Future tool
The Ryobi Quiet Strike is one of the new breed of specialised tools
HNN Sources
Milwaukee has launched a new 18-volt tablesaw
The Bosch EasyCut50 uses NanoBlade technology
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What are the major trends we have seen emerging in power tools, and what do these trends indicate about the direction of the industry? The established trends that we can see today are:
  • The further development of the "connected tool", as pioneered by Techtronic Industry's (TTI's) One-Key system.
  • An increasing diversity in tool voltages, as manufacturers seek to create more powerful alternatives to corded tools.
  • An expansion in range and functionality of tools, as manufacturers seek to enter more niche markets.
  • An increasing interest in and servicing of the outdoor power equipment (OPE) market, which is a special case of combining the two trends listed immediately above.
  • Further development in batteries, including higher amp-hours, coupled with more compact battery units.

  • Each of the four major power tool companies - Stanley Black & Decker (SBD), TTI, Bosch and Makita - are typically engaged in three of these four trends.

    TTI has a particular emphasis on the connected tool, range expansion into niche areas, and further battery development, for example, but only a small program for tools featuring motors with voltages above 18 volts. Makita does not have a connected tool program, SBD arguably does less niche expansion than the others, and Bosch does have an OPE program, but it is very different from that of the other three.

    A shared consequence of these general trends, however, has been something of a massive range expansion by each of the manufacturers, and it seems this expansion is set to continue. This has consequences in particular for the retail channels that service these brands. While the manufacturers are free to continue to produce new models that split familiar categories into several sub-niches, retailers have limited shelf space, limited warehouse/stock space, limited funds to allocate to stock, and, quite frankly, less expertise than they might really need to effectively sell many of these different variants of cordless power tool.
    A prime example

    One tool in particular has stood out for HNN as a prime example of how these product range expansions have come to affect retailers, even large retailers with a great deal of resources to make use of. This single power tool has been sitting on the desk of one of HNN's editors. There is nothing all that spectacular about the tool - in fact, as it was purchased used on eBay, it is somewhat the worse for wear.

    It's a Ryobi. It performs a function that is very common. It uses the conventional Ryobi battery system. It is well-liked - according to online reviews - by those who use it, but it is not, in any way, really a "game changer" - though it does have some notable and interesting innovations.

    There is one outstanding quality it does have, however: despite being a mainstream Ryobi product, it is not sold by Bunnings. That could have something to do with supply issues, but given the outstanding sales growth that Ryobi has experienced in Australia, it seems unlikely that Ryobi parent company Techtronic Industries (TTI) would be inclined to deny Bunnings access to the tool.

    This tool is probably not sold by Bunnings because Australia's largest hardware retailer would likely struggle to find a place in the market for it - even as a non-stocked "special order". Bunnings may boast a very wide range of power tools, but it is no secret that even the swath of space allocated in its largest warehouse stores is no longer sufficient to display even a significant portion of what the power tool industry has served up over the past five years.

    The tool in question is the Ryobi Quiet Strike (pictured on the opening page of this article). The Quiet Strike is an unusual tool, even for Ryobi, which does have some unusual tools. This tool is based on a different take on a Milwaukee/AEG tool, the oil-pulse impact driver. Where most impact drivers rely on a tensioning spring to deliver the rapid pulses of power that help drive self-tapping screws into wood very quickly, oil-pulse impact drivers instead rely on a more complex hydraulic system to deliver similar results.

    The hydraulic systems are, ultimately, more effective, and they give tool designers a great deal of freedom in terms of how they are setup to perform. In the AEG oil-pulse driver, the system is oriented to deliver the maximum bang (literally) for the buck, resulting in surprisingly quick screw drives. The Quiet Strike, as the name implies, has taken a different approach. It is designed to perform at around the same level as a standard Ryobi impact driver - but at a sound level that is close to half that of most impact drivers.

    It isn't just the design that makes this Ryobi so interesting. People who pay close attention to the types of tools being used for common tasks have probably spotted the same trend that HNN has: far from being, as Ryobi modestly describes its products, designed strictly for DIY, these tools have become more accepted by certain types of tradies and handymen. Though still rare on construction sites, they've become very common among those primarily concerned with different types of standard maintenance work.

    So, while Ryobi may claim the advantage of the Quiet Strike is that a cross neighbour may not drop over at 8am on a Saturday morning to complain about the deck you are building in your backyard, the "real" purpose of this tool is to make life easier for maintenance workers in commercial premises such as schools and hospitals, where noise containment is essential.

    Which illustrates just exactly why Bunnings likely does not sell the tool: we're not talking just about a niche use here, we're talking about a niche within a niche. And Bunnings, as HNN has frequently suggested, just doesn't do segmentation. There are two reasons for that (as far as we can determine). Segmentation can be appealing, but it nearly always ends up saying both "yes" and "no" at the same time - and Bunnings goes out of its way to not say "no", under any circumstances.

    Secondly, segmentation often requires explanation and genuine salesmanship. Bunnings offers some guidance to customers, but it doesn't always match up to the more sophisticated products.

    What is highlighted here is an inefficiency in the way Bunnings is able to service some newly developed markets: it is a new, innovative product, with an evident, and perhaps eager, market - but Bunnings lacks a legitimate, assured path to that market.

    HNN would argue that it isn't just Bunnings that finds itself in this kind of curious situation - it's actually large segments of the power tool industry, both retailers and manufacturers, that find themselves facing similar contradictions. While these forces have been present for around the past decade or so, recently they have come increasingly into focus, to the point where they are starting to exert a dominant force on some market sectors.
    The Bosch paradox

    While it might be tempting to see this situation as having to do mostly with the professional, tradie end of the market, in fact it has come to affect the consumer range of tools as well, though with a slightly different inflection. We can see this mostly clearly with the new range of consumer-oriented tools that Bosch has released in 2018. These tools are relatively unique, in that they are aimed not just at the consumer market, but at the lower-skilled end of DIYers, with the explicit purpose of enabling them to do more in a better, less stressful way.

    Some of these changes are useful tweaks to existing product types. Thus the new AdvancedDrill 18 and AdvancedImpact 18 take the conventional drill and impact driver and make them a little easier to use for DIYers, with a low unit weight of one kilogram, an electronic switch to handle forward/reverse, and a way to preset the drilling speed. The same is true of Bosch's PushDrive screwdriver, which is a battery screwdriver that responds to a push against a screwhead by starting its motor and driving in the screw. Similarly the Gluey hot glue pen is a reformatting of the standard trigger-based hot glue gun to a pen-like shape, which makes it work more like a standard adhesive applicator.

    Stepping away from the standard, Bosch has also expanded its range of NanoBlade cutting tools, adding both corded models and an 18-volt alternative to the range of what seem like micro-chainsaws, with 4mm cutting blades. These are designed to make cutting material such as wood as simple as possible, and are suited to areas such as gardening and crafts.

    Perhaps the most interesting DIYer product, though one which is simpler than the rest, is Bosch's SystemBox. These are containers designed to hold the tools associated with a specific task - such as sawing, or screwdriving and drilling - as well as providing a suitable work surface. Bosch describes this product:
    In the future, DIY enthusiasts will also be able to implement projects simpler and faster with our SystemBox range. What's behind this? With the SystemBox from Bosch, you have your tools, accessories and any materials you need to hand at all times. The new stackable storage and transport system clearly organises everything that is required to carry out preparatory and follow-up work for projects while saving time. The SystemBox is available empty or already equipped for the three most common DIY tasks: Sawing, drilling and screwdriving as well as working with multifunction tools.

    These are innovative tools, and this shows Bosch is moving in a very useful direction, by helping to equip the less-skilled with the resources to achieve some basic tasks. At the same time, however, the same range-expansion problems that we've seen with the tradie end of the market are now likely to affect the consumer end as well. In addition to the standard range of "green" drills and impact drivers, there is now an additional number of tools, some with new and unfamiliar uses.

    More than that, though, Bosch is likely to find itself engaging with an interesting paradox in launching these tools. In the past, less-skilled DIYers would tend to buy the cheapest tools on the market, on the basis that they would not get value from more expensive tools. These new tools from Bosch, however, are quite expensive. For example, the corded version of the NanoBlade-equipped EasyCut 50 sells for GBP74 (about AUD135) on Amazon UK and the cordless EasyCut 12 sells for GBP106 (about AUD190). That's far more than the equivalent jigsaws would sell for - and justifiably so, given the new technology.
    A coming change?

    What we are beginning to see develop in the power tool industry is a mismatch between the tools that are being developed by the manufacturers and the channels to market that are offered by retailers. While product ranges have dramatically increased in size over the past six to seven years, retailers continue to rely on the same sales process they were using 15 years ago.

    Online selling has taken up some of the slack in the system. Notably Bunnings offers a "special orders" service, where customers can buy products such as Makita's extensive 12-volt range, and it has recently enabled ecommerce on those transactions. However, even retailers that are predominantly online, such as Sydney Tools, struggle to represent the breadth and depth of products available, and typically fall back on providing only the more popular products.

    It has become a familiar recitation to mention that 20 years ago if you had to get someplace and didn't have your car with you, you hailed a taxi. You rented your entertainment from stores that stocked racks of DVDs. And if you went on holiday anywhere, your choice of a place to stay was limited to hotels, motels, and possibly dodgy bed-and-breakfast places. All that has changed now.

    Individually, innovations such as Uber, Lyft, Netflix and Airbnb seem fairly innocuous. Taken together, they don't so much signal the rise of technology (in particular of the social interactions that get privileged by what mobile phones make possible), as a deeper understanding by consumers of what it is they really need and are willing to spend money on. Consumers don't want taxies, they want to get from A to B with the least possible inconvenience. They don't want the "convenience" of digital media stored on physical media, they want vast selection, and immediate, spur-of-the-moment access. Nor do they actually need or want the stuffy rituals of hotels. They want a place to sleep and to perhaps eat a meal, and having direct contact with "real" locals, rather than hotel staff, seems a particular plus.

    A good question to ask is what happens when we begin to apply that same kind of thinking to the power tool industry. How much do consumers really benefit from owning, say, a cordless power drill? They may be cheaper, more powerful than ever, and so forth, but all that has not altered the use pattern that most follow, where the drill is used a maximum of 50 hours a year, and for the rest of the time sits fallow in a toolbox or drawer somewhere, becoming rapidly outdated, its Lithium-ion batteries ageing into oblivion.

    Of course, there is the argument that, try as you might, power tools remain a very physical product that requires a very physical presence - you can't simply choose to download them. But, unlike movies and Netflix, but very much like Uber and cars, it is likely that consumers will be able to plan and anticipate when they want and need this kind of service/tool. It's very rare that today the average homeowner manages to avert disaster because they have, waiting in a drawer somewhere, just the right kind of impact driver.
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    This is only an introduction to this article. To read the full article, please download the PDF of HI News Vol. 4, No. 3 at:
    HI News 4-03: Future tool
    HI News V4 No.4: HBT speaks to its future
    Download the latest issue of HI News Vol. 4, issue no. 4
    HNN Sources
    Can buying groups evolve?
    Paint 2017-18: The movie
    Click to visit the HBT website for more information
    Now firmly under new leadership, Hardware & Building Traders (HBT) is navigating a future where corporate-owned Independent Hardware Group (IHG) and big box retailer Bunnings dominate. Newly appointed CEO, Greg Benstead and general manager, Mike LoRicco map out the group's path for the next few years. We provide extensive 90-page coverage of the 2018 conference.

    Simply click on the following link to download this edition:
    HI News V4 No. 4: HBT speaks to its future

    Buying groups in the hardware retail industry have traditionally pursued the goal of offering volume in exchange for lower prices, but with the success of IHG in the market, they may need to re-think this approach. We explore a different alternative.

    Our regular review of the global paint companies, Paint-O-Rama is in this edition. It features DuluxGroup's latest results along with AkzoNobel, Sherwin Williams and PPG.

    In our other main feature, we also analyse Bunnings' exit from the UK market and what its consequences might be.

    Companies mentioned in our suppliers section include Reece, CSR, Allegion, Saint Gobain and Yates amongst others. Mitre 10 stores are highlighted in the indie store update in this edition.

    Kingfisher, Home Depot and Lowe's dominate our overseas news coverage.
    Can buying groups evolve?
    A map of independent retailers in Australia
    HNN Sources
    A map of hardware retailers in Sydney
    A map of hardware retailers in Melbourne
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    The hardware retail industry has underestimated the extent to which the acquisition of the Home Timber & Hardware Group (HTH) by Metcash would change the hardware retail market. Rather than being a footnote, just a shifting around of the existing players, it has instead unleashed new competitive forces.

    Overall, we could say that prior to the failure of Woolworths' Masters Home Improvement venture at the end of 2016, the hardware retail market was divided into two, or, at most, two-and-a-half sectors. Today, it has become clearly divided into three sectors. All three are now in competition with each other.

    In addition, strategic changes at Bunnings, accelerated by shifts in the overall strategy of its parent corporation, Wesfarmers, will also add to these new competitive pressures.

    This means that buying groups for independent hardware retailers outside of IHG will need to rethink their strategies, and their management metrics. What strategies will work in this new competitive environment, and what metrics should they be supported by?
    Changing roles

    Fundamental to these questions is the consideration of what the real role of the buying group will be for hardware retailers in the future. Up until the present day, the primary focus of buying groups has been, understandably, on helping member retailers obtain reasonable wholesale prices and rebates on a wide range of products.

    While that will obviously be an ongoing, and very important role, we need to consider whether these buying groups need to consider expanding on what they do offer members. Now that there are two players in the market, Bunnings and IHG, which place a competitive premium on driving down prices ever lower by leveraging volume, other retailers participating in the market may need to consider further leveraging the advantages they have outside of price, in order to retain both their marketshare, and reasonable margins on the products they sell.

    Most independent retailers see one of their prime market advantages as being their close working relationships with tradies and building businesses. Could it be that in the future buying groups need to also concentrate on helping their members enhance that aspect of their businesses?

    In order to trace how the hardware retail market has changed, it's necessary to consider how it has developed over the past 25 years.

    After its full acquisition by Metcash in 2012, up until 2017, Mitre 10 represented one alternative path for independent store owners to take. The CEO of Mitre 10 (and now of IHG), Mark Laidlaw, worked quite hard in public speeches during that time to suggest that Bunnings was something of an endlessly accretive force aimed at "gobbling up" as much marketshare as possible. He presented Mitre 10 as offering something of a shield from that, and many independent retailers were grateful to accept what seemed at least a safer harbour in the market.

    We could say that during this time the independent sector, outside of Bunnings, had something of a "soft line" between the Mitre 10 and HTH businesses, both of which were corporate-owned, and the rest of the independents. Mitre 10 certainly wanted to coax more independent stores to join the group. That competitive drive, however, was balanced by the near-equal market share of HTH. HTH also had very strong corporate backing from Woolworths, with its massive investment in Masters. This limited the extent of competitive actions by Mitre 10.

    With the acquisition by Metcash of HTH in late 2016, competitive actions by IHG were directed largely to self-preservation, especially in discouraging either Mitre 10 or HTH stores from leaving the network in the wake of the amalgamation of the two. One aspect of that shift was that the company's public statements as regards competition with Bunnings shifted from providing a safe harbour, to IHG being able to "take it to Bunnings". IHG suggested, in comments repeated in the mainstream press, that its $2.1 billion in annual revenue somehow compared to the $13.6 billion of Bunnings.

    Overall, IHG's actions to retain stores have been successful, with relatively few leaving, even after the announcement that the Home brand would eventually become secondary to the Mitre 10 brand in 2020. Publicly Mr Laidlaw has stated that IHG has lost only a few smaller stores to the Hardware & Building Traders (HBT) group, as of the end of the first half for its FY2017/18.

    Perhaps encouraged by that success, by late 2017 there began to emerge moves by IHG to compete more directly with other independents. This went beyond encouraging more stores to join IHG. Instead, it shifted to taking marketshare away from stores in the independent sector.

    Take, for example, the recent dustup between Natbuild and IHG regarding allegations of unauthorised access to a database of trade agreements made between the former and its suppliers. This could be taken as a clear sign of a change in competitive strategy at IHG. While there has never been any suggestion in these allegations that this was part of a formal strategy by IHG, in HNN's opinion the allegations portrayed the actions of not just one or two "rogue" individuals, but showed a wider (though limited) involvement. Those allegations (if they were factual) indicate a degree of independent-on-independent competition that is completely new to the market. (We note that, according to industry sources, a settlement has been made in this case.)

    From this we can see that the independent market, after the consolidation of the market power of HTH and Mitre 10 into a single entity, has fractured into two distinct, competing parts. This split market operates alongside the existing competition with Bunnings.

    In FY2018/19 Bunnings, with the divestment of Coles by its parent company Wesfarmers, and the cessation of its UK-based expansion, will likely be stepping up its competitive pressure in the Australia hardware market.

    This combination of factors means that as we move into FY2018/19, the overall hardware retail industry is facing a very different competitive situation from that of the previous six or seven years.
    IHG and critical mass

    While this is the overall picture, its effects on individual store retailers remain muted, so far. Most of the retailers in IHG might compete avidly with nearby stores from other buying groups - but no more avidly than they would with stores from IHG that are also located in their immediate geographic market area.

    In general, all independent retailers see themselves as sharing a great many values and vulnerabilities with most other independent stores, from all buying groups. Some of that unification is an indirect result of having to constantly deal with highly effective competition from Bunnings over the past eight years.

    The reason why store-on-store competition is not noticeable just yet is that the real competitive arena is currently at the supplychain level. Each sector of the current market has its own supplychain strategies. While these have broad similarities, they also have important differences, and carry varying strategic consequences.

    The Bunnings strategy is very sophisticated, and makes complex use of captive brands and, in the case of certain suppliers, what we might even term captured brands (Irwin being an example of the latter). This is a supply (rather than purchasing) strategy, in that it reaches all the way back to the manufacturing process for many products. It is this strategy that in many ways is responsible for creating the market conditions under which the entire market operates.

    The IHG strategy is simpler, and borrows heavily from the Mitre 10 strategy, which was in turn largely modelled on the overall strategy of Metcash's wholesale food businesses. In that strategy, a system of distribution (as opposed to storage) warehouses is central to a buying system that seeks to purchase goods in bulk, then distributes these directly to member stores. This model is aimed at creating highly efficient purchasing, such that IHG can pressure suppliers into ever-lower prices, creating - in theory - wider profit margins and/or higher sales volume through lower prices.

    Key to the success of this strategy for a wholesaler such as IHG, which has a far from dominant position in the market, is the consolidation of demand. The fewer suppliers it contracts with, and thus the higher the volume for each of its product lines, the more pressure it is able to exert on suppliers, and the better the deal it will be able to obtain.

    Yet, as the majority of the stores in its retail network are independently owned, it cannot overtly control what is sold. It can, however, exert some influence through, for example, requiring that stores stock items marketed through a print mail catalogue, or promoted on TV and radio. Incentives, such as the Sapphire store program, can also help to impose narrower choices by placing constraints on retailers.

    Ultimately, of course, if all goes according to plan, and IHG is able to reach a kind of critical mass of order consolidation, the lower prices on its approved product lines will be so attractive that stores will have little inclination to order anything outside of them. This creates a circular relationship were lower prices drive concentrated demand, and concentrated demand further drives lower prices.

