aims to open its first stores by April 2018 and will also launch a transactional ecommerce platform.

House has 104 stores in Australia and is owned by Global Retail Brands. It typically carries 4,000 core SKUs including cookware, glassware, small electrical appliances, knives and crockery. The House website sells an additional 8,000 lines, including products in the bathroom, bedroom, decor and pet categories.

House's entry into the UK follows a other Australian retailers already operating in this market including Bunnings, Typo, Kikki.K, Smiggle and Lovisa.

Executive chairman Steven Lew told Retail Week he was "pumped" to be bringing House to the UK after visiting almost 100 potential locations up and down the country over the past 18 months. He said:
Over the last couple of years we've looked at different markets and different markets internationally, watching the traffic flow, footfall, shopping habits, the internet - and the UK seemed like a very good fit for us.
We think 75 stores is a safe number, but it will be opportunity-led. We are not fixed on that number. If we can't get the right stores and we end up with 50, then that's still a good job.
Likewise, if we find 90 great stores then we'll have 90. So long as the market is there we will keep opening. We like to under-promise and over-deliver. But we want a sustainable product. We are not about putting a showcase on Oxford Street. We want the first store to be the same as the 75th store.
Somerset Homebase turning into Bunnings

Bunnings United Kingdom & Ireland (BUKI) has confirmed that the current Homebase store in Worle, a large village in North Somerset, would be replaced by a new store under the Bunnings brand later this year.

All existing staff will be retained, with up to 20 additional full- and part-time positions being created. A BUKI spokeswoman said:
We can confirm that the next Bunnings Warehouse pilot store will open in Worle later this year, replacing the existing Homebase on Bristol Road. The new store is approximately 76,000sqft...

This will be the first Bunnings store to open in the south west. Existing stores are confined to the south east in locations like Folkestone, Hemel Hempstead, Milton Keynes and St Albans.
Retailers
USA update
True Value could be purchased by a rival
HNN Sources
Lowe's launches UpSkill Project to build DIY skills across America
A study by Market Force Information shows that Ace Hardware is America's favourite home improvement retailer
Click to visit the HBT website for more information
Speculation over True Value sale; Ace Hardware pledges to provide customers with everything they need to tackle paint projects in one trip; Lowe's is teaching DIY skills; A study by Market Force Information reveals America's favourite home improvement retailer; and Home Depot is with working with a digital decorator startup.
True Value's potential sale attracts interest

Hardware retail co-operative True Value Co. is weighing up a sale that could value the home improvement chain at about USD800 million, sources told Bloomberg.

The company said it is working with an investment bank to examine strategic options, including a sale. The process is expected to attract private equity firms. However no final decision has been made and the company may elect not to pursue a sale.

According to a report in the Chicago Tribune, Ace Hardware is open to making a bid for True Value. In an email to the newspaper, Ace president and CEO John Venhuizen wrote:
It is our understanding that True Value is evaluating or conducting a formal auction process for the sale of its business. At this point, we have received no contact to participate in that auction process. If contacted, we would have interest in exploring it.

The Tribune's business columnist Robert Reed believes Ace is signalling it is serious about competing with other suitors, should True Value hit the selling block. Among those he expects to evaluate a True Value deal include private equity groups, national or regional hardware and retail chains and, perhaps, online seller Amazon or another web-based consumer goods company. He writes:
A buyout of True Value, with nearly 4,400 stores, would almost double Ace's retail store network of about 5,000 stores. Ace has 17 product distribution centres compared with 13 for True Value.

Another retail chain, Do It Best also said it is interested in acquiring True Value. It told Chicago Business it is "enthusiastic about the many growth opportunities" an acquisition of competitor True Value could provide.

Do It Best operates nearly 4,000 stores, with 20% of them outside the US. In 2016, the company generated USD671 million (AUD852.8 million) in net income, according to its annual report.

Spokesman Randy Rusk said the retailer does not break out revenue but that Do It Best is the second-largest home improvement co-op in the world, with Ace first and True Value third.

Ace generated USD5.13 billion (AUD6.5 billion) in revenue in 2016 and operated 4,994 worldwide stores as of December 31. True Value generated USD1.51 billion (AUD1.9 billion) in 2016 revenue and operates more than 4,000 stores.

True Value would benefit more from a sale to Do It Best than to Ace because True Value and Do It Best share a company culture focused on keeping stores independent, Mr Rusk said. He said Ace feels more like a franchise, with every store looking the same and stocking the same products despite their different locations. Do It Best President and CEO Dan Starr said in a statement:
While our top priority is generating sustained growth among our current member base, we're also focused on expanding our business by adding new members from other co-ops like True Value.
Ace Hardware's latest paint guarantee

The Extra Mile Promise[tm] is a guarantee that Ace has the expert advice and supplies needed to help consumers successfully tackle any paint project with just one trip to the store.

It was created to address the frustration they deal with when faced with the proposition of yet another trip to the store as a result of forgotten items or not enough paint. By providing the right products and expert knowledge, Ace said it is committed to helping consumers complete their paint projects successfully the first time.

The retailer is so confident in their one trip guarantee that they are willing to go "the extra mile" and provide free delivery to consumers who may be in need of additional paint supplies. President and CEO, John Venhuizen, said:
While it hurt our pride to learn this, the truth is that while consumers trust Ace as the Helpful Place, far too many of them believed that our speedy sized stores didn't have enough product to complete their paint project.
We know this isn't the case, so to assuage these misperceptions, we decided to stand behind our large paint assortment with the Extra Mile Promise. Our objective is simple: to be known as the #1, best, most convenient, most helpful and most credible store for paint in the neighbourhood.

The Extra Mile Promise applies to all brands of paint and paint supplies available at Ace, and is only applicable with the original paint purchase receipt showing the purchase of minimum of one gallon (3.78litres) of paint.

You can see the TV commercial here:

Empowering new generation of home improvers

Lowe's has introduced the UpSkill Project, a program committed to teaching DIY skill-building and helping customers become confident home improvement project-doers. Through the UpSkill Project, more than 200 homeowners across 40 US cities will learn skills from Lowe's teachers and complete a DIY project, combining hands-on expertise, real-world experience and training.

Lowe's research reveals that while home improvement spending increases, attitudes toward DIY are changing as new and existing generations cite a decline in confidence to complete home projects. With the introduction of The UpSkill Project, Lowe's is addressing the home improvement skills gap.

The UpSkill Project enlists the help of both Lowe's associates and specialised experts, including designers, general contractors, craftsmen and teachers, to help participants - known as UpSkillers - define their project, plan it, style it, purchase materials and tools, and master the skills necessary to realise it.

The experts don't do the project for them - they roll up their sleeves and teach and guide as needed. They help participants overcome obstacles by showing them failures are a normal part of the process and by instilling confidence to make the next time, the best time.

Once an UpSkiller has completed the project, Lowe's will give the homeowner an opportunity to "pay their skills forward" to their friends, family and neighbours.

Aspiring DIYers in each market apply to become UpSkillers by submitting a video describing their project and skill goals. Winners are selected based on a number of criteria, including passion and excitement for learning home improvement skills.

Link to video:

America's favourite home improvement retailer

Ace Hardware has beat out its big box competitors to rank as the America's favourite home improvement retailer in a recent study by Market Force Information. It achieved a composite loyalty score of 63%, according to the study.

Menards ranked second, with a 60% score, followed by Lowe's, with 55%, and Home Depot, with 51%. (In order to be included in the category, a traditional home improvement brand must have been selected by 100 or more respondents representing 2% or more of total. Only Ace, Menards, Lowe's and Home Depot qualified).

Market Force also looked at how the retailers fared in operational and product attributes that matter most to consumers. Ace Hardware ranked first in most categories, with particularly strong marks for ease of finding merchandise, staff service and knowledge, and speedy checkouts.

Menards scored highest for merchandise variety and value, while Lowe's earned the top spot for parking availability. Home Depot ranked last of the brands in all service categories, as well as cleanliness and value.

Market Force's research revealed that 60% of consumers consider themselves "DIY enthusiasts" who not only purchase the materials and products themselves, but also complete their own home improvement projects. Another 22% fall in the "do-it-for-me" group that purchases the materials and products, but outsources the labour.

In other findings:
  • Home Depot's app is most popular, with 45% using it, followed by Lowe's, Walmart, Ikea and Menards. Of the 18% of consumers who indicated they have used an app, 93% of them said the app was helpful.
  • One-fifth reported that they participate in the loyalty program offered by the retailer they most recently visited. Ace Hardware's program is overwhelmingly the most popular with 67% participation, Lowe's ranked a distant second with 21%, Menards was third with 11% and Home Depot trailed with 8%.
  • Nineteen per cent indicated they have a home improvement store-branded credit card, with most choosing Lowe's (25%) and Home Depot (21%). Just 7% have a Menards card and 3% have an Ace card.

  • For the home improvement rankings, Market Force polled more than 7,800 consumers. The participants were asked to rate their satisfaction with their last experience at a home improvement or furnishings store and their likelihood to recommend it to others. That data was averaged to rate each brand on an aggregation of the two measures - a composite loyalty Index.

    Market Force also looked at the attributes that drive these preferences, analysing factors such as merchandise and brand selection, cleanliness and value.
    Digital decorator partners with Home Depot

    Home Depot has joined with Laurel & Wolf, which describes itself as a "digital decorating platform" to provide customers with a professional designer. Through the Home Depot Pro Referral Service, Laurel & Wolf connects customers with "top designers to transform your space" online through a flat fee - from USD59 to USD259 - using Home Depot supplies.

    The program will integrate Home Depot's existing Pro Referral service into Laurel & Wolf's platform, essentially referring its customers to Laurel & Wolf depending on their project needs.

    Laurel & Wolf is an online startup formed in 2014 that has expanded to a team of more than 60 employees and a marketplace of more than 1,000 interior designers, according to the company's website.

    The video shows an example of how the two companies are working together. You see it here:

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    The brand manager for British Paints will focus on growing retail market share; Uni-Pro Painting Equipment is seeking a Sydney-based salesperson; and a corporate business development manager is required at Whites Rural.

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    Commercial and strategic involvement

    The role of the British Paints - brand manager ANZ for Dulux will manage the British Paints brand across Australia and New Zealand and deliver channel marketing programs targeted at retail stakeholders. This role involves collaboration with the broader Dulux marketing team to deliver a "seamless and aligned brand offering" to Bunnings.
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    The role of sales territory manager at Uni-Pro will involve selling to paint retail outlets including paint specialist stores and hardware retailers. The Sydney-based territory includes both metropolitan and country travel.
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    Pro-Fit(r) ModeraTM Ledgestone from Cultured Stone is the first of its kind in Australia, according to PGH Bricks & Pavers. Capturing the beauty of natural stone while being easier, cleaner and faster to install, it is a practical way for architects to achieve unique ledgestone looks inside and out.

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    Editorial
    Yarra Junction H Hardware
    Yarra Junction H Hardware, as it is today
    HNN Sources
    Chris and Anthea Moorfoot, owners of the store
    Store owner Chris Moorfoot and HBT's Steve Fatileh at the main entrance
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    The store that would become the Yarra Junction H Hardware did not present itself, back in 2008, as a sterling opportunity in a high growth area. Instead, it was a rundown, poorly performing store that was one of two being sold by brothers who had decided to get out of hardware retail.

    It's not so surprising, however, that Chris Moorfoot had developed a bit of a retail sixth sense, and could see some potential in the failing business. Much of his life has been spent in industries associated with home improvement retail. That began with his first job as a casual sales assistant at McEwan's in 1984, before he turned 18 years-old. While working there he added a job as an automotive spray-painter, working for his father's business.

    All that came to something of an abrupt halt in 1990. After getting engaged, and spending eight weeks on a trip overseas, he returned to find much of Victoria's economy seemingly upended. The Pyramid Building Society had collapsed, John Cain stepped down as state premier to be replaced by Joan Kirner, and Mr Moorfoot's father was basically out of business - so much for his plans to eventually take over the family enterprise. In Melbourne and Victoria the event famously described by the then-Treasurer, Paul Keating, as "the recession we had to have", cut deeply, as asset prices declined, leading to defaulted loans and financial collapses. The AUD was at one stage worth USD0.51, despite expensive intervention by the Reserve Bank of Australia.

    Mr Moorfoot's experience in the paint department at McEwan's proved invaluable, as he found a job working for DuluxGroup, where he stayed for eight years. At the end of those eight years he began a working journey through many of the key players in the hardware industry, such as Danks and Kincrome. Mr Moorfoot describes this time of his life like this:
    I have to say that my motivations for leaving were always good, and I suppose also, you apply to a place, and you hear how good it is going to be. I was always thinking "well we're going to change this, it all can be fantastic." Then two years later, it's as though nothing has happened.
    Any business that has been around for a while is a little like a big lumbering bus, and you get new passengers on board that say "yeah were going to take it off in this direction." But it turns out that the bus is really hard to turn!
    Finding a business

    After 18 years of that kind of effort and disappointment, and after a particularly bad experience with one employer, Mr Moorfoot decided he would try a different direction.
    I had a lot of exciting opportunities that turned out to be disappointing. I think I was also probably a bit anxious and ambitious to try to make things happen. So I ended up saying, "Well, you know what? This is getting too hard."

    While he had experience working in many different businesses, Mr Moorfoot had yet to run a business himself. After looking at several opportunities, such as franchises, and an aborted consideration of taking over the Post Office in Warrandyte - which was, he says, incredibly expensive for its declared earnings - he began to consider hardware stores. He passed over one located in the eastern Melbourne suburb of Templestowe, as he wasn't happy with a location that was too urban.

    Then he came across the hardware store located in Yarra Junction.
    I thought, "Hello, I know exactly where that is." As a rep, I used to call out here [Yarra Junction]. At that stage we were channelised reps, so I was doing Mitre 10 stores only. But I was driving past the store all the time. It always seemed to be busy. It was a Thrifty-Link at the time, and I knew the rep who was dealing with the store. He said the place was amazing and that they would sell a lot goods there.

    His first consideration was the same one that most people getting into hardware have: Bunnings. However, he could see that Yarra Junction was an unlikely destination for a big box store, with both Lilydale and Healesville more likely to attract their business.

    Next stop was to start looking through the books for the store. That's when he discovered that the store in Yarra Junction was paired with the store in Templestowe. He also found out that both stores were in a lot of financial trouble.
    So we started to go through the process. I don't think we ever really thought we would complete the purchase. We thought we would go through all the financials, through all the legal requirements and then something would happen, and we would think, "Well that was a real experience." But everything, rather than becoming a roadblock, became a hurdle that we managed to jump over. So we ended up taking over the store in July 2008.

    Taking over and starting to run the business, Mr Moorfoot found himself facing some unpleasant realities.
    It was a shell of a business. There was no core range, there is no goodwill. The computers were held together with Band-Aids. It was really shocking. Even though we didn't pay a huge amount, we still overpaid, both for the stock and for the business. But then we were green. We simply didn't know.

    A lot of it came down to what the previous owners had done to the business.
    It did come with a few accounts, but they were all really quite shocking. For the most part [the previous owners] had transferred their business over to their other store in Templestowe, which was a larger enterprise. They did a number of other things as well. In my opinion, they basically raped and pillaged this business.

    Surprisingly, though, all these troubles did not really put Mr Moorfoot off the business - quite the contrary, in fact.
    Thankfully there was still some life in the old girl yet, and it turned into a labour of love, because when you're passionate about an industry and you enjoy it, you keep going.

    That said, it was still pretty tough.
    I remember going home each night. At that stage my wife, Anthea, was not in the business as yet. I remember the numbers were quite woeful: $1500 one day, $1200 the next. We spent our first three months apologising to customers for not having stock. Because the store had such a bad credit history that we couldn't get any stock.

    Just as icing on the cake, Mr Moorfoot discovered that some of their problems had to do with their staff. The most serious one had to do with the person handling their accounts.
    We found out that one person who was running the administration side of our business was a thief! This person knew the system better than any of us, and it was only when my wife Anthea came on board, and became more familiar with things, that we found that person out.
    We had blocks of invoice numbers that were missing, and we couldn't work out why that was happening. This person was actually reversing cash sales out. Then the person would pocket the cash. !Since that employee left, all of our invoices are back to being sequential. Previously, we had thought there was a fault in the system.
    We would caution anyone who is buying a business that comes with an employee who has been running accounts receivable, payments and paying bills for a long period of time, that they should audit the entire business.
    So we had some real challenges with staff, some serious. There were psychological issues, whatever. It has taken us some time to get staff that are here because they want to be here. They understand this will never be a business that will make them a fortune, but they are five minutes from home, and that means a lot to them.

    All of the original staff are now gone, except for one, Ken, who is definitely a "keeper".
    Ken who works here, we worked out that between the pair of us, we have close to 90 years of experience! He has just turned 65 ,and I think he started in Wales at the iron mongers, when he was a wee lad. He has probably forgotten more about hardware than I know.
    Developing the business

    In getting the business going, Mr Moorfoot faced a major problem in simply stocking the shelves and displays. Few suppliers were willing to extend any credit. Having chosen to go it alone without any partner, the business did not have a lot of cash to spread around. That meant the store had to become proficient at stocking the bare minimum needed to keep functioning.
    The challenge that we had back in the day, was the that as our business was so damaged we couldn't buy a lot of stuff, because we did not have a lot of money. So one of the things that was prohibitive was the matter of minimum orders.

    To continue reading this story, please download the HI News pdf at:
    HI News Vol.3 No.9: Yarra Junction H Hardware

    Until next time,

    Betty

    You can contact me directly via email betty@hnn.bz or Twitter @HNN_Australia

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    Statistics
    ABS Hardware Retail Revenue
    Hardware retail sales june 2017 and comparison of the last 10 years
    HNN Sources
    Proportional contribution to annual retail sales by each state/territory
    Percentage change in revenue
    Click to visit the HBT website for more information
    With the June 2017 retail revenue statistics now available from the Australian Bureau of Statistics (ABS), it's possible to look back over the 2016/17 financial year, and to contrast this with previous financial years.

    As the chart below illustrates, the proportion of revenue earned by each state has been relatively stable. More recently, NSW has gained ground, while VIC has lost ground. SA, after relatively lean times in 2012/13 and 2013/14, has recovered, as has Western Australia (WA) after its lean years in 2009/10 and 2010/11.
    Hardware retail sales

    The following chart provides a closer look at the proportional contributions of the states for 2016/17, the previous year, 2015/16, and the pre-GFC year, 2006/07.
    Proportional contribution to annual retail sales by each state/territory

    In the two most recent years, virtually the only change has been that Victoria (VIC) has lost 1%, and New South Wales (NSW) has gained 1%. For 2006/07, the contributions by South Australia (SA), Western Australia (WA) and Tasmania (TAS) were much higher that those of recent years, reducing the proportional contributions of VIC and NSW. So, in recent years, there has been an increasing centralisation of revenues to both VIC and NSW.

    Using the original data provided by the ABS (rather than trend data), Australia overall reported its most subdued growth for the past seven years, with the national hardware retail industry growing by just 3.14%. The states that were the least subdued were the Australian Capital Territory (ACT), with growth of 16.09%, SA with growth of 6.64%, and NSW with growth of 6.06%. Both Queensland (QLD) and VIC reported quite low growth, of 1.09% and 0.96% respectively. Only the Northern Territory (NT) reported negative growth, with revenues falling by 8.18%.

    The next chart, which looks at growth, provides some further insights into these changes. The top five states have continued to consolidate their position in a growth range between 0% and 7%, while the two smallest (by total hardware revenue) territories have broken out of this, with the ACT gaining, and the NT losing.
    Percentage change in revenue
    Real estate and hardware revenue

    If we accept that growth in the housing industry, driven by ever-higher real estate prices, has had a big influence on hardware retail expenditure, then we could think that these increasingly restrained growth rates reflect something that is happening in real estate, which in turn is driving changes in the housing market.

    One possibility is that the real estate markets are not so much in a "downturn", or that the "real estate bubble has burst", but rather that we are seeing a market finally reach a state close to equilibrium. To understand such an equilibrium, it's necessary to first consider what disrupted the market in the first place.

    The next two charts indicate what might be the disrupter. The chart below shows the number of persons employed full-time in manufacturing, FIS and IMT.
    Employment by industry

    The next chart shows the trend for what is known as "Gross Value Added" (GVA) for manufacturing, construction, information media and telecommunications (IMT), and financial and insurance services (FIS). GVA is essentially the contribution of an industry to Australia's gross domestic product (GDP).
    Gross Value Added by select industries

    The employment chart shows the steep decline in manufacturing employment. While employment for IMT remains flat, and FIS shows moderate gains, both of these also produce substantial "halo" employment opportunities.

    As can be seen in the chart for GVA, growth in manufacturing moderated to almost nothing in 2004, then entered a decline in 2013. Meanwhile, FIS has, since 2003, entered into a period of high growth. IMT has not grown as strongly, but it has produced consistent growth, despite a flat period from 2010 to 2013.

    Construction has largely kept pace with the growth in FIS.

    In short, what has been happening over the past 12 or 14 years is that a big part of the Australian economy has transitioned from being manufacturing based to being services based. This has exerted two influences on population distribution.

    The first influence is that by its very nature, manufacturing is decentralising. You don't open a factory in the middle of a city, or even in its immediate suburbs. Instead, you choose an area some distance from the city, on a major transportation hub. People who work in the factory naturally choose to live close by to reduce their commuting time.

    Thus significant population centres outside of the main city grow.

    As manufacturing first reduced its total employment due to increasing automation, and then further reduced employment as businesses shrank or ceased entirely, the attraction of these remote centres was reduced. This was combined with the second influence, the increase of employment in FIS. FIS, of course, will exert pressure to create urban centralisation.

    The service industry relies on multiple, internal and external layers of services. The providers and facilitators of these layers need some degree of co-location, as this helps with both service reliability and the ongoing development of those services.

    What has happened, then, over the past 12 years or so, has been a revaluation of urban land. It held one value in a city economy where manufacturing played a major role, and another value where manufacturing played only a minor role, and FIS played a major role.

    The signals that are currently coming from the real estate market indicate that this process of revaluation is entering its "infill" stage in Sydney and Melbourne, and elsewhere in Australia. In this stage, revaluation is largely completed, while there remain some areas - formerly neglected - that will continue to be re-valued.
    Forecasting

    How will this affect future revenues for the Australian hardware/home improvement retail industry? It is quite likely that the kind of constrained growth that the industry has seen over the past two to three years will continue for another three to four years, with annual growth rates for the states with higher revenue levels delivering between 3% and 6% annual growth. The states and territories of NT, ACT and TAS will vary outside of this range, subject to local influences.

    By the end of that time, it's likely that cities will be entering into the final stage of the manufacturing to service economy transition They will begin to develop significant centres of decentralisation - effectively semi-urban clusters that specialise in particular service areas. These will, in turn, open up new areas for real estate development, and new housing projects, driving annual growth rates over the 6% mark.
    Bigbox
    Big box update
    Tradies are allegedly operating in the black economy by fraudulently quoting Bunnings' ABN on invoices
    HNN Sources
    Bunnings is opening a new store at 9 Watts Lane, Russell Vale (NSW) in the Illawarra
    The proposed Bunnings development in Kingaroy (QLD)
    Click to visit the HBT website for more information
    The black economy gets a boost from tradies quoting Bunnings' ABN; go-ahead for Bunnings Warwick store; two new Bunnings stores set for the Illawarra (NSW); plans to build a distribution centre instead of a store in Glynde (SA); approval for Kingaroy (QLD) store may not be granted until mid-2018; Bunnings waiting on decision for Landsdale (WA) site; Panorama (SA) store "too big"; and smaller-format Bunnings Colac sold to Melbourne-based investors.
    Tradies tax scam targets Bunnings

    Tradies have been fraudulently quoting Bunnings' ABN (Australian Business Number) as their own on invoices, according to report in The Australian. This allows them to allegedly operate in the black economy, as part of a scam that is undermining the tax system.

    Bunnings now has one of the most quoted ABNs in the country.

    Treasury's black economy taskforce chairman, Michael Andrew, admitted that the

    ABN system - introduced at the same time as the GST 17 years ago to ensure people did not escape the tax system - was "not working".

    Much of the ABN fraud has had two unwitting victims: Bunnings and the taxpayer. Abuse of the Bunnings ABN has been rife, particularly in some parts of the country, potentially costing the government hundreds of millions of dollars. Mr Andrew told The Australian:
    We found out that more than 40% of ABNs quoted in the Northern Territory were Bunnings. Of course, every tradesman goes to Bunnings. They get an invoice - the ABN's up top.

    Mr Andrew said the Bunnings ABN scam occurred when businesses or individuals employing the services of tradesmen and other service providers asked for an invoice. The document is provided containing the bogus ABN. He explains:
    People ask for an invoice or valid receipt and they get the name of the company, but they then get an ABN of someone else such as Bunnings: the result of which (is) you can't trace then where the money really went.

    Federal Revenue and Financial Services Minister Kelly O'Dwyer said the government commissioned the black economy taskforce to clamp down on situations such as the Bunnings ABN fraud. She told The Australian:
    We know there is a big problem here, and we know it is costing the economy a huge amount.

    Ms O'Dwyer has also released a set of 54 "policy ideas" from the black economy taskforce, ahead of its final report to government in October. Several of these ideas focus heavily on ABN reform. She said she wanted to fully consider the final report before taking formal action on possible reforms, such as real-time ABN recognition: "It will require a properly calibrated response."

    There is no suggestion that Bunnings has done anything wrong.
    Flood concerns continue over Warwick Bunnings

    A legal objection to the $16 million Bunnings development in Warwick (QLD) has been dropped but neighbouring businesses say their concerns have not receded.

    Construction of the 8000sqm development at the corner of Canning and Condamine Streets is expected to begin in the next few months. It should be completed by mid-2018.

    The project, approved by Southern Downs Regional Council in January, was appealed by a group of concerned local business people and residents on the basis the warehouse was to be built in a known flood zone, an area understood to be "off limits" to new developments.

    Bunnings general manager - property Andrew Marks said the company was satisfied with the outcome of court proceedings and was excited to start building a store in Warwick.

    On the question of lessening a flooding impact on local businesses, Mr Marks said Bunnings had worked with local authorities and technical experts throughout the development application process. He told the Warwick Daily News:
    The development application took into account the findings and recommendations of the Jacobs Consulting report, which was commissioned by the council, which concluded that the development would have no significant effect on flooding.

    Olsen's Home Timber and Hardware owner Alan Olsen said it was not Bunnings people were objecting to.
    It's never been about competition for me. It wouldn't matter who was being allowed to build there. Anyone who has had to deal with our major floods will know that anything that might worsen the impact is a bad idea.

    The original flood impact statement reported there would be minor changes in water depth at around 25-50mm and some changes in the energy of the water at the north-west, north-east and south-east corners of the site.

    Related:
    Big box update: Warwick local fights Bunnings' plans - HNN
    Bunnings boosts presence in the Illawarra

    Bunnings will open a new store at 9 Watts Lane, Russell Vale (NSW) and staff at its Shellharbour location is set to move into the former Masters Albion Park site.

    Andrew Marks, general manager property at Bunnings confirmed it received development approval to make the necessary conversions of the former Masters site. He told the Illawarra Mercury:
    Following the reformatting works, our intention is to relocate our existing Shellharbour warehouse including all current team members. The conversion of the site is pending the Home Consortium agreement with Woolworths Limited which is subject to the consent of Lowe's Companies, Inc.

    The 13,000sqm Albion Park Masters closed its doors last December, having been open for a little over a year.

    The big box retailer lodged a development application with Shellharbour City Council last November, seeking to modify the Masters consent. Instead of being a classed as a "home improvement centre", Bunnings sought to create a "hardware and buildings supplies" store.

    Meanwhile, Mr Marks said construction works are currently under way and progressing as planned at the Bunnings Warehouse Bellambi/Russell Vale site.

    The Bunnings Bellambi store is expected to open late 2017.
    Distribution centre plans for Glynde

    Bunnings wants to build a distribution centre in Glynde (SA) after its plans for a $26 million store at the same site were knocked back. The big box retailer has lodged an application with Norwood Payneham & St Peters Council for a site on the corner of Penna Avenue and Glynburn Road.

    Bulk materials would be brought to the distribution centre, repackaged and then transported to other shops for sale. It would not include a retail outlet. Bunnings general manager - property Andrew Marks did not say how much the development would cost.

    In May, the Development Application Panel rejected Bunnings' application for a retail store, saying it would generate heavy traffic in surrounding streets. Approximately 1000 small-business owners and residents signed a petition last year opposing the original plan because of traffic concerns.

    The council could not say when the new application would be assessed.

    Related:
    Big box update: Bunnings planning SA store - HNN
    Plans for Kingaroy revealed

    Bunnings' plans to build a new store in Kingaroy may not get final approval until mid-2018.

    According to the development application tendered to South Burnett Regional Council, the total retail space of the Kingaroy store will be about 7597sqm. Of this about 3893sqm with be the main retail warehouse. The outdoor nursery, soil and stone sale area will be about 1523sqm. A timber trade sale area will be about 1399sqm while the landscaping yard will be 730sqm.

    Bunnings has also planned 203 parking spaces, four disabled spots and four trailer bays.

    While the council has received a draft of the building application, more information is needed.

    It is unlikely the final plans for the project will proceed to community consultation before early 2018. This pushes the estimated date of the council approving the project to mid-2018.

    The timeline could shorten if the state government approves the council's new planning scheme soon. In this case, the land currently under development would be rezoned to allow for this scale of construction.

    Related:
    Big box update: Bunnings lodges DA for Kingaroy - HNN
    Uncertainty over Landsdale site

    Bunnings is waiting on negotiations between stakeholders of the former Landsdale Masters site in Western Australia before it can announce an opening date for its takeover of the warehouse.

    The outlet will give Bunnings a presence at all compass points in Perth's far north, adding to Whitfords (south), Mindarie (north) and Joondalup (west) stores.

    The big box retailer secured development approval for the Hartman Drive-Gnangara Road premises more than five months ago. But Bunnings property general manager Andrew Marks explained they could not proceed in Landsdale until matters were finalised with Woolworths and Lowe's, former joint venture partners in Masters.

    Bunnings will be dealing with property group Home Consortium when given the go-ahead to develop the Landsdale site.

    Home Consortium agreed to take control of all Masters buildings in Australia when Woolworths shut down its home improvement chain last year.

    David Di Pilla from Home Consortium told The Australian in December there would be a staggered opening of the former Masters sites. The former Joondalup Masters building has been approved for conversion to a multi-tenancy large retail format.
    Proposed Panorama store considered "too big"

    The fate of a $42 million Bunnings store in Panorama (SA) will remain unknown until at least October following almost three years of objectors trying to stop it from opening. A Mitcham Council report shows that a conciliation conference between Bunnings, Panorama resident Neil Baron and Mitcham Council has been adjourned.

    It comes after the big box retailer lodged plans for a $45 million store in Edwardstown, 2km from the Panorama site, in May.

    Bunnings general manager - property, Andrew Marks declined to comment about whether the case had been adjourned until the Development Assessment Commission looked at the Edwardstown application. The state government did not say when that would occur.

    Mitcham Council's Development Assessment Panel rejected Bunnings's first application for the TAFE site on Goodwood Road in Panorama a year ago. It argued the store was too big for the area and would create traffic issues.

    Bunnings submitted an amended plan in December - which was also rejected.

    Panorama resident Neil Baron has appealed the decision in the Environment, Resources and Development Court because he thinks the store is well designed and will create jobs.

    Related:
    BIg box update: Bunnings Panorama back on the agenda - HNN
    Melbourne-based investors buy Bunnings Colac

    A smaller format Bunnings warehouse in Colac in regional Victoria has been sold to a Melbourne family for $7.8 million, on a yield of 6.1%.

    The 6500sqm retail property on Bromfield Street in the centre of Colac was sold with an eight-year lease in place to the big box retailer,

    The sale of the Bunnings in Colac was negotiated by Mark Wizel, Joseph Du Rieu, Justin Dowers and Kevin Tong of CBRE. DBR Property's David Ryan represented the buyer. Mr Wizel said:
    Whilst the price point created a far higher level of accessibility for a wide range of investors, the smaller format store did present a hurdle for many investors as we have seen Bunnings continue to move toward large format sites in recent times.

    Other recent sales include Bunnings in Warragul selling for $6.43 million last September with a six-year lease, on a 6.6% yield

    Bunnings Warehouse in Yarrawonga sold for $11.6 million last August on a 10-year lease, and on a 4.9% yield.

    A Bunnings in Osborne Park (WA) with a new 12-year lease sold for $7.05 million on a 4.65% yield in June last year to a Perth investor.
    Companies
    Supplier update
    Hitachi Koki is gearing up for a buying spree
    HNN Sources
    Brickworks' multi-purpose corporate retail environment in Sydney's CBD
    The Classe 300 is Legrand's connected video door entry system
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    Hitachi Koki is aiming to be in the top three global power tool companies through acquisitions; Legrand launches Eliot, its IoT product range, in Australia; Brickworks expects annual profit to double; GUD posts $7.3m loss; Loscam opens pallet repair facility in Brisbane; Victa rates highly in lawn mower reviews; and Swann celebrated its 30th anniversary.
    Acquisitions on the agenda for Hitachi Koki

    Japanese power tool maker Hitachi Koki will spend up to about 50 billion yen (AUD573.5 million) on acquisitions with the help of US buyout firm and new majority owner, Kohlberg Kravis Roberts (KKR). The company is aiming to become one of the top three players in the industry worldwide.