    Both Bunnings and IHG seek to use scale to obtain lower prices. The scale (order volume) that Bunnings provides across several lines of goods is enough to facilitate manufacturing economies, as typically the production cost-per-unit drops as volume increases. That applies less frequently to the level of scale that IHG provides. Both, however, can provide scale benefits that reduce distribution costs, especially for imported goods. And, of course, through guaranteed forward order volumes, both substantially reduce risk for suppliers, which, in a very fragmented market, has considerable value.
    Independents and scale

    In the third sector, outside Bunnings and IHG, made up of small independent buying groups, strategies have until recently been much simpler. Several of these groups were formed as something of a "rebellion" in the late 1990s against what were seen as restrictive and unprofitable requirements by the Danks and Mitre 10 management of the time. Their goal back then was to bring together retailers into groups which could better negotiate with suppliers to get sharper deals on supply price and rebates than retailers could manage on their own.

    As these groups have grown in terms of size and complexity, their strategies have shifted. There are, at the moment, really two main aspects to these strategies.

    One of their most important developments (from the perspective of the overall health of the market) has been the introduction and support of comparatively new brands and suppliers. As many of these brands are, to some extent, excluded from dealing with Bunnings and/or IHG, or have only a minor presence in those retailers, they are eager to cultivate alternative distribution.

    Doing deals with these brands provides the buying groups with two key advantages: lower prices and better rebates, as well as a clear point of differentiation from larger retailers and retail groups.

    The second part of the strategies has to do with scale. However, scale for the smaller buying groups behaves differently that it does for the other two market sectors.

    Over the past two years, these buying groups have begun to follow IHG somewhat in terms of trying to concentrate orders through an elevated group of suppliers, so as to increase volume, and create further opportunities for better margins and/or larger rebates. While this does certainly make sense, and does deliver definite benefits in some areas, it may be a case of pursuing a smaller advantage at the cost of a greater one.

    To uncover some of the potentially greater benefits in the market, it is necessary to look at:
  • what the goals of independents are in terms of pricing strategies,
  • the types of suppliers they deal with and how potential scale affects each of these, and
  • how the division of the independent market into two discrete sectors has changed the situation.
  • Pricing and market goals for independents

    In analysing pricing strategies it is almost impossible to start anywhere other than the influence of Bunnings on the market. Bunnings has used its scale to bring prices down very low in certain key areas, such as power-tools, to the extent that many small- and mid-sized independents have all but given up on these ranges.

    As a result, one of the primary considerations for small retailers is not to achieve price leadership, but rather to achieve "price nullification". As much as possible, they want to remove price as a consideration.

    This is just the start of this article. To read the complete text, please download our HI News PDF magazine by clicking/tapping on the following link:
    HI News Vol.4 No.4: Can buying groups evolve?
    Bunnings misses
    Bunnings misses the mark in the UK
    HNN Sources
    The Homebase store layout when acquired by Wesfarmers
    Bunnings UK, much like Bunnings Australia
    Click to visit the HBT website for more information
    In what for many was a surprise, on 25 May 2018 the Australian conglomerate Wesfarmers announced the divestment of its Bunnings UK and Ireland (BUKI) division.

    This does not affect the ongoing operations of its Bunnings Australia and New Zealand (BANZ) division, which will continue as is. In answer to an analyst's question about whether there would be changes to the senior executives managing BANZ, as Wesfarmers brings some personnel back to Australia, Wesfarmers' recently appointed managing director, Rob Scott replied that:
    No we don't see any disruptions there... A number of the most senior team members will remain on with [Homebase], which I think is good for the business and good for the team. There may be a few team members that do relocate back to Australia, and we will work through that in the coming months, but no material impact to either business.

    The divestment is expected to be completed by 30 June 2018. BUKI's operations will be taken over by Hilco Capital, a private equity firm with a record of UK retail turnarounds.

    It has been reported that the transaction was based on the nominal payment of GBP1.00, but Wesfarmers has retained rights to receive 20% of any equity distribution subsequent to the further sale of Homebase. The agreement is not time-limited. Importantly, however, the agreement means that Hilco will be responsible for all lease entitlements, which relieves Wesfarmers of a substantial potential burden.

    The announcement was accompanied by a presentation to analysts, which was attended by Mr Scott, and the company's chief financial officer, Anthony Gianotti. In his prepared remarks, Mr Scott stated that:
    Homebase was acquired by Wesfarmers in 2016. The investment has been disappointing, with the problems arising from poor execution post-acquisition being compounded by a deterioration in the macro environment and retail sector in the UK. While it is important that we learn from this experience, this should not discourage our team from being bold and diligent in pursuing opportunities to create shareholder value.

    In other remarks, Mr Scott repeatedly highlighted BUKI's dismissal of all of its executive staff, a move instigated by the division's managing director at the time, Peter Davis, as being one of the major mistakes Wesfarmers made.

    The company announced that it expects the divestment to affect its FY2017/18 by between GBP200 million and GBP230 million, depending on elements such as pension contributions. Financial analysts estimate the overall loss from the BUKI venture may be in excess of $1.25 billion.
    Analyst questions

    Many of the questions that analysts asked were about how accountability for the loss of such a substantial sum would flow through to management and board members. Though not mentioned by name, much of that accountability would likely rest on the shoulders of the former managing director of Bunnings, John Gillam, and the former managing director of Wesfarmers, Richard Goyder.

    They were the primary architects of the deal to acquire Homebase. Equally, though, Mr Gillam did not take a prominent role in Bunnings management during the period when Homebase was being transformed in the UK.

    Mr Scott pointed out that decisions about how accountability would be enforced were up to board and management processes in Wesfarmers, and that it would not be appropriate for him to comment. However, he gave what assurances he could, including his personal view that the losses incurred should result in some form of consequence.

    Perhaps the most interesting exchange took place between respected JP Morgan analyst Shaun Cousins and Mr Scott. Mr Cousins followed up a previous question by asking:
    OK, but I mean, wouldn't due diligence actually highlight that you need to have local management in there. So was it a decision where the management effectively ignored some of the recommendations of the due diligence, or were these things not identified during the due diligence part?

    Mr Scott responded:
    Yeah, look I think, Shaun, part of it goes to implementation, and execution, management is critical both at an implementation level and also at a due diligence level.
    I think there was an underestimation - this is just my personal view having reflected on the work - there was an underestimation of the competitive environment, and there was also an overly optimistic outlook in terms of the growth opportunity, and the capital investment that was required. They were some of the issues.
    But as you would know, in every acquisition you make a lot of different assumptions. I feel like I've said a lot about the problems that went into this acquisition, and frankly what I am most focused on, is what can we learn from this, and what can we do better?
    We've acknowledged that we needed to strengthen our capabilities. We have made material changes to strengthen our corporate capability. We have taken a very strong approach from the corporate centre around capital allocation, and we also recognise that when you move to offshore markets, you need to prioritise local management expertise.
    Those are all the things that we are learning. To be frank, we need to learn from this experience, and look forward to what we can improve. I'm not sure what more I can say on what's happened in the past.

    Unusually for Mr Cousins, he added a comment of his own to this, before moving on to the next question:
    It is just concerning that you are looking to grow in an acquisitive manner, where the company's track record is not great, in that [when] you think about BUKI, the WorkWear business you bought from Pacific Brands doesn't appear to have been fantastic, you look at Australian Vinyls, Coles has been executed very well, but caused a lot of damage to group return on equity. It doesn't appear as though Wesfarmers has executed M&A really well over the last decade.

    This is just the start of this article. To read the complete text, please download our HI News PDF magazine by clicking/tapping on the following link:
    HI News Vol.4 No.4: Bunnings misses
    Paint 2017-18: The movie
    Market share percentages and dollar value in USD
    HNN Sources
    PPG results
    The global resources of Sherwin Williams
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    For a business whose level of excitement has been oft-compared (unfairly) to the activity of watching its chief product dry, the paint industry has embarked on some pretty exciting activities over the past year. At times it has seem to come close to one of those fraught big family movie dramas of tangled marriages and divorces.

    What really kicked off the current situation was the move by US paint company Sherwin Williams to merge with fellow US paint and industrial coatings company Valspar, announced in March 2016, and completed in June 2017. That had been (in part) triggered by Sherwin William paints displacing some Valspar paints in US-based big box home improvement retailer Lowe's Home Improvement stores in early 2016.

    That merger created a company that was comparable in size to the two other leading companies in the market, the US-based PPG and the Dutch-based AkzoNobel. PPG, partly in reaction to that move, then began a process of attempting to acquire AkzoNobel, which would have created the world's largest paint and coatings company. The first proposal was made in March 2017, and offered a 30% premium on the company's share price at the time, with a total valuation of EUR22.4 billion. This was rejected, so PPG made a second bid with some improvements in conditions. Again, this was rejected. PPG made a third big, this time for EUR26.0 billion, which represented a 50% premium on AkzoNobel's share price from the previous March - and, yes, it was rejected as well.

    In the midst of this, AkzoNobel's CEO, Ton Büchner, resigned, citing health reasons. He was replaced by Thierry Vanlancker.

    There were a number of consequences that flowed from all this. The one that most recently came to fruition was the resignation of AkzoNobel chairman Antony Burgmans on 26 April 2018. He has been replaced by Nils Andersen, former CEO of the Danish shipping-to-oil conglomerate AP Moller-Maers and Carlsberg, the Dutch brewer.

    Mr Burgmans led the company's opposition to the takeover by PPG, a role which put him at odds with many investors in AkzoNobel, in particular the US-based hedge fund Elliot Management, which brought a court case to force AkzoNobel to consider the takeover offers (which it lost), and to oust Mr Burgmans. A key part of Elliot's argument was that the Dutch resistance was hypocritical, as AkzoNobel itself had grown through acquisitions, most notably of the Swedish based Nobel, and the UK-based ICI.

    PPG's offer for AkzoNobel took place immediately before a hotly contested Dutch election, and it led to calls for legislation to be enacted which would have introduced a mandatory one-year "cooling down" period for any foreign company attempting to take over a Dutch-based one. However, the law was widely ridiculed by academics and others, who pointed out that it would have a strongly negative effect on the business environment and economy of Holland.

    The real ongoing legacy of all this, however, has been a series of promises made by Mr Büchner prior to his resignation regarding a series of reforms AkzoNobel would undertake. The purpose of those promises was to present the company as one that could produce the same level of shareholder return as would have been generated by simply accepting one of PPG's offers. To quote from an article published in The Economist newspaper on 22 April 2017, entitled: "AkzoNobel, under siege, makes unrealistic promises about growth":
    The future for AkzoNobel is dazzling - if you believe Ton Büchner, its chief executive. The boss of the Dutch paint-and-coatings firm reported a solid set of quarterly earnings on April 19th, then promised a new era of rapid growth and investments. Shareholders are to get lavish dividends this year. The firm will break up its ungainly conglomerate structure. A speciality-chemicals part of the business will be sold or listed separately next year.
    Mr Büchner has no choice but to talk things up, if he is to justify rebuffing two recent takeover offers from a similar-sized American rival, PPG.
    Akzo's promises were welcome. But like a newly opened tin of paint, they made some heads spin. After years of eking out smallish gains mostly through cost-cutting, the firm is suddenly to boom. Akzo had previously forecast that returns on sales would be 11% by 2018, already well over its average of less than 9% since 2008; now the CEO promises a rate of 14% by 2020. The firm, which had revenues of EUR14.2 billion in 2016, has emerged from a difficult period. It bought Britain's Imperial Chemical Industries (ICI), the owner of Dulux paint and other products, a decade ago, absorbing it as Europe fell into a slump. The group's recovery since looks solid, but not of the sort to match Mr Büchner's bold targets. "It is a huge stretch, it looks really tough," is the verdict of Jeremy Redenius of Sanford C. Bernstein, a research firm.

    To carry on the cinematic comparison, if you were looking for an analogy for the way AkzoNobel has behaved for the past 12 months, a good one would be one of those chase scenes from a thriller movie. You know the ones, where a protagonist is chased down alleyways and through buildings, all the time knocking over file cabinets, slamming doors, rolling out garbage dumpsters in an effort to impede the progress of his or her pursuers, usually to little or no avail.

    AkzoNobel's version of this has included moves such as a mooted merger with US-based paint company Axalta, an effort which eventually failed on 21 November 2017. Had AkzoNobel completed that merger, it would have ended any effort by PPG to acquire it, as Axalta pursues many of the same markets as PPG, and the anti-trust complications alone would have caused it to fail.

    Then there is the sale of Specialty Chemicals to The Carlyle Group and GIC for EUR10.1 billion. Though with that move, some of the double-bind the company finds itself in is evident. In order to keep its shareholders satisfied, it is going to return the profits from that sale to them, which means it can't use those funds to leverage acquisitions, or fund its restructuring program.

    Meanwhile, AkzoNobel's results for its 2017 were somewhere between "flat" and "dismal", depending on which analysts you read, and it has followed that up with a first quarter for 2018 that also missed expectations.

    In its results the company promotes the many changes and new things it is creating, while downplaying these results as the consequence of "temporary headwinds", brought about by currency fluctuations and raw material price increases - headwinds which most of the rest of the industry seemed to have little trouble predicting.

    We all know how these chase scenes typically end: the three-metre high wire fence you can't climb over. In AkzoNobel's case, that is likely to be its 2018 results. We'll have to wait and see.

    Finally, of course, no movie is ever complete without that final twist, which in this case is a scandal that has broken out at PPG. It seems that financial reporting guidelines have been breached by its financial controller, Mark Kelly (allegedly), who has subsequently been dismissed by the company. Initially the error were thought to be limited to its first quarter report for 2018, where its net income before taxes had been overstated by USD7.8 million. Further investigation indicates that there were further errors amount to USD2.1 million for the second quarter of 2017, and USD4.7 million in the fourth quarter of 2017. As they say (truthfully) in the movies, it's the sort of thing that could happen to anybody.

    As for Sherwin Williams, the company has now succeeded in pushing some PPG paints out from Lowe's, though the home improvement retailer will continue to stock many of the other great products PPG makes, such as the very popular Liquid Nails. And in "turnabout is fair play", PPG has likewise displaced some Lowe's wood stain products from the archrival of Lowe's, The Home Depot.

    Sherwin Williams also enjoyed strong improvements in its overall numbers due to the consolidation of results from Valspar operations. Even without that extra, however, the company recorded good results both for 2017 and the first quarter of 2018. In the words of John G. Morikis, chairman, president and chief executive officer:
    2017 was a year of record sales, net income, earnings per share, cash and EBITDA, but it will best be remembered as the year in which we joined forces with Valspar. The enormous amount of effort and energy invested over the past seven months in bringing these two great companies together, strengthening our customer relationships, defining the right organisational structure and building momentum in every line of business is transforming Sherwin-Williams into a faster growing, financially stronger and more profitable enterprise. These efforts will continue throughout 2018 with similar effect.

    This is the first in a series of four articles on the paint category. To read the other three, please download our HI News PDF magazine by clicking/tapping on the following link:
    HI News Vol.4 No.4: Paint 2017-18: The movie
    Big box update
    Bunnings Baldivis officially opened in a former Masters site
    HNN Sources
    The Toowoomba arm of Hutchinson Builders is building the Warwick store in Queensland
    An artist's impression of the proposed Bunnings store on the Frankton Flats, Queenstown (NZ)
    Click to visit the HBT website for more information
    Bunnings in Baldivis (WA) and in Canberra Airport opened on a former Masters while Katoomba (NSW) is due to open at the end of June; structures for the Bunnings store in Warwick (QLD) are being erected and construction imminent for stores in Kingaroy (QLD) and Port Macquarie (NSW); Bunnings New Zealand is appealing a decision for its proposed store in Queenstown.
    Store openings, now and in the near future

    Bunnings stores have opened or are about to be open in Baldivis (WA), Canberra Airport (ACT) and Katoomba (NSW).

    Bunnings in Baldivis (WA) opened to big celebrations recently, with Australian Paralympian Brant Garvey joining team members to launch the store.

    The 13,000sqm outlet had a soft launch before hosting an official opening ceremony. Located on the corner of Safety Bay Road and Baldivis Road, it opened to local fanfare after Masters Home Improvement shut its doors in the same location more than a year ago.

    Complex manager Darren Feenstra praised his team for working to fit out the store extensively in less than a month.

    Bunnings is due to open in Katoomba (NSW) soon, just a block away from the old Home Timber & Hardware store. And in preparation, the Home store is transforming into Mitre 10 with a major refurbishment.

    Store manager, Rhonda Steed, said it was bought by Metcash about 18 months ago and is being rebranded as a Mitre 10. She told the Blue Mountains Gazette:
    ...It will be a Sapphire store - a bit more like a shop experience than a warehouse experience. It's like a total revamp. It will give us the best we can have to tackle our friends down the road so we're very happy with that.

    Ms Steed also said Metcash had "armed us with a much ammunition as we can have" to counter the opposition.

    Down the road, where shelves are being stocked and landscaping works being completed, Bunnings said it is employing more than 50 locals in its new store. Manager, April Spillett, said she was excited to welcome residents to the store, as well as helping out in the community.
    Team members have worked together to assist in revamping the outside spaces and sensory garden with new garden beds and refreshing the sitting area at Baptist Care Morven Gardens Aged Care Centre.

    A Bunnings spokeswoman added:
    Bunnings competes with a number of different types of businesses in the home improvement and outdoor living market and find there is ample room in the market for all to operate successfully.

    HI News Vol. 3 No. 7: Blue Mountains store close to Home, page 11
    Canberra Airport

    Rugby league legend and head coach of the Australian national rugby team Mal Meninga officially opened the new Bunnings Warehouse at Canberra Airport.

    The $42 million store covers more than 13,000sqm and is Canberra's second largest Bunnings outlet, the fifth in the state. There are already Bunnings stores in nearby Fyshwick, as well as Gungahlin, Belconnen and Tuggeranong. Complex manager Robert Manning said:
    Our new team members have assisted in local community projects such as revamping the outside spaces at Bungendore Public School to celebrate its 100-year anniversary. The team has also given the back garden at local YWCA Refuge House a makeover and supported Hackett Preschool by upgrading its playground.
    Bunnings stores in the pipeline

    Port Macquarie (NSW), Warwick (QLD) and Kingaroy (QLD) are set to have new Bunnings stores.

    Building on the Bunnings store in Warwick (QLD) has begun with concrete walls being placed on the site. Bunnings general manager - property Andrew Marks said:
    Construction has progressed to the erection of the external concrete wall panels with structural steel to be added shortly. The new Bunnings Warehouse Warwick represents a $16 million investment in the local economy and will span approximately 7000 square metres once complete.

    The new store is expected to open in late 2018.

    The Toowoomba arm of Hutchinson Builders is in charge of the project and is fabricating all concrete wall panels on site. Southern Downs Mayor Tracy Dobie said it was great to see the development forging ahead.
    They are tripling the size of their business, which will be positive for employment and the economy of the region.

    HI News Vol.4 No.3: Plans for more Bunnings stores underway, page 18

    The proposed Bunnings Warehouse store in Kingaroy (QLD) is a step closer to starting construction following the tender process for builders recently.

    A Bunnings Warehouse spokeswoman said the time line for construction depended on which builder secured the contract. She told the South Burnett Times:
    Until we review the tenders received and allocate a builder, we won't know any timings.

    The South Burnett Regional Council approved the new development in November last year. Bunnings is expected to spend about $15 million building the new store, which is estimated will provide 60 new jobs.
    Port Macquarie

    The planned Bunnings Port Macquarie store is expected to be operating by early 2019. Mr Marks confirmed that work at the site is likely to commence soon. He told Port Macquarie News:
    We have received development approval to build a new Bunnings Warehouse in Port Macquarie which will replace the existing store. The new Bunnings Warehouse Port Macquarie represents an investment of over $43 million...

    Mr Marks said Bunnings looks forward to continuing to work with Port Macquarie-Hastings Council and the local community throughout the construction of the new warehouse.

    Big box update: Plans for more Bunnings stores underway - HNN
    Bunnings battle in Queenstown NZ continues

    Bunnings has appealed a decision to decline consent for a store it proposed to build on the Frankton Flats, beside State Highway 6, in New Zealand.

    In appealing the entire decision, Bunnings said the subject site was located within an area "in a dynamic state of development and urbanisation" where there was a variety of commercial, retail, and light industrial developments, either constructed, under construction, or recently consented.

    Bunnings had identified the site on the Frankton Flats as the "ideal location" to enter the "booming Queenstown construction and trade supply market".

    The new store would "increase competition between trade suppliers in the Queenstown market and lower the costs of construction, and therefore housing, along with other projects".

    The company had worked extensively with the council before lodging a consent application and, as a result, made significant adjustments to the layout and design, the appeal notice said. Bunnings said the commissioners erred in their decision.

    It also said there were two key questions at issue during the two-day hearing - whether a Bunnings store would be an appropriate and compatible activity for the site and, if so, whether the effects on the environment were appropriately avoided, remedied or mitigated.

    While a council officer had recommended consent be declined, citing, in part, adverse effects would be more than minor in relation to the loss of industrial-zoned land, urban design, visual and signage effects, commissioners held the effects on the district's industrial zoned land would be "minor only". That view should be upheld, the appeal notice said.

    A finding by commissioners that the effects were more than minor and the development contrary to the objectives and policies in the district plan, however, "should be rejected".

    Bunnings sought for the appeal to be allowed and the application granted, subject to conditions offered at the hearing, or such conditions the court considered appropriate and for "costs of and incidental to" the appeal.

    Hi News, Vol.4 No.2: Bunnings NZ rejected for Queenstown store, page 18
    Indie store update
    Goodwin and Storr Mitre 10 will be honoured by the Lockyer Valley Chamber of Commerce and Industry
    HNN Sources
    Business as usual at Kellys Mitre 10 Wodonga
    Click to visit the HBT website for more information
    A Mitre 10 store is celebrated for its longevity; a 58-year-old hardware business in NSW will shut its doors for good; and Kellys in Wodonga (VIC) shows consistency after changing to the Mitre 10 banner.
    Goodwin & Storr's long term legacy

    The Goodwin & Storr Mitre 10 in Laidley (QLD) will be honoured in the Long Established Category at the Lockyer Valley Chamber of Commerce and Industry Business Recognition Dinner later this month.

    The store started out as a fabrication business when Bill Goodwin and John Herbert "Herb" Storr took it on "more by accident than anything" over a century ago, according to the Gatton Star newspaper.

    The firm John Storr's grandfather began has evolved into a major hardware store in the region. He explains:
    During the 1920s when Peter Nelson, who had the hardware shop in town, passed away, his son sold the business. That's when we got into hardware as well as making tanks and iron mongering.

    In the 1950s, Mr Goodwin left the business and Herb ran things with his son, Arthur. Mr Storr's own father went into partnership in the business in the 1980s when he returned from overseas.

    In 1992, Mr Storr joined the business - in which his three sisters are partners - and during his time he has seen plenty of change. He said it was vital to keep on top of the market and make sure he was selling things people wanted.
    When I started here 30 years ago we were selling different products. We would have sold 90% nails and 10% screws and, of course, there were hammers and things.
    Now we probably sell 90% screws, 10% nails and it's not hammers any more, it's all electric screw guns. The nail section has completely diminished...You can have the same product in two different colours and one won't sell, the other will walk out the door. And what sells in Brisbane won't necessarily sell in Laidley, they're completely different markets.

    In 2011, Mr Storr made the decision to focus on hardware and get out of tank manufacturing. He said:
    We stopped the tanks after the last rebates back in about 2011 because the business died.

    Shifting the focus meant he was able to invest in expanding and renovating the hardware store. He said:
    We did about a quarter-of-a-million-dollar expansion back around that time. You've got to keep reinvesting in your business otherwise you just keep losing."

    After 105 years in business Mr Storr is not sure what the future will hold, with no family members interested in taking over once he retires.
    My dad asked me to get it to 100 years old and he said 'I don't care what you do after that'. To get it to 110 would be a good score. I'm 58, I don't want to be like my grandfather and uncle, working until I'm 100 and not have a life.

    Mr Storr said he would like to see the business continue but admitted it was "hard yakka" and there were easier ways to make money, especially with pressure from major stores like Bunnings.
    Bexley North Hardware calls it a day

    Peter Blackwell is closing the hardware business started by his father at Bexley North (NSW) 58 years ago, reports The Leader newspaper. Blackwell's Bexley North Hardware closes its doors at the end of June. He said:
    This one little shop has supplied hardware to some major projects including the M5, the Port Botany container wharf expansion and the upgrade of railway bridges at Bardwell Park, Kingsgrove and Narwee.

    Mr Blackwell's father, Ronald opened the family business in the late 1960s and Peter bought it from him 21 years ago. He said:
    We don't have any kids and my nephews and nieces aren't interested in taking it over...A small hardware shop is not as viable as it used to be.

    Mr Blackwell has seen a lot of changes in Bexley North over the years. He explains to The Leader:
    The area has an ageing population and now the elderly are passing away or going into retirement villages. The new people moving are either in too much debt or are not doing their own handy-work but getting someone else to do it.
    Where the older generation did it themselves the new generation doesn't know what they are doing.

    Mr Blackwell said the attitude of some of his bigger customers, particularly the local schools, has also changed when it comes to supporting small businesses.
    We used to have a lot of accounts with the schools. But the new principals always tell their maintenance people to go to Bunnings.
    I know we are still officially on the books with the schools. We are still asked to source specialist supplies. They have always had good customer service here. Otherwise, they go to Bunnings.
    I don't know why the government is encouraging them to do it just to keep the big boys going.

    Mr Blackwell said he has three categories of customers: project managers covering major developments; developers building units, and people building their own homes.
    The only people we have had trouble with payment are the developers. But I never have trouble with payment from the top end project managers or the home handymen. Sometimes a project manager would ring and ask for something that could not be sourced anywhere or that they needed in a hurry and I would do it.

    There have been difficult times in the past when Mr Blackwell was hit by a car and seriously injured. His wife Karen had to run the business for two years but he was able to recover and make it back to working full-time. While Mr Blackwell won that battle, he said the fight with big business has defeated him.
    When the new Bunnings opened at Kingsgrove I thought we would lose about 30% of our clients but we lost 60%...For Bexley North it means that personal service will be lost.
    Kellys Wodonga re-brand two years on

    The Border Mail newspaper recently profiled Kelly's Wodonga and reports that despite external changes, the owners and service are still the same with Adrian (AJ) and Shelley still managing the store under the Kelly's Mitre 10 Wodonga brand.

    The husband and wife team have been operating the business since 2006, starting as Kelly's Wodonga. They changed to take on the Mitre 10 banner in July 2016. AJ said:
    We are still the same business as we were when we were Kelly's. We just added some additional Mitre 10 products to our existing lines. Even though we are just a husband and wife business, we are backed with the buying power of Mitre 10, NRI and AIS, which means that our prices are competitive with the big corporate enterprises.

    Agricultural retail has been in the Kelly blood for some time. Adrian's father, Des Kelly, was a stock and station agent as was his father.
    You can quite often see any of our four kids in the business as well. Samson now works on one of the counters and Zach helps customers out with their needs and loading cars. Cate and Isla help with putting stock away and cleaning shelves on occasions. Also our niece Gabbs has joined our team, and she is a great asset.

    Indie store update: Kellys Wodonga part of Mitre 10 - HNN
    Supplier update
    Reece will operate MORSCO separately to its Australian and New Zealand businesses
    HNN Sources
    Allegion to acquire Australian brand, Gainsborough Hardware
    CSR's Hebel precast concrete blocks and panels benefit from residential builds
    Subscribe to HNN weekly e-newsletter
    The US housing sector has been targeted for growth by Reece; Gainsborough Hardware and API Locksmiths sold off to Allegion; CSR believes there is a shift toward residential knock down and builds; Ardex takes a majority stake in DTA; Boral sells off "non-core" business; Portwest completes Huski workwear acquisition; Genuine tradies star on Bostik campaign; and Sika and Saint Gobain come to an agreement.
    Reece expands into US, after 10 year study

    ASX-listed plumbing products company, Reece Group has maintained a cautionary approach as it acquires Texas-based distributor Morsco for AUD1.9 billion including debt.

    Morsco generates annual sales of USD1.72 billion and is being sold by its private equity owner Advent International. It operates 172 branches along 16 states in southern United States, between the east and west coasts. The deal will double the size of the normally conservative Melbourne-based company.

    This acquisition will give Reece access to what it has identified as the fast growing Sun Belt region which includes Florida, Louisiana, South Carolina and Texas. Reece chief executive Peter Wilson said in a statement:
    It's a market that's forecast to grow at twice the rate of the Australian market and it is currently about eight times the size.

    Reece said the deal will be funded through a combination of cash and debt, adding that it will also raise AUD560 million through a stock offering. The billionaire Wilson family, which owns a majority stake in Reece and is backing the deal, will subscribe to AUD300 million worth of shares in the offering. A bulk of the funding, however, will come from an underwritten USD1.14 billion secured credit facility.

    Reece said it will operate Morsco separately from its Australian and New Zealand businesses and there would be no attempt to try and rebadge the Morsco stores. It will also retain the US management led by CEO Chip Hornsby who has been at the helm since 2011.

    It will also deploy several of its own team members to the US to help with collaboration and sharing of industry knowledge and expertise.
    Overseas markets

    As Australia's biggest plumbing and bathroom products company, Reece had run out of local acquisition opportunities where it already has a large portion of the bathroom and plumbing supplies market.

    Mr Wilson said the company has been carefully studying the US market for 10 years. It had been talking with Morsco and Advent for two years. Serious due diligence had begun in January this year. He told Fairfax Media:
    We've certainly done our homework...We're really comfortable we've got a handle on it.

    Mr Wilson said Reece had gained extra confidence about the US through its relationships in Australia with ASX-listed Reliance Worldwide, which has a big presence in the US plumbing market with its Sharkbite push-to-connect fittings.

    He said the acquisition of Morsco is a "transformational opportunity" that will drive returns for the next generation of shareholders.
    It has a strong platform across the sunbelt states. It's in the growth states.


    Reece also gave guidance for the fiscal year ending June 2018. It expects an after-tax profit of AUD223-AUD230 million, 5% higher than last year. It forecast sales of AUD2.65 billion-AUD2.70 billion.

    It said the results are driven by new branch openings, leveraging of its supply chain, investment in improving and delivering great customer service and an enhanced online offering for both trade and retail customers.

    Reece, which has a sharemarket value of AUD5.4 billion, runs 600 plumbing and bathroom products showrooms across Australia and New Zealand. It has annual revenues of AUD2.4 billion.

    Reece fortunes connected to housing - HNN
    Allegion to acquire Gainsborough, API Locksmiths

    Global security products company, Allegion has agreed to acquire GWA Group's door and access systems business through one of its subsidiaries. It includes Australian brands Gainsborough Hardware and API Locksmiths. The transaction is expected to close in the third quarter of 2018. GWA managing director, Tim Salt, said:
    The door and access systems business is strong, and we believe Allegion can maximize its potential. Allegion's global scale, innovative technologies and supply chain capabilities will enable both Gainsborough and API to further enhance their offerings to customers.

    The GWA door and access systems business generated sales of approximately AUD95 million for calendar year 2017. The business will operate in Allegion's Asia-Pacific region. Allegion president, chairman and CEO, David D. Petratis, said:
    This strategic acquisition bolsters Allegion's presence in Australia and significantly increases our scale in the Asia-Pacific region ... We're enhancing our residential presence with market-leading positions and longstanding customer relationships, all while accelerating our development of electronic security solutions. This is consistent with Allegion's growth strategy in the region - and highly complementary to our core business.

    The transaction is valued at AUD107million. Allegion plans to fund the acquisition through existing cash on hand and borrowings under its revolving credit facility. Excluding merger and acquisitions costs, Allegion expects the transaction to be slightly accretive to adjusted EPS for 2018.
    Knock down home builds help drive CSR profit

    CSR managing director Rob Sindel said an acceleration in commercial construction of hotels and aged care homes and people wanting to shift into a detached house from an apartment will drive demand in the next 12 months.

    Mr Sindel also said there was a renewed upturn recently for detached houses, particularly on the eastern seaboard.

    As a supplier of Gyprock plasterboard, PGH bricks, Hebel precast concrete blocks and panels, and Bradford insulation and storage battery products to the building market, Mr Sindel believes the company is in a solid position to make the most of this opportunity.

    Mr Sindel said housing markets had benefited from large migrant intakes over the past few years, which had fuelled strong population growth, and while many families had started off living in apartments, they were increasingly looking to upgrade to a detached house. He told Fairfax Media:
    A lot of people start off in an apartment. They want to live in a house in the suburbs.

    The demand for a detached house has been reinforced constantly by the long line-ups of people prepared to camp out to secure a block of land when they were released to the market by developers, according to the company.

    Mr Sindel said CSR had also noticed a marginal slowing in the renovations market, with more people instead opting to demolish an existing property and then build a new home on the same block of land.
    They want a new house, but they like the street.

    He believes heavy stamp duty costs were a big deterrent to moving. Once council approvals had been granted, it usually took far less time for a new build, rather than a more complex renovation. A new house might take six months, compared with a complex renovation that may run for 12 to 18 months.

    The desire for a speeded up process was also playing out in rising demand for Hebel aerated concrete blocks as a building material. Mr Sindel said the use of Hebel was growing strongly off a low base, with builders becoming more enthusiastic about it. CSR is investing $75 million to expand capacity at a Hebel plant at Somersby on the NSW central coast.
    A lot of it is being driven by the builders. It's faster and it's easier to construct.

    While many experts are predicting a softening of property prices, Mr Sindel said first home buyers would welcome it even though existing home owners liked the wealth effect from ever-rising prices.

    The only building products unit that turned in a softer annual performance was Monier roofing tiles, which experienced lower demand in Queensland.

    CSR generates about 12% of its revenues from high-rise apartment construction and while that market has softened substantially, commercial construction was gaining momentum.

    CSR had benefited from the construction of the new Optus sports stadium in Perth and from Commonwealth Games construction on the Gold Coast. But there were also improving activity levels in construction of hotels, hospitals and aged care homes.

    Energy costs are slowing down further growth on the company, jumping 12% over the past year and costing an extra $9 million.

    Former managing director of Bunnings, John Gillam, has also just become the chairman of CSR, taking over from Jeremy Sutcliffe.
    DTA majority owned by Ardex

    The Ardex Group announced it has attained a strategic stake in DTA, a quality tools, trims and machinery supplier for the wall and floor market in Australia, New Zealand and USA. DTA was established in Australia in 1976, and considered a market leader in the industry.

    Dedicated to delivering innovative, dependable products, DTA focuses on servicing the professional contractor. It will continue to operate independently from the Ardex companies in the US, Australia and New Zealand. Phillip Cozens, owner of DTA, said:
    DTA is proud to be welcomed into the fold of the Ardex Group. We anticipate building on opportunities for DTA in markets around the world.

    There are no planned changes to personnel in either company.

    For nearly 70 years, Ardex has been a significant supplier of specialist building materials and remains an independent, family-owned business with over 2,700 employees in 50 countries. Mark Eslamlooy, CEO, Ardex Group said:
    This joint venture is an exciting addition to the Ardex strategy of system solutions. The burgeoning synergies we develop with DTA will present additional value to our customers.
    Boral offloads US business, NSW property

    Boral is selling its US concrete and quarrying business for USD127 million (AUD169 million) to Brannan Sand and Gravel Company as it narrows its focus on building products in North America.

    The company said the Colorado-based business had performed well, but it was non-core to Boral's operations. Boral's CEO and managing director Mike Kane said in a statement:
    Boral's strategy in the USA is focused on growing our building products and fly ash businesses. As we continue to strengthen our core business and deliver synergies from the Headwaters acquisition, the time is right for Boral to realise value by divesting the construction materials business in Colorado.

    Boral acquired American building materials supplier Headwaters in late 2016 for USD3.5 billion (AUD4.6 billion).

    Boral expects to make a pre-tax profit on the sale of USD45 million (AUD60 million), which will be included in its financial results for the current financial year. It said the proceeds will be used to reduce debt. Boral has owned its US construction materials and quarrying operations since 2004.

    The company also expects the sale of its Prospect Masonry property at Greystanes in NSW to contribute AUD56 million to earnings for the 2018 financial year. It said the sale of the progressed earlier than expected and will provide a more detailed update at the company's investor day.
    Portwest finalises purchase of Huski

    Irish speciality clothing company Portwest has completed the acquisition of a second Australian brand as it expands its presence in the local market. It has acquired Huski for EUR10 million.

    Although Huski was acquired in October 2017, Portwest could not state the name of the Melbourne-based company due to a non-disclosure agreement.

    This acquisition is expected to more than double the Irish company's turnover in Australia and New Zealand to EUR25 million by 2019, which will represent about 10% of its business. Huski's turnover in 2017 was close to AUD10 million.

    Last year Portwest acquired Australian workwear business, Prime Mover Workwear, for EUR7.5 million.

    Financial director, Owen Hughes, said the company is looking to expand further in the Australia and New Zealand markets. He told The Irish Times:
    This [acquisition] marks an exciting new phase of development for Portwest and we look forward to expanding our reach in this area.

    Founded in 1904 by Charles Hughes as a small shop, Portwest's products are sold in more than 100 countries and it employs over 2,000 people globally.

    Portwest is run by three Hughes brothers and they have grown revenues at the firm from about EUR200,000 in 1979 to EUR126.9 million for the 12 months ending February 2017.

    Irish workwear firm expands in Australia - HI News, page 22
    Workwear category dominated by UK player - HNN
    Bostik's tradie campaign

    Adhesives company, Bostik has hired two genuine Australian tradies as brand ambassadors. Mark Menagatti (aka Spaghetti) and Adrian Franchina have been given the moniker, "Bostik Boys" to represent the brand.

    According to Bostik, Menagatti and Franchina's relationship with the brand will span the next few years. The pair was introduced in a teaser video on Bostik's Facebook and YouTube pages recently.

    The campaign has launched with a television commercial, "Tradie Life'", featuring the Bostik Boys discussing what it's really like to be a tradie. "Due to TV shows, a tradie's life looks easy, but actually isn't as easy as what you think," said Mr Menagatti. The end of the commercial delivers the tagline, "Real Tradies. Not Real Actors". Anthony Voyage, marketing manager at Bostik, said:
    We wanted authentic tradies who are on the tools 24/7. Tradies who wake up before light and come home after dark. We have Bostik products in thousands of tool boxes around the country at any one time and we want our consumers to be proud of our connection.
    We hope the Australian public find this approach refreshing, informative and engaging.