    The Tokyo-based company's sales totalled 178.7 billion yen (AUD2 billion) in the fiscal year ended in March 2017. This places it among manufacturers roughly tied for fourth in the global power tools market. It is looking to add to its lineup of high-end professional-grade tools by offering mass-market versions via acquisitions. Company president Osami Maehara told Nikkei Asian Review:
    We will grow sales 70% to around 300 billion yen in fiscal 2021.

    Hitachi Koki plans to expand its network of sales outlets in Japan from 39 to between 50 and 60 within three years. This will ease its dependence on dealerships under the umbrella of former parent Hitachi, which account for half of its domestic sales. Industrial conglomerate Hitachi sold its power tools business to KKR in March as part of a wider restructure.

    Hitachi Koki is also looking to change its name but Mr Maehara did not provide a time frame for the move. He said:
    Apart from [Japan] and other markets where the Hitachi brand is strong, we will quickly build up a new brand.

    Related:
    Hitachi to sell power tool unit - HNN
    Legrand targets Australian building market with IoT

    The growing demand for connected devices is creating new opportunities for the building sector. France-based electrical equipment manufacturer, Legrand believes the expansion of the "Internet of Things" (IoT) will lead to an increase in "smart" solutions for end-users. Legrand has created the Eliot range of IoT products for this market.

    Legrand's Eliot program was unveiled at Sydney's Museum of Contemporary Art recently.

    Connected products with the Eliot brand can simplify usage, facilitate maintenance and customise products based on users' needs. The range includes the Classe 300, Arteor with Netatmo, Smarther and Nuvo.

    The Classe 300 is Legrand's connected video door entry system, and allows the user to interact with the caller by voice and image, locally or remotely, on their mobile device. Made easy to install thanks to the Door Entry app, Classe 300 also enables controls for lighting or automated sprinklers.

    Arteor with Netatmo provides controls for lighting or shutters in the home. Legrand developed this range with Netatmo, a French company specialising in connected objects.

    The Smarther connected thermostat can be controlled remotely via a smartphone app. A Wi-Fi connection lets users program, control and adjust the temperature, anytime, anywhere.

    The Nuvo music distribution system enables music from a single digital source to be played in multiple rooms.

    At the Australian launch the company highlighted a number of other IoT products including:
  • Legrand eco-meter that can be used to measure and display electricity consumption directly and on web pages.
  • My Home system for controlling and monitoring electrical functions, and setting predefined scenarios for of heating, blinds and lighting.

  • In the future, all Legrand products with connectivity capabilities sold in Australia will carry the Eliot label.
    Legrand in Australia

    Legrand acquired electrical supplier HPM in 2007 and today sells some 15,000 products in Australia and New Zealand through a network of more than 5,000 electrical wholesalers, hardware retailers and mass merchants under the HPM, Legrand, BTicino, Cablofil and CP Electronics brands.
    Brickworks upgrades net profit guidance

    Brickworks has forecast its net profit this financial year will be about double that of the prior year, as a result of continued strength in its land and development portfolio. Underlying earnings are expected to be up about 25% on the prior year, it said.

    But the company also said earnings before interest and tax (EBIT) for its building products arm was likely to be lower due to difficult market conditions and restructuring in Western Australia, plus the impact of wet weather on its east-coast operations that reduced product deliveries in the wake of Cyclone Debbie in late March.

    All Queensland operations were closed for a period after Cyclone Debbie, and brick plants in NSW were affected when they were taken off line for long overdue maintenance.

    Still, earnings from its building products business on Australia's east coast would be higher than in the previous fiscal year, because of strong performance from the Austral Bricks unit. Brickworks said the order book across businesses in the region remains buoyant. Any delays caused by wet weather have simply resulted in extensions to the pipeline of work.

    Brickworks said it had sold its former brick making site at Malaga in Western Australia for $19.2 million, part of an ongoing restructuring of the company's brick, roof tile and timber operations in the state. Production from the Malaga plant has been transferred to the upgraded Cardup plant.

    Brickworks is scheduled to release results for the year through to July on September 21.
    Restructuring leads to $7.3 loss for GUD

    GUD Holdings, owner of the Oates cleaning brand, made a loss of $7.3 million in FY2016-17. It follows a net loss after tax of $43 million in fiscal year 2016. The consumer and industrial products supplier said the results were largely due to the sale of its Sunbeam, Lock Focus and Dexion businesses.

    Company revenue for FY2016-17 was $426.3 million, which is an increase of 4% from the previous year. GUD's EBITDA for the period was $87.7 million, which is a 3% rise from last year.

    GUD said underlying profit from the three key businesses it continues to operate was $51.5 million in the year to June 30, up 45% from the prior year.

    The company's automotive parts business includes the Ryco and Wesfil filter brands and Narva accessories. It also owns the Davey pumps and pool products business in addition to Oates.

    The sale of storage and logistics business Dexion and lock manufacturer Lock Focus contributed the majority of a $58.9 million loss.

    GUD said its automotive interests remain the key source of revenue and earnings. Earnings in automotive climbed 11% to $74 million, contributing almost 90% of GUD's total earnings.

    However work remains to be done with Davey and Oates. Earnings declined 15% in the Oates business due lower sales caused by the collapse of Masters Home Improvement stores and the withdrawal of Oates products from Woolworths supermarkets.

    A new chief executive at Oates is refocusing the business on opportunities in commercial markets and performance improvements, according to GUD.

    Davey's earnings dropped 24% as demand was impacted by poor weather conditions. GUD said the dependence of Davey on seasonality is being addressed through new products, including pumps and connections linked to real-time weather data.

    Related:
    GUD Group FY 2016/17 first half results - HI News 3.1, page 26
    Loscam opens repair facility

    Pallet equipment pooling company Loscam has opened its new Brisbane pallet repair facility, located in the new Richlands industrial park in Queensland.

    Over 120 dignitaries, customers, suppliers, executive team members and staff from Australia and New Zealand gathered for the ribbon-cutting ceremony. The launch of the facility coincided with the company's 75th anniversary. Daniel Bunnett, executive vice president for Australia and New Zealand, said:
    There is an enormous amount of work which goes into driving a Greenfield site development. The effort from the local team in driving the market share gain and then leading this development has been first rate. I would also like to acknowledge our parent company in China Merchants Group who continues to invest in the long-term, strategic future for the region.

    The Richlands facility is expected to deliver significant expansion of repair and storage capacity for the state and is complemented with brand new machinery.

    Linda Tsui, executive vice president - finance, Loscam, delivered a speech on behalf of Zhao Huxiang, Loscam chairman and vice chairman, CMG. She said that its should help the company to better serve its customers and "offer a new experience".

    Guests were given a tour of the repair line as well as its automation and safety initiatives.
    Victa satisfies customers: Canstar Blue

    Canstar Blue has awarded Victa five out of five stars for overall customer satisfaction in its latest 2017 lawn mower reviews.

    With the core purpose of helping consumers make better purchase decisions with its unbiased assessments, Canstar Blue's reviews are an effective way for consumers to find out more about a product, brand and service. Canstar Blue editor, Simon Downes, said:
    Our aim is to help Aussie consumers make more informed purchase decisions every day. Whether it's lawn mowers, home appliances, internet providers or new vehicles - our reviews and ratings are based on real world experiences across more than 100 consumer categories.

    For Victa, the review rating showcases its history and quality of the company's range of lawn mowers. Victa marketing manager, Laura Clarke said:
    We focus on customer insights and design and produce lawn mowers that appeal to the Australian market. Our team continually aims to innovate and deliver products that satisfy customer needs, and that is why we are Australia's number one choice in lawn mowers.

    Assessing reliability and performance; ease of use; value for money; grass cut quality; maintenance; and servicing, the Canstar Blue review describes Victa's range of lawn mowers as authentic as any other Australian staple. According to the review:
    Victa has expanded to offer a large range of lawn mowers that are known the world over for the enduring quality and top-notch craftsmanship, designed and assembled in Australia.
    Swann reaches 30-year milestone

    DIY security monitoring company, Swann recently celebrated its 30th anniversary.

    From starting out in the basement of David Swann's family home in Melbourne in 1987, the business started out with making modems. It moved into security in 1999 with a "spy cam" that pioneered the DIY security category at retail stores.

    Now it has offices in Australia, USA, Canada, UK, Italy, Hong Kong and China with approximately 120 staff. Swann has also expanded its presence to over 40 countries and sells its products through retailers including Bunnings, JB Hi-Fi, Harvey Norman, Costco, and Officeworks. Jeremy Stewart, vice president - global marketing at Swann, said:
    Swann ... has seen at least 10% growth year on year, for the last 10 years. This growth is a testament to our unique selling proposition and reflects the demand we're experiencing from home and business owners, who want control of their safety and security.

    The Swann range includes DIY wired and wireless security systems with new developments that include state-of-the-art professional-quality super HD (such as 3, 4 and 5 Megapixels) and ultra HD 4K recording systems and cameras.

    The Swann family retired from the business in late 2014 and it is now part of the Infinova Group.
    Products
    Consumer laser levels
    The Stanley Cubix laser
    HNN Sources
    Bosch PLL 1 P Laser spirit level
    The Stanley Cross90 laser
    Click to visit the HBT website for more information
    If you spend any time at all working on construction, whether professionally or as a DIY project, you eventually will become haunted by that one, single question: Is it level? Just about everything begins and ends with that question, because it establishes a key part of structural integrity, as well as a primary aesthetic requirement.

    As a result, not that long ago, if you stopped to watch tradies working on a construction project, you would see them taking up their bubble levels and consulting them with a frequency pretty close to that of teenagers checking their phones for text messages. All that started to change about 20 years ago, when laser-based levels began to become more affordable, a trend that has accelerated over the past ten years. Over the past two to three years, the laser level has passed an inflection point in its development, and has become truly affordable for even occasional DIY use around the home.
    History

    Lasers were themselves initially developed in 1960. It didn't take too long for inventors to see how useful they could be in construction, and the first construction laser was launched in 1968 by Spectra Physics. This consisted of a simple laser that had to be levelled by the use of the traditional bubble level. The plasma tube, which contained the helium and neon gasses which were "lased" to produce the laser would last for up to 300 hours of operation. The rig cost USD8,000 - equivalent in today's US dollars to over USD56,000.

    The first development Spectra made was to add a motor to rotate the laser beam, which meant the level standard could be available to multiple workers building the interior fittings to a room. Next, the first self-levelling laser was developed, again by Spectra, in 1973. By the late 1970s there was general acknowledgement of just how useful the lasers were, with some sources stating they increased productivity by 30% to 40%.

    The next big thing to happen to the industry was the commercial development of the diode laser in the mid-1990s. These used semiconductor materials similar to those used in light emitting diodes (the familiar LED lights). Much less expensive to produce than gas-based lasers, and offering a much longer operating period, these began to fundamentally change the laser level industry. The effect was to produce lasers that lasted for 30,000 hours of operation instead of 300, and cost half the price of gas-based lasers.

    Over the past 10 years, as production in China and other low-cost labour countries has taken off, the prices of laser levels have plunged even further. Once used only on high-value construction sites, then by professional tradies, laser levels are today easily within reach of DIY consumers, as a convenience around the home.
    Types of consumer levels

    There are basically two types of laser levels for consumer use, with a third, in-between type emerging as well. The simplest type is basically a bubble level with a laser attached. These are typically fixed to a wall or other surface, levelled-up with the bubble level, and then project a reliable level laser line across the surface. These can be purchased for less than $45.

    The second, more complex type is the self-levelling laser level. These can sit on the floor, or, more commonly, be placed in a more elevated position, either by fixing to a tripod, to a special attachment fixed to a wall, or, using a universal attachment, to some other "holder" such as a ladder, plumbing, or even a chair back, bed frame - anything. Most consumer levels use a pendulum system to provide levelling.

    The third, emerging type is something of a hybrid of the other two. This makes use of a smartphone with an accelerometer. Connected to the phone via the headphone or connectivity port (Apple's Lightning port, micro-USB or USB-C), the connected device mainly produces the required laser line, while the phone provides the technology to sense when it is level.
    Market development

    Pioneered by companies such as Bosch, laser levels are becoming a more common consumer purchase. At the moment, there are not that many levels in the consumer price range produced by the major manufacturers.

    However, if we accept that these consumer products need a price point under $120, there are already a range of reliable trade offerings between $180 and $240. It won't be long before we see more of these these reach down to the $80 to $130 market, and begin to become attractive to consumers.

    Of course, what will cause that to happen will be a higher adoption rate of laser levels among consumers, driving better volume, and leading to manufacturing and distribution cost reductions. The question then becomes, how big is the potential market? Which leads us to an underlying question, just how useful is a laser level to the average DIYer?

    The answer, HNN believes, is "very useful". That is in part because we need to remember that the average DIYer today probably has fewer skills than the DIYer of 20 years ago. It might seem like a bit of a joke to suggest that using the traditional beam bubble level is difficult, but if you only ever put it to use a couple of times a year, it is tricky. Many DIYers confidently get out the level, draw a pencil line, put up a shelf or cabinet - only to find that things have drifted out, and the bubble in the level is now distinctly out of the middle-zone.

    In contrast, the laser level is a constant reminder to check the level, and offers an easy way to check and correct the seemingly inevitable drift. Spending $80 for what might amount to two hours of use over a three year period might seem excessive.

    However, while cost-saving is great motivator for DIY, once undertaken the main motivator is making sure that you don't make mistakes. The shelf that is out of level by enough that it needs to be shifted 2mm or 3mm creates all kinds of problems. How do you drill mounting holes for the brackets that are so close to the existing holes, for example. Correcting mistakes is particularly difficult if you are inexperienced, and don't know some of the tricks professionals can use.
    The levels
    Bubble/laser levels

    There are surprisingly few tools offered in this area by major manufacturers. This is likely due to increasing commodification. Doing a search for this type of tool on Alibaba, for example, returns a wide range of tools.
    Bosch PLL 1 P Laser spirit level

    With a length of 270mm and a width of 120mm, this is a simple, portable Bosch green tool that effectively boosts the functionality of a standard, small bubble level. One end of the level can emit a laser line, which has an effective range of around five metres. The other end can emit a single laser dot, which has a claimed range of 20 metres.
    Bosch PLL 1 P Laser spirit level

    The level is attached to the wall using a mounting bracket. The bracket itself is attached to the wall using nails, pins, screws, or adhesive tape. The level then attaches to the bracket magnetically. The same mount can also be used to attach the level to a tripod with a 1/4 inch mounting thread. Once mounted, the level can be adjusted to an angle, for use in construction of items such as stairs.

    The laser is a class II, and accuracy is stated as around 0.5mm per metre.
    IKEA Fixa Level
    Ryobi AirGrip Laser Level

    The AirGrip dates back to the time when Ryobi tools were darker blue/green and not their current colour, though a revised model in the current colour has been released. It's a device based on a unique idea. One of the main difficulties in using this kind of laser level is how to position it safely on a wall or other vertical surface. The AirGrip solves this problem by incorporating a small, battery powered suction pump in the design, which maintains enough of a vacuum, even when faced with some slightly porous surface, to keep the device in place.
    Ryobi AirGrip Laser Level
    IKEA Fixa Laser spirit level

    We're including this to give some idea of the market. This is a very simple device, which provides means of attaching to surfaces magnetically, but in no other way, unless the user drives in a couple of nails to hold it in place. The laser has a limited range of three metres, and accuracy, at 1.4mm per metre, is not great.
    IKEA Fixa Level

    On the other hand, it retails for $20, and is designed for light tasks, such as hanging pictures.
    Ryobi Phone Works Laser Level Device & App

    This is one of eight Phone Works products that Ryobi produces, including an inspection scope, an infrared thermometer, and active noise suppression earphones.

    Rather than relying on a bubble level to adjust the system, it instead relies on the inbuilt accelerometer in many smartphones. The advantage of the system is that it offers additional features, such as photos of the level line which can be shared. The disadvantage is that the accelerometers in many smartphones are notoriously unreliable.

    Often it is necessary to first calibrate the phone using a standard bubble level. Additionally, as smartphone design is quite variable, getting the laser attachment to line up with the phone display can be difficult.
    Ryobi Phone Works Laser Level Device & App

    Considering that this approach costs more than many self-levelling laser levels, it's best to regard this as a developing area for special uses.
    Self-levelling laser levels
    Stanley Cubix

    The Cubix is perhaps the most interesting of all the self-levellers that would be suitable for consumers. While it is at the very top of the consumer price range, with an average price of around $105 on eBay and other places, it has a good range of features, and, importantly for smaller retailers who might only stock one item of this type, it is certified for trade use as well. About the only issue is that its accuracy is rated at 0.8mm per metre, with the laser line visible for up to eight metres.
    Stanley Cubix

    It has most of the features needed, including the generation of cross-line for alignment, and the inclusion of a handy grip that slots into the body of the tool, making it easy to attach it to anything from a ladder to a vertical stud. It also includes a 1/4 inch socket for a tripod.
    Stanley Cross90 Self Levelling Laser Level

    The Cross90 is really pushing the upper end of the consumer price range, but it does deliver for the extra cost. It features a class I laser, and provides accuracy of 0.5mm per metre. Like the Cubix, it uses Stanley's mounting system.
    Stanley Cross90

    Its unique feature in a device at this price point, is that it offers a second laser at an angle of 90 degrees to the main laser, making it easy to set up the Cross90 in reference to a secondary point.
    Bosch Quigo

    When you think self-levelling laser levels for consumers, the Quigo is one of the first devices that comes to mind. Bosch virtually pioneered the category with the Quigo, and now into its third generation, it remains a strong performer. It is a very compact design, which comes with a handy mounting grip included (the MM2 universal clamp), making it easy to set up on ladders, chairs and so forth.
    Bosch Quigo

    Accuracy is rated at 0.8mm per metre, and the line is visible on surfaces up to 10 metres away.

    It is a Bosch "green" tool, but it does come with a two-year warranty, which is automatically extended to three years when the tool is registered.
    Conclusions

    What HNN hasn't mentioned so far is that, outside of these major manufacturers, there is actually a very wide range of laser levels of all kinds available from a range of manufacturers in China.

    In fact, it's possible that the laser level market of today presages what much of the power tool market in general may eventually look like, in another 10 years or so. Log onto the Chinese online wholesale marketplace Alibaba and search for laser levels, and you will see over a hundred variations on every kind of laser level imaginable, ranging from $20 up to $1000. Even if you go to a website such as Chinese online retailer Banggood - which, in electronics, largely gives you an idea of what are the more reliable offerings on Alibaba, for an additional cost - there are still dozens of choices.

    This leaves Australian retailers in something of a tricky (and very interesting) situation. Some of those unfamiliar brands coming out of China will prove to be reliable, and offer customers a good deal - but which ones? While there are several Australian brands that have taken on the task of getting reliable laser levels manufactured in China - Imex, Redback and Spot-on, to name a few - these companies concentrate on trade-level devices. Except for the simplest levels, those used for tile-laying, they don't really cater to the consumer market.

    One way through that morass is, of course, for retailers to establish a relationship with a reliable Chinese supplier, and effectively "own brand" the product. That is what Sydney Tools has done, for example, with its CPI line of self-levelling laser levels. The CPI X-Line sells currently for $49, and the CPI Cube sells for $99.
    News
    HI News V3 No. 8: Metcash reports
    Download the latest issue of HI News Vol. 3, issue no. 8
    HI News
    Trim routers have become a more common tool
    Metcash has said no to an offer to buy Hardings Hardware
    Click to visit the HBT website for more information
    The current issue of HI News is primarily about listed wholesaler and retailer, Metcash and its Independent Hardware Group (IHG) subsidiary.

    Simply click on the following link to download this edition:
    HI News V3 No. 8: Metcash reports

    In addition to reporting its annual FY2016-17 results, Metcash confirmed to Fairfax Media that it rejected an offer from Reece to buy its Hardings Hardware group of stores.

    Statistics in this edition takes a look at how "complementary" the Mitre 10 and Home Timber & Hardware store networks are within IHG.

    There are more developments in Bunnings' UK business than in Australia as it doubles its pilot stores in the British market.

    The Home Depot is acquiring rental company, Compact Power Equipment and Home Hardware in Canada is repositioning the brand through a new ad campaign.

    The main product category we explore in this issue are trim routers. Other products featured include the Fiskars weed puller, Stihl's backpack battery, Cub Cadet's Z-Force mower, the newest multi-tool from Fein Power Tools, Swann's latest security system and the Worx Ai drill.
    Retailers
    Metcash full-year results FY2016-17
    Metcash results for FY2016/17
    Metcash
    Metcash 52-week year results by half
    Jeff Adams, incoming CEO of Metcash
    Click to visit the HBT website for more information
    Metcash has released its results for its full-year FY2016/17. Once the results are fully interpreted, it looks like the company had something between a mildly positive and a flat year. However, given the circumstances of its core industry, wholesale distribution of food products to independent grocers and supermarkets, the company has done well.

    Its home improvement retail operations, Independent Hardware Group (IHG), did well in particular. Earnings improved during a turbulent time, as the company acquired Home Timber & Hardware Group (HTH), and coped with the mass discounts dumped into the market during the busiest months of the year, as Masters exited the industry.
    Metcash results for FY2016/17

    The headline results as reported by Metcash were an increase in overall sales revenue by 5.4% on the previous corresponding period (pcp), which was FY2015/16, to $14.12 billion; reported net profit after tax (NPAT) was $171.9 million, down by 20.6% on the pcp; and earnings before interest and taxation (EBIT) rose by 7.7% on the pcp to reach $298.7 million. Metcash also reported what it termed "group underlying profit after tax" (UPAT), which it claimed rose by 9.3% to reach $194.8 million.

    Making allowances for this being a 53-week accounting year rather than a 52-week accounting year decreases some of these gains. However, it is also true that the NPAT decline is largely due both to profit from the sale of its automotive operations, which added close to $40 million to the pcp NPAT, and ongoing costs from the acquisition of HTH, which decreased NPAT in the current period.

    In its hardware operations, the company showed strong gains in EBIT, especially for the Mitre 10 portion of its operations, as well as substantial contribution from the HTH operations Metcash acquired in October 2016. During the second half of FY2016/17, the Mitre 10 operations managed to boost overall EBIT margin to an excellent 4.26%, largely through efficiencies gained.

    Metcash CEO Ian Morrice was balanced in his remarks on the result release, in contrast to early, enthusiastic press reports. In the press release announcing the results he stated:
    Our initiatives focused on supporting Independent Retailers be [sic] "The Best Store in Town", together with our Working Smarter program aimed at simplifying the way we operate and reducing costs, have helped mitigate the impact of difficult trading conditions.
    Significant progress has been made on the integration of Home Timber & Hardware, and we remain excited about the opportunities this acquisition presents.
    The strength of our financial position has us well placed for future investment, and the Board was pleased to announce it is bringing forward the recommencement of dividends for shareholders.

    He was equally measured in his statements at the conference with investment analysts to introduce the results. He said in part:
    I think we've got some results to present this morning that from our perspective really highlight and underpin continued progress against our purpose and vision ... the components of our vision being best store in town, partner of choice, passion for independents and thriving communities.

    Reassessing the results by excluding the additional EBIT from HTH, and adjusting for this year being a 53-week accounting year, growth in operational EBIT from the company's food, liquor and hardware operations essentially kept pace with general inflation at around 1.5%.

    However, the results did show substantial gains from Metcash's Working Smarter efficiency program, and the HTH acquisition promises to be a good source of future growth.

    As a result, the stock market broadly welcomed the results, especially as they were accompanied by a reinstatement of a regular dividend of $0.045 per share for the reported financial year. This led to the share price going up from $2.19 prior to the release, to $2.41 a week later, an increase of 9.1%.
    New CEO

    Prior to the results announcement, Metcash indicated that Mr Morrice would be stepping down from his role as CEO in 2018. Metcash announced on 11 July 2017 that it will replace him with a former executive from the UK-based supermarket chain, Tesco, Jeff Adams. The announcement read, in part:
    Mr Adams will join Metcash in September and, following a comprehensive orientation of the business, will work with Mr Morrice to ensure a smooth transition into the role. He will succeed Mr Morrice as Group Chief Executive Officer following completion of the transition in December. Mr Morrice will then act as an adviser to Mr Adams and the Board through to June 2018.

    Mr Adams has something of a mixed background. He was successful at growing the Tesco business in Thailand, but was one of several executives who struck out when trying to get the company's expansion into the US past first base.

    Mr Adams is slated to begin his role on 4 September 2017, on a four-year contract, with a total employment cost of $1.8 million per year. Additional short-term and long-term incentives also apply.
    End of the transformation plan

    The Transformation Plan, launched initially as a one-year project in March 2014, expanded in June 2015 into into a three-year project, and for a brief time in 2016 apparently a four- or five-year project, has seemingly come to an end, as a three-year project, with these FY2016/17 results. Where it would normally appear as an item under "Strategic objectives" in the report documents, it is absent this year, while the company's ongoing efficiency drive, "Working Smarter", continues.

    It is difficult to say how successful the plan was in reaching its goals, but it is fair to acknowledge that it was successful in parts. The appointment of some key personnel at Metcash in mid-July 2015, including Steven Cain as CEO Supermarkets, and Mark Hewlett as executive general manager of new channels, arguably came out of the transformation plan.

    Equally, though, the way the company managed a major divestment and a major acquisition - the sale of Metcash's automotive division to Burson Auto Parts, and its acquisition of the HTH from the Woolworths controlled Hydrox Holdings - were key to the company holding its own in an increasingly difficult marketplace.
    Results

    Analysis of the results has been complicated by several factors, including the acquisition of HTH from Woolworths, and Metcash's sale of its automotive operations to Burson's in FY2015/16. Additionally, for accounting purposes, Metcash's FY2016/17 consists of 53 weeks instead of the usual 52.
    Metcash Group

    Metcash has been called to task for what a few analysts see as an unusual treatment of some results, especially the number it produced for UPAT. This matter is covered in some depth in our Comment section for this issue.

    To try to make these performance numbers more accessible, HNN has put together some different comparisons. Table 1 presents the results represented in the company's accounting, as well as an estimation of the sales and EBIT to represent an equivalent 52-week year, with the contribution of the HTH acquisition omitted.

    In overall terms, Metcash's food operations, which include its IGA independent grocer brand, had sales of $9.18 billion, up by 0.6% on the pcp. Sales at supermarkets rose by 1.3% while sales at convenience outlets fell by 2.7%.

    Excluding the 53rd week, sales at supermarkets fell by 0.6%, and convenience outlet sales fell by 4.5%. Like-for-like (comp) sales at Metcash grocery banner IGA lifted by 0.1%.

    EBIT was virtually flat at $180 million, though would have declined when accounting for the 53 week year. Poor economic conditions in Western Australia, and stronger competition in that state and South Australia brought the number down, while eastern seaboard states performed more strongly.

    Metcash's liquor operations' sales rose by 3.5% to $3,333 million, and by 1.8% when adjusting for the 53 weeks. EBIT for the unadjusted year increased by 7.9% on the pcp, to reach $67 million.
    Independent Hardware Group

    Mr Morrice made direct reference to the IHG result in his opening remarks at the presentation of the results to analysts:
    So [total Metcash] sales are up 5.4% and EBIT is up 8%. However, both of those numbers include a 53rd trading week and also the acquisition of Home Timber & Hardware. So when you flow that through into Hardware's EBIT increase there, yes, there's an element from HTH, but the good news underneath that is that the continued strong performance of Mitre 10 was also a big feature. This is all given the amount of disruption with the closure of Masters during the course of the year. So I'm very pleased with that hardware result.

    Mr Morrice returned to this theme later in his remarks, in the section specifically devoted to IHG:
    So sales obviously increased significantly without acquisitions. So some of you will want to also focus on how Mitre 10's going. And as you can see, up 2.9%, 1.4% on a 52-week like-for-like basis. And given all that happened in the market, we're pretty pleased with that. And earnings, we've pulled out the $12 million that we've seen from HTH to the second half. So as you back solve that, you will see an increased earnings rate from Mitre 10 due to both sales volumes and cost efficiencies.

    Table 2 sets out the performance figures for IHG, broken down into Mitre 10 and HTH, with estimated accounting for the 53rd week.
    Metcash results for IHG division

    This shows that, on a 52-week basis, Mitre 10 grew its revenue by 1.39%, but increased EBIT by over 9%. This resulted in an EBIT margin for the year of 3.34%. Metcash notes that its EBIT margin on wholesale retail activities was 2.4%, which means that around 0.9% or around 37% of total EBIT came from other sources, amounting to over $13 million. Other sources would include the retail portion of company-owned store revenue, and income from sources such as the 2017 Tradeshow/Expo (which is rumoured to have earned over $1 million for the company).

    HTH EBIT margin was lower at 2.37%, and overall EBIT margin was 3.03%.

    Table 3 sets out the performance of IHG on a half-by-half basis, using estimated 52-week year numbers.
    Metcash 52-week year results by half

    Mitre 10 sales revenue slipped a bit in the first half, but increased by over 2.9% in the second. EBIT, however showed a healthy gain in both halves, rising by 7.8% in the first half, and 13.7% in the second half. First half EBIT margin for Mitre 10 was 2.36% in the first half, and a very hefty 4.26% in the second half, up by 0.4% on the second half of FY2015/16.

    HTH estimated EBIT margin was much lower than Mitre 10's, at 2.68% in the second half. HTH is estimated to have returned $12.2 million in EBIT, which means that, if store numbers remain stable, it is on track to earn mid-range in Metcash's $15 million to $20 million estimation for FY2017/18 EBIT.

    There are some apparent anomalies in these numbers, in particular a higher than expected EBIT margin for Mitre 10, and a lower than expected EBIT margin for HTH. At a best guess what may be happening is that IHG has obtained very favourable rates from suppliers based on future volume of sales, but these suppliers are more broadly featured in Mitre 10 stores than HTH stores. As the numbers show, sales at Mitre 10 were basically flat.

    Another possibility is that, with the changes brought through the Working Smarter program providing real benefits, the HTH stores may not be "best practice" at the moment, in IHG terms. Hard won efficiencies in the supply chain may be boosting the margin for Mitre 10 operations.

    This conclusion is partially backed-up by a statement from Metcash CFO, Brad Soller:
    In relation to FY2017, there's about $4 million of synergies that have been realised in the results. Some of them, importantly, have been realised within Mitre 10 itself and not in all HTH. Some of the savings are in Mitre 10.

    Chart 1 shows the general progression of Mitre 10's EBIT margin for the past seven years. No mention was made this year of like-for-like (comp) sales, which have been provided in past years.
    Store numbers

    In terms of store numbers, Metcash has chosen to report these as consisting of 305 Mitre 10 stores, down from 310 in the pcp, and 67 True Value Hardware stores, down from 68 in the pcp. It provides a single number for all HTH stores, including Home Timber and Thrifty-Link banners, of 368, without a comparative number.

    The IHG Investor Day briefing from 23 March 2017 lists 246 Home branded stores, and 126 Thrifty-Link stores, for a total of 372.

    One of the concerns that have been voiced is the extent to which there will be competition between the Mitre 10 and HTH stores. Mr Laidlaw has stated that the networks are very complementary, in that there is only limited competition. HNN has delved further into this matter in our Statistics section for this issue, where we use Google Maps to determine driving time between stores as a proxy to network concentration.

    This is summary of the main article. To read the main article, please download our pdf publication, HI News, from the following link:
    hnn.bz/HI News Vol.3 No.8: Metcash reports
    Products
    Trim routers
    The Makita RT0770C trimmer features a tilt base
    HNN Sources
    The Makita DRT50Z uses the same accessories as RT0770C
    The MT Series Makita routers offer great value for money
    Click to visit the HBT website for more information
    As recently as six or seven years ago, just about any kind of router was deemed to be the sort of tool only a carpenter or dedicated woodworker would own. However, as prices have decreased, and quality at the lower end of the price range has increased, routers have become a more common tool.

    In particular, the smallest kind of router, usually called a "laminate trimmer", has grown in popularity over the past several years. That is in part because it is small - typically less than 250mm tall, and around 2kg at most - which makes it easy to use, as it can be operated one-handed.

    Most importantly, the laminate trimmer (or trim router as it sometimes called) solves the kind of basic problems that any tradesperson, and quite few DIYers, are likely to encounter. In fact, far from being an "expert only" tool, it's the kind of gadget that can help the less expert look a lot more expert.

    If you are not familiar with the laminate trimmer, the best place to start in understanding them is with the trimming bit itself. Image 1 is an enlarged photograph of such a bit. The laminate trimmer attaches to the top, smooth shaft. Below that is the cutting part of the bit itself, and at the base is the guide, which is a ring of smooth metal that runs on ball-bearings.

    Imagine that you are facing the fairly typical woodworking task of doing something like fitting a new top to a bedside cabinet. It might be plywood that will be painted, or a piece of 12mm pine wood you intend to stain. To make the job look really good, you are going to have to get all four edges of the top flush with the supporting frame underneath.