    Bostik plans to build on the Bostik Boys miniseries by exploring the life of a tradie further, giving trade tips and DIY how-to guides featuring the Bostik product line.
    Saint-Gobain, Sika reach deal after takeover battle

    French building materials company, Saint-Gobain has given up its fight for control of Swiss rival Sika in return for a pay-off. This ends one of Europe's most contentious takeover battles.

    The fight for Sika had seen Saint-Gobain tied up in Swiss courts for years as Sika's shareholders and its board fought back against the takeover attempt, which was launched in 2014.

    The complex deal, first reported by the Financial Times, will see Saint-Gobain take a 10% share of Sika. The Swiss chemicals maker can secure its immediate independence while allowing the Burkard family, the heirs of Sika's founder, to exit the company.

    Under the terms, the heirs behind Sika sold their entire 17% stake for 3.22 billion francs (USD3.21 billion) - and 52% of its voting rights - to Saint Gobain, which will give up the special voting rights that were at the heart of the conflict with other Sika shareholders and management. Sika in turn bought an almost 7% holding from Saint Gobain.

    The settlement could herald fresh consolidation in the sector, with the deal freeing Sika to make acquisitions. Chief executive Paul Schuler told the Financial Times:
    With the new structure we can really explore possibilities for Sika.

    The agreement will allow Saint-Gobain to make a profit while retaining its 10% share of Sika. The companies agreed to a two-year lock-up and a six-year period during which Saint-Gobain cannot increase its ownership beyond 12.9%. Sika will also have the right of first refusal if Saint-Gobain wants to sell. Guillaume Texier, Saint-Gobain's chief financial officer, said:
    This deal...creates value for Saint-Gobain. Second, it puts an end to all of this uncertainty. That's what this does as all litigation is finished. And last, it's strategically important as we have 10% of a great company.

    Having failed to take over a market leader in adhesives and sealants, Mr Texier said no decision has been made on how long the French company will hold its stake in Sika beyond the lock-up period.

    He also indicated Saint-Gobain is ready to move on. Construction chemicals remains a strategic area of growth, and small- to medium-sized targets in markets like the US are a focus area, he told Bloomberg.

    Saint-Gobain bids for control of Sika - HNN
    Retail update
    Temple & Webster has released its own paint range developed in conjunction with Taubmans
    HNN Sources
    Australia could have 30 more Ikea stores in the future
    Ikea Australia CEO Jan Gardberg has plans to expand stores in Australia
    Click to visit the HBT website for more information
    The paint range Temple & Webster developed with Taubmans is available exclusively on the retailer's website; and Ikea could have 40 stores in Australia by 2030, up from 10, according to its new CEO.
    Taubmans paint for Temple & Webster

    Online furniture and homewares retailer, Temple & Webster has released its paint line developed in collaboration with Taubmans. Colour by Temple & Webster is made up of 20 low-VOC classic paint shades and on-trend colours designed to work together seamlessly.

    Included in the range are neutral palettes of Chateau, Lighthouse and Pavilion, or the serene, coastal feel created by Treehouse, Ranch and Temple.

    With the added convenience of to-your-door delivery, renovators and decorators have the option to try a ready-made palette of colours or build a custom colour scheme with wall colour, trim colour and accessories.

    All 20 colours come in two finishes; low sheen, available in one and four litre tins; and semi-gloss, available in one litre tins. A low-sheen, white ceiling paint is also available.

    There are also ready-to-go sample pot packs in varying colour combinations, as well as brushes, rollers, trays and drop sheets.
    Ikea sees 30 more stores in Australia

    Home improvement giant Ikea said it will open over 30 new Australian stores. It currently has 10 stores in Australia, but by 2030 the number is expected to increase to 40. And the number could be even greater if "smaller format" stores are opened inside shopping centres.

    The expansion is part of a plan by Ikea's new boss, Jan Gardberg, who has set his sights on rapid growth in Australia, including selling solar panels. He said:
    We have more than 40 years of home furnishing experience here in Australia and we want to take that and transform that home furnishing knowledge into the virtual and electronic world also.

    In addition to its existing 10 stores, Ikea has recently rolled out collection points in regional areas, primarily for online shopping in Queensland, Northern Territory, Tasmania, Canberra and greater Sydney.

    Last year, the company also opened a $150 million distribution centre in Sydney's Marsden Park, underpinning its online shopping push.

    Ikea customers can expect to see fewer human beings at the checkouts in favour of a more "seamless" experience of touchscreens, self-service and online ordering. Richard Harries, head of HR for Ikea Australia, said:
    Our focus is on customer fulfilment. We know we have great possibilities to meet the needs of our customers. The technology that we're looking at is how we can make it as seamless as possible. We're looking at digital screens for the Ikea food business, payment methods - all things to make it a seamless journey.
    Europe update
    The Entrance to B&Q's small-format store in London
    HNN Sources
    Australian retailers may be able to stock Greenman garden tools soon
    MarXman will soon be manufactured, marketed and distributed by GripIt Fixings
    Give to Amnesty International
    B&Q may open more smaller-format stores; Greenman Garden Tools could be bound for Australia; Kingfisher has a worse than expected quarterly result before the announcement of Bunnings' exit from the UK market; and GripIt Fixings will begin to develop sales and marketing initiatives under the MarXman brand.
    Eyes on Kingfisher following BUKI exit

    European home improvement retailer, Kingfisher received a boost in its share price after Australia's Wesfarmers announcement it would sell its UK chain Homebase to restructuring firm Hilco Capital just two years after buying it.

    Andrea Felsted, writing in Bloomberg, also believes this should be an opportunity for Kingfisher boss Veronique Laury, who is trying to lift her company's profit by GBP500 million pounds a year by 2021. But she also thinks the performance has been disappointing, so far.

    The increase to Kingfisher's share price also came after it reported a worse than expected 9% fall in UK same-store sales at its B&Q chain.

    Like-for-like sales at B&Q tumbled 9% in the UK and Ireland in the three months to 30 April. Sales at its French DIY chain Castorama also dropped 8%. The falls led to an overall 4% decline in like-for-like sales for the quarter.

    The wave of extreme cold weather dubbed the Beast from the East had a negative impact on its first quarter results. Chief executive Veronique Laury said:
    It was a challenging start to the year with exceptionally harsh weather across Europe and weak UK consumer demand. This impacted footfall, especially sales of weather-related categories. February and March were particularly affected with sales improving over the course of April and into May.

    Ms Laury said market conditions in the UK remained uncertain and a cooling property market,, as demonstrated by recent weak retail sales. However UK retail sales beat expectations in April, with a stronger-than-expected rebound from March's cold snap.

    Despite the cold weather, sales at Screwfix still rose by 3.6% in the UK, although Kingfisher said sales would have been higher if it had not been forced to close some stores temporarily due to the weather.

    Total sales for the company fell 1.2% to GBP2.8 billion, while sales in the UK were down 3.7% to GBP1.2 billion.

    B&Q is also seeing market share stolen by fast-rising discount chains in the UK. Fiona Paton of GlobalData said chains like B&Q were struggling to cope with fast-rising discounters. She told The Telegraph:
    [B&Q] is at risk of losing ground to discounters, especially B&M. Discounters' collective market share in DIY & gardening is forecast to reach 14.3pc by 2022. It is currently 11.5pc. Consumers are switching to discounters to purchase lower-ticket items such as paint and small tools.

    Kingfisher is half way through a five-year strategy is to cut costs, improve IT and integrate its products across all businesses. Ms Laury insists the company is "on track to deliver ONE Kingfisher strategic milestones for the third year in a row and we continue to see tangible delivery of our plan", and points out her charge has returned a further GBP40 million to shareholders year to date via share buybacks. She said:
    Around 40% of our ranges are now unified and continue to be well received by customers. Sales of these ranges, excluding outdoor products, are up, and we expect to grow the full year group gross margin, after clearance costs. Meanwhile, we are into the final year of our unified IT platform roll out with Poland now underway and Brico Depot France due to start soon.
    Garden tools exporting down under

    Devon-based retailer, Reedy Supplies are planning to set to sell its garden tool brand, Greenman to Australia and New Zealand.

    Reedy Supplies is a family-owned agricultural and horticultural tool retailer and intending to increase its sales exports to 40% after launching its first online store. Founded in 1972, it has been successfully exporting its handmade garden tools to Germany, France, Canada and the United States for two years.

    Now, the company is in discussions for its first orders from a distributor in Australia and a large garden retailer in New Zealand. Adam Greenman, marketing director at Reedy Supplies, told Devon Live:
    Because of the kind of products we sell, our sales are naturally affected by the seasons. One of our main aims in starting to export was to iron out this fluctuating demand. When it's cold here, it's summer somewhere else, which is why we decided to target the southern hemisphere in our bid for growth.

    Following the launch of its online store, the website will be translated into at least two languages as the business looks to increase its international trade. Mr Greenman, said:
    ...We'll be using it as an online catalogue at first, so that customers and buyers abroad can look at our range, but with DIT's (Department for International Trade) help we are also looking into having it translated into other languages to grow our online sales.
    One of the main challenges we've faced is finding accurate information about the business cultures in New Zealand and Australia. We've also found that there is no substitute for meeting buyers and distributors face-to-face if you want to build relationships. By exporting, we've grown as a business and learned a lot about ourselves in the process.

    Interesting links: UK toolmakers launch garden range - HNN
    Smaller store vision for B&Q

    UK home improvement chain, B&Q could stop opening giant warehouses in out-of-town locations to focus on smaller convenience stores, according to chief executive Veronique Laury.

    Asked at the World Retail Congress in Madrid, Spain how stores owned by Kingfisher will change over the next three to five years, Ms Laury hinted that opening convenience stores could be its next move. She said:
    I think there are two directions of travel for stores, I think one of them is ultimate convenience, to be where people want you to be and to be as close as possible to where people live.
    The big impact on that is urbanisation, everywhere in the world more people are living around cities. It's about how you get to those people as close as you can.

    Kingfisher could roll out plans for its B&Q business similar to the rapid expansion of its Screwfix stores, which sell tools for tradies. Screwfix has been a stand-out performer with growth of 16.7% in 2017. Its model of smaller outposts in town centres is a hit with customers who don't want to drive miles to a bigger store.

    Kingfisher aims to open 700 Screwfix stores in the UK, so that 97% of people are within a 30-minute drive of an outlet.

    Ms Laury said stores were also likely to stock fewer products, with staff on hand to offer advice on what to buy.
    I was in one of our stores last week and there was a whole display 10 metres high of head tool replacements for drills. I thought as a customer, who is going to shop like that in five years from now? And actually, I thought, no one.
    We don't need all of that stock in our stores in the future, we definitely don't.

    However, Ms Laury went on to add that she believed Kingfisher was lucky to have such a big footprint in the UK (via its B&Q stores) because e-commerce was so advanced it was "like a lab" showcasing what would happen in other countries. She said:
    What is happening in the UK today, I believe is going to happen in France in two or three years from now and probably in Poland in five years' time. The pace of internet use and mobile equipment in those countries is catching up very fast."
    Response to change

    Ms Laury believes many businesses had simply been too slow to react to the pace of change created by companies such as Amazon. She said the unstoppable boom in online shopping meant Kingfisher's workforce was likely to shrink over the next five years but declined to say by how much.

    It currently employs 78,000 people at its 1,300 stores in the UK, Western Europe, Russia and Turkey. She said:
    For 50 years, retail has been location, location, location. The race was to get the best store in the best location and if there is a cost associated with that it would be fine. Technology has changed all that.

    Ms Laury also told delegates at the conference that fellow retailers must "change or die" as she warned that the industry had to keep up with evolving alongside consumer habits in the wake of mass job losses and store closures.
    The biggest mistake that most retailers have made is thinking they are going to carry on doing what they have always done, with the same number of people and the same number of stores in the same type of location as they always have and just putting digital on top.
    GripIt Fixings signs global licence deal

    UK Building Products (trading as GripIt Fixings) has agreed to a worldwide licence deal with MarXman to manufacture, market and distribute the MarXman, a professional marking tool.

    The license agreement will see MarXman benefit from the international reputation of GripIt Fixings, which exports to 34 countries and has a presence in 5,000 UK stores (including Wickes, Screwfix, Currys, B&Q, Selco and Jewson) and 15,000 stores across Australia, New Zealand (Bunnings and Mitre 10), Canada and the USA (Home Depot).

    MarXman is a tool designed to quickly, easily and clearly mark almost any surface - from tiles to pebble dash, walls to wood or metal, ready for drilling or fixing. It can take the time and frustration out of marking a reference point for fixing or drilling. Founder and CEO of Gripit Fixings Jordan Daykin told Torque-Expo:
    MarXman is a truly innovative product that appeals to tradesmen & DIYers across the globe. Its ability to deliver a simple solution to a common problem aligns with the GripIt philosophy...

    MarXman founder, Martin Chard, said:
    When you consider the success of Gripit Fixings in the UK and overseas, we are very excited about the opportunities this license agreement presents for MarXman and its growth and recognition globally. Our ambition is for every tradesperson and DIYer to have a MarXman in their tool kit.
    USA update
    Home Depot focused on omnichannel initiatives in Q1
    HNN Sources
    The National Hardware Show gets new branding
    A look at True Value's last report as a retail co-op
    Give to Amnesty International
    Marvin Ellison will take on the chief executive role at Lowe's; Home Depot misses first quarter expectations but remains focused on interconnected retail; the National Hardware Show updates its logo; technology recruitment at Home Depot is strategic; True Value reports on its 2017 financial report; and Hillman Group launches its KeyHero system.
    Lowe's names new CEO

    Marvin Ellison has been appointed president and CEO at Lowe's Companies and will join its board of directors. Mr Ellison succeeds Robert Niblock, who previously announced his intention to retire.

    A 30-year industry veteran, Mr Ellison currently serves as chairman and CEO of American department store chain J.C. Penney Company. He also spent 12 years in senior level operations roles with The Home Depot, where he served as executive vice-president of US stores, where he oversaw US sales, operations and Pro strategic initiatives.

    Marshall Larsen, lead director of the board at Lowe's, said:
    Attracting Marvin is a great win for the entire Lowe's team. Marvin is an experienced retail CEO with extensive expertise in a complex omnichannel consumer-facing company. He also brings significant experience in the home improvement industry, with a proven track record of global operational excellence and driving results from both DIY and pro customers. Marvin joins Lowe's at a critical inflection point as we work to enhance our competitive position and capitalise on solid project demand in an evolving consumer environment. We look forward to shepherding an exciting new chapter for Lowe's under Marvin's leadership.

    As Mr Ellison joins Lowe's, he leaves behind a department store retailer in the midst of a turnaround plan that has never quite gained traction.

    At Lowe's, he will find himself in one of retail's brighter spots, where he will predominantly be tasked with making good on the business' broad promise: To help customers love where they live. In order to do that, analysts say Mr Ellison will need put together a business strategy that carves out a distinct identity to set it apart from The Home Depot.

    According to Jefferies analysts, Mr Ellison's previous stint at The Home Depot should be a huge asset, "especially given his focus on store operations, logistics, the Pro, and customer service, all areas that we believe Lowe's needs to improve upon". In emailed comments to Retail Dive, they said:
    The Lowe's brand is solid, its stores have been maintained, pricing is competitive and its balance sheet is strong. However, it does need some shepherding to get it on a path toward stronger growth and higher profitability.

    Neil Saunders, managing director of GlobalData Retail, said any new plan should focus on Lowe's identity as a core DIY retailer. He told Retail Dive:
    It could, for example, develop more of a compelling proposition around indoor decorative projects. Not only are these activities year-round, but they also necessitate a much more inspirational and compelling product mix and store environment. While Lowe's has already made progress in store, including the increased use of specialist advisors, we maintain our view that it has not yet fully capitalized on the opportunity.

    As Mr Ellison's plan comes together over the next few months, Jefferies analysts predict focusing on Pro will be the "single biggest opportunity for Lowe's".
    Mr Ellison was part of developing that winning strategy at [Home Depot] and was closer to the playbook than probably any other candidate for this position. Hence, his ability to adapt key learnings to the Lowe's situation, while maintaining a separate identity, is important and should prove pretty interesting.
    National Hardware Show 2018

    Hardware and home improvement professionals gathered once again at the Las Vegas Convention Center for the 73rd edition of the National Hardware Show (NHS). Rich Russo, vice president of the NHS, said:
    ...With three busy days full of excitement and enthusiasm, we were thrilled to see such a great turnout and hope everyone left feeling inspired by the ideas, best practices, insights and new connections made at the 2018 National Hardware Show.

    As always, a key focus for all who attended were new products and there were several areas where their latest innovations and developments were on display. The educational seminars at the North American Retail Hardware Association's (NRHA) All-Industry Conference were also a popular area for many attendees.

    The Ultimate Backyard was brand-new area that offered a chance for attendees to find outdoor living products in their natural environment: outdoors. The adjacent Tailgate, Backyard & BBQ area has continued to grow each year, and included food, games and music. It gave attendees the chance to experience products in a more interactive way than they might on the show floor.

    Operation Tiny Home also joined the NHS family this year to showcase the trends in tiny and container home construction and raise awareness about housing instability.

    As the popularity of smart home products continues to rise, the NHS provided a new interactive way for attendees to learn more with its Smart Home Virtual Reality Experience. This display offered a virtual reality tour of a fully equipped smart home.

    Attendees who wanted to find "the next big thing" in the home improvement industry could check out Inventors Spotlight to see over 200 new inventions. Inventors also had the opportunity to pitch their products and meet with buyers and potential investors.

    This year, the Featured Product Gallery included New Product World; the Lawn, Garden & Outdoor Living Awards and the Homewares Awards display. Other product areas were the New Product Launch and Made in USA.

    Pet Products continues to be a growing category, and it was a highlighted one at this year's NHS. One trend exhibitors are seeing is that consumers want products that are more natural.

    The International Sourcing area represents how the NHS draws professionals from all over the world. It included exhibitors from China, Hong Kong, India, Korea, Taiwan and Pakistan. Attendees could also find other international exhibitors throughout the show floor.

    The NRHA Village Stage was home to a full slate of industry presentations, exploring everything from competing online to cybersecurity to competing online to managing retailer-supplier relationships.

    The 2019 National Hardware Show will take place May 7-9 in Las Vegas, Nevada (USA).
    Home Depot invests in omnichannel in Q1

    The Home Depot is doubling down on its interconnected strategy, after missing expectations in its first quarter 2018, but e-commerce sales fared well.

    The home improvement retailer reported sales of USD24.9 billion, a 4.4% increase from the same quarter of 2017, while analysts were expecting revenue of USD25.15 billion. Comparable sales for the quarter were up 4.2%, while US comp sales were up 3.9%, both missing analyst expectations.

    Home Depot blamed extreme winter weather in the quarter, which it said had a negative impact on garden, a category which historically represents around 15% to 20% of Home Depot's first quarter sales.

    The big box retailer invested USD144 million in the quarter, putting the money into increased wages, increased advertising as it moves to a more marketing technology platform; and increases in display cost. In addition, the company has hired around 350 people in its IT department.

    Online sales grew approximately 20% from the first quarter of 2017. The retailer said 46% of its online orders were picked up in a physical store in the first quarter.

    Home Depot is seeing buy online, deliver from store customers trying out its car and van delivery service. Load 'N Go is an hourly roundtrip vehicle rental service that uses cargo vans capable of carrying up to 3,000lbs (1360kgs). The program is intended for rentals of one to two hours but can also be rented at a daily, weekly, or monthly rate.
    Omnichannel initiatives

    Home Depot's omnichannel strides during its first quarter included launching the ability to attach install services when online shoppers buy certain products. For example, in certain markets, if a shopper buys a faucet online they can choose to include the installation of the faucet in their purchase.

    Home Depot has implemented an enhanced "wayfinding sign and store refresh package" in nearly 250 stores during the quarter, something it's rolling out over the next two years across all the stores. The retailer is also putting lockers in the front of its stores for pick up, with plans to add about 1,000 lockers this year, and is adding some bigger holding areas for bulkier items near the front of the store.

    Home Depot has plans to pilot its first new supply chain facility starting this year. Craig Menear, chairman, CEO and president, said:
    As we continue to make the shopping experience more convenient for our customers, another area of focus and differentiation is our supply chain. The flexibility of our supply chain is a competitive advantage, particularly when unpredictable weather results in spiky demand patterns.
    True Value posts final report as co-op

    Retail co-op, True Value has released its final annual report as a co-operative, reports Hardware Retailing. The company recently announced the sale of 70% of its stock to private-equity firm ACON Investments and its plans to transition away from the co-op business model.

    In 2017, True Value's revenue was about USD1.49 billion, down 1.7% compared to the prior year. The slight revenue decline was "primarily due to product sales related to the net change in participating retailers," according to the company.

    In addition, comparable store sales were down "as weather related categories were lower by 1.6% compared to the prior year," said the company.

    Based on the 1,700 retailers who provided point-of-sale data, comparable retail sales increased 0.8%. Stores that participate in the Destination True Value program experienced retail sales growth of 1.9%. E-commerce sales were up 21%.

    The company signed 59 new core hardware stores in 2017 and 52 international and specialty stores. The company also had 27 retailers convert to True Value from other buying groups.

    The co-op had 4,311 member stores at the end of 2017, a decline from 4,392 at the end of 2016.

    Sales to new stores increased by USD29.6 million. However, lost revenue from terminated stores was USD47.5 million. The company said:
    New ground-up store activity was consistent in both count and dollar volume to last year. However, due to competitors capitalizing on sale rumours, the company experienced a lower level of conversions from other buying groups to True Value in the second half of 2017.

    True Value moves out of retail co-op model - HI News Vol.4 No.3, page 69
    Home Depot builds IT as strategic advantage

    Home Depot is hiring about 1,000 technology employees by the end of 2018, the biggest technology-focused expansion in company history and a sign of the growing strategic importance of IT to the business.

    The employees will ultimately report to Matt Carey, the company's chief information officer (CIO), and will focus on supporting an USD11.1 billion three-year strategic investment, which includes building new software and digital solutions for areas ranging from self-checkout to supply chain and website-focused personalisation.

    Home Depot is hiring for positions such as software engineers, user experience designers, product managers and systems engineers that support the flexibility for cloud and on-premise platforms, said Mr Carey.

    They will work at the company's technology centres in Atlanta, Austin and Dallas. About 90% of the software the company runs is already written by in-house engineers, he said.

    Home Depot chooses to build technology in-house instead of working with third-party vendors because the business is vastly different from most brick-and-mortar retailers, according to Mr Carey.

    Many products in-store are delivered by rail and need to be lifted with heavy equipment, for example. Home Depot in many cases acts as a general contractor for customers considering projects such as kitchen renovations. The technology needed to support such aspects of the business is difficult to scale with a third-party technology vendor. Mr Carey said:
    Those things really don't look like retail as most people know it. The ability to connect our software developers with those business problems at a deep level is where we create competitive advantage.

    The new employees will help build technology to support several specific initiatives. One initiative includes outfitting self-checkout counters with customised point-of-sale software that's intuitive for the customer.

    Another involves building software for a mobile app that allows employees to see their upcoming work schedule. The company is also enhancing the personalisation of its website and improving user experience by using data analytics to help customers quickly find what they're looking for. Mr Carey said:
    It's all about connecting a person as quickly as possible to the product they're looking for in the world of the web.

    Another initiative is aimed at building out machine learning algorithms to help categorise different home furnishing styles for the company's new decor business. That way, people could help shop for a specific room in their house based on products that fit into a specific style, such as a modern or traditional.

    The company is also building out new technology to support an expansion of its same-day delivery and two-hour delivery program, which requires software to support the supply chain. All of the initiatives were driven by customer and associate feedback. Mr Carey said:
    The closer we listen to those customers and fulfill what they're telling us they want and need, that's how we can compete.
    Hillman's digital platform for keys

    The Hillman Group and UniKey have partnered to launch KeyHero[tm] that transforms mechanical keys into a virtual key ring.

    KeyHero allows a consumer to backup a digital copy of their mechanical key on the KeyHero smartphone app. This allows them to recall it later to make a physical key at any hardware or home improvement store using the KeyHero technology.

    KeyHero creates a secure backup and offers the flexibility of digital key sharing. The app's multi-layer, military grade security means that no image or physical location is saved, according to the company. Only a Hillman key cutting machine can read the encrypted code. Phil Dumas, founder and CEO of UniKey, said in statement:
    We are thrilled to be partnering with an industry leader such as Hillman and excited to bring this technology to market, as it truly represents the bridge between the physical and digital key worlds.

    Greg Gluchowski, president and CEO of The Hillman Group, said:
    ...KeyHero creates a platform for consumers to safely manage their mechanical keys in a digital world. This innovative solution, leverages Hillman's 60+ years of experience in key cutting technology with UniKey's best in class digital access control platform.
    Mr. Dumas and I have a history of developing innovative security technologies together. While at Spectrum Brands HHI, we worked with Phil and the UniKey team to develop Kevo for Kwikset, which was the first Bluetooth enabled deadbolt on the market.

    Over the next year, The Hillman Group plans to roll out this new digital platform across its large key duplication network, starting with a limited release in Florida and Colorado.
    HI News V4 No. 3: Future tools and Oldfields
    Download the latest issue of HI News Vol. 4, issue no. 3
    HI News
    As power tools change, so should retail channels
    Bunnings has a new tagline in the UK
    Give to Amnesty International
    The possibility of an Uber-like disruption to the power tools category is not a popular notion in the hardware industry but the time to discuss it is now. We explore renting tools as a future option for power tools in this issue.

    Simply click on the following link to download this edition:
    HI News V4 No. 3: The future of tools and Oldfields

    Included as part of the power tools feature is a transcript from Joe Galli, the CEO of Techtronic Industries, home to the Milwaukee and Ryobi brands. He talks about new product releases as he presents the company's 2017 results.

    In other stories, we provide a preview of the 2018 HBT conference in Adelaide, and report on the latest numbers of entries and exits in hardware retail.

    Bunnings' conversion of Homebase stores in the UK has stopped while Kingfisher experiences growth through digital and addresses the gender pay gap.

    In the US, Lowe's Robert Niblock is stepping down as CEO and True Value makes a deal with private equity.

    Companies featured in our regular Supplier Update include Fletcher Building, Knauf, Brickworks, Duluxgroup, Philips Lighting and Jeld-Wen, There are products from De-Walt, Worx and Crescent.

    This edition also includes a profile of paint accessories maker, Oldfields.
    Oldfields: A rightful share
    Richard Abela, CEO of Oldfields
    HNN Sources
    The writing on the wall: a slogan at Oldfields
    Workers gathered outside Oldfields' Campsie factory, 1927
    Advertisement for How to Hire, Train and Keep the Best Employees
    The late twenty-teens in Australia have seen a range of smaller Australian hardware-associated businesses finally give up on their plans to continue manufacturing goods in Australia, and turn to sourcing more of them overseas. One of the better known is GWA Group based in Adelaide. In what can only be described as a truly gracious move, the former CEO admitted that he had done some things that were not optimal, found a replacement CEO in Tim Salt, and set the company up to continue to recovery, if not yet complete success.

    The recipe that Mr Salt applied is something of a familiar one. He restarted innovation, research and development, especially in the Caroma brand of sanitaryware, controlled costs, and boosted the overall image of the brand.

    Richard Abela, who took over as CEO of the legacy paintbrush firm Oldfields in early 2017 has followed something of the same path as he has worked to revitalise what had become a small ASX-listed company balanced on the edge of a very precarious P&L. Like Mr Salt, Mr Abela turned to research and development, setting about to build what the company would describe as one of the best possible paintbrushes for professionals on the market today.

    However, he has taken the company much further than that as well, seeking overseas markets for products such as its scaffolding, and moving sales of its shed business to a direct online model.

    While HNN is fairly sure that Mr Abela has not read the books written by modern startup guru Eric Ries (author of The Lean Startup, and The Startup Way), it is interesting how much of what he has done at Oldfields bears a strong resemblance to the strategies that Mr Ries recommends. One fundamental of that kind of startup thinking is simply that a company is nothing without a customer base, and that the only way to find out what customers want is to involve them in the development process and not just by asking questions and hearing the answers. As Mr Ries points out (frequently and with some force), customers are seldom able to really articulate what it is they want. To work out what that might be it is necessary to not just listen to them, but also to watch their actions and reactions.

    It is, we could say, management by doing, rather than management only by meeting and consulting. It takes about five minutes of being in the same room as Mr Abela to grasp that he is strongly committed to this kind of doing.

    When HNN met with Mr Abela it was January, and we trekked through the simmering heat of a Sydney summer day to meet him at the neat, modest factory where Oldfields continues to produce some of its products. He began our conversation by telling us about the new line of brushes the company had launched and how well they were doing in the market.
    The brush that was launched last year has gone really well. It s really exciting for us. We launched it in November 2017, so the pickup has been very, very encouraging. We are already out of stock of one size... And we ve been having conversations with people about brushes that we haven t had for a long time.
    The good news is it s coming from the trade. These are the guys who are using it and if you recall at our launch, we had trade people together with store owners and they are the ones providing that feedback.
    We really went out there to say that Oldfields is back and I think that is the truth. We will continue to push that story.
    In months and years to come it will be an ongoing story... Now we will go through our whole range and there may be some adjacent products launched in the future. I was out in the back yesterday and I saw that our warehouses are now struggling to keep up. That is really great, a good problem to have.
    So we are under some pressure to get orders out. And it s different because historically if we were largely in the DIY market the demand might be prior to Christmas, but now it s the New Year when all the tradies are back at work. It s a shift back towards our core, and what we are traditionally good at. The tradies seem to be saying, We are so glad to have Oldfields back . It s not about us necessarily, but they are buying the brushes and saying this is great .
    Momentum has really started to kick in, replenishment orders are starting to flow in. The stands that we developed, there are now 180 of those in stores across Australia. We didn t have them eight weeks ago. There s a couple hundred more to go and in our pipeline, then there s another couple hundred more to go out. People are trying it, they are liking it, and they are coming back.
    It s a journey back. We re not all the way back in five minutes, but the journey back has commenced. For us, this is long-term. This is the first year of a five-year plan.
    The good news is the first step has been good. We are not sitting here saying we re in just five stores or six stores; we are already in over 120 stores. Soon we should be in 250 stores. That rollout is gaining momentum and that s partly because we do have the history and the legacy. We have a great roller product so to match the brushes up now is really quite exciting. It is taking hold. Even industry experts are saying so.
    It s rewarding and all that but we ve got a lot of work to do. It s good to know that the investment we made sends us back to our core, and the target person which is the tradie is saying this is great .

    While very pleased with the first indications of success in the new strategy, Mr Abela is also very quick to indicate that much of that success (as with GWA Group) is not entirely due to him, as the process was started by the previous CEO.
    It was about a two-year process. And I ve only been here about 13 months, so my predecessor needs to take credit for the development of that. To a large extent that s my predecessors doing. Tony Grima needs credit for that. My predecessors, when we went through a tough time, did all the hard work to get us into a position where I can grow. I am fortunate enough that both those guys worked really hard and they got us into a position of a low cost base and I am the beneficiary of their hard work. So I can now grow that.
    But it s also a re-positioning of where we are. There is no doubt that this business and many others like this business, were seduced by the big boxes. But to be honest with you my realisation when I arrived was that we largely had a homogenised market. We really did have white bread in a white bread shop.
    It s a particular kind of philosophy, you can have any bread you like as long as it s white. And for me, that s not what Oldfields is. Oldfields is trade traditional. Yes, there are segments of that market that are disposable and certainly we can deal with that, but that s not our core.
    Having said that, that [low product cost] discipline is not lost. So the cost savings must continue. For us it s a continuously competitive environment, so the discipline that they instilled must continue and it is continuing. We are adding more costs now because we want to grow, that comes with growth, but it doesn t mean we lose focus on costs.

    Though Oldfields did take the decision to not be a preferred supplier with the Metcash-owned Independent Hardware Group (IHG), Mr Abela is quick to point out that this was not a question of slamming the door on that relationship or that kind of business. Overall his concern seems to have been that concentrating solely on price discount and the ultra-lean production processes that go with it would not be good for a company that really needed to start standing up and presenting a clear, understandable identity to the market.
    We headed down that road [in the past] and strategically that may have given us some volume but now it s not where we want to be. And so we made a decision early 2017 to not exit that market completely but that s not where our focus needs to be...So we did break some relationships with retailers who wanted to take the whole thing off us and we have to make commercial decisions for our shareholders and for our employees and our community, which is our trade community. And we made those tough decisions.
    The good news is we re back now to where we wanted to be. It s taken a year and it will take another year before we are even stronger. But the margin is strong and we are heading in the right trajectory of where we want to be. So we are not on the path of this forever cycle of debating with buyers and big chains who want it 5% cheaper each year.
    There is nothing wrong with seeking cost savings but not to the point where it starts destroying you. And I think for us, getting back to our core has been very very important. So that s what we ve done.
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    This is only an introduction to this article. To read the full article, please download the PDF of HI News Vol. 4, No. 3 at:
    HI News 4-03: Richard Abela restores Oldfields
    Big box update
    Bunnings has a new tagline in the UK
    HNN Sources
    The fire to Bunnings' Inglewood store has raised questions about additions to its Balcatta outlet
    Bunnings appeals against a development in Keperra (QLD)
    Click to visit the HBT website for more information
    Submissions have been requested from potential bidders for Bunnings' UK-based Homebase chain of stores as it reports on sales for the third quarter; and Bunnings store proposals and openings continue around Australia.
    Bids for Homebase as Q3 sales slide

    Wesfarmers has asked prospective buyers for Homebase, as part of the Bunnings UK and Ireland (BUKI) business, to submit initial offers, according to a report by Sky News.

    Sources told Sky News the conglomerate is putting together a large financial package for any new owner to help contend with BUKI's large losses. The value of the package has not been confirmed but there is speculation it could exceed GBP100 million (AUD184.2 million).

    Same store sales at BUKI's fell 15.4% in the third quarter - an acceleration from declines in previous quarters of 15.1%, 11.9%, and 4.3%. Total sales - which includes the impact of opening or closing stores - fell 13.5%. Wesfarmers said sales were impacted by storms in the UK in the quarter which cut foot traffic at Homebase stores. Wesfarmers said:
    For BUKI, better execution and improved trading results in the early part of the quarter were offset by unusually poor weather in March 2018, resulting in a decline in total sales of 6.5% (13.5% in local currency terms) for the quarter.

    This is in contrast to sales at Bunnings Australia and New Zealand which grew strongly with comparable sales up 7.7% in the quarter, compared to 6% in the same quarter last year, while total sales rose 9.1% compared to 7.4% a year ago.
    External consultants

    Sky News also revealed that Alvarez & Marsal, a restructuring specialist, has been called in to advise Wesfarmers on alternatives to a sale, including a Company Voluntary Arrangement, a mechanism that would see it closing many Homebase outlets. This would help Wesfarmers cut its financial liabilities.

    Investment bankers at Lazard are handling the sale discussions, and its involvement in the review of options for Homebase is notable because of its role in Wesfarmers' purchase of the chain in 2016.

    Archie Norman, chairman at British multinational retailer Marks & Spencer, also chairs Lazard's London operation. He has held separate roles with various Wesfarmers operations for years.

    Boston Consulting Group have also been tasked to advise the management team at BUKI led by managing director Damian McGloughlin.

    Private equity firms, including Hilco, Endless and Lion Capital, as well as bargain retailer B&M, are also considering a bid for the business. It is unclear at this stage whether any bid would be for the entirety of the business, part of it, or in B&M's case, a chunk of Homebase's store estate.
    Switching things up

    Recently, BUKI completed a change of its tagline from "Lowest prices are just the beginning" to "Your home improvement and garden centre". It has updated all exterior signs to educate UK shoppers about Bunnings' offering.

    The retail group said the change is based on customer feedback and that it will still offer low prices, but it wants to show customers what it actually sells through its marketing.

    The new management team has also set about rejigging its product range to appeal to British shoppers. Mr McGloughlin told Horticulture Week:
    Customer feedback is really important to us and as we continue to establish the Bunnings brand in the UK and Ireland, we are updating our tagline and building signage to showcase our great range of home improvement and garden products. We remain committed to delivering the widest range, best service and our policy of lowest prices, backed by our Price Promise Guarantee.
    Plans for more Bunnings stores underway

    Bunnings's latest stores are being planned for South Australia, New South Wales, Queensland and Western Australia. The recent fire that destroyed the Bunnings store in Inglewood (WA) has amplified concerns about fire risk for proposed additions to the hardware chain's Balcatta store.

    A former Bridgestone factory in Edwardstown (SA) will be converted into a $45 million Bunnings Warehouse. Building has started and the new Bunnings is expected to open in the first half of next year.

    Bunnings general manager - property, Andrew Marks told Adelaide Now the company was still deciding what to do with the former TAFE site just 2km from Edwardstown on Goodwood Road, Panorama, where it had previously planned to build a store.

    Mitcham Council's planning panel rejected that project, following backlash from some residents. The Marion store located within the Westfield complex would remain open, Mr Marks said.

    Southern Business Connections chairman Greg Garrihy said the Bunnings development will help strengthen Edwardstown's position as an employment hub and help offset manufacturing job losses.

    Big box update: Bunnings rejected in Panorama - HNN
    Port Macquarie

    Bunnings hopes to commence construction on its proposed store in Port Macquarie (NSW) soon and anticipates it will be completed in 2019.

    The Northern Joint Regional Planning Panel approved an application to modify a bulky goods premises and hardware and building supplies development at 18 John Oxley Drive.

    Bunnings is awaiting official documentation from the planning panel which confirms its decision for a Bunnings Warehouse in Port Macquarie. Mr Marks told Port Macquarie News that once confirmed, the Bunnings Warehouse Port Macquarie development would represent an investment of more than $43 million for the land, construction, fit-out and stock.

    The new Bunnings store will replace the outlet on nearby Lake Road. The modified application includes re-positioning of each building, floor area changes and minor modifications to the car park.
    Kembla Grange

    A Bunnings store is proposed for Northcliffe Drive in Kembla Grange (NSW), which will be considered by the regional planning panel. It is set take up almost a third of a 40,000sqm site, with parking for 415 cars included in the plans.

    The proposal includes a large roundabout at the intersection of Northcliffe Drive and the Princes Highway, which will eventually form a major access point into residential areas of West Dapto.
    Warwick (QLD)

    Signs of construction on the Bunnings Warehouse in Warwick (QLD) can be seen the first bricks being laid. The Warwick Daily News reports that a brick wall about four metres high has been built on the Canning Street site, which spans about 7000sqm.