    If you are (like the editors of HNN) a bit of a duffer with a saw, it can seem like there is almost no way of doing this easily. Measure as you will, even with a good mitre saw it just seems inevitable that the end result will be a one or two millimetres out, spoiling the whole look. You end up filing, sanding, and so forth - and then you have to worry about keeping the edge perpendicular, and not rounding it out.

    With the laminate trimmer, you don't worry about cutting the wooden top precisely. Instead you cut it oversize by 10 to 15mm or so, then fix it to the cabinet frame, making sure there is overlap on all four edges. Using the laminate trimmer, using the flush trimming bit, you then simply run around the edges of the frame. The ball bearing runs on the frame itself, and the cutting portion of the bit removes all the excess wood. The end result is the the most perfectly flush finish you can imagine.

    There are only two "gotchas" to worry about. The first is to remember to move the trimmer in a counter-clockwise direction (push in and forward with your right hand), as, with the trimmer turning clockwise, this enables the bit to do its work. (If you are trimming inside out, such as when making the hole for a sink or tap in a counter, you move clockwise instead, for the same reason.) The second "gotcha" is to always start trimming wood on an endgrain edge. About half the time, at the end of the endgrain you will push off a chip from the grain edge - but it won't matter, because that's the very edge you will be trimming next.

    Once you've done this a few times, you will be tempted to move to the next stage, which is using a slightly different bit to produce a fancier edge. It's very easy, for example to put a nice 30-degree bevel on the edge (though you do have to think through how you want the corners to look).

    Beyond this specific task of trimming, it's also possible to use the the laminate trimmer as a kind of "light" router as well. A typical task where they are very useful is when installing a new door. With a proper router bit, they make mortising the space for hinges very simple (though you do have to dig out the corners with a chisel still).

    Even better they handle the surprisingly tricky task of cutting the recess for the latch plate on the lock, which goes on the edge of the door. These can be surprisingly tricky to do well, especially if the chisel is anything but your friend. Both of these tasks are best accomplished by using templates, which make it a matter of just guiding the laminate trimmer.

    As a trade sale, it really comes down to the choice of brand and size, as most professionals are well-acquainted with how useful the laminate trimmer can be.

    As a DIY sale, however, it can be one of the more difficult items to sell outside of people with some real interest in woodworking. The problem is that the laminate trimmer is, indeed, a specialised tool, and does not get used nearly as often as a hammer drill, or even an impact driver.

    The selling point is that it takes a task that can really consume a surprising amount of time, or end with a compromised result, and makes it easy to produce something that looks great. It's actually an ideal tool to sell through a short demonstration course - as long as the course sticks to the basics outlined above: doors and tops/bottoms to things. Most DIY courses that feature any kind of router seemingly cannot resist deep into the world of complex routing, and simple DIYers, who are seeking to solve problems more than to experience a craft, are simply not interested.
    The role of Makita: RT0770C trimmer

    While HNN does not have any statistical proof for this, only some anecdotal evidence, we do think it is likely the real spark to the growing popularity of the laminate trimmer was Makita's RT0770C trim router.

    Introduced in 2012, and revised since, the 770 was one of those classic tools that managed to combine two things: it hit an exact sweet spot in terms of size and capabilities, and it was very thoughtfully designed. Plus, as we often have said, it just had that Makita quality of having things in balance.

    In terms of the sweet spot, the 770 is a corded tool with a rated power of 710 watts. With most laminate trimmers ranging from 300 watts to 600 watts, that gives it just that little bit of extra power. At the same time the motor is small enough, when combined with an aluminium chassis, to keep the weight down to just 1.9kg - easy enough to handle one-handed.

    The great design mainly expresses itself in the set of three accessories available with the tool. It comes standard with a trimmer base, which is all you need if you are going to do the kind of trimming jobs described above. An option set of accessories includes two other bases, a plunge base and a tilt base. The plunge base converts the 770 into a lightweight plunge router, complete with soft-grip handles, and a rotating turntable of three depth stops, for different stages of a complex job.

    The tilt base is quite a unique accessory. It enables the trimmer to be rotated from plus 30 degrees out to minus 45 degrees. This has an interesting effect on custom router bits. For example, the flush trim bit can be used to make a bevel.
    The Makita RT0770C trimmer features a tilt base

    In addition to these three bases, there is another, fourth base, sold individually, which converts the 770 into an offset router. Daughter gears transfer the drive to the edge of the base, meaning it can work as close as 18mm to a wall or other barrier.

    Where the excellence of design really shows itself is that the parts of the various bases are interchangeable.

    For example, the trimmer base has a round base plate, and the tilt base has a square base plate. Undo a few screws, and you can put the square plate on the trimmer base, which means you can use a straight edge clamped to the work piece to guide the trimmer for special uses. The soft-grip handles from the plunge base can be fitted to the offset base, for better control in tight situations. And so on.

    Then there are the other typical Makita touches. There is an integral shaft lock, so it takes just one wrench to change bits. The motor base is flat, and the power cord comes out from the side of the motor, so the unit sits flat when upside down. It has soft-start, making it easy to pause and begin again in the middle of trim. Just a great tool.
    Makita DRT50Z

    This new, cordless trimmer launched in Australia in early 2017. It is, basically, the 770 in cordless form. It even uses the exact same accessories. Without battery, it weighs just 1.4kg.

    The really exciting news about this trim router is the price. It retails for $249, just $60 or so more than the corded version. That doesn't include the battery or the range of accessories, but for tradies who already have Makita batteries and the 770, it's a great buy.
    The Makita DRT50Z uses same accessories as RT0770C
    Makita 3709X and 3710

    Makita does also offer a simpler laminate trimmer, the 3709X. This is a corded tool, with a 530 watt motor, weighing 1.5kg, just 199mm tall. It is generally sold with an aluminium carry case. The Makita 3710 is basically the same trimmer with a tilt base.
    Makita MT Series M3700G

    In terms of sheer value, next to the RT0770C is this recent offering from Makita's MT Series, which replaced its previous value brand Maktec. This is essentially a slightly older version of the 3709X, but it sells for close to half the price of the pure Makita version. It features a 550 watt motor, and weighs 1.4kg.
    The MT Series Makita routers offer great value for money
    Other brands

    To be frank, most of the other brands available in Australia really do not match up to Makita, with the exception of Festool, which makes very high end router products. In fact, these are such a speciality item (and typically cost over $700) that HNN simply does not have the technical knowledge to effectively provide a guide or review of them.

    DeWalt, for example, sells just one, corded model in Australia, the DWE6005, which typically costs more than the Makita RT0770C, and has specs that are not quite as good.

    Bosch sells a blue router, the GMR 1, with, again, similar specs to the RT0770C, but for, typically, a higher cost.
    Bunnings

    Ryobi offers two laminate trimmer. The corded version has a 400 watt motor, weighs 1.67kg, and retails for a price close to that of the Makita MT Series M3700G. It's not a very impressive offering.

    The other laminate trimmer from Ryobi, however, is a real competitor. Newly designed, this One+ cordless trimmer (R18TR-0) is styled as a "palm" tool, with special attention paid in its design to permit easy one-handed use.

    Finally, there is the Ozito laminate trimmer. While this is the least powerful of all those covered here at just 350 watt, and it lacks basic features such as a spindle lock (which means changing bits requires two spanners), it really should not be dismissed. At $65 it will attract consumers who have very infrequent need for the tool, or even just one main period of use, when installing a new kitchen, for example.
    Other products

    While Makita seems to be the outstanding brand in this sector for Australia, that is much less the case overseas. In the US, for example, a Bosch router typically wins this category, with offerings from Techtronic Industries Home Depot-only brand Ridgid and Hitachi highly ranked as well.
    Careers
    Seeking opportunities
    A NSW-based territory sales manager is required for Toro and Pope brands
    HNN Sources
    A GM role at Australian Outdoor Living
    An opportunity to develop digital marketing strategies at PGH Bricks
    Visit the Mecca Website
    Toro Australia seeks an "ambitious self-starter" for a sales role; a general management role with Australian Outdoor Living is on offer; and CSR's PGH Bricks has an opportunity for a digital marketing specialist.

    Click on the logos to find out more about each role.
    Optimising product sales

    Reporting to the state sales manager (NSW/ ACT/ VIC/ TAS), the territory manager will develop market opportunities for the Pope and Toro branded products in the north/west Sydney and Northern Beaches region, within the hardware retail channel. This position is also responsible for leading a small team of part-time sales merchandisers.
    A territory sales manager is required for Toro and Pope brands
    GM for outdoor products

    A general manager is required to head up the Victorian operations of home improvement company, Australian Outdoor Living. The successful candidate will oversee a team of design sales consultants tasked with introducing a range of Australian-made outdoor blinds, pergolas, verandas, decking and artificial lawn. The role will eventually involve product expansion.
    A GM role at Australian Outdoor Living
    Promoting bricks on digital platforms

    PGH Bricks, a business unit within the CSR Group, is looking for a digital marketer to join its marketing team. Based at North Ryde (NSW), the digital marketing specialist will assist in the execution and management of online projects and deliverables across owned, earned and paid digital channels. Key duties will include management of digital programs and multi-channel online communications.
    An opportunity to develop digital marketing strategies at PGH Bricks
    Bigbox
    Big box update
    The Bunnings North Toowoomba store should open later this year, in 2017
    HNN Sources
    The former K&D site in Devonport is turning into a Bunnings store
    Bunnings has not confirmed whether the Panoroma (SA) store on Goodwood Road will go ahead yet
    Click to visit the HBT website for more information
    Bunnings said the North Toowoomba (QLD) store is expected to create 180 team member jobs and over 100 jobs in Devonport (TAS) once they open; and Mitcham Council is trying to find out whether a Bunnings outlet will open in Panorama (SA).
    Bunnings developments on schedule

    Construction work on the $43 million Bunnings Warehouse development in North Toowoomba (QLD) is progressing as planned. Bunnings general manager - property Andrew Marks said the new store is expected to open in late 2017.

    The warehouse is located on the corner of Ruthven and Bridge Streets and is the second Bunnings for Toowoomba, the other being on Anzac Ave in Harristown. Once completed, the latest store will have a total area of more than 17,000sqm.

    It will include the main store, indoor timber trade sales area, building materials and landscape supplies yard and outdoor nursery. The development will also include an indoor playground, cafe and parking for more than 370 cars on the site of the former Toowoomba foundry.
    Devonport location

    The old K&D Warehouse building in Devonport (TAS) has also been painted the signature green of Bunnings Warehouse as preparations continue for the store's opening.

    The new Bunnings is located at the Devonport Homemaker Centre and is expected to open in late 2017. Mr Marks told The Advocate:
    The erection of structural steel is complete and the pre-cast concrete wall panels and the roofing works are well underway.
    Panorama store not confirmed

    Bunnings has not said whether it will continue with plans for a $42 million outlet at the former TAFE site in Panorama (SA) after almost three years of fighting with objectors.

    Bunnings general manager - property Andrew Marks would not say if the hardware giant would lodge a third application to Mitcham Council to build the warehouse on Goodwood Road.

    Mitcham mayor Glenn Spear said he had been "left in the dark" about the future of the development. He wanted it approved so the old TAFE buildings, now dilapidated and vandalised, could be demolished.

    Bunnings has previously lodged plans for a $45 million store in Edwardstown, 2km from the Panorama site. Mr Marks did not confirm what that proposal meant for the Panorama plans.

    Mitcham Council's development assessment panel knocked back Bunnings' first application for the TAFE site in August 2016 at a meeting that attracted at least 80 people. The big box retailer submitted an amended plan in December, which was also rejected.

    Panorama resident Neil Baron appealed that decision in the Environment, Resources and Development Court. The matter is still before the courts.
    Bigbox
    Europe update
    Bunnings United Kingdom & Ireland is accelerating its store expansion plans
    HNN Sources
    Andrew Livingston (second to the right) is leaving his position as Screwfix CEO
    Travis Perkins is looking at new technology to boost its business
    Click to visit the HBT website for more information
    Bunnings United Kingdom and Ireland (BUKI) is doubling down on its expansion plans and has opened its fourth store; Kingfisher-owned Screwfix gets a new boss; and technology startups will soon influence the way Travis Perkins does business.
    BUKI increases pilot store program

    Bunnings United Kingdom and Ireland (BUKI) said it plans to double the number of stores launched in 2017 from 10 to 20 after a "positive response" from customers to pilot outlets in St Albans and Hemel Hempstead. BUKI managing director Peter "PJ" Davis said:
    Increasing the number of pilot stores to 20 will give us the opportunity to test the concept in new geographies, with different demographics, across a range of store sizes.
    We are determined to combine the best of Bunnings Warehouse with what UK consumers want. The success of the pilots still remains a precursor to additional investment.

    The retailer is trialling its Bunnings Warehouse concept to "road test" demand in Britain before rebranding all its Homebase stores.

    Mr Davis admitted that the expansion came during a tough time in the retail sector as shoppers face an increasing squeeze on their spending power from rising inflation.

    However, he said the firm had seen "very little inflation" in its own prices after the pound regained some ground from the lows seen in the immediate aftermath of the Brexit vote.

    Over 1,000 jobs are expected to be created from opening the additional stores, according to the big box retailer. International Trade Minister Mark Garnier said:
    This is a significant and welcome investment by Bunnings ... The Department for International Trade works with companies around the world to promote the strengths of the UK and this investment from Bunnings is yet another endorsement of the UK's attractiveness to overseas investors.

    At Wesfarmers' investor day in early June, Wesfarmers warned that the Bunnings UK business would lose money in the first half of 2018 as well as in the 2017 June half. It blamed the losses on a combination of restructuring costs, bad weather and the repositioning of Homebase's bathroom and kitchen offer.
    Milton Keynes and more

    The announcement to double its pilot store program was made as Bunnings opened its fourth store in Milton Keynes, Buckinghamshire, a large town located about 72 km north-west of London.

    This store is the second one in the area and the largest in the UK and Ireland, at more than 90,000sq ft.

    It stocks more than 35,000 different home improvement and garden products, including a mix of international and British brands from Purdy's paintbrushes, never before available to non-professionals, to Ryobi and DeWalt tools. Paint mixing services from Johnstone's Trade, Crown and Dulux are also available in-store.

    To celebrate the opening, Australian racing driver Mark Webber, a nine-time Grand Prix winner, hosted a welcome breakfast for team members. The store's complex manager, Kevin Dale, said:
    It is great to finally open our doors to customers. Our team members have worked really hard to get the store ready for opening. Collectively we've already completed more than 1,500 training hours to make sure we have the expertise to help with home or garden projects.

    BUKI also has plans in place for a fifth pilot outlet in Folkestone, before overhauling Homebase stores in Thanet, Sittingbourne and Basildon Vange.

    Related:
    Europe update - HNN
    Executive moves at Kingfisher

    The CEO of Kingfisher-owned DIY retailer Screwfix is leaving to become chief executive of British kitchen supplier, Howden Joinery.

    Andrew Livingston has headed up Screwfix since 2013, joining the company as commercial and ecommerce director in 2009. This followed stints as chief operating officer of Wyevale Garden Centres and as commercial director of kitchens and bathrooms at B&Q.

    Screwfix, with over 500 stores, has recently been a major driving force at Kingfisher, last year growing sales 23% to GBP1.3 billion thanks to strong growth from the specialist trade desks, digital growth and the opening of 70 outlets in the UK and Germany.

    Mr Livingston will be succeeded by Screwfix's operations and property director Graham Bell, who has held roles within the Kingfisher group for 18 years.

    At Howden Joinery, Mr Livingstone will replace its founder and chief executive Matthew Ingle, who will retire in the first half of next year after 22 years at the helm.

    Kingfisher's head of sales & operations head has also exited the company after less than a year. Jean-Paul Constant's departure follows soon after B&Q retail director Damian McGloughlin leaving to go to Bunnings UK and Ireland.
    Travis Perkins seeks new tech to lift trade

    Builders' merchant and home improvement retailer, Travis Perkins has initiated an accelerator program called BreakThru as a way to benefit from tech start-up businesses.

    BreakThru is part of a company-wide initiative to embrace digital methods that could future-proof business operations and enhance customer experience across Travis Perkins' 22 brands.

    Led by chief digital officer Cheryl Millington, the program has been launched to expose the group, which operates over 2,000 branches, to entrepreneurial thinking and new products.

    BreakThru, in collaboration with innovation specialist L-Marks, will allow successful start-ups to validate their business ideas over the course of an 11-week partnership program.

    Up to GBP200,000 each is available for those digital entrepreneurs coming up with the most viable solutions.

    Travis Perkins said it is exploring ways to streamline customer service, improve health and safety, and create fleet and workforce efficiencies. It also hopes to find start-ups that can create a seamless digital customer experience, including technologies to create real-time inventory visibility and management. Chief executive John Carter said:
    Our goal is to provide a seamless customer experience through harnessing the latest innovations and ideas brought by start-ups.
    We hope the start-ups who join us can challenge us internally, while we also hope to provide them with the expertise and support to take their product or solution to the next level.
    Retailers
    Indie store update
    Metcash resists pressure to sell hardware stores, according to Fairfax Media
    HNN Sources
    Sam's Hardware in Blacktown (NSW) has decided to shut up shop
    Total Tools opens a new branch in Cairns (QLD)
    Click to visit the HBT website for more information
    Metcash has said no to an offer to buy Hardings Hardware, according to Fairfax Media; a hardware store in Blacktown (NSW) has shut its doors for the last time; Cairns has got a new Total Tools store; Reece is planning an outlet for Toowoomba; and a PlastaMasta branch has opened in Ipswich (QLD).
    Metcash rejects offer to sell hardware stores

    Fairfax Media reports that Metcash has knocked back a $25 million offer from plumbing supplies retailer Reece for Hardings Hardware. It has also ruled out selling its company-owned hardware stores.

    Metcash acquired Hardings Hardware last year as part of its purchase of Home Timber & Hardware from Woolworths. Woolworths' Danks division had bought the former privately owned group of stores in 2013 to strengthen its hardware wholesaling operations.

    It is understood that Reece offered about $25 million for Hardings, which has six outlets in Victoria, Queensland and South Australia and sells bathroom, kitchen and building products to the trade sector.

    Metcash chief executive Ian Morrice and Mitre 10 boss Mark Laidlaw turned down the unsolicited offer, telling Reece the price was too low and it was not ready to sell.

    Analysts said the sale of Hardings would have dented Metcash sales and earnings, because the stores turn over about $100 million a year and are said to be profitable.

    Metcash declined to confirm if it had received an offer for Hardings, but doused hopes that it would at some stage sell company-owned hardware stores. A spokesman told Fairfax:
    We have consistently said we are not looking to sell our company-owned stores in hardware. We have made it clear when asked and in investor meetings that Hardings provides significant growth opportunities for the Independent Hardware Group going forward.

    The report goes on to day Metcash is under pressure from Mitre 10 and HTH store owners to sell company-owned stores to avoid competing directly with independent retailers. A source said:
    They're wholesalers and don't really like to own their own stores. They're not good at running stores.
    Blacktown hardware store closes after 23 years

    The Lebanon-born Jabbour brothers closed the doors at their Sam's Hardware store in Blacktown (NSW) for the last time recently.

    Owner Sam Jabbour opened the store in 1994, after deciding he was "too old to keep driving trucks". He was inspired by his older brother, who had a hardware store in Lidcombe in western Sydney. That store closed down six years ago after losing business to a nearby Bunnings.

    Mr Jabbour said he would miss talking to the locals and helping people. He told the Blacktown Sun:
    Most of the customers are friends. They're part of the furniture over the years.

    With five children and now three grandchildren, Mr Jabbour said he was looking forward to taking a break and reclaiming his weekends. He and his wife are about to embark on an eight-week European holiday gifted by their children.

    Mr Jabbour was visited by Boral sales representatives Jason Townsend and Peter Lindsay on the final day, who brought pizza to farewell their loyal client. Mr Townsend said Sam's Hardware was his first account when he moved into sales in 1994.
    Total Tools store opens in Cairns

    Darwin man Damien Gorton has opened a Cairns branch of Total Tools in the suburb of Portsmith (QLD). He told the Cairns Post the response has been fantastic so far.

    There had been franchise availability in Cairns for some time, but finding a site to accommodate the size of the store had been difficult.

    Mr Gorton said he had been the nominated Cairns franchisee for about 16 months before the Aumuller Sreet site was settled and Total Tools Cairns opened.
    It's the perfect location. That southern corridor down to Gordonvale is going to be a huge growth area. Being at the southern end of Cairns close to Comport Road poses well for us...

    He said his store offers between 60,000 and 70,000 items on the shelves with availability to many more.

    Mr Gorton's background includes being the manager at Port of Darwin and prior to that, he had been an oil and gas engineer. He said:
    I love tools and I'm very into buying tools. I had been looking for something like this for a long time ... We're here for local tradesmen and women.
    Reece gains approval for Toowoomba suburb

    Toowoomba Regional Council has granted approval for Reece to build a hardware and plumbing supplies warehouse for trade customers in the suburb of Wilsonton (QLD).

    The company's new branch will provide a wide range of products to support the water, gas, sewer, fire service and telecommunication sectors. It will supply bulk items and designate large areas of the site for storing outdoor items.

    Reece will predominately store supplies for delivery but this outlet will also include a small counter for pick-ups ordered by trade account customers.

    There will be no display or showroom component in the single-storey warehouse and no walk-in retail sales to the general public.

    Reece has more than 450 stores across the country and employs about 4000 staff.

    The site at 198-200 McDougall Street is in the medium impact industry zone as defined by the Toowoomba Regional Council.
    Building supplies outlet opens in Ipswich

    A PlastaMasta branch officially launched in Ipswich (QLD) in early July to serve local tradies and home handymen. Manager Wayne Knight told the Queensland Times:
    PlastaMasta Brisbane West is the next logical addition to our stores around the Greater Brisbane area.

    PlastaMasta has operated in Underwood, Toowoomba, Brisbane's northside, and the Gold Coast for 25 years. Mr Knight explains:
    PlastaMasta was established as a franchise; we own all of the stores. We are distributors of Knauf products and have an exclusive partnership with them.

    The business offers products such as wall and ceiling linings, using Knauf plasterboard, acoustic linings, cornice, compounds and plaster, metal profile, primer, sealants and a range of accessories.

    PlastaMasta works closely with builders and construction firms. It recently supplied products for the new state government building in William Street, Brisbane. Mr Knight said:
    There is a massive growth in the western corridor. Having a store in Ipswich makes sense, so that the product is close by. We have supplied product to local builders for years so this adds convenience for them.
    Companies
    Supplier update
    Gerard Lighting gets an investment boost
    HNN Sources
    Tap maker Sussex is a Melbourne-made success story
    JELD-WEN has acquired a Finnish manufacturer of interior doors and door frames
    Subscribe to HNN weekly e-newsletter
    A major boost for Gerard Lighting from two investment companies; tap manufacturer Sussex produces its inventory from its Melbourne sites; and Finland-based Mattiovi Oy is now owned by JELD-WEN.
    Restructure deal for Gerard Lighting

    Private equity-owned Gerard Lighting is set to see a recovery after key lenders agreed to a deal that will alleviate its debt burden.

    According to a report in the Financial Review, the company has entered into a restructuring agreement with Bain Capital Credit and Investec. This deal will see the two firms assume control of Gerard, which is the largest lighting distribution and partnership network in Australasia.

    The deal means Bain Capital Credit and Investec will invest $15 million in new equity, with representatives from both firms expected to assume board seats in the company.

    The Street Talk column in the Financial Review first reported that Bain Capital Credit increased its exposure to Gerard's debt stack, taking a $30 million loan from the leveraged finance arm of industrials giant Siemens.

    Bain Capital Credit's initial exposure to Gerard came when it bought GE Capital's Australian and New Zealand commercial finance business in 2015.
    Brief history

    Gerard Lighting is best known for brands such as Crompton, Sylvania, Pierlite and Moonlighting. The company operates in a competitive industry subject to intense pricing and margin pressures as imported products jostle for extra sales.

    It was founded by Alfred Gerard in 1920s when it was then known as electrical accessories business Clipsal. It listed on the Australian Securities Exchange in 2010 before private equity firm CHAMP successfully embarked on a $186 million takeover in 2012.
    Melbourne tap maker defies manufacturing trend

    Vanessa Katsanevakis heads up her family owned firm, custom tapware manufacturer Sussex, and first met Alan Wilson, founder and chairman of Reece, a decade ago. She told The Australian in an interview:
    My dad was still alive. Alan came out and visited us at our Somerton facility and got a factory tour. He wanted to see how we were still manufacturing in Australia.

    That was ten years ago. Sussex is best known for its classic Scala collection, and is quietly delivering double-digit revenue growth from three sites in Melbourne's north.

    In an era when Australian manufacturing is seen to be in crisis, Sussex continues to make all its products in Melbourne and is the only Australian tapware manufacturer operating its own foundry. Every step of the manufacturing process is performed by local workers.

    Celebrating 20 years in business this year, Sussex is now looking at exporting to Britain, Canada, Asia and the United Arab Emirates after recently launching sales into New Zealand. The move would see it double staff numbers to over 120.

    Ms Katsanevakis runs the company with her husband George. She said:
    Our growth has been in excess of 17% per annum now since the GFC. It will increase over the next few years. We currently have the capacity to double, if not triple, production.

    Ms Katsanevakis' father, Dutchman Nicolaas Johannes van Putten, a watchmaker by trade, moved to Australia from The Netherlands in 1960. He originally founded Sussex as a jewellery company but the business expanded to tapware in the 1990s. His mantra was to have a fully integrated business from foundry to end product, allowing Sussex to compete with Reece and a bunch of importers.

    For 10 years before the global financial crisis, the group had between 20% and 25% year-on-year revenue growth. But sales fell 30% during the GFC, just as Ms Katsanevakis was being encouraged by her father to take the reins of the business.

    Her brother (and only sibling) was not interested in taking on the role, so she was groomed to take over the company by her ailing father.
    My dad got prostate cancer, he took a step back and the business did plateau for a few years.

    Her father lost his battle with cancer in 2010 when his daughter was 28.
    It was such a tough time. My firstborn was seven weeks old when my father passed away. My husband had been in management at a steel fabrication plant. My dad gave him his blessing; he wanted us to take the business to a new level.
    My dad ran it like a hobby, he was brilliant at engineering and vision but he wasn't strategic in his approach.
    It was no option for us to take it over, we knew we had a special product and there was room to improve in the business. We cut our overheads and manufacturing costs by 15%.
    With time we saw the niche for customisation and we were able to offer that even further, with the 30 different finishes we now offer.

    Some of Sussex's main customers are women aged 35 to 50, a demographic Ms Katsanevakis can empathise with. She said:
    Customisation is our focus, and focusing on our niche. With the finishes we offer, imports can't offer that. We are local, we take each order as it comes and customise it. Gone are the days of plastic chrome tap products. Now it is brush gold, rose gold, black spouts, etc.
    Quality first is what has carried us through. Our focus is mid- to high-end because we can't compete at that lower end.

    Ms Katsanevakis said the focus of tap buyers has also changed in recent years. !Australian-made is back in fashion. It has done a full cycle. People care about that crafted and bespoke item that is handmade.

    While she worries about the next downturn, following the experience of the GFC, she sees no slowdown on the horizon.
    We are experiencing so much growth, and all the builders that we know say it is booming.

    And as she moves to take the company into new offshore markets, her father's legacy remains paramount.
    I will not let all the work my dad has done go to waste. My husband and I are passionate about taking this business to the next level.
    JELD-WEN makes another European buy

    Window and door maker JELD-WEN Holding has acquired a Finnish manufacturer of interior doors and door frames. The company did not disclose what it paid for Mattiovi Oy, which is privately held. JELD-WEN president and CEO, Mark Beck, said in a statement:
    The acquisition of Mattiovi strengthens our market position in the Nordic region and enhances our unique pan-European strategy.

    The company has actively expanded its global footprint in the last two years. Mattiovi is JELD-WEN's seventh acquisition and the second in Europe during the period. Europe is one of the company's largest markets, generating revenue of USD242.3 million in the first quarter, more than a quarter of its total revenue, according to the company's financial statement released on May 9, 2017.

    Based in Charlotte, North Carolina, JELD-WEN is one of the world's largest door and window manufacturers. It operates 115 manufacturing facilities in 19 countries.

    In January, JELD-WEN went public and priced its initial public offering at USD23 per share for a total of USD575 million.

    The company expects the acquisition will be accretive to its earnings this year. Previously, it estimated 2017 EBITDA would range from USD440 million to USD460 million.
    Bigbox
    USA update
    The Home Depot buys Compact Power Equipment
    HNN Sources
    eBay's divisional merchandise manager - home and garden for eBay will present at the eRetailer Summit
    Canada's Home Hardware embarks on a new project
    Click to visit the HBT website for more information
    Home Depot agrees to purchase Compact Power Equipment which is set to improve its customer experience for professionals; the Home Improvement eRetailer Summit will be held in September 2017; and Canada's Home Hardware emphasises projects in its new advertising campaign.
    Home Depot buying tool rental company

    The Home Depot is acquiring Compact Power Equipment, a provider of construction and landscape equipment rental and maintenance services, in a USD265 million cash deal.

    The deal bolsters Home Depot's position in the market for equipment rental to both professional and do-it-yourself customers. Home Depot CEO Craig Menear said in a statement:
    The acquisition allows us to further improve the customer experience - in particular for pros - through enhanced equipment and tool rental offerings. It also allows us to grow Compact Power's best-in-class building services capabilities.

    Compact Power Equipment has been a business partner of Home Depot's since 2008. The companies' partnership began with three pilot equipment centres at the retailer's Charlotte, North Carolina stores. By 2015 it had grown to 1,000 Home Depot stores across the US and Canada.

    Home Depot said the cash acquisition would close in the company's fiscal second quarter.

    Revenue for the U.S. equipment rental industry was expected to increase by 3.4% to USD49 billion in 2017, based on an American Rental Association report conducted with IHS Markit. Tool rentals are expected to grow by 4.3% annually from 2016 through 2020, according to the projection.

    The deal is Home Depot's first big acquisition since August 2015, when it acquired Interline Brands Inc. for USD1.7 billion to establish a platform in the maintenance, repair and operations (MRO) market where it primarily serves institutional customers (such as educational and health-care institutions), hospitality businesses, and national apartment complexes.

    Also in 2015, Home Depot acquired HD Supply Hardware Solutions, known as Crown Bolt, a leading supplier of fasteners and builders hardware to retailers in the US. And in January 2014, Home Depot acquired Blinds.com, an online seller of window coverings.

    Compact Power is majority-owned by Canadian private equity firm Kilmer Capital Partners.

    Related:
    Home Depot buys Interline Brands - HNN
    Home Improvement eRetailer Summit expands focus

    Accelerating online sales in the home improvement retail space is the mandate of the second annual Home Improvement eRetailer Summit. This event, being held September 13 to 15, 2017, at the Rosen Shingle Creek in Orlando, Florida (USA) will feature a conference and networking opportunities for vendors and e-commerce retailers.

    The purpose is simple: to help the hardware and tools, home decor, paint, housewares, lawn and garden, outdoor living, and flooring sectors develop winning e-commerce strategies. This year's event will also include housewares and kitchenware, furniture, and large appliances.

    The highlight of this year's eRetailer Summit is an "e-commerce boot camp" to learn best practices from leaders in the online selling marketplace. The conference will be capped by a presentation by Alyssa Steele, divisional merchandise manager - home and garden for eBay.

    A logistics Q&A will examine the demands being put on the delivery aspect of online sales. Event founder, Sonya Ruff Jarvis from Jarvis Consultants said:
    Online housewares sales are hot, and large home goods have historically been considered too large or unwieldy to sell online. We want to make sure retailers and vendors alike are on top of the trends affecting all these important categories.

    Retailers looking to understand the e-commerce space and vendors who wish to make real connections with leading e-retail decision makers will find this forum a way to meet, share ideas, and develop concrete strategies for growing online sales.

    About the Home Improvement eRetailer Summit.

    If you are interested, please contact Sonya Ruff Jarvis: sonya@eretailersummit.com.
    Home Hardware's "Here's How" campaign

    As part of its latest brand positioning, Canada's Home Hardware has launched a new campaign that shows a couple stepping into their new home and discovering all the projects they have ahead of them to fix the place up. They are able to tackle them, though, thanks to the supplies and advice they get from their local Home Hardware store.

    The retailer recently debuted its "Here's How" positioning, replacing the "Homeowners helping homeowners with expert advice" tagline it had used for nearly eight years.

    The core of the old brand positioning was that Home Hardware stores were a place would-be DIYers could get friendly, helpful advice from people living and working in their communities. The new campaign keeps that element of the brand's positioning, albeit in a more subtle way, with the spot ending with the tagline "Do it yourself doesn't mean do it alone." Rick McNabb, VP of marketing and sales at Home Hardware, said:
    The old positioning has been around for a while and it's served the company well, but it's a mouthful. What got us here is a higher level of customer care and going the extra mile. It's less about 'expert advice' and being more grounded in the experience our staff has and how helpful they'll be. 'Here's How' is not a radical departure from that, because that's our differentiation.

    Mr McNabb adds that "customer care" differentiation is important to maintain as a competitive advantage in a crowded category that also includes The Home Depot, Lowe's and Canadian Tire.

    The advertising agency, John St. has also created a series of short videos focusing on products exclusive to Home Hardware stores. That was a major part of Home Hardware's previous marketing efforts, and Mr McNabb said those efforts were successful in drawing traffic into stores.
    It's a traffic driver and differentiator, and the hope is we can get you excited about the other stuff in the store once you're there. But along the way, it can get you away from the notion of home improvement and you run the risk of becoming known as an 'exclusive item' brand.

    That's part of the reason why the newest campaign focuses on projects, as it allows the brand to show off every category it plays in and how it can serve any home improvement need someone might have. It's also applicable across the company's three retail banners: the typical, small-format Home Hardware, the larger Home Hardware building centres for contractors and large-scale projects and hybrid locations that tend to be located in more suburban locations. Mr McNabb said:
    We wanted a campaign that would be an overarching Home Hardware campaign that could speak to all of our banners and the different needs we serve.

    He adds it is also looking to speak a bit more directly to younger consumers, as Home Hardware's previous marketing has skewed older to a demographic that grew up with the brand and already has a high affinity for it.

    Products
    Cub Cadet expands Z-Force range
    A review of Cub Cadet's Z-Force SX 54 zero-turn manoeuvrability
    HNN Sources
    The LX 48 model has a 48" triple-blade cutting system
    Visit the Cub Cadet Australia website for more information on its lawn equipment products
    Click to visit the HBT website for more information
    Cub Cadet's Z-Force SX 54 is equipped with a 24 HP professional grade Kawasaki FR Series V-Twin engine. A 54" triple blade cutting system provides a wide cut, while its heavy duty welded steel frame gives the SX 54 a long life.

    The SX 54 features a steering wheel with patented Synchro Steer technology, providing 4-wheel control to create genuine zero-turn manoeuvrability and a PTO clutch, utilising electronic fingertip engagement. It also has a high-back elasticity vibration control suspension seat with armrests, which minimises fatigue and reduces the likelihood of back pain after sustained use.

    Similar to the SX 54, the LX 48 operates on a 24 HP professional grade Kawasaki FR Series V-Twin engine. A slightly smaller 48" deck allows users to navigate narrower terrain, while zero-turn capabilities maintain the same level of agility as the SX 54.

    Operated via a lap bar, the LX 48 is constructed from the same heavy duty steel frame as the SX 54.
    Products
    Meeting weeding needs
    The Fiskars Xact Weed Puller is featured on the Bunnings website
    HNN Sources
    A video of Xact Weed Puller is also on Fiskars' YouTube channel
    Specifications for the Xact Weed Puller on the Australian website
    Click to visit the HBT website for more information
    The Fiskars Xact Weed Puller means it could be time to ditch the potentially harmful chemicals in herbicides to eradicate weeds. The tool can help alleviate the effects of digging, bending, and backaches.

    Engineered to facilitate easy removal of root weeds, the Xact Weed Puller is ergonomically designed, and allows users to tackle weeding jobs of any size. A 1m reach means users don't need to be on their hands and knees in the garden, while the stainless steel prongs will penetrate the earth, grip the root firmly, and remove the weed.

    An innovative weed ejection system means end-users never have to bend over to remove the weed from the tool. Specifications include:
  • Dimensions - Height 1000mm
  • Weight - 950g
  • Material - Aluminium shaft/stainless steel
  • Warranty - 25 years
  • Products
    Drill uses advanced intelligence
    A video of the Worx Ai Drill
    PR Web: Worx
    The ToolGuyd website reviews the Ai Drill
    Worx said its Ai Drill is almost intuitive
    Click to visit the HBT website for more information
    Worx senior product manager, Jeanne White, said advanced intelligence can be defined as the capability of a machine to imitate intelligent human behaviour. This is just what the company's engineers had in mind when they created the Ai Drill. She said:
    The Ai drill is almost intuitive. It's so easy to use that first time users and do-it-yourselfers will breeze through home and craft projects.

    The Ai Drill has three drive modes including drill, SafeDrive and PulseAssist, which are activated by touch sensitive keypads on the top of the drill.

    BitLock is another key feature of the Ai Drill. Load a drill or driver bit into the tool's chuck, and its motorised jaws tightens and self-centres the bit, and does it with 30% more torque than hand tightening, according to Worx. The motorised jaws also run in reverse to release the bit when it's time to swap bits or for storage. To engage BitLock, users simply turn and hold the collar ring until the chuck's jaws have tightened or loosened the bit.

    The Ai Drill has no clutch settings. It relies entirely on the tool's internal electronics to safely drill holes, drive and remove screws, regardless of the work material.

    When SafeDrive is selected, it delivers just the right amount of torque necessary to drive the screw and then backs off once the screw head is flush with the surface.

    With PulseAssist, the Ai Drill applies enough bit rotation to drive the screw snug to the surface without over-tightening or stripping the screw head. This feature also works in reverse to back out stubborn screws without damaging the screw head. The drill moves at a slow, optimal speed so it doesn't strip screws.

    The 3.1lb or 1.4kg (with battery) Ai Drill is powered by a 20V MAX 1.5 Ah battery. The battery is compatible with other Worx 20V MAX batteries used in WORX DIY and lawn and garden tools. It is also part of Worx 20V PowerShare program.

    The MAX battery recharges to full capacity in approximately five hours. The drill has a low battery capacity indicator. When the battery's power runs low, the drill's LED light flashes.

    The single-speed (0-800, no-load) drill has a 3/8 inch chuck. It is capable of handling a variety of drilling and driving jobs with 180 in./lbs. of torque. An integrated LED light illuminates the work area and is activated by pressing the trigger. The tool's drilling capacity is 1-inch in wood and 3/8 inch in mild steel.
    News
    HI News V3 No. 7: Bunnings Strategy Day
    Download the latest issue of HI News Vol. 3, issue no. 7
    HI News
    http://hnn.bz/bunnings-99-chainsaw.jpg
    Graph of historical data for DuluxGroup's paint segment
    Click to visit the HBT website for more information
    The latest edition of HI News focuses on the major corporates in Australian hardware/home improvement retailing: Bunnings and DuluxGroup.

    Simply click on the following link to download this edition:
    HI News V3 No. 7: Bunnings Strategy Day

    In terms of independent retailers, Tasmania-based Kemp & Denning (K&D) has sold its trade business to Clennett's Mitre 10 and Newcastle's Toolies store is closing down.

    Our regular section on statistics takes a look at the entries and exits of Australian businesses to see how hardware retailers and general retail is faring.

    Klein Tools has acquired General Machine Products and in other US news, Sears is suing another tool maker.

    Also, US home improvement retailer Lowe's outsources some of its tech jobs to India while experimenting with exoskeleton suits for store staff; Ace Hardware wins again on customer satisfaction; and True Value delivers its first quarter results.

    In the UK, Bunnings opens its third store, names more locations and appoints a COO.

    Product news in this issue includes the launch of graphene paint in the UK; a roofing tool that has been developed in WA; and the Everdure range of BBQs winning a prestigious Australian design award.

    Other products featured are the Worx BladeRunner X2 portable benchtop saw and Loctite RE-NEW adhesive.
    Editorial
    Wesfarmers-Bunnings Strategy Day
    Michael Schneider, CEO Bunnings
    Wesfarmers
    Bunnings display of special order products. These can be ordered online
    Bunnings has introduced a $99 electric chainsaw
    Give to Amnesty International
    Each annual Wesfarmers' Strategy Day, from the perspective of reporting on Bunnings, tends to fall into one of three categories. Type A is when Australia's largest home improvement retailer is making an investment in something controversial - such as when it radically expanded its store network in response to the challenge from Masters Home Improvement - and needs to both announce this and defend it under questioning from investment analysts.

    Type B is when Bunnings is doing something a little controversial, but not very obvious, so the company can get it past the analysts by either not emphasising it, or by making it seem as though something else is being referenced. Type C is when some other event has occurred outside of Wesfarmers that has captured the analysts' attention, and coloured their attitudes and questions.

    This year's Strategy Day, held on 7 June 2017, was mostly type C, with a dash of type B added. The exterior event that captured the attention of the analysts was the imminent arrival of the world's largest online retailer, Amazon, to the Australian market. Analysts came close to suggesting that some of Wesfarmers' divisions, in particular its still-failing mid-range department store Target, were unlikely to survive the arrival of Amazon in the Australian retail market.

    Bunnings did not come in for that level of questioning, but analysts did push to understand what the retailer's online strategy would be over the next two to three years.

    All this is to say that it's always a good idea to keep in mind that "Strategy Day" goes both ways when it comes to Wesfarmers, and particularly Bunnings. Analysts do get an opportunity to ask more questions, the company does present more of the fundamentals of its plans for the next year or two years. However, Wesfarmers has always been adept at concealing elements of its strategy from competitors. It's not uncommon to find that a little less has been said than at first seemed to be revealed. And on occasion, what seems to have been said is not quite what was really said.

    That's one side of the Strategy Days. The other side is that, especially for Bunnings, the top executives do deliver some of the most dense, and at times the most profound, statements about the basics of how these businesses intend to operate. They can often be a kind of very modest, but nonetheless ambitious, operational manifesto.

    For Bunnings, these manifesto-like statements reference what is perhaps the deepest part of its DNA. Bunnings' most closely held belief, as nourished by its former CEO, John Gillam, is that "nothing is deserved, everything must be earned". The Strategy Day introductory statements are, at their heart, a reiteration of this belief, and a careful listing of the ways in which, in the coming financial year, the retailer intends to (again) earn the trust, loyalty and engagement of its customers, its staff and its suppliers, as well as acceptance by the communities in which it operates.

    The manifesto delivered this year by Michael Schneider, who has replaced John Gillam as both managing director of Bunnings Australian and New Zealand (BANZ), as well as overall CEO of Bunnings, including Bunnings UK and Ireland (BUKI), was particularly dense, and deserves close parsing and interpretation. In HNN's view it presages some more difficult times to come for not only Bunnings, but also for home improvement retail in general.
    Smaller stores

    Before getting into this deeper view, it is best to start with something on the lighter side of the Bunnings presentation. As remarked above, while this Strategy Day was largely a type C affair, there was a dash of the type B, which in this case is all about a little bit of "misdirection" by understatement.

    We saw something of this in the response to what was a good question from respected analyst David Errington, Bank of America Merrill Lynch, Research Division - Head of Consumer Research for Australia and Asia. Mr Errington asked:
    The one area that I've really been interested to watch in the last five years is the flexibility in your format. I mean, John [Gillam] always used to say, and you used to say, you're not a cookie cutter, but you're taking that to new dimensions like the Collingwood store. With the carparks all around the place, it didn't seem to be a typical Bunnings, but you seem to be a lot more flexible now in where you're putting stores. You can put car parks on the roofs. You can put them underground. You can do anything you like.
    What's the sales density of these new type of formats? Are they comparable to a typical 15,000 to 20,000 square metre one out in the sticks or - and do they - what sort of return metrics are they? And going forward, what sort of proportion are we going to see with these new type formats that are outside of the norm of what we expect the Bunnings Warehouse to be?

    Mr Schneider replied:
    The Bunnings stores we open - so Bunnings Warehouse will always be the big box, big stock, big box, stores that you know. And the Bunnings stores are our small format.
    For a long time, we had formed a view that the future was only warehouses. We revised that in the last probably six or seven years, to say the small formats play an important role. They play a role in going into a market to get the communities to having a Bunnings store in the area before you migrate to a warehouse. We've done that a few times where we have them, with the feeling 'well, we couldn't get anything else in Collingwood.' So we took the old credit building and turned it into a Bunnings store.
    So from a format point of view, I'm pretty agnostic. I think if we can get the numbers to sort of work, and Richard [Goyder] and Terry [Bowen] touched on some of the sort of modelling that we do, then we can get in and get going. It's great, and some of them are good infill, particularly as traffic in major cities gets worse on weekends, and they're very convenient during the week for charities to drop in and get the things that they need. In terms of productivity, they perform really well. Some will be better than others and some of our warehouses also have high stock turn.

    Well, there is nothing wrong with that response. However, the underlying reality is that Bunnings is engaging in some really experimental new formats, such as the store it has proposed for the inner-Sydney suburb of Rozelle.

    Where the Collingwood store does a good job of compressing the content of a Bunnings Warehouse to a "pocket edition" that covers most of the needs for that area, the proposed Rozelle store would seem, based on its plans, to offer lower stock density and more amenity in an urban environment. It even includes a turntable in the delivery area, to reduce the problem of turning trucks in urban traffic:
    Service vehicles (up to 12.5m long) will be provided with a turntable to turn within the site enabling them to enter and depart in a forward direction and these vehicles will approach along Parsons Street from Crescent Street and depart along Parsons Street to Mullens Street.

    It is a quite radical, and very interesting idea.

    Any other retailer - just about - in Australia, given this question would have gone on about these new formats, what the company plans to do with them, their potential, other plans under development.

    But not Bunnings. Not Bunnings, because the retailer simply does not see any real advantage in doing so. All it would be doing, we expect the Bunnings' view would be, is to increase expectations, telegraph strategy to competitors, and possibly increase local resistance to the development application.

    In the end, if the store gets approval (the first version was rejected), the store will be built, and it will be judged on how it justifies that investment and satisfies the needs of its customers.

    The next bit of this conversation with Mr Errington is just as masterful. He asks another very good question:
    But going forward, say if your next 100 [stores], which arguably ... could be the rolled out in, say, five or seven years, how many of those would be warehouses compared to how many would be these infill type stores?

    That question is fielded by Justin Williams, the incoming chief financial officer for Wesfarmers (replacing Terry Bowen):
    Majority is still warehouses. It's still the preferred format, but where there's opportunities, where there's markets, as I said, where it's rightsized, then we take advantage of that flexibility.

    The majority. If 100 are built over the next seven years, that's...well, it's 51, isn't it? Once again, the company answers, but it doesn't advertise its strategy, or limit its future options by much.
    The manifesto

    After carefully reading the introductory comments that Mr Schneider made at the Strategy Day, HNN has reached the conclusion that the Bunnings strategy for FY2017/18 - and possibly beyond that - is based on expectations of a flat to slightly reduced market for home improvement goods and services.

    This does not mean that Bunnings is suggesting or forecasting a reduction in either revenue growth or earnings before interest and taxation (EBIT) growth. It does mean that the company will likely be making some changes to strategy and its approach to ensure it does deliver its expected good growth results.

    Probably the most significant data point which could suggest this is Mr Schneider's careful description of the opportunity he sees for Bunnings arising from the exit of Masters:
    In the last 12 months, we've seen some fairly significant change in the market with one large competitor closing down.
    Accounting for range overlap, the differential in average pricing and the role of competitive marketplace on those dynamics, we see some opportunity for growth, but at a much more modest level than some analysis has suggested.

    In fact, the number that Wesfarmers has suggested is 20%. The company is stating that Bunnings will pick up only 20% of the revenue that was going to Masters while it operated.

    This gave rise to some questions from analysts. Bryan Raymond from the Research Division of Citigroup asked:
    On the residual sales you expect to pick up from Masters' closure, I'm just interested in your workings how you got to 20%? It seems, given the crossover that amounts to 70% to 75% of the overall range, it seems like a relatively low number. I would be keen on [understanding] ... how you got to your 20%.

    Mr Schneider handed over to Mr Williams to respond.
    Yes, 20%, consistent, obviously, with our market share, and it sort of really reflects the competitiveness of the industry. As Mike's slide showed, there's a myriad of competitors out there.
    So, the sales were built up. They came from a large number of competitors, and it make sense that they would be shared back between that similar suite of competitors. We don't expect to pick up large numbers of those sales. The industry is much more competitive than that. That's the reality of the industry, it's highly competitive.

    Mr Schneider then picked up on this answer:
    And probably on a unit basis, we - if you thought about gain on a unit basis, it might be a bit higher, but we've also invested significantly in price and we also recognise that there was a price differential between us and that business.
    So if you normalise some of that, if you - how many hammers you're selling, as an example, it might be more than 20%. But in dollar terms, that's sort of where we see it planning.

    He is suggesting that a Masters' customer might spend $199 on a cordless power tool, but an equivalent power tool might cost only $189 at Bunnings, so a 5% reduction in revenue would be built in.

    It fell to Richard Barwick, an analyst with CLSA's Research Division to ask a key follow-up question:
    I think your comment, Mike... was it "lower than some analysis that's out there"? Is that code for "the market's expecting too high sales in Bunnings over the next 12 months"?

    Mr Schneider clearly denied this:
    I don't think that we'd sort of suggest that for a second, I think it's really just about trying to make sure that we can give all of you and everyone listening in sort of a good sense of the mechanics and how we've worked out our numbers.

    Without the kind of modelling Bunnings can do on its own business, but thinking through typical customer interactions and the dynamics of the market, it is just really hard to get to the 20% number for the transfer of sales from Masters to Bunnings.

    The narrative that Mr Williams and Mr Schneider are suggesting is that a customer back in 2014 stops going to his or her local Thrifty-Link for drill bits, sandpaper, paint, nails, hammers and mitre saws, and switches to a nearby Masters. Two years later, after Masters closes, he or she then says "Righto!" and shows up back at the Thrifty-Link.

    In support of this, there are, of course, some people who just do not like Bunnings, and will not shop there. But so strong a preference is quite rare. It seems that, in general, a more likely narrative is that customers who have previously sought out a big-box experience by shopping at Masters will, when Masters closes, transfer their purchases to the only other big-box in the market, Bunnings. This is especially the case given that some Masters stores are within 100 metres of a Bunnings, and most others tend to be less than a five-minute drive away.

    Again, though, allowing for a two-month aftereffect of the Masters liquidation sale on the market, Bunnings does have modelling not only for March of the previous quarter, but probably for April and May as well. That is "low season" modelling, but it would still be telling.

    HNN's prediction, in line with other analysts, was around a 60% pickup for Bunnings of Masters customers. We could assume that is too high, and 50% is more likely. Given that, the only way that HNN can make sense of this prediction is to suggest that what is going on is that the Masters market (which was tilted towards more affluent consumers) will itself see a contraction, of around 35% over the FY2015/16 demand. Combined with a (to be generous) 10% price difference, that would mean overall potential demand was 90% of Masters demand, further reduced to 58.5% by a decline, with Bunnings then picking up, overall, around a 29% gain.

    Of course, all this eventually just becomes a game of numbers and assumptions. If we are lucky, five or more years from now we'll be able to look back and have some clarity about the shape of the market.

    What is very clear, however, is that the outlook is essentially pessimistic. Neither Mr Williams nor Mr Schneider is saying "Well, there was an 8% differential in price between Masters and Bunnings, but that will be wiped out through increased demand".
    Competition

    The exchange reported above also brings up another feature of Bunnings' presentation at the Strategy Day. The reason why Bunnings will get less share of Masters' revenue is, Mr Williams tells us, the competitors in the market.

    Mr Schneider made repeated references to competition in his prepared remarks. A standard slide Bunnings uses in its presentations showing the logos of its competitors has swelled considerably to include about 200, where in the past it listed a more modest 60 or so.

    He began by stating:
    ...as competition increases and the broader addressable market is further explored, we must ensure we're listening closely to what our customers are asking for as well as evolving our offer to reflect the changing landscape of our industry.

    His fullest statement about competition came mid-way his remarks:
    In stark contrast to what many people talk about, we see and experience a market that's incredibly competitive. It has a wider range of specialists, mass merchants and category killers. Whilst many have a strong physical offer, many others have a strong online presence, and increasingly, we're seeing both. By focusing on ensuring we have a winning offer and drive our real focus on having the lowest prices, we continue to work really hard to ensure we have the products, the prices and the service that allows us to compete effectively regardless of format.

    Later he stated:
    We take no competitor, and I mean no competitor, local or global, physical or digital for granted. We are never complacent. If we ought to be successful, we must continue to give great value and fantastic experiences to our customers, and in doing so, be chosen by them.

    These remarks are, on face value, quite true. Competition has increased in the home improvement market. The main independent hardware groups, chiefly Metcash's Independent Hardware Group (IHG), and the smaller Hardware & Building Traders (HBT) as well, have realised that whatever other advantages they offer, they need to start by having the best supply chain possible. Beacon Lighting has optimised its business, Reece continues to dominate some sectors in bathrooms, and retailers such as Sydney Tools offer low power tool prices online, and are expanding their physical presence.

    However, it should be noted that the main reason why Bunnings has so many competitors in so many markets is that it keeps entering new markets, and taking considerable market share away from the incumbents. A business will certainly gain competitors through that strategy, but it is not as if it is beset by competitors popping up out of nowhere.

    It is possible that both in these remarks, and in its remarks about gains from Masters, Bunnings is dealing with a concern that the Australian Competition and Consumer Commission (ACCC), which has been active recently in the home improvement sector, might be wary of how much market share the retailer has now gained. Even a simple suggestion by the ACCC that Bunnings should limit its future expansion could be damaging.
    Leaner times

    While concerns about some kind of regulatory intervention may have shaped a narrative that sees Bunnings depicting itself as a little less strong than it really is, HNN does still believe that underlying this is a genuine concern about a weakening home improvement market.

    Bunnings would not be alone in this. The Housing Industry Association (HIA) is forecasting (as of 8 March 2017) volume growth in renovations of 2.0% in 2017/18, and 2.7% in 2018/19. The Reserve Bank of Australia (RBA) has also suggested that the "interest rates and equity windfalls" may be balanced by increased concern over the future. Writing in its "Statement on Monetary Policy" for May 2017, the RBA noted:
    A substantially weaker housing market could have broader implications, including slower growth in consumption and dwelling investment than expected.

    The way in which the company looks at gains from Masters' exit wasn't the only indicator of a Bunnings strategy geared to delivering ongoing growth in a down market. In the opening part of his prepared statement, Mr Schneider made reference to delivering:
    ...strong and sustainable returns across a variety of economic conditions. Working to stay nimble and responsive to what our customers are looking for is evident in the consistent track record of performance that Bunnings has continued to deliver.

    In addition to this slightly unusual comment, there are three areas of focus that come up which indicate Bunnings may be gearing up for tougher times.

    The first is an increased focus on existing customers, over gaining new ones. This isn't to say that Bunnings is not also seeking new customers and new markets, but where in the past that was a primary focus, the focus seems to have shifted to engaging more with customers the retailer already has.

    The strongest statement about this Mr Schneider made was this:
    Unsurprisingly, our strategic agenda remains the same. A deep and strong focus on the lowest prices, the widest range and the very best of service. In doing this, we ensure we remain absolutely focused on creating value for our customers over the long-term, and supporting these with physical and digital experiences that create inspiration and confidence to take on many types of DIY projects and do them in ways that create real values for the customers who do them. If we do these things, as I said, we get to be chosen more often, hoping to not only expand the market, but the degree to which we get to participate.

    This is a well-known strategy for dealing with flat or declining markets. Gaining new customers in new markets carries upfront development costs, which can take a year or two to recapture. Convincing existing customers to buy more or from a wider variety carries lower costs.

    The second element is what Mr Schneider has termed "better use of capital".
    Bigger products and the changing technologies, store formats and the ability to use our capital more effectively to create better, even more convenient store offers or being more productive to invest in more value for customers.

    Later he states:
    Supporting this, we'll continue to improve operating efficiencies, lowering both our operating and capital spend on a per-project basis, meaning we can drive our growth agenda even more efficiently.

    Referring to new stores and the rollout of new store formats, he said:
    Trials across the last year on using capital more effectively and efficiently in these sorts of projects has been really pleasing to us and will form part of their model going forward, which enable us to do even more work with less capital.

    In a down market, conserving capital is very important to providing good performance numbers. This is especially the case with Bunnings, which as a service/retailer, judges its performance using return on capital (RoC), rather than, say, return on net assets (RONA), which is more common in manufacturing.

    Finally, there is Mr Schneider's focus on efficiency. This is an area where he has long been acknowledged as an expert. The recent shift in Bunnings Warehouses to combine the kitchen ordering, special orders and information desk into a single staffed in-store unit is typical of the clarity he and his team bring to this task.

    Mr Schneider is also an enthusiastic supporter of using technology to improve both efficiencies and customer experience:
    We're finding even more ways of using our tech platforms to improve efficiencies in the business from HR to supply chain to in-store tools to make our business even easier to run.

    And:
    Simplifying processes, using apps and other technology, such as mobile point-of-sale will ensure even faster and more enjoyable experiences in store.

    It goes almost without saying that pursuing efficiencies is a really key strategic move in a down market. It is a fundamental to ensuring growth continues.
    Community

    Not associated with market conditions, this was perhaps the most surprising feature of Mr Schneider's address: he re-emphasised the need for Bunnings to be more engaged with the communities in which its stores operate. The word crops up no fewer than six times in what he had to say.
    By working hard to be trusted by our team, our customers, suppliers community and of course, the wider market, we continue to ensure that the sincere and genuine way we participate in both the broader market and local communities is maintained. And the customers are willing to choose to shop with us because they understand and they appreciate it.

    Later he said:
    And our plan reflects this. It focuses on even better experiences for both our commercial and consumer customers and in the communities, which our stores are and our teams live.

    As well as:
    Speaking about stores, the unique environment of our stores is something that we know our customers really enjoy. And doing more to bring our stores to life and participate even more in the community in which we operate will be core to the engagement we want to continue to build with our customers.

    HNN is sure that Mr Schneider and his team, like all good retailers, has a strong and genuine desire to engage with the communities where he does business, in a way which reaches beyond the store itself. It could be equally true, however, that the campaigns run by small retailers of all types is having some effect on customers' attitude to shopping at larger, corporate-owned stores.
    Product lines

    In terms of hints as to what new product developments can be expected from Bunnings, the slide presentation did call out a new outdoor power equipment offering from Honda. It also suggested that Bunnings would be continuing to market smarthome, LED lighting, and assisted living items for ageing Australians.

    Perhaps one of the more interesting hints at what is coming is a couple of references Mr Schneider makes to "big products":
    We'll continue to expand our reach through rolling out an online offer that supports and grows our already substantial special orders offer, enabling customers to buy large products in areas, such as playgrounds, sheds, outdoor structures, mature trees, bulk landscape, all of these in an online platform.

    This is only part of this article. To read the remainder, please click on the link:
    HI News Vol. 3 No. 7: Bunnings Strategy Day

    Until next time,

    Betty

    You can contact me directly via email betty@hnn.bz or Twitter @HNN_Australia

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    HNN iPad App
    Companies
    DuluxGroup results FY2016-17 H1
    Results for DuluxGroup first half 2016/17
    HNN Sources
    Graph of historical data for paint segment
    Dulux gets star billing at Fagg's Mitre 10
    Subscribe to HNN weekly e-newsletter
    Australia's DuluxGroup Limited (Dulux) has announced its results for its FY2016/17 first half, which ended 31 March 2017. (DuluxGroup is not associated with AkzoNobel which markets the Dulux brand in Europe, nor with PPG, which markets the brand in the US.)

    Overall sales revenue was $881.2 million, up by 3.54% on the previous corresponding period (pcp) which was the first half of FY2016/17. Earnings before interest and taxation (EBIT) also grew, climbing by 7.83% on the pcp, to reach $106.0 million.

    (In fact, as Dulux chose to list its payment of $540,000 to the Australian Competition and Consumer Commission in November 2016 under expenses, it's arguable that the company's true performance EBIT should be $106.5 million.)

    Nominal net profit after taxation (NPAT) was $72.7 million, up 14.13% on the pcp. However, this number includes the writeback of an outstanding tax provision worth $3.1 million. Setting aside the writeback, NPAT would be $69.6 million, a 9.26% increase on the pcp.

    Dulux's paints and coatings segment reported sales revenue of $473.7 million (including inter-segment sales). This was an increase of 4.69% on the pcp. EBIT for this segment was $88.5 million, up 7.14% on the pcp.

    In the media release that accompanied the results announcement, Dulux's CEO, Patrick Houlihan, was reported as saying:
    This is a high quality result, driven by strong profit growth across all of our Australian and New Zealand businesses. The strong Dulux ANZ result reflects strategic decisions we made a few years ago to align with key retail channel partners, consumer-driven preference for our premium branded products and our longer term strategy to broaden our coatings portfolio.
    We have an excellent portfolio of businesses that have a track record of providing our shareholders with resilient growth. Looking forward, we see multiple streams of growth both domestically and offshore.
    Results overview

    The Dulux results were fairly positive for a paint and coatings company at this particular stage of its development cycle. Sales revenue growth was positive but low, reflecting environmental factors and internal strategies, while EBIT growth was much stronger.

    The external factors included the discounted sell-off of competing products during the company's first quarter, as Masters Home Improvement exited the market, and wetter than normal weather during the prime exterior painting season during spring 2016.

    The internal strategic factor was the decision to raise prices as the company released a range of new products in the second half of calendar 2016. This contributed to better profitability, reflected in both EBIT and NPAT, but may have inhibited sales growth.

    Despite the positive results, the investor presentation saw investment analysts somewhat more assertive in tone during the Q&A session. One reason for this is possibly that, with a slow-down in residential construction likely for the second half of calendar 2017 and all of calendar 2018, analysts were exploring if Dulux will be, as the company suggests, largely immune to this change in the market, due to its low dependence on new construction.

    While it is often the case that renovation activity increases when new house construction and sales decrease, it is also possible that the housing market reset Australia seems headed for may alter homeowners' relation to their dwellings. This could see reduced overall spending on housing, with some of this going instead to other discretionary categories, such as travel and entertainment. This is not delayed spending, it is revenue exiting the sector.

    Additionally, with the a strong move to consolidation in the global paint industry, as Sherwin-Williams completes its acquisition of Valspar, and PPG continues to pursue AkzoNobel, Dulux itself could become a takeover target within the next two years.

    HNN will return to these matters at the conclusion of this report. We begin with an overview of the company's four main segments, before looking at some macro aspects of the overall business, and Dulux's predictions for the next half and beyond.
    Paints and Coatings ANZ (Dulux)
    Overview

    This segment includes: Dulux decorative paints, woodcare, texture, protective, powder and industrial coatings in Australia and New Zealand for both consumer and professional trade markets.

    For this segment, retail paint sales make up 36.8% of revenue (21% all revenue), trade paint sales make up 38.5% of revenue (22% all revenue), and specialty coatings make up 24.7% (14% all revenue).

    In market terms, 65% is paint for maintenance and home improvement; 15% is related to new housing; 15% is for commercial and infrastructure construction; and 5% is for industrial use.

    Dulux states that is has approximately 46% to 47% of the "measured" paint market overall in Australia. The company states that decorative paint makes up 60% of what it sells, and the other 40% consists of speciality coatings, such as Dulux Metalshield, Dulux PRECISION, and Dulux Protective Coatings. (HNN assumes these are volume figures.)

    Dulux stated that the renovation and repaint market declined by 1.5% during the reporting period. (This decline was in the "sell in" market, from supplier to retailer.) This was due to wet weather and the effects of Masters' stock liquidation. New housing, which represents 20% of the paint market volume, grew by 5%, while commercial construction, which represents 5% of market volume, grew by 4%.
    Results

    Setting aside inter-segment (same company) transactions, revenue for this segment for the reported period was $472.3 million, an increase of 4.8% on the pcp. Including inter-segment transactions, the revenue was $473.7 million, up by 4.7% on the pcp. The segment revenue amounts to just over 53% of the overall Dulux sales revenue.

    EBIT for the segment in the period was $88.5 million, up by 7.14% on the pcp. The EBIT margin was 18.68%, up by 0.43% on the pcp. Dulux stated that net input costs were flat. An increase in the cost of titanium dioxide (TiO2) was offset by reductions in other costs, it said.

    Dulux breaks down its 4.7% increase in revenue for this segment as coming from four different sources. Overall market share grew by 2.0%, with all of that growth coming from the retail channels. The price increase delivered another 2%, with the increase around 5.7% on premium products.

    Additionally, New Zealand provided 0.2% of the increase, as its revenue grew by 10%. Finally, around 0.5% came from the growth of the overall market. Mr Houlihan commented that he estimated another 0.5% of market growth was wiped out by the liquidation sales at Masters Home Improvement.

    While Dulux's trade sales were only stable in overall market share terms, the company pointed out that paint supplied for the new housing market continued to grow sharply during the reported period. Dulux has only a 25% exposure to that market. So to maintain a stable trade share, this has to mean the company's net share of the trade-based renovation market would have increased.
    Commentary

    Introducing the results for this segment, Mr Houlihan stated:
    The modest market growth outcome reflected the last of the Masters liquidation activities, which adversely impacted sales-in activity into the retail channels in the half. Excluding this, we saw solid growth in other markets such as the do-it-for-me or trade part of the renovation market, new housing and commercial. We note also that sales-out demand through retail channels has remained solid. ["Sales out" refers to store to customer, rather than "sales in" stock purchases.]

    In terms of the ongoing effect of Masters on market size, Mr Houlihan pointed out that, as there was no longer a sell-in market into Masters, the apparent growth of the paint market might seem artificially reduced during Dulux's second half FY2016/17, as there would be less stock being held overall.