    Real estate agent Helen Harm said she did everything she could with the funds available to stop the development. Concern about the potential damage caused by flooding is still on Mrs Harm's mind. She said:
    You can't put a two-acre island in the middle of the flood stream and expect nothing to happen, it's unrealistic.

    Mr Marks said a design was developed based on a flood report.
    As part of the development application for the new Bunnings Warehouse Warwick, a flood report by a qualified engineer confirmed the design requirements for the project. These will be adhered to.

    The store is expected to open in late 2018.

    Big box update: Flood concerns continue over Warwick Bunnings - HNN

    Bunnings is likely to return to Inglewood (WA) following a fire that burnt the Beaufort Street store burnt to the ground in late February. Arson Squad has determined the blaze was not deliberately lit.

    Bunnings chief operating officer Debbie Poole confirmed the company was "continuing to work with the landowner to rebuild the Bunnings Inglewood store", according to Community News.

    The fire to its Inglewood store has also raised questions about additions to the Bunnings Balcatta outlet. The big box retailer has sought approval from the Metro North-West Development Assessment Panel for various changes including extending its timber trade sales area and enclosing the building materials and landscape yard.

    A report by the City of Stirling recommended approving plans for changes to the garden centre, hardware showroom, parking, landscaping and signage but refusing the timber trade and building materials yard additions because of bushfire risk.

    The report said the site was in a bushfire prone area and the bushfire management plan and bushfire emergency evacuation plan submitted by the applicant "failed to adequately convey an alternative solution to demonstrate compliance" and had many inconsistencies.

    It said there was not sufficient justification for the location of the structures so approving the extension would represent a "high to extreme risk".

    Burgess Design Group associate director Mark Szabo presented on behalf of Bunnings and said the changes would increase safety because the open timber sales area would become enclosed and described the fire risk area as "small bush" in a road reserve.

    Bushfire behaviour analyst Mike Scott, of Bushfire Prone Planning, also spoke on behalf of Bunnings and told the panel there were "minimal" fatalities from building fires in the past 100 years and the non-combustible materials used in the proposed structure would reduce the risk of a building fire.

    Construction is about to begin on Bunnings' four level store on Breakfast Creek Road in Newstead (QLD), The Courier-Mail reports.

    With a total floor area of more than 17,000sqm over the four levels, the Newstead store will be more than double the size of a typical Bunnings, which generally come in at about 8000sqm.

    The mixed-use site, located about 4km from the CBD, will consist of a basement carpark, the main warehouse, outdoor nursery, bagged goods area, cafe and timber trade sales area, and will also feature six street-level tenancies for retail or office space, totalling just under 1600sqm.

    Bunnings purchased the original site in 2011 and the initial development application (DA) was rejected in the same year. A revised DA for the new-look store was submitted in 2014 and approved last year.

    Big box update: Bunnings builds multi-level site in Queensland - HNN
    Bunnings store network continues to grow

    Western Australia had three new Bunnings store openings while customers were welcomed to individual stores that opened for business in NSW and QLD. The Canberra Airport store is expected to open in late May. The big box retailer is also negotiating with Brisbane City Council about a housing estate in Keperra (QLD) which it believes will have "adverse impacts" on its newly opened warehouse store.
    Gregory Hills

    Legendary racing driver Dick Johnson helped to officially Bunnings' new store in Gregory Hills (NSW) at the site of the former Masters outlet. The $41 million warehouse store spans over 13,000sqm. Complex manager Ben MacDonald said the Bunnings team had been active in the community prior to the opening.

    Bunnings' new $40 million store in Keppera (QLD) has opened recently. The 17,000sqm warehouse is one of the retailer's larger outlets, and is almost 30% bigger than its 13,000sqm store in Stafford.

    Bunnings has also agreed to meet with Brisbane City Council ahead of a court hearing to resolve the big box retailer's appeal against the Brookfield Residential Properties (BRP) housing estate development which has been approved by the council.

    According to the Sunshine Coast Daily, Bunnings lodged an appeal in December, claiming BRP's development would cause "unacceptable adverse impacts" from stormwater entering adjoining lots, and the possible impacts from its business on homes in the development. It also cited conflicts with the rural and extractive industry zones, and said impacts on "local amenity and values" had not been adequately considered and addressed.

    The Keperra store backs onto the BRP site. Bunnings general manager - property Andrew Marks told the North-West News:
    We do not believe that Brookfield Residential Properties has properly identified how the proposed residential development will interact with the operation of our newly opened Keperra Warehouse in a compatible way.
    There are a number of issues such as lighting and noise impacts that do not appear to have been considered in their submission to Council.

    BRP's $313 million plan for the Keperra quarry site includes 700 homes and a 3000sqm shopping centre.
    Canberra Airport

    Bunnings $42 million store at Canberra Airport is expected to open its doors at the end of May. Mr Marks said the Fyshwick store would remain open and continue to trade as normal.

    There are currently four Bunnings stores in the ACT: Fyshwick, Gungahlin, Belconnen and Tuggeranong. The Canberra Airport will be the fifth store.

    West Coast Eagles footballer Josh Kennedy visited Landsdale (WA) to help open the Bunnings Wangara store. He joined the company's marketing and merchandising director Clive Duncan, operations general manager Debbie Poole, complex manager Marty Hornbuckle and staff at the store's official opening recently.

    The warehouse covers over 13,000sqm and includes an indoor timber trade sales area with a four-lane drive-through, flooring display, DIY workshop space, five kitchen displays, four bathroom displays, playground and cafe.

    Another West Coast Eagles player Nic Naitanui was guest of honour at the official opening of the new 14,000sqm Bunnings Warehouse in Bayswater (WA) recently. Complex manager Patrick Kelly said his team looked forward to continuing to help community groups in the future.

    The new $38 million Bunnings Warehouse Mandurah is located at 21 Kirkpatrick Drive, Greenfields (WA). Complex manager Von Soriano told Community News:
    Team members have provided assistance in local community projects such as donating equipment to help reduce safety hazards at the Mandurah Surf Life Saving Club, renovating the outdoor living area for volunteers at the Mandurah Volunteer Fire and Rescue and creating a play area for students from the Peel Development School.
    Supplier update
    Wesfarmers could be eyeing NZ group Fletcher Building
    HNN Sources
    German building materials firm Knauf offers to buy USG - but is rejected
    Philips Lighting is changing its name for the digital era
    Subscribe to HNN weekly e-newsletter
    Wesfarmers managing director Rob Scott has signalled he would look for new business to drive growth and this could include Fletcher Building; Brickworks flags off-shore buying; Jeld-Wen has acquired Australian window and door maker A&L; USG said a USD5.9billion takeover offer from rival building products manufacturer Knauf is inadequate; DuluxGroup ups the ante on digital with an AI-powered digital analyst; Philips Lighting intends to change its name to Signify; QEP has purchased a Queensland-based flooring company; and Briggs & Stratton' Resilient products will be on show at the upcoming Hire & Rental event in Brisbane (QLD).
    Fletcher Building takeover target for Wesfarmers?

    There is growing speculation that New Zealand's Fletcher Building has become a potential acquisition target for Wesfarmers. Sources close to the company have told Fairfax Media that Wesfarmers has bought a stake of about 3 to 4% in the construction and industrial materials company.

    Wesfarmers is expected to chase acquisitions in its industrials division after completing the demerger of Coles. The Coles business accounts for 60% of the capital employed across the Wesfarmers portfolio so the spin-off should free up funds to invest in existing and new businesses.

    The revelation of Wesfarmers' stake in Fletcher comes as the market anticipates where it will look to expand under managing director Rob Scott. When Mr Scott announced that he would spin off Coles into a separate company sitting in the ASX top-30, he said the supermarket chain was not growing fast enough to generate the kind of returns shareholders expected.

    He said carving it out would allow the company to drive growth at its remaining businesses and look for new acquisitions that promised the kind of growth Coles delivered during its decade-long turnaround under Wesfarmer's ownership.

    The potential attractions of Fletcher as a turnaround investment would potentially fit well with Wesfarmers' stated strategy. The Auckland-based company has been in crisis in recent months after cost blowouts at a string of construction projects led to heavy losses and it breaching debt covenants with its lenders.

    Fletcher's troubled projects include the building of Auckland's International Convention Centre for listed casino company SkyCity, which Fletcher estimates will lose it $410 million on instead of an intended $400 million to $500 million profit. The project is due to be completed about six months behind schedule in mid-2019, and SkyCity has indicated it will take legal action to recoup losses from Fletcher because of the delays.

    Fletcher's building and construction division lost $619 million in the first half of 2018, and the company ran at a loss of $332 million, down from a $310 million underlying profit in the same half a year earlier.

    Fletcher's business includes making building products, including under the brands Winstone Wallboards, Altus aluminium, and the road barrier supplier Australian Construction Products. It also has a number of retail brands selling trade and plumbing supplies inducing Tradelink, PlaceMakers and Calder Stewart Roofing, which could complement Wesfarmers' Bunnings chain.

    Fletcher is dual-listed on the Australian and New Zealand stock exchanges and is one of the largest listed companies in New Zealand. It has assets on both sides of the Tasman and a market value of NZD4.1 billion (AUD3.9 billion). However Fletcher's share price has fallen 45% since January 2017 and it is considering selling assets as part of a business-wide review.

    It is likely Wesfarmers would buy stock on an anonymous basis through a nominee entity and would only have to declare its holding once its stake reached 5%.

    Sydney-based fund manager Ellerston Capital recently took on a 5% stake on behalf of a secret investor in Fletcher Building. Ellerston said its stake of Fletcher shares, worth about $214 million at their current price, were "owned by third party account under the discretionary investment management of Ellerston Capital".
    Brickworks' offshore option

    Building products group Brickworks has begun looking into shifting some production offshore as it prepares to face higher energy prices. The company has warned that the surge in gas prices will add $20 million to its costs over the next few years that it will not be able to absorb.

    Brickworks has posted a net profit of $97 million on revenue of $396.2 million for the half-year period ending March 31 2018. The profit and revenue were down 6.7% and up 7% on the prior corresponding period (pcp).

    The company has warned that activity in the building industry was being hampered by "trade shortages and a lack of titled land". Managing director, Lindsay Partridge, told Fairfax Media:
    We're looking at alternative markets such as New Zealand and Malaysia. Malaysia already has a well-developed brick sector.

    Brickworks already sources some of its bricks from Spain, where the deep economic downturn has helped to make some of this product competitive. Mr Partridge said:
    Brick prices from Spain are very cheap, and back-freight prices are also cheap.

    The company was also facing the prospect of a lack of gas supply from 2025, on present indications, he said. Brickworks has contracted gas supplies until the beginning of 2020 but with supplies for 2019 priced at "76% above where we are today", Mr Partridge said. Similarly, the company was facing steep rises in the price of electricity.

    "On the forward price curve we are facing up to an 80% increase", he said of the outlook for the price of electricity.

    Mr Partridge's warnings came as the company said it was enjoying a "full order book" across the east coast of Australia, where builders have a long pipeline of work, with little change expected through to the middle of the year at least.

    Given the size of these projects, they will take some years to complete, with the prospect of continued buoyant activity for a few years yet, he said.
    Jeld-Wen grows footprint in Australia

    Window and door maker, Jeld-Wen has completed the acquisition of A&L, an Australian manufacturer of residential aluminium windows and patio doors. Founded in 1980, A&L has a strong reputation of supporting homebuilders and contractors. It has a network of manufacturing facilities and showrooms across the eastern seaboard.

    Jeld-Wen has acquired five other Australian-based companies since 2015. John Linker, senior vice president, corporate development and investor relations, said:
    A&L's excellent position in the first-time home buyer market expands the reach of our current product range and customer base. The addition of A&L's brand name expands our portfolio of leading Australian brands and supports our strategy to build leadership positions in attractive markets. We expect to deliver synergies through operational savings from the implementation of JEM [Jeld-Wen Excellence Model] and by leveraging the benefits of our combined supply chain...

    A&L was privately held by its founders. Terms of the deal were not disclosed. Jeld-Wen expects the acquisition to add approximately AUD130 million in annual revenue.

    In another recent development, Jeld-Wen president and CEO Mark Beck unexpectedly departed the company. According to a statement, Mr Beck and the board of directors decided to part ways "by mutual agreement". Kirk S. Hachigian, who chairs the company's board and preceded Mr Beck as president and CEO, will take over as CEO while a search for a new leader continues.

    News of Mr Beck's departure comes soon after Jeld-Wen reported that revenues for the fourth quarter of 2017 grew just 0.3% to USD976 million.

    Mr Beck, who joined Jeld-Wen in November 2015, oversaw the company's decision to go public. The company launched its initial public offering (IPO) in January 2017 on the New York Stock Exchange.

    According to filings with the Securities and Exchange Commission, Jeld-Wen is No. 1 in net revenue for residential doors in the United States, Australia, Germany, Switzerland and Scandinavia. In Australia, it owns the Corinthian, Stegbar and Trend brands.
    Knauf's offer to buy USG is rejected

    German building materials supplier, Knauf is seeking to take over the Chicago-based gypsum manufacturer USG Corp. It recently called on USG shareholders to pressure it to engage in deal talks by withholding their support for its board nominees.

    USG have rejected a USD5.9 billion bid by Knauf, arguing it undervalued the company. That was despite Warren Buffett's Berkshire Hathaway, which is USG's largest shareholder, offering to sell its 31% stake at that price, if Knauf clinches a deal for the entirety of USG.

    Knauf said in a statement that voting against USG's four board nominees would send a message that the company must engage in deal negotiations. USG has a staggered board, meaning only four of its 10 directors face a shareholder vote this year. It also has a "poison pill" defence available, preventing Knauf from launching a hostile bid.

    USG said its financial and legal advisors met with Knauf's advisors in one of several meetings between company representatives. It added that Knauf's campaign against its board was a tactic to push through what it called a "wholly inadequate, opportunistic" USD42 per share cash bid.

    In the meeting, Knauf's advisors suggested that USG consider providing at least limited additional information under a non-disclosure agreement, Knauf said in a regulatory filing. USG's advisors responded that the company would not do so, according to Knauf. USG chief executive Jennifer Scanlon said in a statement:
    Knauf knows this industry well and understands that USG, with our Sheetrock brand, is the crown jewel within North American building products, and to date has not indicated any willingness to pay full value to all of our shareholders.

    Knauf has so far resisted raising its bid further. It has argued that USG's share price has "dramatically and consistently" underperformed the market, and that the company would require significant capital investment to remain competitive. It has called its bid, which infers a 30% premium to USG's 12-month average closing share price, attractive.

    Knauf also said it had not decided whether to take up Berkshire on its offer. Berkshire's proposal is unusual, structured as a six-month option contingent on Knauf buying the rest of USG. Knauf would pay a USD2 per share upfront fee, or USD86.8 million, which Berkshire would keep if the six months expired without an acquisition. The option's exercise price would equal Knauf's eventual bid for USG, less USD2 per share.
    DuluxGroup makes more use of digital

    Paints, garden care and home improvement manufacturer, DuluxGroup, is increasing its investment into machine learning and algorithmic-based virtual assistance technology by signing an expanded partnership with Complexica.

    Nine months after announcing its initial investment into the Complexica Customer Opportunity Profiler (COP) system for its trade paints, texture coatings and protective coatings business, the company will now extend usage to its group digital capability team.

    Specifically, the plan is to integrate COP, which is based on Complexica's AI-powered digital analyst and sales assistance tool, Larry, with the Adobe Campaign Platform to drive more personalised campaigns for its brands, Dulux, Yates, Selleys and Cabot's. DuluxGroup group head of CRM, James Jones, said:
    Complexica's software will enable DuluxGroup to reduce the amount of time required to generate usable insights, increase our campaign automation capability, personalise our communications based on core metrics, and close the loop on sales results to optimise ongoing digital marketing capability.

    DuluxGroup started rolling out the Adobe Marketing Cloud more than two years ago as the centrepiece of its marketing technology stack to support its digital offering to customers across both B2B and B2C brands.

    Complexica director of customer engagement, Mike Costa, said DuluxGroup is a significant customer and said his team was looking forward to expanding the relationship across the digital space.
    Our next-generation Customer Opportunity profiler will provide DuluxGroup with the seamless ability to generate personalised campaigns using the advanced machine learning and knowledge discovery algorithms within Larry, the Digital Analyst.

    Initially, the original project (COP) was designed to help automate questions for DuluxGroup's sales team around which customers to visit and prioritise and what to discuss with each customer.

    Complexica managing director, Matt Michalewicz, said the new deployment is for Dulux's digital team, which has a goal of driving personalisation into their digital communications by better understanding was is the next-best conversation to have with each individual customer.
    From there, it's then about deciding whether that personalised conversation/message should be delivered via a sales rep or via a digital channel.

    Complexica pitches Larry as a form of Siri for business, using a combination of algorithms on big data sets to help with data-driven decision making.
    Corporate name change for Philips Lighting

    Philips Lighting is changing its name to Signify, shareholder approval pending.

    The Dutch company said the new moniker originates from the fact "that light becomes an intelligent language, which connects and conveys meaning". The company, however, will continue to use the Philips brand on its products.

    The Philips Lighting stock exchange ticker will remain LIGHT.

    The name change could also reflect the move by lighting vendors such as Philips to outfit LED lights, luminaires, and the lighting infrastructure with chips and sensors connected to the Internet. Vendors hope to turn lights into valuable information nodes, and to turn the lighting infrastructure into vital information networks linked into cloud computing systems.

    This Internet of Things (IoT) strategy would then position lighting vendors as gatherers and providers of data that will help run all typed of operations.

    LEDs magazine also speculates there may be another reason for the rebranding. The company's ownership split from former parent Royal Philips contractually required an eventual change. Royal Philips spun off Philips Lighting in an IPO in May 2016, at first retaining a large share which it has been steadily reducing. Royal Philips, which today focuses on healthcare, owned 18% of Philips Lighting as of late February 2018.
    QEP expands Australian operations

    Manufacturer and marketer, QEP has acquired the assets of PR Floors, a wholesale flooring distribution company established in Queensland in 1961. It provides a wide range of branded flooring products, tools, underlays, marine sealants and accessories. Chairman, Lewis Gould, said:
    We are extremely pleased to welcome customers and associates of PR Floors to the QEP family. The addition of six locations throughout Queensland to our fifteen existing Australian Flooring Supplies (AFS) stores throughout Victoria and New South Wales creates the largest distributor of its kind with an unmatched ability to meet the needs of the professional flooring installer throughout Australia. The acquisition will add efficiency, purchasing power, operational strength and geographic reach to our AFS operation.

    QEP Australia managing director, Bruce Maclaren, said:
    We have enjoyed a relationship with PR Floors and its founders as long-time QEP customers. Through this addition, we are excited to have the opportunity to expand the range of products and services available to PR Floors and AFS customers.

    Terms of the transaction are confidential.
    Briggs & Stratton to showcase Resilient range

    Briggs & Stratton will highlight its Resilient products at the Hire and Rental Industry Association's 50th anniversary convention, HIRE18.

    The Vanguard 200 is a single cylinder, horizontal shaft commercial engine. It includes an advanced version of TransportGuard, Vanguard's exclusive single ignition and fuel shutoff designed to prevent oil dilution during transport.

    Briggs & Stratton's Elite Petrol Generator is designed to provide users with a safe and reliable solution to get power in remote outdoor locations. The heavy-duty frame protects the generator and stands up to transport while the fuel-efficient overhead valve engine starts easily and runs smoothly to maintain power requirements.

    The Ferris IS2100Z with Oil Guard is a first-of-its-kind solution for the commercial turf market. Ferris mowers with the Oil Guard System offer an increased oil capacity of 4.7 litres, allowing cooler running, longer engine life and extended service intervals.

    Billy Goat's AE1300H Hydro Aerator improves hole quantity and quality due to patent pending variable aeration density (VAD[tm]), which creates 2-10 times more holes than drum models in one pass. The intuitive hydro-drive controls allow users to feather the speed and aerate in both forward and reverse with fingertip control.

    The Briggs & Stratton portfolio also includes the Victa brand. HIRE18 will take place at The Brisbane Convention & Exhibition Centre on May 30-31 2018.
    Indie store update
    The "local bloke" is no more at Ruralco
    HNN Sources
    Yolla Co-op impressed at AIRR's retail conference
    Heathcote Rural Merchandise has had the same owners for 25 years
    Click to visit the HBT website for more information
    CRT's "Your local bloke" message is being replaced in an era where women's roles in agriculture are acknowledged to be as significant as men's; Yolla Co-op is a highly "progressive" store; and Dave and Cheryl Thomas took over Heathcote Rural Merchandise 25 years ago.

    "Local bloke" cut from CRT branding

    Ruralco-owned CRT (Combined Rural Traders) branches across Australia will have the "Your Local Bloke" slogan removed. CRT general manager, Greg O'Neil, announced the decision at the group's annual conference recently.

    It has already disappeared from corporate advertising and the slogan will now gradually be removed from uniforms and store advertising at 500 locations around Australia as the branding is updated, he said.

    Mr O'Neil told conference delegates the word "bloke" was a problem when women were increasingly taking professional roles in agriculture. He said:
    It was felt that the word 'bloke' was limiting in today's environment.

    Ruralco managing director, Travis Dillon, believes the familiar "Your Local Bloke" message "has had its time". He said:
    Your Local Bloke is not a branding you would choose today if you were starting from scratch.

    Mr Dillon also said the Ruralco marketing team decided it was time for a refresh and that the slogan change was not motivated by political correctness. He told The Wellington Times:
    It's just unfortunate our timing has come around that of which political correctness is in the headlines. It is a discussion that has been going on within the company for years in order to make it more relevant to our customers and CRT members.
    The Local Bloke, while it has been part of the business since 1988, it's just not as relevant as it was before ... it's just not contemporary or fits with the profile or our business.

    Mr Dillon said it is unlikely the company will create a new slogan for CRT, instead a number of brands around rural Australia will be upgraded and refreshed in what will be rolled out as a staged approach.
    Not everyone will have to change overnight, it is a gradual upgrade over the years. In terms of stores, they'll be given a time frame to change it so we don't expect it will be a massive impact to our branches.

    However he admitted the news hasn't been well-received by all members of the group, some who have been a part of it prior to the slogan even being introduced. Mr Dillon said:
    I think everyone understands we need to have a more contemporary logo and that 'Your Local Bloke' doesn't necessarily represent our customer base anymore, so generally it's all been pretty supportive.

    During the past year it acquired "a portfolio of high quality businesses", including five CRT member sites in WA, NSW and Tasmania, with help from a $65 million capital raising a year ago. Mr Dillon said:
    We've looked to grow our base by attracting existing member businesses to come over to Ruralco, and we've also acquired businesses not previously part of the network.
    AIRR chooses most progressive store

    Yolla Co-op in Tasmania has won the award for Most Progressive Store for the second year running, at the Australian Independent Rural Retailers (AIRR) conference. General manager Peter Moore told The Advocate:
    This award for the best marketed store is voted on by suppliers around Australia. It's a great honour.

    Mr Moore credits Yolla Co-op's success to the relationships staff and management build with suppliers. He said:
    We run the largest in-store open day each year, where 60 national suppliers attend

    Yolla Co-op runs supplier information sessions and regularly sends staff to mainland Australia or New Zealand for training. Mr Moore explains:
    We are heavily into forming good relationships with suppliers. It's that commitment to work with suppliers in partnership and understand their objectives. This is recognition of what we do in the field and store and is a good indication of what we put into the store.

    AIRR group sales general manager Peter Lourey said the award was based on driving sales, promotional support, in-store merchandise, service and use of technology, and Yolla Co-op won "fairly resoundingly".
    Suppliers spend a lot of money to get in front of the end user and Yolla harnesses that exceptionally well. They really see the worth in partnering with suppliers to bring value to their customers. They're leading the way Australia wide.

    AIRR said it has 400 members in the group.
    Rural retailers celebrate 25 years

    Cheryl and Dave Thomas, owners of Heathcote Rural Merchandise in regional Victoria, have reached the quarter century milestone of operating the business.

    In March 1993, they moved from Dandenong to take it over. Cheryl told The McIvor Times that after 25 years, she is unsure if the time has gone fast or slow but sometimes it can be both. She said:
    It seems like a very long time when you look back on it, but then again time flies when you're having fun and we sure have had fun.

    When the couple took over, the newspaper ran an article in which Dave said they were "looking forward to getting to know the people here". Cheryl said he anticipated correctly that it is what they've enjoyed most about the job.
    The most rewarding and enjoyable part for us has been the people - the people you meet every day and what we have learnt from them and are still learning. The relationships you make out of a job like this mean a lot to Dave and I, some of them will last a long time.

    Cheryl was hopeful the milestone wasn't going to attract attention. She said:
    We were hoping it was going to just drift by!

    While Cheryl and Dave have enjoyed their time at Heathcote Rural Merchandise, Cheryl mentioned it hasn't always been smooth sailing.
    There have definitely been tough times, it obviously depends on the season, but the whole way through we have tried to stick to the positives and think about the good times because there have been plenty of them.
    New products
    The new ExoCore tools from DeWalt feature durable, lightweight carbon fibre composite handles
    HNN Sources
    Worx's Circular Saw with ExacTrack incorporates a tracking guide that enables accurate rip cuts
    Crescent (H.K. Porter) introduces new PowerPivot bolt cutters
    Click to visit the HBT website for more information
    DeWalt expands into sledge hammers and axes; Worx said its latest circular saw simplifies accurate rip cutting; the PowerPivot bolt cutters boast a double compound action system; and the Wiha e-screwdriver handles time-consuming screw-fastening.
    Axes and hammers from DeWalt

    DeWalt has a new line of seven ExoCore sledge hammers and three ExoCore axes, marking the company's first foray into this category.

    The sledge hammer range is designed to meet a variety of applications, from metal to drywall to driving a punch or chisel. The hammers are available in 6lbs (2.7kgs), 8lbs (3.6kgs), and 12lbs (5.4kgs) models with a 32" handle, and a 4lbs (1.8kgs) model with a 12" handle. A Blacksmith sledge hammer with a triangular head is also available. Each hammer features an efficient strike face and a carbon fibre composite overlay to mitigate damage to the tool.

    The ExoCore Axe range includes a camper's hatchet with a 12" handle, a 3.5 single bit splitter with a 32" handle, and a log splitter with a 32" axes. All of the axes feature a scalloped cutting edge, designed to ensure a deep cut and improved separation.
    Simple, accurate circular saw

    The Worx 20V 6-1/2 in. Circular Saw with ExacTrack can take the guess work out of straight line cutting by incorporating a tracking guide that enables accurate rip cuts.

    Weighing 6lbs (2.7kgs), the new Worx circular saw is compact and lightweight. It is powered by a 20V 2.0 Ah Power Share Max lithium battery and 3600 rpm (no-load) motor.

    It features a rubber overmould comfort grip and a spindle lock for fast and convenient blade changes. As part of the Worx Power Share program, the 20V 2.0 Ah battery is compatible with more than two dozen Worx DIY and lawn and garden tools.

    In addition to the saw, the kit includes a 20V 2.0 Ah battery, a 3-5 hour charger and a 24-tooth, carbide-tipped saw blade.
    More cutting power, less effort

    Crescent (H.K. Porter) has introduced its new line of PowerPivot bolt cutters. Featuring a compound action design, they can provide more cutting power, but require 30% less force to cut than traditionally designed bolt cutters.

    Blades are precisely ground then induction hardened for extended edge life and added ability to cut hard materials. Handles are made of tubular steel for extra strength and have durable rubber grips for added comfort and control.

    PowerPivot Bolt Cutters are available in five sizes with handle lengths of 14, 18, 24, 30, and 36 inches. All have been designed for high performance cutting capacity, both in diameter and hardness of materials.
    E-screwdriver promises fast work

    A new motor assisted screwdriver called the speedE from Wiha promises to halve the time users take to complete their work.

    An electric motor assists with fastening screws up to 0.4 Nm before disengaging to ensure that material is protected. The screw can then be fixed by hand with a deft touch, similar to a conventional screwdriver. An electric ratchet function assists users as they complete fastening.

    Thanks to its electric drive, the Wiha e-screwdriver handles screw-fastening at a rapid rate. This power transmission and torque control in electric mode brings a particular benefit to users for delicate screw-fastenings. An integrated LED light also ensures users are not left in the dark as they fasten screws.

    When fully charged, speedE can fasten electrically up to 800 times without re-charging the batteries.
    Retail update
    Bob Beaumont (centre) surrounded by his Beaumont Tiles senior executive team
    HNN Sources
    Beaumont Tiles eyes domestic and international expansion
    Australian housewares retailer, House has launched in the UK
    Click to visit the HBT website for more information
    Bob Beaumont from Beaumont Tiles has been in the business for 50 years; and House is providing a different proposition for the UK customer with an omnichannel experience.
    Global expansion for Beaumont Tiles

    Australia's largest tile retailer, Beaumont Tiles - Bunnings is the second biggest player in tile retailing - plans to grow its footprint in the country from 115 stores to 180 outlets and take its brand overseas. Most of the 65 new Australian stores will be franchised businesses, according to CEO and executive chairman Bob Beaumont.

    Mr Beaumont also believes home owners are spending an average of $20,000 on a full bathroom renovation which is helping to drive its robust growth. The company is importing 100 shipping containers full of tiles each week to keep up with demand, according to a report in Fairfax Media.

    Beaumont Tiles generates about 50% of its business from the renovations market and the other half from new home and apartment construction.

    However Mr Beaumont believes there has been slight cooling in the market and the company isn't likely to repeat the exceptional 12% growth in sales to $275 million that occurred in 2016-17. It was likely that rate of growth was the high watermark in this housing cycle.

    Mr Beaumont expects it to remain solid even if interest rates begin to rise this year but said a tapering was occurring in NSW. He said:
    Melbourne is still going gangbusters. We are seeing a slight tapering off in Sydney. Things are certainly coming off the boil a bit.

    Despite an expected slowdown, Mr Beaumont told Inside Franchise Business, "there is plenty of opportunity within Australia, and opportunity for sales within each store to grow as well". Staff development is the key to strong sales growth, he added.
    We already have very good marketing. I think we can develop our people to be stronger and better than they already are.

    This year the retailer is launching an IT system that is a base for future business. Mr Beaumont said:
    We plan to grow substantially over the next four to five years and then we can use this as a launch pad to extend the brand overseas.

    There are currently no specific countries targeted for expansion, but the team working on exporting the brand have pinpointed countries such as Malaysia and India as well as North America (ie. Canada) as potential regions. He said:
    We believe by bringing together the disparate parts of the business, particularly the IT this year, we can build on this package, transfer and adapt it. We will have to be flexible but strong enough to withstand any environment.

    Mr Beaumont identifies the challenges ahead to be developing a system that takes a client through the sales process to delivery and payment, integrating all aspects. He said:
    We also need to be able to plug in marketing, web, IT based training and payroll - any system in a different country. The big one is logistics but we're set up already with worldwide sourcing so its not such a big step there.
    House homewares kicks off in the UK

    Australian housewares retailer, House said its launch in the UK in April will see it initially open four stores and will be joined by a further two before the end of June.

    The first branch has opened at Westgate shopping centre in Oxford, followed by Bracknell in Berkshire and Meadowhall shopping centre in Sheffield. There are also plans for House to trade directly to consumers via its own dedicated UK website.

    It has ambitious plans to open 75 stores across the UK within three years. Steven Lew, founder and executive chairman of Global Retail Brands, owner of House, said:
    Visiting a House store will not be a 'me-tool' experience. We have a strong store presence, with both favourite brands and so much never seen before product launches.
    We are committed to showing our fresh approach to customer interaction. We want our customers to feel right at home when they come in to see us for cooking, dining and entertaining tips.

    Mr Lew added that the company is an "extraordinary advocate" of training its in-store teams, and has already secured its first UK-based training kitchen and learning facility. He said:
    Our teams must know our products 'inside and out' before they can interact in our stores with our customers...What better endorsement is there than a team member who uses the very product they are demonstrating to you?

    Mr Lew said it is also revealed that it has won the exclusive rights to launch a number of international brands into the UK that are not yet available.

    Europe update: Aussie retailer House in UK launch - HNN
    Europe update
    Screwfix mobile sales deliver for Kingfisher
    HNN Sources
    Bunnings store in Frome, Somerset (UK). The store conversion program has stopped until Wesfarmers' review in June.
    Kingfisher addresses the gender pay gap at its home improvement stores
    Click to visit the HBT website for more information
    Kingfisher experiences strong digital growth in the last financial year; there will be no more store Homebase store conversions in the UK until Wesfarmers' review has been completed; and the gender pay gap is acknowledged at Kingfisher.
    Digital delivers for Kingfisher despite profit fall

    Home improvement group, Kingfisher has reported that total sales increased 3.8% to GBP11.6 billion, up from GBP11.2 billion, for the year ended 31 January 2018. However it posted a 10.1% fall in annual pre-tax profits to GBP682 million, but saw underlying profits edge 1.3% higher to GBP797 million.

    Like-for-like sales were down 0.7% year-on-year at constant currencies, to GBP11.7 million.

    Its annual results has been impacted by softer sales from its UK chains, Screwfix and B&Q, in the fourth quarter. The slowdown was due to less demand for big ticket items - such as kitchens - as the housing market cooled and as consumers hit by higher inflation and stagnant wage growth cut back on spending.
    Screwfix digital

    Over the year, total sales at Screwfix grew by 16.7% to GBP1.5 billion and by 10.1% on a like-for-like basis, as mobile sales soared by 86% and click and collect by 38%. Sales from specialist trade desks exclusive to plumbers and electricians also grew. But in the fourth quarter, sales slowed to 7.1% on a like-for-like basis. By the end of the financial year, 60 new outlets were opened, reaching a total of 577. Kingfisher said it aims to have 700 Screwfix outlets in the UK.

    Screwfix continued to offset sales woes at B&Q, with price inflation also providing a boost.

    Sister company B&Q saw sales fall by 5.3% to GBP3.5 billion during the year, following a store closure program which has seen it shut 65 shops and cut around 3,000 jobs in the UK and Ireland over the last two years. Sales were down by 2.8% on a like-for-like basis associated with the store closures.

    However, digital sales grew by 11% to represent 4% of total sales. More than 33,000 B&Q products can now be collected via click and click, including 29,00 for one hour pick up.

    A new B&Q mobile app launched in September 2017 which "is delivering improved average transaction values", according to the company. The first of its digital home improvement services has also launched, including a bathroom planner tool.
    Castorama and Brico Depot

    Kingfisher trades as Brico Depot and Castorama in France. Castorama total sales fell 1.9% (like-for-like sales declined 2.4%) to GBP2.4 billion. Brico Depot total sales fell 4.2% (like-for-like sales declined 4.8%) to GBP1.9 billion. Across the two businesses, two new stores opened and one was revamped. Kingfisher said it is encouraged by the market in France, "although it is volatile".
    Other international sales

    Sales in Poland grew 6.3% (like-for-likes increased 5.3%) to GBP1.3 billion. Russia sales fell 3.7% to GBP391 million and Spain sales dropped 4.8% to GBP316 million.

    Romania, Portugal and Germany saw sales of GBP174 million. A further roll out of Screwfix Germany is on hold this year pending completion of the unified IT platform roll out.
    ONE Kingfisher progress

    Kingfisher is coming into the third year of a five-year transformation plan. More than 50% of its group sales now operate on one unified IT platform. Six per cent of sales took place online in its latest financial year, up from 4% a year earlier.

    There has been an 80% reduction of SKUs and suppliers as part of the "ONE Kingfisher" strategy. Kingfisher said "business disruption" knocked around 1.5% off its group-wide like-for-like sales as it was left with stock availability problems amid efforts to clear out old stock. But it had "acted on the root causes of business disruption".

    Chief executive officer, Veronique Laury insists her turnaround was beginning to bear fruit and said it was set to deliver a GBP500 million boost to annual profits by the end of 2020-21.
    BUKI store conversion halted

    The program that saw a number of stores (23) changing from Homebase to the Bunnings' format has stopped as Wesfarmers reviews what to do about staying in the UK. The most recent store openings have been in Somerset, Walton-on-Thames and Sprowston.

    Bunnings officially opened its doors in Frome, Somerset, replacing the Homebase store at Wessex Fields. Former skeleton racer and Olympic gold medallist, Amy Williams, helped to open the 47,000 square feet store.

    Complex manager, Mandy Wilkinson said Bunnings team members have helped with projects in the Frome area ahead of the official opening. These include painting a classroom for students at St John's First School and giving the doors of the local YMCA a fresh coat of paint.

    A new Bunnings store measuring 34,000 square feet has opened on the site of the former Homebase store in Walton-on-Thames, a large affluent market town located on the River Thames in the Elmbridge borough of Surrey. Kelly Smith, former England footballer, helped to launch the store.

    Bunnings in-store staff have assisted with projects in the local area including fixing the scout hut guttering for the Walton Sea Scouts and painting planters and repairing shed roofing for students at Walton Oak School.

    Bunnings' newly opened store in Norwich, Sprowston is among the first Homebase branches to be re-branded to Bunnings as part of the pilot scheme. To celebrate the opening, former Premier League footballer Grant Holt joined a welcome breakfast for team members.
    Kingfisher addresses gender pay gap

    Kingfisher has reported a 9.6% mean gender pay gap for fixed hourly pay across its 34,000 UK employees as at 5 April 2017. This is based on data across the retail group's four legal entities in line with the British government's gender pay gap reporting regulations. The entities Kingfisher has reported on include B&Q, Screwfix Direct, Kingfisher Information Technology Services and Kingfisher Corporate.

    Kingfisher has attributed its gender pay gap to the fact that it has a lower level of female representation in senior roles across the business. Typically, senior positions attract higher pay and bonuses and the majority of these job roles are currently held by male employees.

    To tackle its gender pay gap, Kingfisher is reviewing its employee benefits for parents, making more senior job roles open to flexible working and reduced hours opportunities, changing the way in which job adverts are written and introducing new programs to help support women returning to work.

    In addition, as part of the organisation's leadership development programs, Kingfisher will help leaders to understand the importance and benefits of building inclusive teams, as well as understand the implications around unconscious bias. The organisation has also signed up to the 30% Club, which aims to achieve having a minimum of 30% of women on its board.

    The gender pay gap reporting regulations require organisations in Britain with 250 or more employees to publish the difference between both the mean and median hourly rate of pay for male and female full-time employees; the difference between both the mean bonus pay and median bonus pay for male and female employees; the proportions of male and female employees who were awarded bonus pay; and the proportions of male and female full-time employees in the lower, lower middle, upper middle and upper quartile pay bands.

    Kingfisher's median gender pay gap for fixed hourly pay as at 5 April 2017 is 2.5%.