    A theme Mr Houlihan repeated several times in the presentation was that Dulux owed much of its growth to a good choice of retail channel partners.
    The positive share outcomes in Australia resulted from the decisions we made to align ourselves with the eventual winners in these segments, specifically Bunnings, Mitre 10 and Inspirations Paint Specialists.

    He added later, in response to an analyst's question:
    In terms of though the half just gone, all of the share growth came through the retail sector. So that decision to align with Bunnings, that decision to align with Mitre 10 and we've been for many years now aligned with Inspirations in the paint specialist channel, by backing those three market leaders who back us in those channels because our share in those is higher than our weighted-average share ... that's the fundamental thing driving the weighted average up. And at the same time, we've got the bias towards Dulux premium-branded products helping ultimately drive that consumption but adding to the price componentry as it goes, as well.

    Mr Houlihan also noted that the company's New Zealand operations were completing a realignment after being de-ranged from that country's Mitre 10 stores (which operate independently of the Metcash brand of the same name).
    We've... seen that business realign itself in the Paints business with Bunnings versus Mitre 10 in New Zealand, which is a separate identity to the Metcash-owned Mitre 10 here, it's now trending its way back towards similar EBIT margins to the overall Dulux ANZ segment. So certainly, it's providing profitable revenue growth, if I could describe it that way, and the fundamentals are very good there. But that's all we can comment on.

    Mr Houlihan later expanded further on the New Zealand operations:
    In terms of the exit out of Mitre 10 New Zealand, we're now in the half where we're clean in terms of comping half-on-half. So really, what you're seeing in this sort of new environment for us with what we've done there.
    On the retail side of the business, we are aligned with two key partners. We're aligned with Bunnings in big-box hardware, and we're aligned with Guthrie Bowron who are our key paint specialist partner, in the same way Inspirations is here in Australia. And as they are both growing, we've been able to drive growth through that customer alignment. Obviously, we have launched our products into New Zealand so we're getting that marketing innovation-led growth as well.
    But the trade market in New Zealand is an area where we have really, over the last 24 months, stepped up the investment. We have increased the number of trade centres we've got in New Zealand, we've refurbished some other ones and we relocated some. So I think we've taken our number of trade centres from in the order of low 20s now to high 20s. So that revitalisation of our trade network has also been one of the other levers we've been pulling, as well.
    Consumer and Construction Products ANZ (Selleys and Parchem ANZ)
    Overview

    This segment includes: Selleys adhesives, sealants and other household repair and maintenance products for the consumer and professional trade markets; and Parchem construction chemicals, decorative concrete solutions and related equipment in Australia and New Zealand.

    The market for this segment is 60% maintenance and home improvement, 30% commercial and infrastructure, and 10% new housing. Selleys delivers 60% of revenues for the segment (9% for all Dulux), and Parchem the remaining 40% (6% for all Dulux).

    While the demand fundamentals for Selleys remain strong, Parchem's engineering construction markets continue to decline, though Dulux suggests they have have reached bottom during the company's second quarter.
    Results

    Setting aside inter-segment (same company) transactions, this segment delivered $121.0 million in revenue, a decline of around 0.6% on the pcp. Including inter-segment transactions, the revenue was $125.8 million, up by $0.1 million on the pcp. Selleys alone achieved revenue growth of 4.4%, according to Dulux.

    EBIT for the segment in the period was $13.7 million, up by 10.2% on the pcp. The EBIT margin was 10.89%, up by 1.1% on the pcp. While Parchem suffered a loss in revenue, Mr Houlihan stated that it did grow in EBIT, due to a combination of cost reductions, and improved margins.
    Commentary

    Selleys continues to grow as a product line, according to Mr Houlihan.
    Selleys achieved good revenue growth of 4.4%, with particular strength in our key retail partners. We were particularly pleased with the performance of a number of our recent premium new products, including Selleys Storm, which has become a strong SKU for us.

    (Storm is a waterproofing sealant product that can be applied even under wet conditions.)

    Mr Houlihan pointed to several reasons why Parchem has continued to perform poorly:
    The top line for Parchem was adversely impacted by two factors: firstly, we have continued to fine-tune this business by exiting low-margin commodity products, such as concrete reinforcing mesh. This contributed about half of the revenue decline. Secondly, whilst engineering construction markets have continued to decline at double-digit rates, our core Fosroc construction chemicals business mitigated much of the decline through share gains.

    He clarified this statement later:
    Parchem has been progressively exiting low-margin businesses and increasing its focus on the core, profitable Fosroc construction chemicals business. Parchem is increasingly becoming a logical product extension to Dulux and Selleys in a similar vein, the Dulux Acratex or Dulux Protective Coatings businesses. We have recently migrated Parchem onto the Dulux ERP [enterprise resource planning] system to enable it to more effectively leverage our broader Dulux trade capabilities.

    This is an introduction to this article. To read the full article, please click on the link below to download the PDF edition of our magazine, HI News:
    HI News Vol. 3 No. 7: Bunnings Strategy Day
    Bigbox
    Big box update
    Bunnings will build a store across the road from Home Timber & Hardware in Katoomba (NSW)
    HNN Sources
    Development application for a Bunnings store has been lodged in Kingaroy (QLD)
    Lesso Home in Greenacre is located close to the Bunnings store but is only open to trade customers
    Click to visit the HBT website for more information
    Home store in Katoomba (NSW) will face direct competition from a new Bunnings; Kingaroy (QLD) is another location for Bunnings; Lesso Home is open to trade customers in Greenacre (NSW); Bunnings Colac is up for sales; and Shepparton store officially opens.
    Blue Mountains store close to Home

    Bunnings is building a store across the road from the existing Hudson Home Timber & Hardware store located in Wilson Street, Katoomba (NSW).

    The new Bunnings store has led to some concerns about whether the market in the Blue Mountains can sustain two large hardware outlets at all, let alone within metres of each other.

    Bunnings general manager - property, Andrew Marks, said the new store will be a "small format" model. He told the Blue Mountains Gazette:
    We generally find that there is ample room in the market for both larger and specialty providers. Almost everywhere we operate we have successful competitors located close by to our stores.

    Mr Marks also referred to environmental concerns which had been raised about the site, part of the Leura Falls Creek catchment. He promised that "measures have been put in place to ensure receiving waters of Leura Falls Creek are maintained at the highest standard". He said:
    We will continue to work with the builder to ensure there is no environmental impact from construction works in and around the site.

    The Bunnings store is expected in early 2018.
    Bunnings lodges DA for Kingaroy

    Bunnings is planning a $15 million store in Kingaroy (QLD), and has lodged a development application with the South Burnett Regional Council (SBRC) for the highway frontage site on the D'Aguilar Highway (Walter Road).

    If Bunnings' development application is approved by the SBRC, the development would go ahead within sight of the Sunshine Mitre 10 store in Rogers Drive.

    According to recent editorial in southburnett.com.au, the announcement that Bunnings has lodged a development application to build a new store in Kingaroy has provoked a mixed response.

    On the one hand, some residents welcome the news that Bunnings would like to open up a South Burnett outlet. They feel the chain will offer them better hardware prices, and see the announcement as a sign the region is moving forward again after several years in the doldrums.

    Against this, some other residents feel the arrival of Bunnings could spell the end of several other "home grown" small businesses that compete in the same market, and lead to an increase in unemployment.

    The last two big retail chains to open up in the South Burnett were Harvey Norman in late 2008, and Aldi in 2009. At the time both these stores opened, the population of Kingaroy's town area was about 9154; but by the end of last year it was 10,125, or about 10.6% bigger.

    A statistical snapshot based on data available shows the first three years after Harvey Norman and Aldi were both up and running, the South Burnett's unemployment rate was fairly stable at between 6.5 and 7.5%. This was despite the 2011 floods, the 2012 drought and the flow-on effects of the 2008 Global Financial Crisis.

    The editorial goes on to say that while it is likely the arrival of both these large retail chains did lead to the closure of some other businesses, the net effect of these closures on overall unemployment was negligible.

    In other words, any jobs that were lost in the businesses that closed down were made up for by the jobs the new retail entrants created.

    The arrival of these businesses also seems to have had no negative effect on the region's long term growth rate.

    If anything, their arrival could be a sign that the South Burnett is a market worth investing in for the future, and people willing to back that belief with bricks and mortar.

    It would be ideal if a large retail chain that didn't compete with any existing businesses, according to the editorial That would create new jobs that really were new, and add to the local retail mix that people currently have to travel outside the region for.
    Lesso Home Greenacre welcomes the trade

    Lesso Home has opened its first overseas complex in Greenacre (NSW). It is located in a 30,000sqm building in Mayvic Street, and is what the company calls a "one stop global building materials, home furnishings and hardware trade hub". It is just blocks from a Bunnings outlet.

    The Chinese firm is part of China Lesso Group Holdings Ltd which has more than 50 subsidiaries and 22 production bases in China, North America, Asia and Africa. It manufactures more than 10,000 different products and the Greenacre display space brings some of them together in one location, the company said.

    The Australian reported last year that Lesso is expanding into the Australian market after warning of challenging conditions in China. Victor Lin, vice-president of China Lesso Group, told the newspaper:
    Our offering in Sydney is a trade-focused outlet, rather than a consumer-focused outlet, that brings more choice to Australian businesses. China Lesso Group products are already widely available in Australia from a number of outlets and Lesso Home is bringing all these products under one roof.

    The Express had a preview of the centre before it officially opened. It said the complex has a large number of displays featuring most components needed to build or renovate, including bathrooms, kitchens, mirrors, furniture, flooring, lighting, windows and doors, shower screens, beds, furniture and electrical appliances.

    Unlike other retailers, Lesso Home Greenacre is only be open to customers with an ABN and for people who join up with a free membership.

    A spokesman for Lesso Home Greenacre told The Express the centre was designed for online to offline sales and the location was chosen because it was close to both logistics and the building industry. He said:
    So many people go to China to purchase and bring here but we've tried to bring the supply here. We want to work with local people and we want to support the local retail industry and bring some new products and building ideas into the market.

    The company said over 60 tenants are currently renting spaces within the centre.
    Home designers can bring their clients here and see what's on offer. It's something very different to what the Australian market has been doing.

    The group is planning to open another outlet in Australia in early 2018, focused on lighting and furnishings, and has plans for other home building offerings in the future.

    In 2016, China Lesso bought the St Hilliers Estate in the western suburb of Auburn and a major block of land in the outer suburb of Huntingwood East, which will serve as a longer-term distribution hub. Dr Lin said the group is "currently working on plans" for its Auburn site. Melbourne is also "high on the list" for further locations in Australia.

    The company's move into Australia could be driven by hopes of diversifying from manufacturing into e-commerce, after it set up the Lesso Mall platform in China in 2015.

    If the Lesso Greenacre centre pays off, it would be a blueprint for sites in other major cities in Australia and the USA, the Middle East and Asia.

    Related:
    Big box update: Another "threat" to Bunnings? - HNN
    Bunnings Colac store hits the market

    The sale of the Bunnings Warehouse in Colac (VIC) is expected to generate additional interest from international investors.

    The 6500sqm property at 130-138 Bromfield Street is located in the commercial centre of the Colac township and has a 10-year lease to Bunnings which has been operating from the site for the past two years.

    The 3912sqm Bunnings site nets $475,090 in rent and it will be sold with fixed annual rental increases of 2.75%, with options up to 2035. CBRE Melbourne agent Joseph Du Rieu said:
    We've seen first-hand over the last six to twelve months, the influx of Chinese investors into the retail investment markets ... it would suit a private investor or business owner looking for something they can put in the bottom drawer and not worry about for eight years.
    This is only the second Bunnings to sell in Victoria this year. The first one was in Bendigo for $14.5 million to a private, Melbourne-based family.
    The location is very strategic - directly opposite the new Colac Plaza - that's ultimately going to underpin the investment for years to come.
    Open for business in Shepparton

    In a few days since its opening, the new Bunnings store in Shepparton (VIC) has already had a few thousand people through its doors, according to complex manager Paul Connaughton.

    The $53 million warehouse store, is the second biggest in Victoria, and has an increase in range as well as depth of stock compared to its old location. He told the Shepparton News:
    People really have to come down and see the 18 kitchen displays and four bathroom displays, and take the time to walk through the six aisles of timber. The nursery is also the second biggest in the Victorian network with thousands of plants.

    Mr Connaughton said staff were proud to be able to offer the store to the people of Shepparton.
    We really look forward to servicing the Greater Shepparton area for many years to come.
    Retailers
    Indie store update
    K&D's trade stores are now owned by Clennett's Mitre 10
    HNN Sources
    Earlier this year, K&D announced store closures
    Toolies Tool Specialists in Newcastle (NSW) is closing down
    Click to visit the HBT website for more information
    Kemp & Denning's trade stores are now owned by Clennett's Mitre 10 in Tasmania and Newcastle's oldest tools and hardware store is closing down.
    K&D trade sold to Clennett's Mitre 10

    Clennett's Mitre 10 has bought the trade division of Kemp & Denning (K&D) Limited, expanding its trade store network in southern Tasmania.

    It leaves K&D with retail sites in Hobart and Cambridge. In recent months the company has closed its warehouse in Devonport and sold its Glenorchy site to developer Errol Stewart.

    Clennett's will take over three of the K&D trade sites - in Glenorchy, Cambridge and Kingston - and continue to serve all K&D trade account holders.

    The hardware retailer, which has sold timber and building supplies since 1885, presently operates at Mornington, Kingston and Huonville.

    The K&D operation at Kingston will be closed with the Clennett's site in Kingston being retained as the centre of operations for the region.

    A number of K&D employees will transfer with the businesses, adding to the Clennett's Mitre 10 trade teams.

    Clennett's Mitre 10 general manager Will Clennett said the venture would deliver benefits to customers and fitted with the company's vision to expand its trade business. He said:
    Relationships form a large part of our business and our absolute priority is to ensure we continue to service our existing and new customers to the same high standards that we're known for. We are also committed to working together with K&D management to recognise the significant contribution of the current K&D employees.

    K&D chairman, Greg Goodman added: "This opportunity follows a strategic review by K&D management to consolidate our business. Clennett's is a successful service-oriented business and has become synonymous with trade excellence. The team has built a remarkable reputation in servicing the trade and we're thrilled to come to this agreement and ensure continuity of supply for our trade customers. I'm excited for the ongoing opportunities for many of our employees to join a thriving trade business."

    Related:
    K&D loses CEO amid ongoing changes - HI News, page 14
    Indie store update: K&D store closures - HNN
    Newcastle's Toolies closes down

    Toolies Tool Specialists is the oldest independent hardware store in Newcastle (NSW), operating for 44 years. However owner Rob Chambers has made the difficult decision to close the business in the face of tough economic conditions.

    The store has been at its current site for 30 years, after Mr Chambers rescued it from liquidation in 2013.

    At the time, he was its general manager and couldn't bear to see it close, so he made the decision to buy it. He told SmartCompany:
    The process has been long and arduous - you can understand, as a business goes into liquidation or receivership there's not much left in it. But I had to try to rescue it, it really is an iconic business in Newcastle.

    The decision bought Toolies another four years serving the region's locals and customers from around the country who've made purchases from the Toolies online store.

    Mr Chambers said one of the big most important differences between independent hardware retailers and big box stores is that businesses like Toolies are focused on actually solving a customer's problem, rather than selling them a solution. He explains:
    I sent a guy home the other day with a way of solving his problem that didn't involve us selling him anything.

    Toolies is in the process of selling off stock before a June 30 exit date and Newcastle locals have been popping in to reminisce about the characters who have been involved with the business since it started in 1973.

    The business has faced a number of hurdles over the past decade, including being hit hard by the global financial crisis and a sliding coal price, which had a big impact on the region. In the years leading up to 2012, the business had annual turnover of more than $8 million and 15,000 "loyalty customers" on the books.

    Mr Chambers said a key lesson he's learned through the process of trying to save Toolies is that you need a significant amount of [money] try to turn around a business.
    The owner prior to me just didn't have the capacity to weather the storm when it came, because of the level of debt that was being carried. You can't have a business that just relies on the good times. You need to come into something like this with a lot of capital.

    While Mr Chambers says this has been a "very painful experience", he believes he has bought the business more time and continued to help customers in a way that no other hardware competitor will now be able to achieve.
    None of the others ... seem to do that. This is a problem, with the rush to sale [from big players] and all that sort of thing.
    Bigbox
    Europe update
    Bunnings opens its third store in Hemel Hempstead
    HNN Sources
    Bunnings has poached B&Q's retail director
    More BUKI store locations are revealed
    Click to visit the HBT website for more information
    Bunnings United Kingdom & Ireland (BUKI) has a chief operating officer; an overview of the new BUKI store in Hemel Hempstead; and 10 stores to be up and running by the end of calendar 2017.
    BUKI appoints retail executive from B&Q

    B&Q's retail director for UK and Ireland, Damian McGloughlin will become chief operating officer at Bunnings UK and Ireland (BUKI). He will report directly to BUKI managing director PJ Davis.

    According to a number of reports, Mr McGloughlin has spent 32 years at B&Q after joining at the age of 16.

    He has been placed on gardening leave until he starts his new role. This means Mr McGloughlin will stay away from work during the notice period, while still remaining on the payroll.

    A B&Q spokeswoman confirmed McGloughlin's exit and added: "We wish Damian all the best."

    Industry publication Retail Week writes that Mr McGloughlin's move to Bunnings makes him the latest in a steadily growing list of UK DIY experts to join the business.

    Bunnings owner, Wesfarmers axed Homebase's entire board - with knowledge of the UK market and replacing them with existing Bunnings staff - shortly after buying the home improvement retailer from Home Retail Group for GBP340m in February 2016. Since then, it has added many with British DIY experience to its management ranks.

    Matt Tyson, former Masters Home Improvement managing director and also ex-Kingfisher, has been advising BUKI and is understood to have been pivotal in convincing McGloughlin to switch allegiances.

    "Matt would have been instrumental in bringing Damian to Bunnings," a former B&Q colleague of Mr McGloughlin's told Retail Week. He said:
    When they were at B&Q together, Damian was a divisional director and Matt was operations director at the time. Matt was his mentor, his father figure if you like, so he would no doubt have been telling Bunnings how talented Damian is and urging Damian to come on board.

    But another former B&Q colleague believes it is one skill in particular that Bunnings will benefit from most. He said:
    Damian is really well liked by the B&Q team. His departure will be a big blow for them. He's very much a man of the people - people in stores like and respect him. They enjoy working for him and they want to work for him.
    ...
    On a broader note, he knows the sector really, really well, so he's a great acquisition for Bunnings. Their warehouses are similar in size to B&Q's Supercentres, which Damian knows inside out, so he will bring a great deal of knowledge to that format for Bunnings.
    B&Q will be smarting, without a doubt. Their loss is very much Bunnings gain.
    Bunnings Hemel launches

    The third Bunnings Warehouse in the UK has opened. It is a conversion of a Homebase store located at in Hemel Hempstead, Buckinghamshire. The Insight DIY team led by managing director Steve Collinge made a visit to the location.

    They believe "a few tweaks" may be starting to appear in some of Bunnings' in-store ranges. The hand/power tool category in the Hemel Hempstead store is "dominant", and the paint offer and gardening range are "impressive". However the same can't be said of its kitchen and bathroom products, according to Mr Collinge. He writes:
    Once again, there's a poorly represented kitchen and bathroom offer, although having spent time with PJ ... I'm beginning to understand why kitchens and bathrooms are a lower priority. However, with the increasing focus on the performance of the remaining 252 Homebase stores, I still don't quite understand why they have effectively handed all their kitchen business to Wickes on a plate.

    However Mr Collinge believes the store in Milton Keynes (scheduled to open in the first week of July), will be the "acid test".
    With 100,000sqft of space available, there are only so many BBQs the size of small family cars and hot tubs that can accommodate a family of twelve in comfort that you need to offer. We'd therefore expect a more credible offer of K&B than we've seen in any of the three Bunnings stores to date.

    In the paint category, the repackaged and refreshed Craig & Rose 1829 range takes centre stage.

    (The Craig & Rose brand is owned by DuluxGroup. To read more about its acquisition, go to /http://hnn.bz/fullView?articleIndex=4432242937940}DuluxGroup FY results 2015-16 - HNN)

    Insight DIY believes this is an "important move" for Bunnings as it provides an exclusive, premium range to deliver a key point of difference to its decorative offer. B&Q stocks the Farrow & Ball paint line. Mr Collinge writes:
    The core chalky emulsion range looks great, is well positioned on price and has developed its colour offer to reflect the whites and greys now popular in the UK. The small Artisan Decorative Effects range offers some interesting products, but at GBP49.95 and GBP69.95 for a 2.5L can, we'll be updating you on the depth of dust gathering on these tins over the next few months.

    According to DIY Insight, the other brands to get significant exposure in the Hemel Hempstead store include Monarch and Paint Partner (painting ccessories), Selleys, Ozito power tools, Kaboodle kitchens, Aqua garden watering, Matador BBQs, Trojan hand tools, Marquee garden furniture and Flexi storage.

    Insight DIY also said it has been tracking Bunnings pricing since the day the first store opened in St. Albans. According to Mr Collinge:
    The most recent audit completed on 6th June 2017, showed Bunnings was 10% lower than Wilko, 17% below B&Q and 27% lower than Wickes ... in identical or directly comparable lines. In the garden, Bunnings is 19% below Wickes, 21% below B&Q and a massive 34% below Wyevale.
    Of course, you wouldn't expect the bigger players to price match a competitor with only three stores and no transactional website, but this is clearly going to have to happen at some point.

    To read more about Insight DIY's impressions of the Bunnings Hemel Hempstead store, go to:
    Bunnings tweaks offer in Hemel - Insight DIY
    Store specifics

    The Hemel Hempstead store is on the site of the former Homebase at Apsley Mills Retail Park. At 64,000sqft, it is slightly smaller than the 67,000sqft store in St. Albans that opened at the beginning of February and much larger than the 40,000sqft Hatfield Road store that opened in April.

    In total, the Hemel store stocks over 27,000 products, all of which the team were encouraged to get to grips with during a 10-day supplier expo, where 93 of the largest brands delivered "in the aisle" interactive product knowledge training.

    To celebrate the opening, Olympic gymnast champion and Hemel local Max Whitlock MBE hosted a welcome breakfast for team members.
    Other stores

    Wesfarmers recently confirmed there will be ten Bunnings stores operating by the end of 2017, in locations that include Broadstairs and Basildon Vange.

    A Homebase store located in Sittingbourne will be the sixth to be converted to a Bunnings Warehouse. Sittingbourne is an industrial town situated in the Swale district of Kent in south east England. Insight DIY said:
    With Folkestone and Sittingbourne being only 42 miles apart, as expected the next tranche of openings by Bunnings are likely to be part of a Kent Cluster enabling them to invest heavily in local advertising to build awareness of their brand, which is unknown to UK home improvement customers.

    Related:
    Europe update: Bunnings reveals its fifth UK store location
    Careers
    Seeking opportunities
    A Victorian-based account manager is required for Austech's SP Tools brand
    HNN Sources
    Nubco in Tasmania is seeking a category manager for tools
    A retail manager is wanted for Southern Innovations in Fyshwick, ACT
    Visit the Mecca Website
    Austech Industries is expanding its Victorian-based sales team and looking for an account manager; Nubco in Tasmania has an opportunity for a category manager in tools; and Southern Plumbing requires a retail manager for its ACT-based showroom.

    Click on the logos to find out more about each role.
    Professional tool sales

    The account manager at Austech will apply their experience in wholesale and/or retail sales, and be responsible for proactively driving the retention and growth of business customers. An understanding of the tool industry is desirable to sell Austech's SP Tools and SP Air brands.
    A Victorian-based account manager is required for SP Tools brand
    Procuring tools

    Tasmanian-based Nubco has a role for an experienced power tool and hand tool category manager in its Devonport head office. Key responsibilities include establishing and maintaining effective relationships with new and existing suppliers; monitoring marketplace pricing; and reviewing product ranges.
    Nubco in Tasmania is seeking a category manager for tools
    Bathroom and kitchen showcase

    Southern Innovations is seeking a highly qualified retail manager to grow the sales of top international brands such as Villeroy & Boch, Hansgrohe, Catalano, SieMatic kitchens, Bette, Smeg and Asko in its Fyshwick (ACT) showroom. The job involves leveraging these brands to achieve the best possible sales results.
    A retail manager is wanted for Southern Innovations in Fyshwick, ACT
    Retailers
    USA update
    Lowe's experiments with exoskeletons
    HNN Sources
    Weather has a negative impact on True Value's Q1 performance
    Sears sues another Craftsman vendor
    Click to visit the HBT website for more information
    Lowe's outsources some tech jobs to India; unfavourable weather affects True Value's Q1 results; Ace Hardware customers are highly satisfied; Sears files another lawsuit; Danik Hook product voted most innovative by independent retailers; MiTek's award winning merchandising for building products; TreeHouse opens another location in Dallas; Houzz attracts additional funds; and Kohler launches new retail concept in New York.
    Lowe's moves some tech jobs to India

    As a way to improve its profitability, Lowe's has laid off about 125 tech workers, primarily at its headquarters in Mooresville, North Carolina.

    Many of the affected information technology job functions are being sent to Bangalore, India, where Lowe's employs approximately 1,000 people in information and technology and analytics.

    The layoffs are the latest in several rounds of reductions over the last year.

    Lowe's eliminated 96 tech jobs in October, then in January cut another 2,400 full-time jobs, mostly at store level. In February, it followed with more than 500 corporate layoffs, including 430 at its headquarters and 70 support staffers.

    In a memo to IT workers, chief information officer Paul Ramsay said the staffing reductions are part of planning effort that began "several years ago" to build a more diverse, global team to respond better "in this highly competitive 24/7 retail environment" and more quickly to "evolving consumer needs."

    Mr Ramsay added that the company will be providing a competitive severance package and outplacement services, including a job fair with local IT employers.
    Wearing exoskeletons

    Other Lowe's employees have been wearing exoskeletons to work. Lowe's is testing exoskeletons on four employees at a Christiansburg, Virginia, store to make it easier to lift objects and stock shelves. Some Lowe's employees spend 90% of their time moving and lifting everything from bags of cement to huge buckets of paint.

    Wearing the exoskeleton is somewhat similar to putting on a rock climbing harness and a backpack. The suit also includes attached carbon-fibre shafts that run down a person's back and thighs. The shafts flex and store energy as a person bends over to pick something up.

    When the employee stands, the rods straighten and the energy releases, making the task easier. The process is similar to how a bow releases energy when an arrow is launched.

    Lowe's developed the exoskeleton in partnership with Virginia Tech engineering professor Alan Asbeck. For years, engineers have tinkered with exoskeletons as a way to augment human abilities with extra mechanical powers.

    Kyle Nel, executive director of Lowe's Innovation Labs, describes the suits as a way to better recruit potential employees and make their workdays easier.
    Weather impacts True Value Q1 results

    True Value pointed to bad weather as a key factor for a sales decline in its first quarter.

    The retailer reported gross billings of USD502 million for the first quarter ending April 1, down 1.6% from the same period a year ago. Revenue was USD347.6 million, a decrease of 2.6%. Relative to the prior year, net margin remained essentially flat.

    Retail comparable store sales were down 1.9% for the same period. Unfavourable weather patterns across the US led to a decline in retail traffic and drove lower volume resulting in decreased warehouse replenishment, the company said.

    However True Value's international business continued to see strong growth with gross billings up 13% and handled sales up 18%.

    The company's top three performing categories for the quarter were hand and power tools, hardware, timber, building supplies as well as plumbing and heating products.

    Although weather trends affected quarterly sales, True Value asserted that it made progress in the execution of its multi-year strategic plan. John Hartmann, president and CEO, said:
    We continue to put the independent hardware dealer at the centre of everything we do. Coming off a year of record growth including new stores and remodels, stores that have implemented the Destination True Value (DTV) format consistently see increased returns, experiencing comp store sales 200 basis points greater than overall retail comp.

    During the first quarter, the company added 534,930 square feet of relevant retail space through the DTV format.

    True Value is based in Chicago and has about 4,400 independently owned and operated retail stores in its network throughout the world.
    Customers satisfied with Ace Hardware, again

    The J.D. Power 2017 U.S. Home Improvement Retailer Satisfaction Study has ranked Ace Hardware "Highest in Customer Satisfaction among Home Improvement Retail Stores" for the eleventh year in a row. Ace has been awarded this ranking by J.D. Power every year since the inception of the survey in 2006.

    The 2017 J.D. Power study is based on responses from 2,751 consumers who purchased home improvement products or services over the past 12 months. Ace ranked highest among major retailers with an overall satisfaction index score of 835 on a 1,000-point scale.

    According to surveyed consumers, Ace performs particularly well in the categories of staff and service, as well as store facility.

    This year's score is based on overall performance in the following five areas: merchandise, price, sales and promotion, staff and service, and store facility. Ace Hardware president and CEO, John Venhuizen said:
    We are truly honoured and humbled to receive this prestigious award for the eleventh consecutive year. We could have never done it without the loyalty of our neighbours, the entrepreneurialism of our local owners and servant hearts of the 100,000 red-vested heroes upon whose back these awards stand.
    Sears sues second Craftsman vendor

    Sears has filed its second lawsuit in less than a month against one of its Craftsman hand tools suppliers, alleging that the vendor is abruptly ending its relationship and agreeing to resume it only on terms "onerous" to the struggling retailer.

    It also announced that it has settled its dispute with the first supplier, One World Technologies, which it sued in Cook County Circuit Court in May. Sears will continue its relationship with One World, which makes power tools under the Craftsman brand.

    For more than 50 years, Western Forge supplied Craftsman tools for Sears to sell in its bricks-and-mortar stores and online. In 2010, Western Forge was acquired by Ideal Industries, and since July 2011, the relationship continued - until now, according to the latest lawsuit.

    Up until the end of April - when the agreement was set to expire - Ideal and Sears discussed extending the deal, the lawsuit says.

    But "after several weeks of assurances by Ideal intended to lull Sears into the belief that Ideal would agree to extend the agreement, Ideal abruptly informed Sears that it will not agree to extend the contract beyond its term," according to the lawsuit.

    Sears said in its suit that it told Ideal in late February that it wanted to extend the deal another year.

    "Despite giving Sears numerous written and verbal assurances over the ensuing eight weeks that an extension was forthcoming, Ideal waited until April 28 to tell Sears that it wouldn't extend the contract, Sears alleges.

    Ideal, under a "transition" period in the contract, however, is supposed to continue to supply products for six months, through the end of October, but Ideal did so for only one month, Sears alleges.

    Sears wants the court to force Ideal to continue providing the products through the end of October. The retailer said in court documents that it has been seeking a new supplier.

    "Ideal now refuses to provide Sears with transition assistance and has informed Sears that it will not fulfill any existing purchase orders," Sears said in its lawsuit. !Furthermore, Ideal has informed Sears that it will fulfill Sears' orders only if Sears agrees to onerous payment terms that were not part of the agreement and that were unilaterally imposed by Ideal.

    Ideal's refusal "has left Sears without the ability to sell certain of its Craftsman brand tools without supply interruption and constitutes a material breach of the agreement," the lawsuit argues.

    Sears spokesman Howard Riefs said the company "will take the steps necessary to hold vendors to honour our agreements." Sears also wants to recover damages, though no dollar figure was given in the lawsuit over what the company characterizes as a breach of contract.
    Retailers choose Danik Hook

    Independent retailers from around the US have selected the Danik Hook as the 2017 winner of the National Hardware Show's Retailers' Choice Award.

    The Danik Hook is tool that can be used to quickly tie-down anything. It was selected from approximately 500 new products as one of the most innovative at this year's event. The award means the Retailers' Choice selection panel believes the Danik Hook is unique and has the potential to be a home improvement industry best seller.

    Talks are underway with retailers from six countries, said national sales manager Greg Spangler.
    The response at the National Hardware Show tells us the Danik Hook is something different, something special. We're not just another screwdriver.

    Inventor, Daniel Austin is an avid boater and water skier, and originally created the Danik Hook to quickly and easily secure anchor or boat lines without ever having to tie a cumbersome knot. It soon became apparent, however, the Danik Hook could be used any time something needed to be tied-down.

    Customers use the Danik Hook to tie-down a tarp on the truck or trailer or to secure an awning. Outdoors enthusiasts find the Danik Hook makes it fast and easy to tie-off a tent or hammock. If a rope or bungee cord is needed to tie-down something, it can make the task easy.

    The quick release lever is the heart of all Danik Hooks. The Danik Hook Mini accepts Paracord, bungee cord or rope ranging from 5/32 to 3/8 inch diameter. The integrated ring makes securing a second line effortless. It is made of a non-corrosive, glass-filled thermoplastic which can lift and hold up to 300lbs (136kgs) under laboratory conditions.

    For bigger jobs, the stainless steel Danik Hook can attach any 3/8 to 5/8 inch diameter anchor rope line to secure any size boat or anything else up to 8000lbs (3629kgs).

    The slightly smaller composite, non-scratching Danik Hook can handle any 3/8 to 7/16 inch diameter line for items up to 500lbs (227kgs).
    MiTek reworks building products display

    MiTek USA said its award-winning "retail sets" (newly designed aisle signage, product bins, and colour-coded packaging) have recently been installed at Roadside Lumber and Hardware in Agoura Hills, California.

    The new retail sets are part of a national effort by MiTek to redefine in-store displays of building products. The company's displays and packaging recently won three awards from the North American Retail Hardware Association (NRHA). MiTek won a gold award for its bin display, a silver for carton display, and an honourable mention for packaging.

    At Roadside Lumber and Hardware, MiTek's retail sets showcase 650 products including fasteners, hangers, connectors, embedments, epoxies, and more. In addition to the aisle signage, product bins, and packaging, the retail sets also include end-cap graphic displays and colour-coded header boards, all designed to enhance and simplify the retail buying experience. Owen Nostrant, Roadside's general manager, said:
    Effective display of 650 products, many of which must be correlated to specific code requirements in the field, is no small task. MiTek's new retail sets not only help buyers sort through their choices using colour-coded shelving systems, its displays are uniquely eye-catching.
    Eco-friendly retailer practices what it preaches

    TreeHouse, which specialises in supplies and services that promote healthy and sustainable spaces, has expanded beyond its Austin, Texas home base, and opened in Dallas. Its new 35,000sqft outpost is billed as the nation's first energy-positive (ie. it will generate more energy than it uses) big box store. Co-founder and CEO, Jason Ballard, said:
    This building sets a completely new standard for ecological and human health and is an embodiment of what our company hopes to accomplish for homes as well. This store is a signpost to what the future will be like for both homes and retail.

    TreeHouse, dubbed the "Whole Foods of home improvement," offers shoppers a curated selection of green products, materials and technologies - some of which are not available elsewhere. It also offers turn-key services and programs, including kitchen and bath design. solar energy kits, home insulation and "smart" home installation.

    San Antonio-based architectural firm Lake/Flato used TreeHouse's approach to products and materials selection, in combination with sustainable design practices, to create the store. Mr Ballard said:
    For so long, net-zero energy was this magical aspirational goal. This building is beyond net-zero...completely new territory.

    The architecture of the store is crucial to its energy efficiency. It boasts saw-tooth roofs that are positioned to maximize the effectiveness of its giant, ultra high-efficiency SunPower solar rooftop solar array. (This feature solved the need for extra space for solar panels). The standing-seam metal roof collects rainwater and reflects heat.

    In addition, the north facing clerestory windows allow for indirect sunlight to effectively illuminate the interior without the impact of direct heat. This allows for a cooler baseline temperature in the store and minimising the use of electricity.

    A Tesla Powerpack (a rechargeable battery storage system for utility and commercial applications) is located at the centre of the store. It stores the power produced by the rooftop solar array, deploying it for evening use and allowing the building to return excess renewable energy to the city's grid.

    TreeHouse Dallas is the anchor tenant in The Hill, a North Dallas shopping centre.

    Related:
    TreeHouse, green home improvement retailer - HNN
    Houzz goes fund raising

    Home improvement online platform Houzz continues is in the process of raising another round of funding. The company confirms that it is raising USD400 million in new financing, at a valuation that multiple reports peg at around USD4 billion.

    Founded in 2009, Houzz provides a platform to help users renovate and remodel their homes, as well as providing tools for finding furniture and fixtures they might want to purchase. The company operates in markets that include the US, UK, Australia, France, Germany, Russia, Japan, Italy, Spain, Sweden and Denmark.

    It makes money mostly through paid listings for local home professionals and service providers. But it has been delving more deeply into direct commerce through the augmented reality (AR) products it has added to its website and mobile apps.

    Houzz has introduced a deep learning tool that analyses home photos added to the site and enables users to search for and purchase comparable products directly from the page. It has added an AR feature to its mobile app that allows users to preview what new pieces of furniture might look like in a certain place in their home.
    Trade program

    The Houzz Trade Program has also been launched to provide industry professionals with discounts.

    All professionals working in the home improvement industry with a valid business - including designers, architects and contractors - can apply for the program.

    Program benefits include trade-only discounts up to 50% on products, access to a support staff and free shipping on most orders of more than USD49.

    Vendors providing discounts include Baldwin, Emerson, Feiss, Flos, Kraus, Missoni Home, Safavieh and Swarovski.

    Related:
    Houzz satisfies Australians' digital needs - HNN
    Kohler debuts experiential retail concept

    The first-ever Kohler Experience Centre (KEC), located in Manhattan, New York (USA) houses fully-functioning displays of Kohler's product line - including showers, tubs, sinks and "intelligent" toilets - in what is a first for the brand. The centre is open to trade design professionals and the general public.

    The 10,000sqft. store has more than 20 kitchen and bath vignettes. It includes a private "bathing space" in which customers can experience Kohler products such as its digital showering system and showerheads.

    The centre offers a new Kohler global specification service, which allows architects and designers to have instant, hands-on access to all products across the company's entire product portfolio. A Kohler team of experts will be stationed on-site to help source and resolve plumbing projects both in the United States and around the world.

    Kohler plans to open nine KECs over the next year, with London to open soon. Additional locations include Los Angeles, Singapore, Shanghai, Hong Kong, Bangkok, New Delhi and Taipei.

    Related:
    Supplier update: Kohler's digital content strategy - HNN
    Companies
    Supplier update
    Klein Tools buys General Machine Products
    HNN Sources
    Klein Tools entered the Australian market through a distribution deal with Mumme's Tools
    Caterpillar takes on Yard Club
    Subscribe to HNN weekly e-newsletter
    Klein Tools gets bigger through its purchase of General Machine Products and Caterpillar diversifies by acquiring online start up Yard Club.
    Klein Tools buys General Machine Products

    General Machine Products (GMP) has been acquired by Klein Tools, a maker of tools for the construction, electronics and mining industries.

    The deal also includes General Machine's subsidiary, CBS Products, in the United Kingdom.

    GMP is a supplier of specialty cable tools and equipment, and will continue to operate in Pennsylvania, with the same management team, said Thomas R. Klein, Sr, chairman of Klein Tools.
    The brands GMP and CBS represent a long history of high-quality, innovative tools to a professional user base, consistent with the Klein Tools brand. Following the acquisition, we anticipate continued investment and development to grow the brands with new product introductions.

    Founded by engineer George M. Pfundt in 1936, GMP is a third-generation business and recognised as a major supplier of specialty cable placement tools and equipment. The company is primarily known for its premium quality cable lashing machines, cable blowing equipment and other specially designed tools for the utility, data and telecommunications markets. Mr Klein adds:
    GMP is very appealing to Klein Tools as we continue to expand our US manufacturing presence. GMP and Klein Tools have much in common, including loyal customers, go-to-market strategies and reputations for high-quality products. We believe our combined resources will present additional growth opportunities...

    General Machine has about 130 employees. With those additional employees, Klein now has a total workforce of about 1,200.
    Caterpillar gets into construction rental

    Yard Club, a startup that makes more efficient use of construction and other heavy equipment, has been acquired by Caterpillar.

    The deal came about almost exactly two years after Caterpillar announced a strategic investment in Yard Club. As part of that investment, Yard Club began working with the dealers (retailers) in the Caterpillar network and helping them to rent as well as sell equipment to contractors and construction crews.

    Since then, Yard Club has continued to grow its rental business, while also adding features for users. According to the company's website, Yard Club processed USD120 million in transactions across 2,500 contractors and rental companies in 2016.

    The company also moved from a transactional business based on taking a cut of rentals made on its platform to one that provides a SaaS platform to help customers manage all the pieces of equipment they own or rent. That includes tools for dispatch, scheduling and fleet visibility, as well as inspection and maintenance management.

    Competitors in the space include startups such as EquipmentShare and Getable. But compared to those companies, Yard Club has received a relatively modest amount of venture investment. Altogether, the company had raised USD5.1 million from investors that include Caterpillar, Andreessen Horowitz and Harrison Metal, to name a few.

    Now that it is a Caterpillar company, the hope is that Yard Club will be able to bring more technology to an industry that has sorely been lacking in technology.

    As part of the deal, Yard Club's 13 employees have joined Caterpillar and will act as the equipment maker's digital presence in San Francisco.
    Products
    Lightweight benchtop saw
    A review of the Worx BladeRunner X2
    PR Web: Worx
    The BladeRunner X2's features and specifications
    The Worx BladeRunner X2 on Facebook
    Click to visit the HBT website for more information
    The Worx BladeRunner(r) X2 is a portable benchtop saw that does the work of multiple saws by making fast and accurate rip, crosscut, scroll, inside and mitre cuts using standard T-shank jigsaw blades. Sharon Blackwell, Worx product manager, said:
    What's nice about this benchtop saw is that it's not limited to only cutting wood. Oftentimes, homeowners need to cut aluminium, PVC, copper pipe or ceramic tile, and BladeRunner X2 handles all those materials by simply changing blades.

    BladeRunner X2's compact size makes a small footprint of 17 inches wide by 15 3/4 inches deep. The saw weighs 14.7 pounds (6.67kgs) and is 6 3/4 nches high, which makes for a comfortable work height when mounted to a workbench.

    An advantage of BladeRunnerX2 versus conventional benchtop saws is the ease of changing blades. There's no need for wrenches; just slide the blade release lever on the left of the tabletop to seat or release the blade. Once the blade is in position, guide rollers ensure accurate 90 degree cutting at all times.

    BladeRunner X2's adjustable hold-down arm matches the thickness of the work piece, and incorporates a splitter to help keep straight cuts on track. It holds the work piece against the table to minimise vibration, and flips out of the way when making interior cuts.

    The BladeRunner X2 fence has two adjustment knobs to align work pieces for straight and accurate rip cutting. Fence channels at both the front and rear of the tabletop have measurement scales for precise alignment. A mitre gauge also is provided for making angle cuts.

    This benchtop saw is powered by a 5.5-amp motor that delivers 3,000 strokes per minute. Its cutting capacity is 1 1/2 inch in wood, 1 1/4 inch in PVC, 3/8 inch in aluminium and ceramic tile, and 1/8 inch in mild steel. The blade stroke is 3/4 inch.

    The durable base is impact resistant and supported by four, non-marring rubber feet. Built-in storage is provided for the fence and mitre gauge. Other features include an on/off paddle switch with safety key to prevent unauthorised use, 6-foot power cord and built-in carrying handle.
    Products
    Shovel mounting bracket
    Rhino-Rack's Shovel Mounting Bracket is suitable for road trips
    HNN Sources
    Users will be able to mount a shovel onto a vehicle with multiple configuration options
    Rhino-Rack has a range of shovel holders
    Click to visit the HBT website for more information
    The Shovel Mounting Bracket is the ideal accessory to keep a shovel at the ready when needed to dig snow, sand, mud or any other type of terrain, according to its maker Rhino-Rack.

    It mounts directly onto the Rhino-Rack Vortex crossbars or Rhino-Rack Pioneer systems. Rhino-Rack's Pioneer systems are designed to maximise load capability while freeing up space inside a vehicle.

    With easy installation and removal, users will be able to mount a shovel onto a vehicle with multiple configuration options. The brackets can be inverted to position the shovel above or below the tray and the hinged design allows mounting of a wide variety of handles as well. The safe and secure roof system holds tools to prevent any cabin damage from occurring.

    Constructed from steel with a high quality powder coated finish, this mount bracket is built to last and to hold a shovel in place for rough roads. It is backed by a 3-year warranty.
    News
    HI News V3 No. 6: New HBT team steps up
    Download the latest issue of HI News Vol. 3, issue no. 6
    HI News
    The bathroom category is ripe for disruption
    There are increased home improvement sales at Amazon
    Click to visit the HBT website for more information
    This issue of HI News is mainly about Hardware & Building Traders (HBT) and its 20th anniversary gathering, held recently in Sydney. It is indirectly dedicated to Tim Starkey, its leader for many of those 20 years, and whose loss is still deeply felt.

    Simply click on the following link to download this edition:
    HI News V3 No. 6: New HBT team steps up

    We also take a look at the bathroom category and its emerging trends: ageing in place, polarisation in the market and "design dissonance".

    Bunnings is placing more of its stores on the market, both here and in New Zealand. Its website is the most visited Australian site.

    Building material companies, CSR, Adelaide Brighton and James Hardie report on their quarterly results.

    In other news, latest data seems to indicate that an increasing number of shoppers are using Amazon to buy home improvement products.

    On the international retail front, Lowe's is seriously getting into the maintenance and repair market, and Home Depot is building brick-and-mortar stores again at a slower rate. Ace Hardware delivers a solid first quarter result despite a slight dip in same-store sales.

    European big box retailer, Kingfisher has see also seen its like-for-like sales slow down in its first quarter.

    Innovative products from the HBT show are included in this issue along with Fiskars PowerGear[tm] garden tool range and the on-trend Reflekta round mirror.
    Editorial
    Australia's forgotten bathrooms
    Ageing in place has developed many solutions
    HNN Sources
    Kingfisher has defined the journey of the home improver
    How to make renovations changes for ageing in place
    Give to Amnesty International
    This is an edited version of the Bathroom feature. To read the entire version, go to the PDF magazine:
    HI News V3 No. 6: Australian's forgotten bathrooms

    While kitchens may still remain the "king" of home renovations, there is little doubt that bathrooms are rapidly catching up. Surveys in the US and the UK indicate that the two are coming closer to parity.

    A survey based on data collected from the US National Association of Home Builder's Remodeling Market Index (RMI) survey, which measures conditions in the remodelling market, showed that kitchens and bathrooms topped the remodel list for 2015, with kitchens hitting 81% and bathrooms 79%.

    Those numbers are based on home renovation businesses reporting their most common jobs.
    US National Association of Home Builder's Remodeling Market Index survey

    A UK report from MTW Research shows that spending on bathrooms has increased by GBP230 million over the six years between 2010 and 2016. UK homeowners are thought to have renovated some 830,000 bathrooms during 2016.
    MTW Research

    For Australia, the Housing Industry Association (HIA) paints something of mixed picture of the future for bathrooms overall. It predicts that when it comes to the installation of new bathrooms, these numbers will drop from 441,200 in 2015/16, to 338,900 in 2018/19, a decline of over 23%. This will occur as new home construction slows, according to the HIA.

    However, the decline in new home construction will likely support an increase in renovation activity. While the HIA does not forecast renovations, it suggests that the number of bathroom renovations will continue somewhere around 220,000 a year through 2018/19.
    Housing Industry Association on bathrooms
    Beneath the numbers

    While predicted numbers are nice to have, they don't really go that far in telling the real story of bathrooms. After a period of some consolidation in bathroom trends, from 2010 to 2016, HNN is seeing some signs of a more complex market developing. Rather than being influence by strong market signals from just a few sources, there are demographic and cultural differences starting to emerge that will change the nature of the bathroom industry as we move towards 2020.

    Of the trends that we do see emerging, it seems useful to concentrate on four of them in particular: ageing in place, the polarisation of the market, and, perhaps the most important, something that HNN is going to call "design dissonance".
    Ageing in place

    The easiest trend to spot, and one which is receiving much more attention internationally than in Australia, is ageing in place. The bathroom is a particular focus for the changes that older Australians need to make to their houses if they continue to live at home and not move to an aged care facility. Falls are a real health menace for older people. In 2011-12, 96,385 people aged 65 and over were hospitalised for a fall-related injury in Australia. This is three and a half times as many people who were 45 to 64 years old, according to statistics collated by the Australian Institute of Health and Welfare.
    Australian Institute of Health and Welfare

    According to ABS statistics dating back to 1995, falls in the bathroom are a high risk, especially for men. Some 7.7% of all falls by men took place when bathing, showering or dressing, while the number was just 3.3% for women. For both genders, falls resulting from a slippery surface underfoot were 10.3% of the total.
    Bathrooms present risk: ABS statistics

    It would be possible at this point to quote from a number of surveys and studies which indicate that, despite there being solid evidence of the demographic increase in people over 70 years of age (something that will ramp up still further by the middle of the next decade), and lots of well-meaning plans and governmental initiatives, there is little evidence that much has been done to improve house safety for the elderly.

    Beyond these elements - the statistical weight of more older people, the lack of action, despite good intentions - there is another factor to consider, which is simply culture. Many of us have a fixed mental image of what it is to be older, which can include rapidly declining health, frailty, lack of mental acuity, and simply not being "with it".

    The reality of older people today is that there is far more variety than there once was. Fewer people have lived physically tough lives, more have had good nutrition constantly, most have received medical care far beyond what was possible a generation ago. Some people certainly do (unfortunately) age according to the expectations of past generations, but many do not, and it's quite likely that the "spritely" 75 year-old will become the usual, rather than the exception.

    Graeme Hugo writing in a "Policy Brief" for the Australian Population & Migration Research Centre at the University of Adelaide in early 2014 put it like this:
    The third dimension of population ageing in Australia is one which is often overlooked and relates to their characteristics. They are quite different to earlier generations entering the retirement stage of the life cycle - economically, socially, and in their values, attitudes and their expectations. This is because each cohort lives through quite different economic, social and cultural conditions, they have different levels of education, world experience, etc. Baby boomers will differ in a myriad of ways from the previous generation of older people. This will also have a major impact on the nature of the care and residential arrangements which they seek, prefer and can pay for.
    Australian Population & Migration Research Centre

    In terms of the bathroom industry today and how ageing in place affects the markets it serves, it's possible to see that market as splitting into two. At one end of the market - and this is, a little curiously, the part that seems to get much of the attention - are what we might call the "wise and well-off elderly". These are people who, at 65 or 70 years of age, will go systematically through the house where they live, and work out what they need to change in order to go on living there safely for another 20 or 25 years. They get the kerb removed from the shower (a major source of trip-and-fall), the bathroom floor resurfaced with non-skid rubber, install a walk-in sitting bathtub, put a bench in the shower, add brighter lights everywhere, and so forth.

    For many people, even in the bathroom industry, that is how they think of ageing in place, and its market potential. It is well-off couples or individuals who can spend $20,000 to $40,000 getting their house kitted out for a comfortable life as an older person.

    Yet these wise and well-off are, without doubt, a smallish minority, and the real need for ageing in place as it applies to bathrooms is far more general, more broad, and actually more urgent. For example, a March 2011 report for the NSW Ageing Disability and Home Care, Department of Human Services, entitled "Housing And Independent Living: Environmental and built factors for maintaining independence in older age" went around looking at where older people in New South Wales were living to assess how well those dwellings met their needs as older people. This is some of what they discovered, just for bathrooms:
  • 96% did not have a folding seat in the shower
  • 77% did not have a slip-resistant floor surface in the bathroom
  • 76% did not have a slip-resistant floor surface in the toilet
  • 40% did not have an easy to reach shower tap
  • 91% did not have a provision for a grab rail near the toilet
  • Additionally, 62% had problems because they did not have shower or bath grab rails to aid them.

  • Looking at overall conditions in these homes, the report states that 27% of them had eight out of a possible 25 potential hazards, and were thus at high risk of causing injury.

    This is not a market that needs to go out and spend $25,000 on kitting up the bathroom to a comfortable standard. Look at the list of things that are wrong: that's about $3,500 to maybe $6,000 that needs to be spent. To at the very least stop a 75 year-old getting a nasty fright and bad bruise, if not winding up in hospital with a broken limb, with all the potential health risk that come with being elderly and bed-ridden, that is not a significant cost.

    Now, here is the thing. We'll be looking at this more closely in the section on polarisation of the market, but go to the really very well done Bunnings bathroom gallery at:
    Bunnings bathroom gallery

    There are about 20 bathroom combinations on display there. Click through them all. Now tell me, how many grab rails did you see?

    Yeah. None.

    That is not in any way a dig at Bunnings. You could look at any of a half-dozen bathroom companies, and while they may sell grab rails, it's not there in the marketing.

    You simply are not going to see a bathroom visual display carousel for bathrooms that lists the Modern Minimalist Bathroom, the Timeless Allure Bathroom, the Black Vogue Bathroom, the Pamper Bathroom, and then the Ageing In Place Bathroom.

    And there is a good, solid, sound sensible reason for this. Really. We all know as retailers that if, say, a thirties-ish couple were to be browsing through an online bathroom catalogue, and they came across an image of handrails, non-slip mats and a shower with a folding seat, well, one of them at least would likely crawl under the bed with a pillow over their head moaning softly for an hour. For sure.

    This is, very explicitly, a retail problem, in the sense that it is a bit of an unthinking reflection of some outdated cultural notions about ageing itself. To be very clear, HNN is not making the kind of argument that if you don't have doggy doors specifically designed to accommodate blind, left-handed Beagles, you are somehow discriminating against their owners as a minority. Not at all.

    There is a good, solid market out there. At least for two or three years, it seems likely that if this market were properly explored, it could bump revenues from bathrooms up by around a good 3% or so. Yet even the ultimate market rationalist, Bunnings, which declares itself as being always on the look out for expansion markets everywhere, a company whose former CEO would declare he wanted to sell toilets to everybody everywhere without barrier or obstacle, cannot overcome a cultural bias from the past, and actually overtly market to old people.

    Built into this is also a reflection of just how fragmented the bathroom industry really is. Compare it to, for example, the solar power industry. Solar power went out and campaigned to get some massive subsidies from governments to help cover the cost of solar power installation in homes, both because this would be good for the environment, and because it would help with loading and resilience of the urban power grid. Estimates put the amount spent by government to subsidise solar roof panels in Australia for FY 2015/16 at $726 million.

    The case for subsidising ageing in place bathroom conversion is potentially much better than that for subsidising solar power. Increasing medical costs are of prime concern. Those costs will increase with an ageing population. Spending money on preventative measures in the home to make bathrooms safer makes every bit as much sense as spending on safety in the workplace.

    Imagine a program where trained assessors could help home owners determine what alterations need to be made, then arrange for a 20% to 30% discount on the materials and labour needed to perform the installation. Politically, looking after pensioners, reducing health care costs, just making "mum and dad" feel more comfortable, would surely be something of a winner.

    Yet it is unlikely to happen. Purely because the bathroom industry as it has developed is far more competitive than it is cohesive. There is no effective single voice to speak for the bathroom retail industry as a whole. It is a massive, wasted opportunity.
    Polarisation of the market

    In the home improvement/DIY sector, market polarisation is often masked by failure.

    That's an important statement to make, because of three major Anglo-based markets, US, UK and Australia, it applies more to the home improvement market in Australia than the other two. Can't DIY? Don't have the funds to pay for the high prices tradies charge for the work? Well, then, you are, simply, no longer part of the market.

    Think of it like this: right now, here in Australia, there are probably (conservatively) 85,000 couples under 35 years old with no DIY skills that could scrape up $4500 to spend on either a kitchen or bathroom renovation. That's a $38 million market, and almost no one is really catering to it.

    Instead, what the bathroom market in particular does, is to compete over different parts of the middle market. Reece goes after the higher end of the middle, Bunnings goes after the lower end, and IKEA flits between the two, offering some higher end features at the lower end price points. There is another half-dozen companies that would get allocated different points on that middle spectrum. The upper end of the market has its own suppliers and sources, most of the international companies that distribute directly through architectural firms and some house designers.

    The thing to really think through is this: that little money, few DIY skills market is just going to get bigger. Job prospects in Australia, even for those who go through universities, are not going to get magically better over the next five or six years. And we all know that DIY skills are declining through the general population.

    Much of Western Europe (let alone Eastern Europe) has been in a similar situation for well over a decade. It is almost normal in many countries to not get a "real", decent job before you turn 30, and only then if you've managed to find some work for the six years since you graduated from university.

    It was understanding this, and the way in which European society has developed, that made UK-based home improvement retailer Kingfisher choose to go down a particular path. When Veronique Laury took over as managing director of Kingfisher in February 2015, she was, after years of working for the company, aware of many of its operational inefficiencies, and knew some of what needed to be done to fix that: fewer SKUs, a centralised IT system, more rational staffing of various departments.

    What she also knew, and a basic fact that everyone in home improvement should remind themselves of from time to time, is that if Kingfisher was experiencing slipping sales revenue (as it was), that would come down to one thing: the company was not selling things that people wanted to buy.

    Ms Laury's response to this was to set out and to carefully study the markets where Kingfisher operated - Britain, France, Ireland, Poland, Russia and elsewhere - to discover how people lived, and how Kingfisher could help them improve their lives.

    What Kingfisher discovered was quite surprising. For example, Kingfisher found that in France, 39% of home improvers would abandon a bathroom renovation project well before it was completed. Of course, the comparable number in Australia is ... well, we don't know, do we? And that is precisely the point.

    Perhaps the best story Ms Laury tells about responding to the kind of market needs Kingfisher discovered doesn't have to do with bathrooms, but with fencing. Kingfisher wanted to offer some simple fencing solutions for people, fences that would be so easy to put together that if you could build a tower in Lego you would probably not have a problem.

    As they researched customers' needs as regards fences they discovered something very interesting: the majority of customers only had access to their backyards directly through their house. In other words, any material they used to repair a backyard fence would have to be carried through the front door, down the hallways, probably through a couple of narrow doorways in small rooms, and then out the backdoor.

    To quote Ms Laury's delightful way of describing this:
    Another one is the fence that you see here. This is not a completely new product. It has been developed on the basis on a product that was existing in France. And that was highly successful, but not democratic at all. So you will have different components: you have aluminum, you have wood, you have composite, you have glass, you have those kind of decorative panels. And you can assemble all of that.
    One of the things we learnt from our deep customer insight, as an example, in most people who have a garden, they don't have any way to go on the site. When they have to do things in your garden they have to go through the house. And when you are doing fencing, I promise you that going through your house with those big fencing is not easy. This one is completely disassemble, and you can put it in your car and easily go through your home with those parts. So, this is the kind of things that we do. This is how we are going to bring some new stuff to people in every of our markets.

    That wasn't an insight any other home improvement retailer had come across before. It meant that in designing these easy-to-build fences, Kingfisher would need to design them with smaller components that could be easily carried through a small house.

    Kingfisher has spent about 18 months now beginning to design and build a whole new kind of bathroom system, based on this research, and the kind of concerns it discovered about fencing. The goal of these systems is to embrace the needs of home improvers who have been at least partially forgotten by most home improvement retailers. The systems will be easy to design, easy and inexpensive to install, and adaptable to the very small bathrooms that most houses throughout Europe have.

    Nobody is doing anything like that in Australia. The market is not polarising here around people who have enough money to buy more expensive fittings, and those that are happy to find something that works, that looks nice, and that is easy to install and repair. In Australia, the real polarisation is between people who can do bathroom renovations because they possess the right combination of money and skills, and those who can't do bathroom renovations.

    It's another lost opportunity.
    Design dissonance

    "Design dissonance" is a term we are borrowing from the world of systems design in technology. Perhaps the best definition is this:
    Design dissonance occurs when a product or service sends out cognitive signals that run counter to the desired effect.

    What is being pointed to here is that design does a number of things. It should facilitate the use of whatever is being designed - of course. It should also, perhaps, unfacilitate a bad or unsafe use of what is being used. For example, the safety button on a power tool trigger makes it a little harder to use, but it makes it really hard to use it in an unsafe way, by accidentally starting it up.

    The other main function of design is to contain and communicate a narrative about the things that have been designed. When we purchase an object or simply go to use it, we might have no or just very little experience with that particular object, so we look at its design in an effort to determine how it might perform.

    Of course, this opens up the way for profitable miscommunications as well. A typical one is buying some product in a box, then opening up the box to discover that it is half-empty. The design of the box should have accurately described size or quantity, and instead it has been deceptive.

    Between those two extremes - design that accurately describes an object, and design that misleads - is an area where design can be somewhat ambiguous. The guy who buys a simple family sedan, but chooses the option to have racing stripes on it isn't being fooled into thinking the car is faster than it is. Rather he is expressing something that is aspirational. Either he wishes he could own a sports car instead of a family sedan, or that he could afford a faster car.

    A lot of retail has a high component of the aspirational attached to it. While there is certainly a place for that, from time to time the aspirational begins to overwhelm the basic reality of whatever is being sold. The situation often seems to become one of people buying half-imaginary products for half-imaginary uses.

    At least a part of the Australian bathroom industry seems to be developing toward this. In particular, looking through most of the home design magazines available today, it can be difficult to know what exactly it is they are describing, or, really, why. Take this sample of text from a picture caption in Real Living (ironically) magazine:
    A whirlpool bath (left) with matt black tapware sits among the urban jungle housed in an atrium. Dual sinks and round mirrors (above) provide a contrast to the grid design of the tiling. The greenery of the atrium (right) is complemented indoors with a small flowerbed of grasses that provide a handy border to hide the loo.

    It's a bathroom with a skylight, and underneath the skylight is a glass box with a couple of plants and a bunch of rocks. This sits between the bathtub and the shower. ("Among the urban jungle"? Really? You can just imagine saying to a designer, "I desire an urban jungle to be among".)

    What is just as interesting as the words, is the way the bathroom is portrayed in images in the magazine. There are four pages of content, spread out over six pages in the magazine (due to ad pages), consisting of three double-page spreads. The images on the first of these two spreads are a little confusing and disorienting, in that they make it hard to get a sense of this bathroom. It is only on the final spread that a clear, overall picture of the bathroom is shown - making possible the rather simple description we've provided above.

    What is clear is that the magazine is taking something of a cinematic approach to the architecture it describes. It's not designed, as the magazine in other ways suggests it is, to provide a clear overview of what is going on with this design so as to aid other designers. Instead it is designed to dazzle the eye, to introduce a narrative experience that has to do with "jungles", geometry, and secrets somehow concealed in a small brightly lit room that is wall-to-wall white tiles.

    Often when we venture into territory such as this, HNN falls back on finding some actual practitioners in the real world of whatever it is, the people who actually put things together. When it comes to bathrooms, and what people are really doing, we fell back on Klaus Tietz. Mr Tietz was, once upon a time, a hardware retailer, but swapped over for the other side of the counter and became a specialist in bathroom renovations for the past 15 years.

    His company, Bermagui Bathrooms, did most of its work in Canberra, but he has recently moved location to the south coast of New South Wales.

    This is an edited version of the Bathroom feature. To read the entire version, go to the PDF magazine:
    HI News V3 No. 6: Australian's forgotten bathrooms
    Bigbox
    Big box update
    The Bunnings store in Gladesville will be on the corner of Victoria Road and Frank Street
    HNN Sources
    The proposed Bunnings store was to be located on the corner of Penna Avenue and Glynburn Road
    The newly-opened Bunnings store in Grey Lynn (NZ) is up for sale
    Click to visit the HBT website for more information
    A $26 million Bunnings at Glynde (SA) has been rejected by the local council's development panel; Bunnings is proposing additional changes to its store in Gladesville (NSW); the new Shepparton store prepares to open as the old one is sold; Bunnings Colac is being sold; Queenstown (NZ) is set to get another Bunnings store; and the just-opened Grey Lynne store in New Zealand has been placed on the market.
    Bunnings Glynde "knocked back"

    Plans for a Bunnings store in Glynde (SA) has been rejected by the local council's development panel.

    Bunnings lodged an application with Norwood, Payneham & St Peters Council to build a $26 million store on the corner of Penna Avenue and Glynburn Road. The site is located within a light industry zone.

    However panel members rejected the plans, saying the store would generate heavy traffic in the surrounding streets and would not be "manufacturing on a small scale".

    The decision comes about eight months after more than 1000 small business owners and residents signed a petition opposing the plan because of traffic concerns.

    Amanda Price-McGregor, speaking on behalf of Capaldo Investments, which owns Mitre 10 Glynde, said the Bunnings proposal was at odds with the council's development plan. She told Adelaide Now:
    It does not meet the intent of a light industry zone (and) it will have a significant, detrimental impact on the existing bulky-goods traders in the area. A large number of vehicles will avoid Glynburn Road and that will cause rat-running in the backstreets due to the easy access of roads.

    Bunnings property general manager Andrew Marks said he was disappointed with the panel's decision and said the company would now "evaluate its options".
    We will continue to work with authorities to bring investment and jobs to Glynde.

    Bunnings' application for the site was made in April 2016 and came after Home Timber & Hardware closed its store on the corner of Magill and Glynburn roads in 2015.

    Related:
    Big box update: Bunnings planning SA store - HNN
    Design accommodations for Bunnings Gladesville

    The Bunnings store for the corner of Victoria Road and Frank Street in Gladesville (NSW) has planning approval, but the big box retailer has proposed more changes. These include greater setbacks to surrounding streets, reducing the size of the store, and vehicle access.

    Bunnings said one of the main reasons for the changes was to sit the store away from the retaining walls and batters to Victoria Road and Frank Street. The previous design required excavating the retaining walls, which could affect their stability and pose risks to public roads, according to the company. The changes would increase the setbacks and reduce the risk.

    The Joint Regional Planning Panel is expected to approve the proposed changes. Bunnings general manager - property, Andrew Marks told the Northern District Times that there are no firm timings on when building will begin or when the store will open.

    When the big box retailer first proposed the store, some Gladesville residents were concerned about builder traffic using residential streets. They successfully called for nearby College Street to be closed to through-traffic. Ryde Council put barriers in the street in November for a trial period.

    A council spokesman said the barriers will remain until Bunnings is operational for at least 12 months. The council will prepare a report on the findings of the trial period. Its traffic committee will consider the report to decide whether the barriers remain.
    Shepparton store opening, old store sold

    As preparations continue for the opening of the $53 million Bunnings Shepparton in regional Victoria, the company has been recruiting an additional 50 new team members to help run the store.

    Bunnings Shepparton store manager Paul Connaughton said the site would have an approximate total store size of more than 18000sqm, making it the second largest in Victoria. He told Shepparton News:
    It's a big investment in the region and in terms of employment for local people, with our team now 170-strong. Training is under way for our existing and new team members.

    Mr Connaughton said Bunnings would be in a better position to supply commercial products for the numerous building projects in Greater Shepparton, along with a wide range of home improvement and outdoor living products for its DIY customers.
    The previous Bunnings centre was bursting at the seams and the new store will make it easier than ever for customers to get what they want.

    The old, soon-to-be-vacated Bunnings site has been sold to a private Brisbane-based family for $5 million, in a deal negotiated by real estate services firm CBRE.

    Joseph Du Rieu from CBRE told the Financial Review it was his understanding the new owners intended to convert the warehouse into a large-format retail centre. The previous Bunnings Warehouse measured 6500sqm and stands on a site of almost 22,000sqm.
    Bunnings Mackay also sold

    Another Bunnings Warehouse located in South Mackay (QLD) has been purchased by listed property trust, Charter Hall Long WALE REIT for approximately $28.5 million, reflecting a yield of 5.95%.

    The $830 million Long WALE property trust - its acronym refers to weighted average lease expiry - was launched in November last year through a spin-off of properties held across the Charter Hall's unlisted platform.

    Charter Hall has a strong relationship with Bunnings and has an ownership stake across its managed funds platform in 34 Bunnings stores valued at about $1 billion.

    Related:
    Big box update: Bunnings gets bigger in Shepparton - HNN
    Big box update: Mackay Bunnings up for sale - HNN
    Bunnings Colac on the market

    Real estate firm, CBRE Victorian Retail Investments is handling the sale of Bunnings Warehouse in Colac, western Victoria.

    Located at 130-138 Bromfield Street, the 6,500sqm property is secured by a 10-year net lease to Bunnings. The big box retailer has been operating from the site for two years.

    CBRE is selling the property on behalf of a local syndicate who have owned the property since developing the site in 2011. Justin Dowers from CBRE said:
    Bunnings Warehouse assets have been a highly sought after investment vehicle over the past two or so years - and given the fixed rental growth of 2.75% per annum and the secure lease in place, we anticipate this property to be well received.
    Proposed store for Frankton Flats, NZ

    Bunnings has plans to build a big box store on a 1.62ha site at Frankton Flats in Queenstown, New Zealand.

    Bunnings New Zealand general manager Jacqui Coombes told the Otago Daily Times the company had lodged a development application for a store, which would front State Highway 6.

    The application said Bunnings' planned 8119sqm store would be divided into a main warehouse building, timber trade sales area, outdoor nursery and a building materials and landscape yard, along with 134 car parks.

    The only other store in Queenstown of a similar size is Mitre 10 Mega, about 150m from the Bunnings site, which is 8000sqm. That opened 18 months ago.

    The application said Bunnings would help develop the construction sector "and will contribute to lowering the costs of construction, which in turn will assist in delivering more affordable housing, among other projects".

    The Queenstown Lakes District Council had "raised concerns" about the company occupying industrially zoned land. Its planner, however, quoted a report that "categorises [Bunnings] as, in many ways, akin to an industrial activity".

    The retailer is also consulting with the NZ Transport Agency. If approved, it would be the South Island's sixth Bunnings Warehouse. The nearest to the proposed store is in Dunedin.
    Grey Lynn NZ store for sale

    The newly-opened Bunnings Warehouse store located in Grey Lynn, an inner suburb of Auckland, New Zealand is on the market.

    Surrounded by some of the country's wealthiest suburbs, the 7207sqm site is one of the biggest private landholdings in Auckland's city fringe. Bunnings will take a new 12-year lease with eight six-year rights of renewal when a sale is settled. Whillans Realty Group managing director, Bruce Whillans, told the New Zealand Herald:
    [Bunnings] chose this site because of its prominent corner position and frontage to Great North Road, which is a major arterial route connecting Auckland's inner west suburbs with the CBD.

    The new store has been constructed using a steel portal frame, precast concrete walls and reinforced concrete floors to provide a building area of about 8872sqm. There are two levels of car parking with 212 bays connected by two sets of travellators and lifts to the main retail and trade areas.

    The nearby suburbs are undergoing substantial development and intensification because of the city's strong population growth. Demand for closeness to the CBD by both homeowners and businesses is pushing land values higher.

    Five of Auckland's 10 most affluent residential suburbs are within a 3km radius of Bunnings Grey Lynn. Over the past two years, about 300 apartments have been built within a 1km radius of the property, with a further 500 units under construction.

    Related:
    Big box update: Bunnings NZ makes changes to Grey Lynn store - HNN
    Companies
    Supplier update
    Demand for CSR's Gyprock product will continue despite peak in residential housing
    HNN Sources
    A house in Chantilly, Virginia (USA) using James Hardie fibre cement lap siding
    MTD Products will merge with F. Robotics Acquisitions to develop robotic mowers
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    CSR managing director Rob Sindel believes residential construction markets have peaked; Adelaide Brighton says the infrastructure spending pipeline remains strong; MTD Products is making a bigger push into the robotic lawnmower business; and James Hardie posts a rise in net profit.
    Housing has "peaked", says CSR boss

    In an interview with the Financial Review, the managing director of CSR says residential construction markets appear to have peaked. This led to an almost 12% fall in the company's shares, as investors concluded the record profits generated by its core building products division won't be repeated.

    But Rob Sindel, who has been running the company since early 2011, said there would still be solid demand for Gyprock plasterboard, tiles, bricks, insulation and walling systems on the eastern seaboard over the next year. He said the company is protected from a downturn in the high-rise apartment market because that only represents 12% of its customer base.

    Mr Sindel predicted a smooth landing as the Australian housing market adjusts from boom times. He said that while the high-rise apartment market would continue to slow down faster than the detached housing and low-rise townhouse type segment, only a sharp rise in interest rates for borrowers would trigger more serious issues for the broader market. He told the Financial Review:
    I just can't see that happening. Multi-residential is the one that will come off a bit quicker.

    It was important for housing markets observers to look more closely at the health of different types of segments in Australia. He said:
    It's actually a whole series of sub-markets.

    Mr Sindel said all of the individual businesses in CSR's building products division increased their profits over the past 12 months as they capitalised on the strength of the housing sector on Australia's east coast to deliver a record result.

    The building products arm lifted earnings before interest and tax by 21% to $202.8 million for the 12 months ended March 31, 2017. Profit margins in building products reached 12.9%, compared with 7.9% five years ago.

    However investors were concerned the outlook had now dimmed. Mr Sindel said the market had now likely peaked from the record levels of activity that had been happening, although there was still solid demand for construction products particularly in Sydney and Melbourne, with Western Australia still weak.

    He pointed to the strong run-up in CSR shares in the few weeks before the results as perhaps one of the reasons for the sell-off. He said:
    The market will decide what the price is.

    CSR's overall net profit was up 25% to $177.9 million for the year ending March 31, 2017. Total revenues were up 7% to $2.47 billion.
    Infrastructure spending strong: Adelaide Brighton

    As Australia's biggest cement supplier, Adelaide Brighton, believes there are at least three years of strong demand ahead for its products on the east coast, even if house prices start softening.

    Chief executive Martin Brydon said that, although housing approval figures were slowing from high levels, there was still a strong pipeline of orders in residential construction for up to two years, and then any slack would be picked up by rising levels of infrastructure spending on roads and other big projects. He told the Financial Review:
    Certainly the residential pipeline has got a year or two to run. We expect to be pretty busy in all of our products.

    Approximately one third of Adelaide Brighton's revenues from supplying the residential construction market. Chairman, Les Hosking, said even if residential housing prices did begin to decrease, it would have little impact on the construction market in the short term.
    It's not immediate. There are plenty of housing sites being developed now where construction hasn't even started.

    He pointed to the Badgerys Creek region in outer Sydney as a particular hot spot, where demand would be very robust in new housing construction. The federal government will oversee the building of a second airport for Sydney there.

    Demand for cement and other products is also very strong in Victoria, and Mr Brydon said while some parts of the Australian economy were going through difficult times, such as retail, the economy overall was able to navigate through the shifts fairly well.

    Adelaide Brighton expects profits in the first half of calendar 2017 to be below the same time last year, because of one-off restructuring costs and the relocation of a North Melbourne plant, even though sales volumes will be higher.

    But it expects profits in the second half of 2017 will be stronger than the same time last year, despite electricity costs likely being $8 million higher than last year.
    MTD Products gets into robotic mowers

    US outdoor power equipment manufacturer, MTD Products has entered into a merger agreement with F. Robotics Acquisitions, which makes a product called Robomow, a line of environmentally friendly, robotic residential lawn mowers sold mainly in Europe.

    Terms of the deal were not disclosed. It is expected to close by July 2, pending governmental and other approvals.

    The transaction will "combine Robomow's industry-leading technology and award-winning robotic lawn mowers with MTD's broader outdoor power equipment portfolio and extensive global network of dealers," MTD said in a statement. CEO Rob Moll said:
    Both MTD and Robomow see tremendous opportunities to grow our brands through this merger of our products and talents.

    He said MTD plans to market Robomow technology under the company's Cub Cadet and WOLF-Garten brands.

    Mr Moll noted that technology "has already taken hold in Europe, and the market is growing globally at a rate of 15% or more annually."

    If the merger is completed, F. Robotics' operations would remain headquartered in Pardesiya, Israel. Its existing management team would continue to lead the company with support from MTD's European, North American and Asia-Pacific divisions. Udi Peless, CEO of F. Robotics, said:
    For the last 22 years we have been focused on developing innovative technologies and leading robotic mowing products. We are excited to see this investment reach its full potential in the market via MTD's leading brands and distribution.

    MTD already markets the Cub Cadet RG3, a robotic mower for golf greens. In 2015, it bought two companies that strengthened its technological capabilities: CORE Outdoor Power, which MTD says offers motor technology that "provides greater torque and efficiency than traditional electric motors in cordless battery applications", and Precise Path Robotics, which added the RG3 to MTD's offerings.

    Related:
    MTD Products makes acquisitions - HNN
    James Hardie posts a rise in net profit

    Building materials supplier James Hardie has posted a 13% rise in full- year profit largely due to strong housing construction in its core US market.

    The company's bottom-line profits were $371.8 million in the year to March 31, as sales rose 11% to $2.57 billion.

    Sales of fibre cement - the group's flagship product - were up 12% in the US. Housing market activity in Australia and New Zealand underpinned a 22% rise in earnings from its fibre cement business outside of the US, including Asia and the Middle East. In reference to a drop in sales in the Philippines due to imports from competitors, chief executive Louis Gries said:
    Asia Pacific had a good year - the only bump in the road was the Philippines.

    Its Australian operations were strong, with improvements in volume, price, costs and the efficiency of its new cement plant in Queensland, he said. The performance of the Australian business is expected to be steady in the 2017-18 financial year, Mr Gries added.

    Modest growth in the US housing market is also expected to continue into the current financial year.

    A $51.74 million decrease in the value of James Hardie's estimated asbestos liabilities also boosted the company's bottom line. Claims for mesothelioma, a cancer caused by asbestos exposure, were down 6% to 373 in 2016/17. There were two large mesothelioma settlements worth more than $1.34 million in the year.

    Total claims for all asbestos-related compensation fell 3% from the prior year to 557, and the average settlement dropped 10% in value. Large claim settlements amounted to $4.4 million. This is down from $13.3 million in the prior year and significantly lower than the company's forecast of $24 million in claims.
    Retailers
    Retail update
    American shoppers are increasingly turning to Amazon to buy tools and home improvement
    HNN Sources
    Bunnings beats JB Hi-Fi as the most visited Australian retail website
    Core business performance delivered record half-year profits for Ruralco
    Click to visit the HBT website for more information
    More US shoppers are buying home improvement goods on Amazon; new study shows Bunnings is the most visited Australian retail website; and Ruralco's core business helps to deliver its best ever half year profit.
    Amazon making inroads in home improvement

    According to research from One Click Retail, American shoppers are increasingly turning to Amazon to buy tools and home improvement, outdoor and sporting goods, and home appliances.

    In the tools and home improvement category, Amazon had an overall growth rate in 2016 of 35% over the previous year, compared to the US domestic market's total growth of 6%. Sales of woodworking items rose 30%, while sales of garage storage products increased 35%.

    Nathan Rigby, vice-president, One Click Retail, which specialises in eCommerce data measurement, sales analytics and search, said:
    Though often seen as an Amazon-proof industry, the old-fashioned American hardware store is not untouchable. Amazon has all the same advantages in the tools and home improvement sector that it has in grocery, beauty products and health care - and we've seen plenty of evidence of those industries feeling the Amazon Effect. As more uber-connected millennials enter home ownership, Amazon's share of this product group, like many others, will continue to grow at a disruptive rate.

    In the outdoor and sporting goods category, Amazon's 20% year-over-year growth in 2016 was four times the rate of the overall market, according to One Click Retail. Mr Rigby said:
    Amazon understands that it's the consumer driving the company's success. The ways they are innovating new services and offerings, they are doing so with one thing in mind: is this what the consumer wants?
    E-commerce sales near USD11bn

    Global information company, The NPD Group also finds that online sales of home improvement products have grown 41% in the 12 months ending March 2017.

    The e-commerce home improvement market reached USD10.9 billion in sales for the year, according to NPD's receipt mining service, Checkout TrackingSM.

    With the exception of outdoor living, online sales of each major segment of the home improvement market grew in the 12 months ending March 2017, and almost every category tracked within those segments experienced double-digit online dollar growth.

    The fastest growing categories last year were plumbing pipes and fittings, light bulbs, and ceiling fans, and the categories with the largest online sales gains were home decor, light fixtures and lamps, and rugs. Joe Derochowski, executive director and home industry analyst at NPD, said:
    The pace at which e-commerce is gaining acceptance among home improvement consumers emphasises the need to understand how consumers are utilising online and in-store shopping options, and how to make them work together.
    Marketers can capture the replenishment of commodity products, like light bulbs and air filters, by offering online convenience, but there are also opportunities to benefit from consumer showrooming for bigger ticket items, like bathtubs and vanities, with the in-store experience.

    NPD's Checkout Tracking E-commerce information illustrates that the online sales growth reaches across a variety of home improvement categories and consumer age groups.

    Millennials are a driving force behind this online growth, with the younger segment growing at the fastest pace, and the older portion accounting for the largest share of dollar gains. However, gen X and the baby boomer generation are also very active in online home improvement spending, representing almost two-thirds of industry sales for the year. Mr Derochowski said:
    The current demographic changes are driving increases in the number of people entering life stages that are important to home improvement categories, from first-time home-buyers to downsizing empty-nesters, the industry is in a prime position to help consumers today and develop new shopping habits that will last for decades to come.

    Related:
    On Amazon now you can add tradies to shopping cart - HNN
    Retail industry development in 2017 - HNN
    Bunnings is most visited Australian retail site

    A new study into the visitation of Australian retail websites has seen Bunnings beat JB Hi-Fi for the number one spot.

    The research, by global discount platform Cuponation, found that Bunnings had 25.58 million hits to its site between January to March 2017. However, when international sites were added into the mix, Ebay was the clear winner with 215.38 million hits in the same period.

    Amazon came in at second spot, an indication that Aussies are comfortable with online behemoth.

    It follows on from reports that Amazon will "disrupt" traditional retailers such as JB Hi-Fi and Harvey Norman when it finally arrives in Australia and another study that found searches for anything "Amazon" in Australia had jumped 93% since July last year. In the research, Cuponation also noted:
    Users from Australia are big consumers of foreign webshops...It's a big challenge for domestic webshops to keep up with the foreign ones. The competition is hitting hard and consumers tend to find alternatives in other markets and through other e-commerce channels.

    The top 10 Aussie sites were the following:

    1) Bunnings.com.au: 25.58 million

    2) Jbhifi.com.au: 25.06 million

    3) Woolworths.com.au: 19.28 million

    4) Officeworks.com.au: 15.90 million

    5) Coles.com.au: 14.61 million

    6) Kmart.com.au: 14.54 million

    7) Harveynorman.com.au: 13.99 million

    8) Kogan.com: 12.37 million

    9) Bigw.com.au: 11.07 million

    10) Catchoftheday.com.au: 8.98 million

    The top 10 most visited retail sites (when overseas sites are included):

    1) Ebay.com.au: 215.38 million

    2) Amazon.com: 62.13 million

    3) Ebay.com: 36.11 million

    4) Bunnings.com.au: 25.58 million

    5) Jbhifi.com.au: 25.06 million

    6) Woolworths.com.au: 19.28 million

    7) Officeworks.com.au: 15.90 million

    8) Coles.com.au: 14.61 million

    9) Kmart.com.au: 14.54 million

    10) Harveynorman.com.au: 13.99 million
    Record half-year profit for Ruralco

    Ruralco, owner of the CRT group of independent rural retailers, reported net profit after tax for the first half of the year jumped 15% to $12.4 million, up from $10.8 million in the previous corresponding period.

    Revenue of $841.4 million was up 4% on first half 2016.

    Ruralco Holdings managing director and chief executive officer Travis Dillon is pleased with the "core business" performance that delivered record half-year profits on the back of good seasonal conditions across regional Australia.

    Strong sales growth in rural merchandise, fertiliser and crop protection chemicals, high average livestock prices, recovery in the wool market and increased real estate sales volumes at higher average prices drove a strong performance by its rural services division, Ruralco said.

    Gross half-year profit for the division was $132.7 million from revenue of $697.1 million compared to $118.4 million from $694.3 million for the same period last year, it told the Australian Securities Exchange recently.

    But while higher than average rains across agricultural regions boosted rural services, it had the opposite effect on the company's water services division. Gross division profit slipped $2 million in the half to $27.5 million on revenue up from $96.7 million to $102.3 million.

    Geographical concentration of its irrigation supplies and water trading businesses in above average rainfall areas in the west and south of the country contributed to the impact of the rains, Ruralco said.

    But completed acquisitions of 14 new businesses during the half year - including Great Northern Rural Service, Geraldton (WA) - in key catchment areas and agricultural centres was expected to diversify the division's earnings base for the future, the company said.

    Company focus in the second half of the year will be to optimise operational and financial performance of its newly integrated business acquisitions and the Ausure Consolidated Brokers joint venture in its insurance business.

    It would also continue to the commercialisation of an unmanned aviation vehicle (UAV) with PrecisionHawk and UAV flight services expert The Ripper Group.
    News
    HI News V3 No. 5: Sleeping tool giants wake up
    Download the latest issue of HI News Vol. 3, issue no. 5
    HI News
    Bosch Easy Cut 12 is part of the power tools feature on page 35
    Porters takes over four Woodman's Mitre 10 stores in Queensland
    Click to visit the HBT website for more information
    The latest edition of HI News takes a closer look at the innovation cycles at Stanley Black & Decker (SBD), and the power tools division of Bosch.

    Simply click on the following link to download this edition:
    HI News V3 No. 5: Which power tool company gets to own 2020

    As impressive as SBD has been with its recent product developments, it is really Bosch Power Tools that has begun to show it can take advantage of the very big potential the company has, both with its stand-alone expertise and history, and through its association with the larger Bosch company, and its ongoing research into sensors.

    This issue also includes our regular, in-depth look at the kitchen category. Freedom Kitchens is launching a flatpack range, IKEA has stopped advertising, while Kaboodle has refined its digital marketing approach.

    For the first time, we have put together a guide to the HBT Conference that started on May 10.

    In terms of retailer news, Mackay-based independent hardware business, Porters has acquired four Woodman's Mitre 10 stores in Queensland. Managing director Gavan Porter Snr said the company purchased the stores located in Sarina, Marian, Proserpine and Cannonvale (QLD).

    Big box retailer Bunnings United Kingdom & Ireland has revealed its fifth store location and B&Q has finally found success in China through e-commerce.

    Outdoor power equipment maker, Husqvarna has begun a pilot project in Stockholm, Sweden, for homeowners to access pay-per-use power tools for the garden.

    Featured products in this edition include sustainable wallboard from USG Boral, Krylon's new spray paint for outdoor decor, and Kwikset's Z-wave enable locks, to name a few.
    Editorial
    Sleeping tool giants charge up
    FLEXVolt is Stanley Black & Decker's main innovation
    HNN Sources
    Bosch Easy Cut 12 promises to make craft tasks simpler
    Bosch has introduced professional connected grinders
    Give to Amnesty International
    This is an edited version of the story. For the full version, please go to the current issue of HI News PDF magazine:
    http://hnn.bz/hinews-3-05.pdf

    What is the big news in power tools for 2017? It might just surprise you.

    US/Hong Kong company Techtronic Industries (TTI), makers of Milwaukee, Ryobi and AEG tools, continues to develop its niche product line, but as HNN described in our lengthy analysis last issue, it's likely on a tick-tock-tock cycle, with strong innovation coming every third year.

    In fact, our take on TTI at the moment is that it seems that while the company's CEO, Joe Galli, is enthusiastic about more rapid future development, he's being "braked" a little by the company's investors, who don't have his appetite for innovation.

    Makita, as always, has gone ahead down its path of quiet excellence. There is something very Makita-like about its launch of a compact 18-volt cordless line of tools, making use, of course, of its standard 18-volt battery, but with a tool body size close to that of 12-volt tools.

    However, Makita is struggling with a very difficult problem: for a company renowned for its great designs and high standards of manufacture, how does it develop a less-expensive, "value" brand that doesn't cannibalise its main brand? The MT Series partially answered that question in 2016, but while parts of its range (for example, the corded routers) make sense, the cordless tools, in the Australian market, really do not. (HNN will be looking in more detail at both Makita and Hitachi in the next issue of HI News.)

    That leaves us with two remaining large power tool companies, US company Stanley Black & Decker (SBD), and the power tools division of the vast German firm that is Bosch.

    The two companies have much in common, in addition to their size. SBD seemed to emerge during the past year from a five-year process of digesting the merger between the two big companies (Stanley Tools and Black & Decker). Not only did it bring out some real innovations in its FLEXVolt range, but it has also gone on the acquisition path again, getting hold of the well-respected and familiar Sears Craftsman brand of tools.

    Its DeWalt brand also "teased" details of network-connected tools, which appeared (by a remarkable coincidence) just as TTI was releasing its annual results. The teaser was largely images, with only one sentence that declared anything definitive:
    Tool Connect[tm] updates are coming soon; including a new app, inventory management software, and 3 new ways to connect anything on your jobsite. Stay tuned for more details in the coming months.

    That was three months ago, and there doesn't seem to have been any further information released. It will be interesting to see if we learn more over the coming three months.

    As impressive as SBD has been with its developments, however, it's really Bosch Power Tools that has begun to show it can take advantage of the very big potential the company has, both with its stand-alone expertise and history, and through its association with the larger Bosch company, and its ongoing research into sensors. While it is likely that 2017 won't be an outstanding year for the company (only a good one), both 2018 and 2019 could turn out to be significant, not only for Bosch itself, but for the industry as well.
    Stanley Black & Decker

    SBD recently released its results for the first quarter of its FY2016/17. The company reported overall revenues of USD2,800 million, up by 5% over the previous corresponding period (pcp), which was the first quarter of FY2015/16.

    SBD also noted that its operations had become more profitable, with an operating margin up by 1.1% on the pcp (excluding merger costs). Gross margin was 38%, up by 1.4% on the pcp. Excluding one-off items, earnings before interest and taxation (EBIT) were up by around 8.5%.

    Australia did not perform especially well, with its revenues slipping by 3%, following a similar decline in the fourth quarter to FY2015/16. North America currently accounts for 65% of the company's overall revenues, while Europe accounts for 18%.
    Tools and storage

    The company's tools and storage division outperformed other divisions, returning a net revenue increase of 6%. SBD states that overall revenues increased by 9% over the pcp, lifted by volume expanding by 6%, and acquisitions adding a further 4%. Fluctuations in currency exchange rates reduced these gains by 1%.

    Regionally, North America produced the highest level of growth at 8%, while Europe grew by 6% and emerging markets grew by 1%. The North American growth was boosting in particular by growth in the US market, with commercial (Pro/tradie) sales up by over 10%, and DIY sales up by between 7% and 9%.

    Operating margin for the division grew by over 16% on the pcp, to reach 16.4%. In discussing this growth, chief financial officer Don Allan said that every region worldwide showed positive revenue growth for the quarter in this division. He said that:
    New product introductions and successful field conversions drove growth in the commercial channel. Strong e-commerce volumes and continued momentum from the FlexVolt launch, field growth in the US retail channel as we did overcome some modest channel inventory tightening.
    SBD's backstory and FLEXVolt

    The merger between tool companies Stanley and Black & Decker was finalised in November 2009. This has been something of a vast undertaking, though also a proficiently managed one. It has also come at something of a cost, in terms of actively managing some aspects of the business, such as innovation in cordless power tools.

    Some measure of that can be seen in DeWalt's 12-volt cordless drill range. A revised version was launched in 2010, ahead of its time in featuring slide-on Li-ion batteries, as opposed to the in-handle batteries that many manufacturers still produce. However, from that time until today, this product has changed little.

    While Milwaukee, Bosch and Makita have moved to brushless motors on their 12-volt lines, DeWalt has persisted with its brushed motors. In a recent ranking of the top 10 12-volt drills by respected website Pro Tools Reviews, DeWalt came in fourth, behind the brushless tools of Makita, Bosch and Milwaukee. It's a seven year-old design.

    Innovation had slipped so far as a priority in the cordless tool business that at one point SBD management, in response to an analyst's question at a results briefing, suggested that they didn't expect much innovation in the cordless tool area. They suggested development would largely consist of the spread and commodification of existing innovations, such as brushless motors as well as larger and better Li-ion batteries.

    The focus at the company was mostly on commercial performance, which resulted in some interesting new product launches - the introduction of the Stanley FatMax range, for example, was a brilliant move in the market - but very few ground-breaking products.

    By 2014, with Milwaukee in particular continuing to take marketshare from DeWalt, and evidently starting down the path of more radical innovations, SBD realised it needed to take action. The result was what the company calls the "Stanley Fullfilment System 2.0" (SFS 2.0), which works like an "operating system" for innovation. This was introduced in early 2015.

    In its corporate financial filings, SBD describes SFS 2.0 like this:
    Entitled "SFS 2.0" this refreshed and revitalized business system will continue the progress on core SFS, but importantly, provide resources and added focus into (1) commercial excellence, (2) breakthrough innovation, (3) digital excellence and (4) functional transformation.

    SFS 2.0 is something that gets SBD executives very excited - which is great to see. It's also probably one of the few corporate innovation programs that sometimes gets marketed directly to shareholders. In a "letter to shareholders", the effort is described as "breakthrough innovation special forces teams", that
    ... have been assembled across core business units that are entirely focused on generating breakthrough ideas, beyond the incremental. These teams, modelled after the incubator approaches of standout innovators and startups across Silicon Valley and elsewhere, are delivering solutions to unmet user needs and creating disruptive, industry shaping ideas.
    FLEXVolt

    FLEXVolt, a cordless tool system from DeWalt that makes use of 54/60-volt batteries that can, through switching between serial and parallel connection, be stepped down to 18/20-volt for use on the rest of DeWalt's 18/20-volt line. This system is used to power tools such as table saws, grinders and circular saws, that would otherwise have to run off of mains power. The larger units actually run off of two of these batteries, or 120-volts of current. This is the same as mains current in the US, and the tools can also be directly plugged into the mains, where it is available.

    On its launch, DeWalt released information about its considerable success that met with more than a few raised eyebrows in the industry. Really new product launches need quite a lot of what is called "sell-out" in the US, which refers to retailers stocking up on product for future sales, while "sell-through" is product that has reached the consumer.

    SBD claimed a figure of USD100 million in combined sell-out and sell-through sales for the last four months of calendar 2016 (to the end of SBD's financial year). There were concerns voiced by industry commentators that much of the apparent sales success might have more to do with sell-out than real sell-through.

    Asked about the prospects for FLEXVolt in calendar 2017, the normally quite staid executives at SBD often become very optimistic and enthusiastic. Here is the company's chief financial officer, Donald Allan, describing what he sees as the product's potential in response to an analyst's question at the company's announcement in January 2017 of its full-year FY2016 results:
    Yes, I would just add that related to 2017 your comment is correct Nigel, we do see another USD100 million of incremental revenue that is included in our guidance. Jim however did discuss in his comments that we have capacity up to USD400 million. So, in total we have USD200 million in our numbers with incremental of a USD100 million next year so there's capacity to take on another USD100 million.

    That enthusiasm has continued through to the most recent results for the first quarter of 2017. Jeff Ansell, the head of SBD's tools division, describes just how far ahead of some expectations the company sees FLEXVolt performing:
    What tends to be in this marketplace competitors are violent and if your competitors don't have a response they tend to - they have a negative view on what you - what you're doing and how it's performing. The reality is we couldn't be happier with FlexVolt and if you think of 7% growth in this first quarter 8% in North America, 6% in Europe. We're very pleased with that. But half that growth came from the core, so what it says, our core business vibrant we comped a very big quarter from last year and grew the core at the same time while allowing FlexVolt to provide the other half of the growth.
    Our retail execution of FlexVolt is now more than double-digits ahead of what the customer expectations were, which is fantastic. And the uptick and uptake in industrial channels is every bit as good if not better. So if you consider those things and you look to the fact that we are loading new flexible products as we speak in this quarter and we will continue to load new introductions throughout 2017. And as Jim said, in the next several years that has been the real, the real driver behind what you do with this breakthrough innovation team. We have to continue to keep this fresh and we feel that we are quite nicely doing that.
    The last point I would tell you is, while it takes time to introduce new systems and power tools, the fact that this does leave the old system behind has led to a much faster adoption than most new power tool platforms. As such, our growth in FlexVolt, the ramp in FlexVolt is 10 times faster than the ramp in brushless as an example. So we couldn't be more pleased and we are we know it's a competitive advantage and the average of five stars. The average user rating of FlexVolt is 4.9, so if you get the product right for the user everything else takes care of itself. So we feel great.

    Mr Ansell also explained elsewhere some of the future potential that SBD sees for the FLEXVolt line of tools:
    Well, the beautiful thing about FlexVolt is we are able to develop 20 volt tools where they're appropriate, where the max watt outperformance is appropriate. At the same time, develop 60 volt tools where the max watt outperformance is required and obviously there is a cost difference because the 60 volt tool is a more expensive proposition for the user and for us that delivers unprecedented performance, at same time the user wants the right tool for the right job, at the right cost.
    So all those things come together and what you'll see over the next 36 months we'll be presenting this to Jim and team in the next few weeks and then you'll see some of it at the May 16 session, you'll see fresh introductions of both 20 volt and 60 volt tools coming within the FlexVolt range and I will tell you that the users pick up on them has been equivalent. The user likes what they can do with FlexVolt batteries under 20 volt system but they really have also embraced the 60 volt performance. Circular saw in particular is absolutely killing it. The portable you mentioned 120 volt, the portable products like mitre saws which are 120 volt absolutely killing it. So the user has embraced all those various platforms and because it gives them the performance of corded in a cordless package. So more to follow but yes, we are very, very active in development of 20, 60 and even 120 volts going forward.

    This point about possible future developments was also made by president and CEO Jim Loree at the full-year FY2016 results announcement:
    It really is a market share gain mechanism that has enormous potential even at the voltage levels we are at today. And we haven't even talked about going up the voltage curve or the power curve, which we have the capability to do as we develop this technology. And that breakthrough innovation that we're working on will have some more surprises I'm sure, positive surprises in the future.

    Mr Allan was also clear that, as optimistic as the forecasts for FLEXVolt have been, the company sees those goals as being largely met during the most recent quarter:
    We expect the momentum surrounding FlexVolt, which by the way did meet expectations for the quarter, will be maintained and bolstered by our commercial team's launch strategy, which has a well-designed roadmap of promotions and new FlexVolt tool and accessory SKUs hitting the shelves regularly over the next few years.

    Of course, a major concern for SBD overall is the extent to which the FLEXVolt range will be "cannibalising" its standard range of tools, through replacing sales rather than being completely a matter of new sales. Mr Allan commented on this:
    The USD100 million makes sense to us right now based on it's too early to really know what the cannibalisation is going to be. And that's something we'll watch closely, but if the cannibalisation is not as high then there's certainly a possibility that we're somewhere between that USD200 million to USD400 million number as the year progresses, combined with some of the factors that that Jim just mentioned.
    The FLEXVolt market

    The success of FLEXVolt, which seems to be confirmed by the most recent results, was not that expected by most market observers. It's a product that has two "strikes" against it: it is very expensive, and it is close to being "ultra-niche", in that it appeals to a niche within a niche.

    It's not only heavy construction builders that will use most of these tools, but those builders whose business would get a big boost from the convenience of very powerful cordless products. The DCS7485 cordless table saw costs $1300, complete with charger and two 6-amp batteries, or $1000 as bare tool.

    At a guess, what is driving high levels of sales is a combination of three factors. In many world markets pressures on housing are continuing, driving up prices and pushing developers towards considering more multi-floored, multi-dwelling unit buildings. There is also an uptick in infrastructure construction projects, as government seek ways to support regions which previously relied on more outdated forms of production.

    In both these cases, the need for high capacity tools which reduce logistics support problems through being cordless would be high. The third factor is the ongoing skills shortage. Tools which help the existing workforce get more done faster are bound to be popular.

    That said, of course, there is little doubt why SBD was so enthusiastic in launching this particular product. Mr Loree explained this in presenting the fully-year 2016 results:
    And where we are really trying to attack is at the competitor's install base. And so think of FLEXVolt as a battery system that is establishing an install base as aggressively and quickly as possible that requires DeWalt tools to operate and then think of every year a wave of new tools SKUs coming in that will enhance the substitution of corded products and the ability for us to substitute corded products in the higher voltage, higher power requirements, higher duty cycle type SKUs.
    And if you think of it that way, I think it's helpful because then you will understand it really is, well there is going to be some cannibalisation of our own coated tools, it really is a market share gain mechanism that has enormous potential even at the voltage levels we are at today.

    The competitor, of course, is Milwaukee. In terms of strategy, at its core FLEXVolt is also a mirror to the Milwaukee strategy of achieving market "lock-in" not only by making high-quality mainstream products, but also by making unique "can't do without" products, that help get customers - especially large customers - to go with one particular charger/battery system over another.
    Other developments

    As mentioned in the introduction to this article, DeWalt did send out press notices about a new networked tool system it had developed in late February 2017, but, three months later, there seems to be nothing happening with this. The notices suggested it would feature three different connecting systems.

    The "Tag", which is similar to Milwaukee's "Tick", is a simple tracker that can be stuck onto any tool - power or hand - to provide tracking.

    The "Connector" looks like an adapter that fits directly to the battery slot on a cordless DeWalt, then accepts a standard battery into it, and provides Bluetooth-enabled monitoring of the battery.

    An image shows a row of four power tools, likely one impact wrench and three drill/drivers from the back, with a blue WiFi logo on the rear of the motor chassis. In front of the handgrip, on the battery connection plate is what seems like a row of four blue LEDs and a selector button. The text reads: "Tools: Integrated Bluetooth Technology".

    To be generous, we could describe these evidently mocked-up images of tools as "artist's renditions of possible future products". The control panel featured, if actually produced, would be an ergonomic nightmare, as it would require reaching around the shaft of the tool to operate. To function, the panel would have to be rotated by 90 degrees, or a full 180 degrees, facing the front of the tool - the way the actual control panels on existing Milwaukee One-Key tools, which already offer this full functionality, are positioned.

    HNN would be pretty certain both that SBD has some plans in place for developments such as these, and we also would suggest it will be very unlikely we'll see any of them before 2018. In large part that is because the efforts of the development team will be focused on building out the FLEXVolt line of tools, and SBD will likely not want anything to complicate, blur or distort its marketing messaging around FLEXVolt.

    Additionally, of course, there is the matter of DeWalt's much promoted Bluetooth-connected battery, which these proposed tools relate to. In general, most commentators (including HNN, which has tested this device) agree that this particular approach, while not without its uses, is not the best starting point to a fully connected worksite. It provided DeWalt with a connected product that could be quickly launched before Milwaukee launched its far more extensive One-Key connected tool systems.

    Given things as they currently stand, DeWalt might be better served by starting development on the next generation of connected tools. These are likely to rely on a central worksite "hub", such as a worklight or bluetooth speaker/radio, that is hooked into the internet via a 4G chipset when WiFi is not available.

    Tools would connect with these hubs via WiFi, and provide full offsite monitoring without the need for intermediate connection through Bluetooth phones. It makes sense that this will be the end point both Milwaukee and Bosch will be working towards for 2020.
    Stanley Black & Decker's DIY story

    SBD had been represented in the DIY area largely by the dark orange and black Black & Decker brand. The company's recent acquisition of Craftsman Tools from failing US retailer Sears could indicate that it is considering reviving this sector of its business.

    At the moment, Black & Decker is not competing well with brands such as TTI's Ryobi, and is constantly being encroached on by brands such as Worx, which offer innovative tools designed to make chores around the house and garden easier to perform.

    One possibility that could emerge during 2018 is the formation of a division of SBD that is dedicated to the DIY product across a range of products. For the moment, however, it is clear that SBD's focus is more on the professional market and we will probably not see much development of the Black & Decker tools.
    Analysis

    The apparent success of SBD's FLEXVolt system is a reminder that tools succeed through the combination of two factors: the size of the market sector they go to, and the intensity of demand within that sector. SBD through some very good research has found a niche that is of a smaller size, but has a high intensity of demand - these tools have rapidly moved to the "must have" list.

    As with many of the developments of its arch-rival, Milwaukee Tool, there is also the question of to what degree the FLEXVolt technology will create an effect on other tools in the range. For professionals who will never use any FLEXVolt tools, the only possible improvement is that they can, if they wish, buy a large, heavy battery and another expensive charger, and attach that battery to their drill or circular saw to get extended life.

    This is starkly different from the approach that Bosch in particular has taken, which is based on developing new systems that benefit a broad range of users. That said, in the process of moving from a company that saw development strictly in terms of commercial excellence, to one that now evidently values the gains that can be made from new technologies, FLEXVolt is an excellent first step. HNN is sure most of us are eager to see what comes next.
    Bosch

    Robert Bosch Power Tools has reported its results for 2016, and these show an ongoing improvement. Sales were a record for the division of the vast German firm Bosch, reaching EUR4,500 million. In local currencies, the company states, it experienced 7% growth over the previous corresponding period (pcp), which was calendar 2015. Taking account of currency fluctuations, growth came in at 4% over the pcp.

    To read more, please go to the current issue of HI News PDF magazine:

    http://hnn.bz/hinews-3-05.pdf
    News
    HI News V3 No. 4: Inverell H Hardware re-brand
    Download the latest issue of HI News Vol. 3, issue no. 4
    HI News
    Leigh Muggleton is the owner and face of Inverell H Hardware
    A transcript of TTI CEO Joe Galli's presentation is featured in this issue of HI News
    Click to visit the HBT website for more information
    This edition of HI News focuses on a major store in the Hardware & Building Traders (HBT) network that undergoes a re-brand to become an H Hardware store. We travel to the bucolic regional town of Inverell (NSW) to see how it came about.

    Simply click on the following link to download this edition:
    HI News V3 No. 4: Inverell H Hardware re-brand

    On the global stage, we take a deep dive into the 2016 results of Techtronic Industries (TTI) and provide a transcript of CEO Joe Galli's presentation to analysts and investors.

    We also look at the latest reports from international home improvement retailers, Kingfisher in the UK and US-based Home Depot and Lowe's. Kingfisher's results will be in two parts.

    Local big box retailer, Bunnings continues its expansion both in Australia and the UK.

    Other news stories include Adelaide-based online business, Monsta selling paint direct to consumers; Briggs & Stratton's exclusive distribution of Billy Goat products in Australia; Tasmania's independent retailer K&D losing its CEO; and Ikea's foray into smart lighting.

    A Melbourne-made bin caddy is just one of the products featured in this issue, along with the Mirka dust-free sanding system which is new to the Australian market.
    Companies
    TTI results presentation 2016 transcript
    Horst Pudwill and Joe Galli, chairman and CEO of TTI
    HI News Vol.3 No. 4
    Vertical markets serviced by TTI
    Gross margin growth at TTI
    Subscribe to HNN weekly e-newsletter
    The following is an extract from the transcript of an address the CEO of Techtronic Industries (TTI), Joe Galli, gave to investment analysts on the release of TTI's results for 2016.

    To read the complete transcript, please click on the link below, which will download the edition of HI News which includes this article:
    TTI 2016 results presentation - HI News Vol. 3 No. 4
    Transcript

    We are delighted to share with you yet another record-breaking year. Sales are up 9.8% in a marketplace that is not going anywhere near that. We are totally outpacing our competitors in every geographic region. Sales of our power equipment business were up an amazing 13.3% [in local currency]. This is not just Milwaukee, this is our entire power equipment business. Our DIY business, our OEM business, our outdoor business. These results reflect just amazing performance in our local operations around the world.

    Floorcare down 3.3%, but that is misleading when you consider that the future of our floorcare business [sales of cordless] was actually up 53% [in local currency]. So our overall floorcare business needs to be improved, we recognize that we are dedicated to that. But let us not lose sight of the progress our team has made launching a very exciting stream of cordless floorcare products.

    You will see in a moment that we have an outstanding pipeline of new products in floorcare that will fuel the turnaround of the business and help it to catch up to the power tool progress that we've made. As Frank has pointed out, our sales are up double digits, gross margin up 50 basis points.

    This is the eighth consecutive year of improvement in gross margin. The eighth consecutive year. Up 36.2%, and we were able to able to leverage our sales growth EBIT performance at 12.6% growth. Net profit is up 15%, which in the environment in which we are in, with the level of investment we're making we think is quite acceptable.

    This is a chart we love to talk about. So for eight consecutive years we have driven gross margin up from a modest starting point of 30 .8% to a level now at 36.2%. As Horst pointed out at the start, we've basically doubled our output in China with the same headcount.

    So think about that: we've doubled our output with the same head count. We are uniquely positioned to transition to any geographic region such as the USA, if the legal environment and the political environment creates an opportunity or a requirement to produce there, we can move at a very quick rate. And I'll show you that in a moment.

    As Frank pointed out, working capital was better than last year at 16.4%, that's world-class, that still continues to be the best in the industry. And yet we do think there is room for improvement, in inventory as we go forward. But what we won't do is to compromise our service level to our customers.

    If you were to look at Home Depot or Bunnings or any of our other major customers, what you would see is that we are routinely awarded vendor of the year recognition for outstanding service levels. We retain and exceed the levels of our competition and we are doing it with an acceptable level of inventory. While that may come down a bit as we go forward, but never at the expense of customer service. That is a hallmark of TTI.
    Milwaukee

    So, you know, look, the Milwaukee business is one of the growth engines of the company along with Ryobi. We were able to grow Milwaukee last year at 21%. Now think about that: 21% growth in the power tool industry. We are not in Silicon Valley here, we're talking about power tools, a GNP business for years and this significant part of the company is growing at 21%. As we have shared before, our plan is to grow at a 20% clip really for the next five years at Milwaukee as we continue to take market share and stimulate market growth with our cordless strategy. I'm going to share that with you here as we go.

    The Milwaukee growth is extraordinary not only because it is at 21%, but because we are able to do it in every region that we are tracking around the world. So North America was really strong at 20.6%, but Europe was the star of the company last year with a 21% growth rate in Milwaukee.

    As you know, the European theatre is in a state of contraction, there is all sorts of concern about the economic health of the region, and yet TTI was able to build Milwaukee at 21.3% growth. That is maybe the most exciting result we had last year. Of course, rest of world is paced by Australia and New Zealand, where we have become the number one pro supplier of power tools. But also we are beginning to focus on other countries in Asia, like Korea, like Taiwan, where we've had amazing success with their Milwaukee program. Not at a discounted level, we are going in with significant premium pricing, and we are finding users willing to pay up for the quality and the safety that we provide with Milwaukee.
    Manufacturing in USA

    Horst mentioned upfront and I think that it is important to point out now, that we have never put all your eggs in one basket when it comes to manufacturing. We have an outstanding manufacturing foundation in the US, this is not something that we reacted to, this has been in place for a long time. For a lot of reasons, we always felt we should have geographic diversity when it comes to manufacturing. We also have manufacturing in Europe by the way. These decisions are made based on a strategic plan that would allow TTI to flourish no matter what local laws are passed.

    So if something happens in the US, and there's some sort of border tax, it is going to affect everyone equally, everybody manufacturers in Asia, it is not like we are the only company producing power tools in China. The great news is that we are positioned to ramp up fast in our manufacturing operations. We have two Milwaukee factories, we have a Ryobi operation, a floorcare operation, and a handtool operation. We have a lot of friendly [US state] governors that seem to be anxious to fund our decision to increase manufacturing.

    So if you say what is going to happen to TTI if we do this? Well first of course the US has higher labour rates, but you save on freight. We have learned to automate our manufacturing and we have proven that over the last five years, and we have an amazing world-class manufacturing operation in China, that is a perfect operation to supply the rest of the world. The US is, everyone is speaking about today about the US, but we are growing like crazy in Canada and Europe and Australia and Korea, and Latin America, so we have China, China is ready to go to supply the rest of the world if the US focuses on production locally.

    Again I think that you have to understand that the laws that may come across in the US will not discriminate, every manufacturer will be dealing with the same situation. It is just the winner will be the company that can move the most quickly, and I think that our execution track record speaks for itself.
    Future leaders

    Okay, so here's another interesting highlight of the company's success. We are continuing to be dedicated to hiring college graduates to provide manpower for our growth. So this year we will actually hire over 500 college graduates over 50 campuses in the US, and in another 12 countries around the world. This is a program that provides the future leadership for TTI.

    It is an interesting group that we hire. These Millennials that we hire, they are 52% female they are 18% bi- or trilingual, we look at 100 resumes and we pick one, we do that 500 times and then the top 10% of those people are promoted into the company's opportunities or product management jobs etc. around the world.

    There is no one in our industry that is remotely close to this kind of commitment to developing future leadership. It is one of the things about having so many Millennials around, the Millennials all want to save the world, but they also live on social media, and they think their iPhone should control everything. So you're going to see TTI blazing a trail when it comes to iPhone and Bluetooth capabilities on our products, whether it's in floorcare or power tools.

    This is an enormous advantage that I think is underestimated. I think to have a group of 50-year-old executives sitting in a room trying to figure out how to turn the iPhone into a device on the jobsite might not be the best strategy. And I think that our campus recruiting program is going to bear fruit as we move forward.
    Thinking about the market

    I would like to introduce today, a way for you to think about our market over the next five years. Many people have said, what are you going to do next? Horst and I talk about this all the time. Milwaukee is growing like crazy, Ryobi is an amazing success story, what is going to happen next?

    We wanted to share with you our vision about the marketplace over the next five years and to give you some confidence that we can continue to grow our company the way you have in the past and deliver outstanding financial results, in the businesses we serve today.

     And this growth we have will be fuelled by what one of the most prominent analysts of our company has coined the phrase "the growth drivers" to describe. We have Milwaukee, Ryobi are powerful growth drivers, soon to be joined by floorcare.

    Let me show you how that growth will manifest itself in the market.

    So first of all we we think in five years, we are talking about serving a market that could be USD35-USD36 billion plus. These are internal estimates, this relates to marketplace that we are in fact helping to create, and develop. So our vision is to stimulate and create a market, much in the way that Apple did with the iPhone and the iPad, and we want to be in a position to harvest the benefits of that creation.

    We recognise that we are never going to control the whole market, and I think what people miss, none of our competitors have to lose for us to win. We have some very good competitors - Bosch, Mikita, Stanley, DeWalt - these are well-managed companies ,and they are very strong in many geographic regions. We intend to be real leaders in the market, particularly in cordless, where we already are exhibiting that leadership. What we create here will benefit everyone, and the key is that we want to be the Apple, we want to be in the vanguard, and to be the company that is creating the opportunity.
    Network effects

    The power tool market has changed dramatically. The reason this is so exciting, is because of what we call the network effect in cordless. In the old days power tools was called a "best of of breed" business. So you'd walk into a Home Depot and you would buy a Milwaukee Sawzall, a Bosch router, a Makita circular saw. And you were considered to be a smart user if you knew what brands to buy for what category. And there was no interconnectivity, so your truck looked like a rainbow of colours, and it did not have and it did not matter if one tool could talk to another, because there was no synergy, no connectivity.

    That is all over now. The power tool market is going to go to cordless. In fact the whole power equipment market is going to go to cordless, including floorcare. And the opportunity for us is because we have the broadest network work the broadest range of products that work off the same battery platforms, we think that we can convince the user to buy our kits to start and lock them into our network over the long haul. And this is a way where you can build a much higher level of marketshare at a much higher level of growth than the old best-of-breed days.

    Let's take a look at this cordless market potential. So the total power equipment market potential we think is USD36 billion.

    To continue reading this transcript, please click on the link below, which will download the edition of HI News which includes this:
    TTI 2016 results presentation - HI News Vol. 3 No. 4
    Retailers
    Inverell H Hardware: The big re-brand
    Front entrance of re-branded store
    HNN Sources
    Leigh Muggleton, the managing director of the store operation
    The New England region of NSW has its own unique history
    Click to visit the HBT website for more information
    One thing that HNN's visit to Inverell, New South Wales (NSW) for the re-branding of Inverell Building Supplies as an Hardware and Building Traders (HBT) "H" branded hardware store firmly brought home to us was the isolation of some rural regions. After much scrolling around Google Maps, and rattling of printouts of train and bus timetables, we ended up doing what probably most business travellers do - paying Rex Airways more than you might expect for a ride in a twin-propeller airplane (which, fortunately, remained a twin-propeller airplane, at least for the duration of that flight).

    Yet, as it turned out, it was certainly worth it. Not just because Inverell is a lovely town well deserving of a visit for any reason, and the rebranded store - now Inverell H Hardware - is a good store, and that the owners, Leigh and Erin Muggleton, are one of those interesting, fun couples you meet in the hardware retail industry. That mattered, but what also showed up was a sense of what the future might really hold for regional areas and hardware.

    It's a future where a sense of history, the community memory and community ties continue to matter, and where, rather than inhibiting change and adaptation, they enable it, helping to promote new growth, and better prospects.

    Not, of course, that this is all a story of "plain sailing". As with almost all independent hardware retailers, the Muggleton's story is one of survival as well, getting through an event that almost certainly should have terminated their business, but ended up strengthening it instead. That's important for many reasons, not least because the store carries a staff of 16 floor reps, many of them under 30 years old.
    Opening events

    HNN had come to Inverell for the actual launch of the H branded store on 24 March 2017. The night before the launch, the store's owners, Leigh and Erin, hosted a dinner at a local Thai restaurant, mainly to thank suppliers for their support in making the changeover to the new branding. Steve Fatileh and Mike Loricco from HBT were there as well.

    The next morning, bright and early, the real launch was held. There was a large amount of eggs and bacon cooked for the brekkie, and the major suppliers set up stands where they provided advice about their products to some of the store's key customers who attended. The local radio station, Star-FM was also there, giving away doughnuts.

    Leigh made a speech to thank everyone who had participated in making the rebranding possible, and a local councillor, Dianna Baker, who was there coincidentally as a customer, gave a quick speech as well, speaking of the store's place in the community.

    Steve also spoke, highlighting how important the store was to HBT itself, a prominent presence in the New England area, and how glad HBT was to see another large store added to its growing list of H branded hardware stores.
    A little history

    Inverell is in the fabled table highlands area of New England. New England is a region of New South Wales (NSW) that stretches north to the border with Queensland, and takes in the townships of Moree, Boggabilla, Tenterfield, Glen Innes, Armidale, Walcha, Tamworth, Gunnedah and Narrabri, with Inverell a little north and slightly east of its exact centre.

    It is a region that has a long held belief in its own unique identity. In 1915, the New State Movement was launched, with the goal to separate this region from the rest of NSW. In 1934, a Royal Commission affirmed this region as distinct and separate from the rest of the state. This sentiment was revived after World War II, and a gathering in Armidale in 1948 clarified the boundaries of the region.

    Events in the 1970s blurred much of this focus on division. The agricultural sector, on which New England heavily relied, found itself in trouble. Britain joined the European Economic Community in 1973, which saw, for example, Australian butter exports drop by 90%. A bumper wheat crop at the end of the 1960s destabilised world markets. Regional concerns were overridden by national - and even international - ones. Once responsible for 78% of Australia's exports in FY 1952/53, the share of agricultural goods fell to 21% by FY 1995/96.
    The recent economy

    Today, with Australia placing more importance on becoming a "creative" economy, through a focus on developing services as a centre of high growth, the prospects of regional areas such as New England might seem less than hopeful.

    Yet this seems to not really be the case. US urban economists such as Richard Florida have pointed to how "creative cities" enable people from diverse fields to build temporary connections, and rapidly hook-up creative networks. In Australia, academics such as Chris Gibson, who lectures on economic geography at the University of Wollongong, have added to urban creativity the creative processes at work in regional areas.

    The difference between the two is that where in cities businesses and other creative enterprises develop goals, then build networks which can realise these, in regional areas the order is reversed. People begin with networks that have been well-established between people - and between people and institutions - over decades and generations, then develop goals based on the capabilities those networks can provide.

    Just how close the Inverell H Hardware business and Leigh are to the local community was brought home to us on our first afternoon in the town. It had been raining over the week before we got there, but the skies had mostly cleared, leaving a heavy humidity in the air.

    Leigh stood for a moment in the doorway of his store, his eyes searching the heavens above the way only the eyes of country people who live in the drier areas can, as though questioning every single cloud.

    "I like the rain," he told us. "For me, it is like liquid gold. When it rains, I know I will get paid."

    It was a quiet comment, but it spoke volumes about the links between Leigh, the store, and the community around. That willingness to carry people through the tougher times, and the ability to share in the good fortune of all when hard work and simple, enduring toughness finally get their reward.
    The Inverell story

    The story of Leigh and his development of Inverell Building Supplies, now Inverell H Hardware, is one where the presence of these networks - professional, personal and regional - can be clearly seen.

    Leigh's history with Inverell itself goes back close to 25 years ago, in the early 1990s, when he first came to the town. He was working at the time at BK Oliver Frames & Trusses, the Home Hardware store located in Inverell.

    Whatever his ambitions might have been, he didn't have an opportunity to act on them immediately, as a family illness saw him take on a job with BBC Hardware as sales a rep, in the years immediately prior to its acquisition by Bunnings. In fact, during his time there, Leigh left to go work for Bunnings, but only lasted there for three months or so. Against the odds, he managed to get rehired afterwards by BBC. As Leigh explains:
    Apparently I'm the only fella that John Reece who was state manager of BBC had taken back. You could go to work in a different industry but if you went to the opposition that was treason. That was the word he used.
    He heard I wasn't happy [working at Bunnings] so he rang me and said "come back to see me". I spent 30 minutes in this sterile office, the table had to be 12ft long. He sat there and the whole time he spoke in a very quiet whisper so I had to lean forward. John told me succinctly, but not nastily, why he doesn't take people back. Jason O'Hagan, who was state trade manager and is now the managing director of Weathertex is also sitting there. He said, "What, do you want to come back? Talk to Jason." Then he leaves his office. It was the most incredible interview that I had in my life.

    While Leigh was not fired in the general "cull" of BBC staff that took place in 2001 when Bunnings took over, he chose to leave in 2002.

    Inverell, which he had first seen ten years or so before was still in his mind.
    I thought, what can I do in Inverell? Because we wanted to come back. Then someone said, "Why don't you start a trade hardware?" Because 90% of [that business] was going out of town, and the local Home Hardware owner was very expensive. Funny how he came good when we started!
    But that's what we chose to do. And the rest, as they say, is history.

    Starting from scratch, with a minimal investment wasn't the easiest of beginnings.
    We started in about September, 14 and-a-half years ago [end of 2002], and we didn't have a shop to sell stuff. There was just a bit of furniture in the corner. When I came in and looked, my wife said, I thought you are starting a hardware store, not a flipping warehouse!

    Besides the selling space being quite bare, Leigh was also uncertain if the location was exactly right.
    Apparently the space was always here, it was the furniture place in town and it sold out to someone else. They let us rent it and I thought "this is too far out of town". Inverell is funny in that from the Main Street, even for a slow person, it could take less than two minutes to get here, and this is considered a long way to come.

    Leigh was not deterred by the lack of store fitout. In fact, he thought (at first) they might not need much.
    I told my wife it was going to be trade, and you might not need [a lot of fitout], but within two-and-a-half years [the business] went through the roof and we needed more space. At the time, we put in an extension of 8m x 30m at the back, and that's where we are up to.

    The store measures 2100sqm with another 1000sqm for land. And Leigh is pretty clear about why the store was such a success, from the very beginning.
    People drive 30km to come into town, but once they come they know they can park, and there is someone here who can differentiate from a hex bolt and a cup head bolt. [That knowledge] makes a big difference.

    Another critical element to the store's success was that it was one of the early members of the HBT buying group, from its inception. While the store was not able to meet the criteria for eligibility at the time, then HBT group manager, Tim Starkey, after "doing the numbers", realised the store had good potential.

    It turned out, like many of Mr Starkey's "gut" decisions, to be a good one. The store went on to win HBT's coveted Store of the Year award for 2013.
    Trouble

    It wasn't until about six years after its founding, in 2008, when Inverell Building Supplies hit its first major obstacle. And it was a really big one. This is how Leigh tells it:
    Like all things, we've had the good and bad. We had one builder who was a good friend that was buying from us. His word was his bond. But he rang me one day and said he was in a dark place, and he said, "I'll let you know soon".
    In this town everybody knows if you change your shoes, and someone said did you hear that [the builder] had gone broke? I said "You're kidding!". Because they owed $290,000.

    It was an enormous shock. Leigh faced some tough decisions.
    If we had sold up and we would have received 10% on our goods, I could have come out with a couple of thousand, or maybe $10,000 down. I could go somewhere and get a decent job and just pay it off. Yes, that can level you for some time but I am very thankful that we are still here and still going. So you can either trip your lip and carry on about that or keep going.

    In fact, what happened was a fairly astonishing series of events. The people of the town, including his bank, Westpac, and Leigh's customers, all rallied around to help support the business through its tough times.
    At first, I just sat in the chair and thought, what do you do? I called the bank manager and I couldn't believe it. The bank covered the debt within a week.
    You would not believe some of the builders. There were six of them that came in and said "Would you like us to take this to $100,000? And we'll just get that back whenever without interest." Then all the others started paying. Probably had two then 10% of them paying within 35 to 45 days. Now there were at 43% paying within about 40 days properly and 3% within about 30 days.

    On the other end of the cash flow, many suppliers helped out, extending payment terms as much as they could. HBT, hearing of Leigh's troubles, also reached out to offer help and advice.
    You know who helped us? That a fellow at Orange who is on the board, David Kent. He rang me and asked me how I was going. It was such a lovely thing that he reached out, and I think I can mention Tim [Starkey] who we obviously we miss dearly. That day, he rang and said you've got to have an "office Nazi".

    Getting the "office Nazi", who was already a partner in the business, Robin Cameron (who is anything but a "Nazi"), turned out to be just what the business needed to not only get itself out of its problems, but also to increase its growth rate.
    I am a softy although I've tightened a little bit but I didn't want to become a mongrel which is hard. We had to have Robin, our business partner who took over and since then its happy days, as they say.

    As a result, Leigh is pretty sure that the business could weather a similar setback (not that they would let that happen) without having to draw much on outside resources.
    Not a Nazi, business partner Robin Cameron looks after accounts
    Becoming an "H" Hardware

    Part of the store's ongoing growth has been its decision to rebrand itself as an H Hardware store. While Leigh and Erin had been considering the move for a number of years, the trigger was the 2016 HBT Conference in Townsville, Queensland.

    For such a large store, the task of rebranding has absorbed a considerable amount of resources and taken longer than expected. According to Leigh:
    We started at the end of January [2017] and we wanted it done by end of February but the amount of rain that we've had has made it really difficult. It's virtually done now with some paint on arrows that need to be done outside. The timeframe has been about six weeks but it's actually been about three months, to be fair. It's definitely getting there.

    While it is an expensive undertaking, suppliers rallied around, with the encouragement of HBT.
    It was really great to do even though we dragged our feet a bit but with the help of our suppliers, 17 of them really helped. You've got - just to name a few - Koala Nails, Fletchers, Macsim, Gunnersen's, Bluescope Lysaght, Soudal and at the 12th hour Romak came in.
    Haymes really looked after us. They threw in $1000 and have given me the paint [for the store] at half price.
    We got about $16,000 and it will probably cost us about $40,000. I'm just very thankful and we just need to sell a few bolts and nuts and tins of paint to get the other $25,000 back. But you wouldn't do it unless you think you could, and there are a lot of other benefits with the companies involved.
    The store before opening

    Leigh believes that the changes to the store with the rebranding have already had some positive results - though he is a bit bemused about some of them!
    The merchandising is fantastic. It's really bought an awareness, and obviously I think that will just keep growing.
    We had one fellow who came in and said "You're hardware store?" And I said, "Yeah, we've been here about 15 years." He said "You know what? I've never come in because I didn't see any signs or anything."
    He said, "Do you know what made me come in because I didn't see any signs painted?" [The new H Hardware signs were not up yet.] He said, "I saw the wheelbarrows."
    I thought "great" and we've seen him here for repeat business.
    The only thing is that every day, we've always had the wheelbarrows out there. Always.
    So he didn't pick up on the colour. Now we've got hardware in the name; I wasn't sure if it was a good move when we called it Inverell Building Supplies. We agonised over whether we should have hardware and timber in it. But we thought how long do you make the name? I'm glad now that we have H Hardware and Inverell in small because that is still our identity, as building suppliers.
    Merchandising

    Part of the move to the H brand includes a shift a little more towards the DIY enthusiast. As Leigh describes it:
    We were once 90% trade but we are probably now whittling it that down to 80% trade and 20% retail or serious do-it-yourselfers. We are not going to get people who just want to buy one plant, and I don't want to do that. I don't want to compete with Bunnings or the Plants Plus down the road.

    The store has also been constantly expanding how much stock it carries, though the increase sometimes gives Leigh pause.
    We have 15,000 to 16,000 different items; we hit over a million [dollars in stock] the other day and it scared the heck out of me.
    We usually average now $940,000 to $970,000 but we did over $1,000,000 of stock the other day because a new line of wood-fuelled heaters came in. We've been selling heaters almost from the beginning we had mainly the Eureka range from Melbourne. You try to sell to keep Australian made stuff but at the end of the day you have to play the game to keep up and a lot of the Chinese stuff is seriously good (and getting better). I'm not against them, you just have to go the flow. This is a retail business and now it's working well.

    Leigh is particularly proud of the paint section.
    The paint section is pretty good. We've just got to get our tradesmen be more prolific but the retail side is not bad. We're getting there, our rep keeps knocking on doors, so we are trying hard.

    Leigh is particular keen to see suppliers at the upcoming HBT Conference in Sydney, especially those who will be launching new products.
    Competition

    Inverell is "blessed" by the presence of a Bunnings store, though at least it's not a Warehouse, but one of the smaller format units Bunnings has in some regional locations. The nearest full warehouse is a 90-minute drive away, in Armidale.

    One of the biggest lessons other independents could take from Leigh is that he's not all that particularly concerned about competition from the Bunnings.
    It's unbelievable how much [Bunnings] helps us. Every now and again, sure they are pain with gross profit. but overall that's the only way they can sell, they can only sell on price.
    And I'll give you a great example. The other day, an older couple came in and said do you have 10mm ply? Bunnings said they'll have it up there but we said no sorry we haven't. But the boys - I've got the best crew in Australia but I'm a bit biased - they said we've got 9mm ply. The customers said, that would be fantastic. The order would have been worth about $200. And you know what was on Bunnings' shelves - 9mm ply, and they didn't know it.
    I'm not knocking the people there but they just don't have people who know, the staff who have product knowledge. I say to my guys, try not to say no - unless they ask for a Mercedes-Benz! And, with confidence, we could say no then.
    Analysis

    When you look closely at Leigh's really inspirational story about Inverell H Hardware, and its origins, it's clear just how important a role networks have played in its development. On the surface, many of these networks might seem to be purely commercial, linking the business to banking facilities, the supply of goods, customers, and buying group activities through HBT. In fact, though, while there are commercial aspects to all of these networks, they also operate as deep community-based networks as well.

    The main difference between commercial and community networks is that, while both work on something of a "quid pro quo" basis, when it comes to community networks the time between the "quid" and the "quo" - the length of a "pro" - can stretch out over a year, five years, or even, sometimes, 20 years. With commercial networks, the "pro" is generally about 65 days maximum.

    The currency of the community network, in other words, is trust. The currency of a commercial network is utility.

    This is clearly illustrated by Leigh's example of when his store was in trouble through a default. In this case the community network failed - a trusted member defaulted on an obligation. With a community network when that happens, most of the other members of that network are obligated to offer help and assistance, even if this means they end up "taking a hit" in the short term.

    It's easy to see how that works in a regional area. With a comparatively low population, and low resident turnover, there is a finite number of people which a business can serve. Acting inappropriately, or taking a more commercial, short term view, can result in damage to future business and growth. Plus, quite frankly, it is part of the core social values of these regional areas that you just don't do that. You just don't.

    The real question that is at the heart of the struggle of independent retailers in Australia, not only in hardware/home improvement, but also in sectors such as groceries, is whether in less regional areas, with more diverse networks, the benefits of developed community networks can outweigh those of developed commercial networks.

    It seems likely the key to this kind of success will be finding ways to overtly enhance those community networks, to make them relevant in a modern setting, and also to develop the means to effectively package and market them. To the wise people of Inverell, who are no doubt very proud of their hardware store, the benefits of the "art of the local" are evident. That is less the case in modern, urban-based communities.


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