    Its mean gender pay gap for bonuses paid in the year to 5 April 2017 is 33.2%, and the median gender pay gap for bonus payments is 0.1% in favour of female employees. Over this period, 62.3% of female employees received a bonus payment compared to 60.7% of male employees.

    More than a third (37.3%) of employees in the highest pay quartile at Kingfisher are female, compared to 43.5% in the second quartile, 46.4% in the third quartile and 46.9% in the lowest pay quartile.

    Kingfisher is also considering ways to analyse its gender pay gap across the organisation internationally, as well as exploring how it can investigate pay gaps across different ethnicities and other characteristics. This is to ensure that the organisation pro-actively manages its pay fairly and equitably.
    USA update
    True Value strikes a deal with private equity
    HNN Sources
    Positive changes for a new CEO at Lowe's
    Home Depot has more than 100,000 shoppable products on Pinterest
    Click to visit the HBT website for more information
    True Value to enter the deal with ACON Investments; Lowe's CEO Robert Niblock will retire as soon as the company finds a successor; Home Depot and Pinterest expand "Shop the Look" feature with over 100,000 decor products; Lowe's has a new artificial reality feature in its mobile phone app; and a female-led paint company is taking it up to the corporate players in terms of environmentally-safe products.
    True Value moves out of retail co-op model

    A private equity firm has taken a majority stake in True Value that will shift the hardware retailer away from its co-operative roots that dates back to1948.

    Eighty-five per cent of True Value members voted to pass the deal, which will turn over 70% equity of the Chicago-based retailer to ACON Investments. Current members will keep the remaining 30% equity, as well as receive a USD196 million cash payout.

    About USD229 million of ACON's funds will be used to return 70% of retailers' capital, promissory notes and dividends. In an interview, True Value president and CEO John Hartmann Hartmann said the returned money would give store operators more financial flexibility.
    The concept of a co-op, which I'm very respectful of even though I've asked shareholders to move away from that, is that individuals came together as a group to do things they couldn't do on their own. The unfortunate thing is it traps their investment, their equity, in the company.

    The retailers who retain a stake in the new True Value can use the returned funds to invest in their business or use as they see fit. Mr Hatmann said:
    Our independent retailers operate in a very competitive space, so freeing up this capital is a really big deal. It allows them to reinvest in their stores, modernise their stores and invest in new stores.

    The retailer's day-to-day operations at existing stores will not change, at least for now. Members will continue to receive True Value merchandising and marketing support. In the future, a minimum-purchase threshold will entitle retailers to use the True Value brand in the store and in local media, as well as participation in the True Value e-commerce ship to store program. Mr Hartmann said:
    The partnership also will let True Value broaden its brand's reach by eliminating the requirement that anyone selling True Value products purchase stock. The company is now free to sell to anyone who wants to buy from us.

    Mr Hartmann acknowledges that members "have weathered some significant intrusions from very able competitors" including big box home improvement stores like Home Depot and Lowe's. He also concedes the company is "not 100-percent insulated from Amazon". But he remains optimistic that True Value has carved out a solid niche.
    Our stores are community-based, very convenient, small retail. A drone can't get you a hammer any faster than you can get it from your local True Value, and it can't mix your paint, either.

    ACON's investment was particularly attractive, Mr Hartmann said, because the firm already has investments in wholesale, retail and manufacturing - all three of which are part of True Value's business. In addition to its retail locations and wholesale distribution arm, the company also operates a manufacturing facility for its branded paint. In a prepared statement, Aron Schwartz, managing partner of ACON said:
    True Value is an iconic brand and one that we have long admired. We believe that independent hardware retailers are an essential part of our society, providing consumers and communities with unrivalled service and expertise. We share True Value's passion for helping to ensure that the independent hardware retailer thrives for decades to come, even as times change and the competition gets tougher.

    True Value currently has about 4,400 independent retailers worldwide and revenue of USD1.5 billion in 2017. It operates under the store identities of True Value, True Value Rental, Grand Rental Station, Taylor Rental, Home & Garden Showplace and Induserve Supply.
    Lowe's CEO stepping down, investors happy

    Robert Niblock is stepping down as chief executive of Lowe's Home Improvement, and according to a report in Bloomberg, investors are hoping a new leader can bring the mojo back to a chain that has spent years in the shadow of rival Home Depot. Seema Shah, an analyst at Bloomberg Intelligence, said:
    The market is likely excited for new leadership. It is hoping for a leader who can better capitalise on the macro tailwinds and drive improved bottom-line performance.

    Lowe's same-store sales growth has trailed Home Depot's for many years, weighed down by a focus on DIY customers compared to Home Depot's core customer base of professional contractors who buy more bigger ticket items.

    In the most recent (fourth) quarter, same-store sales grew by 4.1% at Lowe's, while Home Depot reported an increase of 7.5%.

    While both Home Depot and Lowe's have benefited enormously from the home improvement boom caused by increasing home values and the ageing housing stock in the United States, Lowe's has not been as adept at capitalising on that. Home Depot has also achieved better sales performances, thanks to better store locations because they are located in more lucrative areas than Lowe's. In addition, its earlier investments in e-commerce and more responsiveness to changing market trends through product assortment, has helped place Home Depot in a leading position.

    And Home Depot is not ready to cede any of its leadership. In addition to an aggressive move into appliances, an area where Lowe's leads it, Home Depot is roughly doubling its capital spending in the next three fiscal years to some USD11.1 billion on store remodelling and new technology to make store workers more productive and deepen their interaction with customers. (Last year, Home Depot's online sales rose 21.5%.) Mr Niblock said in December that Lowe's will increase its own capital spending to USD3.6 billion from 2017 to 2019.
    Strategy for improvement

    Lowe's executives have announced plans to get profits back on track through initiatives aimed at improving the in-store shopping experience. They also want to bring in more exclusive product partnerships like the one it announced with paint giant Sherwin Williams.

    The company has also reinvested in its workforce to increase motivation and performance; it has announced bigger bonuses as well as higher benefits packages for its employees. At the same time, Lowe's is expanding its supply chain by launching its first ever direct-to-customer fulfillment centre in Nashville.

    The home improvement retailer is expecting a growth in revenues of about 4% and same-store sales are expected to increase by 3.5% this year. Additionally, Lowe's is expected to build another 10 stores in the US in 2018.
    Home Depot expands decor strategy with Pinterest

    The Home Depot is doubling down on its interior home decor push, broadening its partnership with image bookmarking site Pinterest.

    The home improvement retailer said the partnership will "dramatically expand" Pinterest's visual discovery feature called Shop the Look, to include more than 100,000 new shoppable home decor products. That includes vanities, faucets, lighting, textiles, tabletop and interior decor, according to a press release.

    Shop the Look is meant to simplify the way Pinterest users can search and buy similar products to the ones featured in Pins.

    In an article in AdWeek, Melanie Babcock, senior director of agile marketing and social media at Home Depot, explains:
    In the past, a user would go to Pinterest, find a room scene they liked and see an item they really liked ... but now what? In order to find that item, they would have to go to another website and make a search describing it.
    On Pinterest with Shop the Look, they're taking all that extra work out. Customers can roll over hot spots and see an assortment ... hopefully, an exact match and others like it appear in the customer experience.

    Home Depot is now working with Pinterest to identify products in Pins whether they're from Home Depot or not to help that customer experience go from inspiration to discovery to sale in one experience, Ms Babcock added.

    Ms Babcock said that Pinterest is ideal for Home Depot because "it's a great place" for people to start home improvement projects "in a safe way".
    Home Depot has expanded our offering to consumers from traditional do-it-yourself to the home decor business. For us, our strategy with Pinterest was originally around an introduction to do-it-yourself projects and has evolved to drive awareness around soft goods...
    I have been Pinterest's No. 1 advocate at Home Depot for a number of years. Shop the Look is the first time we're able, as a retailer, to see the direct relationship between Pinterest and how it meets customers' need [for] discovery, which is why we're doubling down on multiple versions of types of ads and experiments with components.

    Pinterest debuted Shop the Look in February 2017; the feature combines computer vision and human curation to make recommendations. At the time, Pinterest said visual search was one of its most-used features, with hundreds of millions of searches every month.
    Video campaign

    Home Depot launched a video campaign on Pinterest in earlier this called "Built in Pins" that demonstrates the work for home improvement projects inside a pinned video. The Pins feature how-to guides and tip-sheets for the projects and are fully shoppable. Ms Babcock explains::
    Sometimes, when you're a big company and have a campaign or message you want to send, you tend to create a creative strategy that is generic across multiple channels. In this case, we knew customers are going to Pinterest to seek out help around home decor and redoing rooms, and we wanted to build a strategy for the actual pins.

    Home Depot said the partnership expansion with Pinterest complements its growing online catalogue of home and interior decor products. Most notably, it fits with the company's acquisition in December 2017 of home decor online retailer The Company Store from Hanover Direct.

    Last July, Home Depot also joined online startup Laurel & Wolf, which describes itself as a "digital decorating platform," to provide customers with a professional designer.
    Lowe's using AR for faster buying decisions

    Home improvement retailer Lowe's has partnered with Google to launch an augmented reality (AR) enabled feature showcasing the latest spring collection on its mobile app.

    The new "View in Your Space" mobile tool allows Android users with ARCore-enabled devices to place lifelike, size-accurate items from Lowe's spring catalogue into their outdoor spaces, according to the company's website. They select certain products in their homes prior to making a purchase.

    Lowe's research reveals consumers often take weeks when considering big-ticket items such as patio furniture and bbq setups, culminated in the "stalling out" of more than USD70 billion in home improvement projects. The goal for Lowe's mobile augmented reality is to close this gap.

    Typically that lag in purchase is due to ensuring the potential product will fit and look appropriate in the home or yard space. The AR capability eliminates any concern about how the items will look once in place as it lets consumers embed products into a scanned image of the space.

    Gihad Jawhar, head of digital development at Lowe's, told Retail Dive in an interview:
    There are a lot of returns driven by a product not actually fitting in a space. Many times it doesn't look like what it looked like it did in the picture, because you're looking at this two dimensional picture on a small screen even if it's on a desktop...

    With the "View in Your Space" feature, a Lowe's app user taps on the option while browsing products on the retailer's website. The customer can then scan, via the device camera, a potential product location and then drag and drop a product into the desired spot.

    Shoppers can even "walk" closer to the product or walk "around" it to get a look at how the item looks from different vantage points. If all looks good, consumers just need to click an icon in the lower right-hand corner to move it into their online cart.

    While technology is the centerpiece to Mr Jawhar's job, he acknowledges that Lowe's doesn't have a competitive advantage when it comes to technology but companies like Google and Apple do, so partnerships are a critical piece to staying ahead of the retail competition.

    Stores are an important piece of tying everything together. Roughly 60% of all in-store sales are influenced by digital, Mr Jawhar said. Where Lowe's hopes to continue to differentiate from online players like Amazon and other brick-and-mortar companies that haven't invested much in technology is with the interplay between channels, allowing customers to research online or on mobile and then come into stores to get advice and browse materials and potentially buy them.
    Paint brand challenging others to think green

    Colorhouse is a US-based women-led, women-owned company that is making its product as eco-friendly as possible. Established in 2005, it became one of the first paint companies to combine an eco-formulation (of acrylic-based paints) with an emphasis on colour and sustainability.

    The paints are GreenWise certified, the highest verification available for a paint brand. As part of that certification, the following chemical compounds are not allowed: methylene chloride, 1,2 dichlorobenzene, phthalates, isophorone, formaldehyde, methyl ethyl ketone, methyl isobutyl ketone, and heavy metals (antimony, cadmium, hexavalent chromium, lead, and mercury).

    Puji Sherer, company president, said the eco-sensibility goes beyond just the formulation: the paint comes in recycled content containers with 100% PCW chlorine-free labels, and brochures; it is manufactured in a LEED gold manufacturing facility, and the company is a member of the EPA SmartWay transportation (to streamline freight and delivery). Colorhouse headquarters is run on renewable energy and serves as a paint can drop off site.

    When founders, Virginia Young and Janie Lowe, started the company, they wanted to adapt their clay-based paints to make them easier for consumers to use in their homes. But the company ended up going beyond just formulation to think more deeply about their impact. Ms Young said:
    Our search for healthier paint options pointed us to the vibrant green building community, a grassroots community that is about sharing knowledge and pushing the envelope on building materials that are better for us and the planet.

    That trickles down to small details: for instance, the company doesn't hand out colour cards. Instead, they ask customers to purchase the cards (for 50 cents a piece) on its website. It is simply to reduce waste and unnecessary paper usage. And instead of having a long roster of colour cards, Colorhouse has 128 in total.

    Kim Martin, e-commerce manager, works with customers to find the right colour. She answers everyone's questions whether it is on email, Facebook Messenger, or Instagram. Ms Sherer said:
    The biggest challenge for Colorhouse has been competing in an industry with only a few major players, all with deep pockets. From offering free colour chips to Google Adwords, it is expensive for us to compete in the traditional marketing world, so we rely on our reputation for quality, our creativity, and grassroots marketing ideas to get the word out about our brand.

    Colorhouse has received investment from Solera Capital, a women-owned, mission-based private equity firm that invests in emerging-growth companies.

    That said the economics of running a small business in a massive industry can be challenging. The paints do cost more than standard options at Home Depot but they have zero smell, which some consumers appreciate, making it easy to swiftly move into the space after painting it. Ms Sherer said:
    We have a toll manufacturing agreement that allows us to share in the cost of raw materials and helps to keep the cost of our paint down. As an independent paint brand, it would be difficult to keep costs down without this arrangement.

    As the company expands, it is turning up in more stores: Ace Hardware, Home Depot (online), Amazon, Crate and Barrel.
    HI News V4 No. 2: The hardware activist
    Download the latest issue of HI News Vol. 4, issue no. 2
    HI News
    The buying group puzzle
    Bunnings results for FY2017/18 first half
    Click to visit the HBT website for more information
    At first sight, Grant Crowle could be viewed as an easy-going tradie on his way to the pub. But underneath that casual exterior is a sharp-minded, intense and ambitious hardware retailer. We regard him as an outlier in many ways, an activist willing to take on council planners and a corporation or two.

    Simply click on the following link to download this edition:
    HI News V4 No. 2: The hardware activist

    The differences between the major buying groups are quite stark, but what is the economic, market basis for those differences? Using the work of economist Robert Steiner, HI News models what the groups are doing, and suggests where their current directions will eventually lead.

    We take a deep dive into the results for the first half of FY 2017/18 for Wesfarmers/Bunnings, and what the demerger of the conglomerate's Coles operations might mean for the hardware-home improvement retail industry.

    We also introduce our readers to the new CEO at the Hardware & Building Traders group, Greg Benstead.

    In our regular look at statistics relevant to the hardware industry, the Australian Bureau of Statistics has released its numbers for renovations, based on household spending figures, not approvals.

    This issue also includes stories on Adelaide Brighton, Boral, and James Hardie. We provide performance updates on Home Depot and Ace Hardware, as well as the job cuts at Kingfisher.

    Products from Bosch, Hitachi, Crescent and Lufkin are featured.
    Grant Crowle, hardware activist
    Grant Crowle outside his hardware store
    HNN Sources
    Exterior of The Hardware Store in Balmain, NSW
    The busy counter at The Hardware Store
    Click to visit the HBT website for more information
    Grant Crowle first came to the attention of HNN through a series of irascible but oddly enjoyable emails about a Bunnings small format warehouse store that had been proposed in Balmain, a suburb of Sydney, NSW. The proposed store would be quite close to one of Grant's two hardware stores, which are evocatively titled "The Hardware Store".

    It's not uncommon for HNN to receive emails and notes from hardware retailers who are concerned about what a nearby Bunnings could do to their businesses. Grant, however, had gone further than just complaining. He was, umm, in close personal touch with individuals who might have been responsible for putting up a protest sign on the proposed site - which was rapidly taken down.

    As it turned out, the Balmain store is more than just your average Bunnings urban infill project. It's an entirely new style of building. Instead of the "crammed to the scuppers" design that has worked well in areas such as Melbourne's urban-edge semi-compact Collingwood Bunnings store, the Balmain project is much more a warehouse-style store scaled down. Among its unique features is an internal turntable, to enable delivery trucks to better navigate the urban traffic situation.

    While the design is very interesting, it also has to be said that the way in which Bunnings has attempted to get around issues such as traffic congestion in this busy, wealthy, inner-urban Sydney suburb has been, well, somewhat "creative". And in one of those things "that just happen", this particular high-concept Bunnings store has found a worthy opponent in the person of Grant.

    Though "opponent" is perhaps a little unfair. As our conversations on this topic have developed, what has emerged is the portrait of someone who is quite a deep thinker on urban issues. Grant's concerns are not just that a major competitor might move directly into a neighbourhood he has had to himself for some years. It's really that planning bodies and councils are, in his opinion, not really doing their jobs.

    From Grant's point of view the Bunnings application does not go far enough in answering basic questions about issues such as traffic flow. While the turntable is an interesting innovation, it doesn't answer the key question of where delivery trucks will park while they wait to access the store. He also has a lot of questions about the application's modelling of general traffic flow. He says from what he has seen, the most recent application suggests that traffic flow will not increase, because they will be taking customers from businesses like his own. As Grant tells us, "A mate of mine who used to be a traffic engineer said he had never seen that argument used before."

    Whether councils and city planners approve what he might call "dodgy" proposals from major retailers is one thing. Equally important is whether they are actively working to find and develop inner urban space for all the commercial enterprises that are vital to making an urban area "work". That includes large-scale retail, such as hardware stores and furniture shops, but also vital services such as automotive repair, air-conditioning servicing, and even light manufacturing. Grant's point is that all too often councils and planners will work diligently to help a major retailer move into an area, but knock back environmentally sensitive, well thought-out plans to integrate retail and services into residential areas.

    Grant is typically succinct when asked about how he became a hardware retailer.
    I was a boat builder and sailor. Then that industry got really hard by the late 80s and early 90s, so I thought I would buy a hardware store, as that would be so easy. [Grant grins.] Stupid man!
    And now here I am 30 years later and I'm still trying to do it. I bought a store in Burwood (NSW) and the guy shafted me a little bit and we worked really hard at it but it was a tough environment. I ended up selling it to some guys and then I opened this store.
    I knew the area. There used to be Brown's Hardware up the road which was quite successful, but was just too expensive. So we sort of brought a bit of Burwood pricing into Balmain. And gave people what they wanted. From the very first day the local community really supported us.
    I was a local too in Balmain. I just lived down the road.

    Balmain is, of course, an area of high property prices, with the average dwelling costing around $2 million. It's split about 50/50 in terms of renters and owners, and skews lower in the age range with under 39 year-olds dominating. It features considerable harbour frontage, and is located around 4km from the Sydney CBD.

    Grant's store was at one time a factory for Leatherman tools, and later became a depot for Campbell's Soup trucks, before passing into the hands of the Sydney College of the Arts. It's a high-ceilinged space, but the overall floor space is relatively limited - typical of an inner-city hardware store in a high-growth area.

    It's also one of those hardware stores where, through long years of hard experience, Grant and his team have managed to pack a lot of stock into the space.
    I know that we stock probably four times the industry average, stock per metre. There is about $385,000 worth of stock here.

    Grant is also very obviously someone who works hard at improving his stock position with brands, moving away from those that return smaller margins, or offer direct competition through distribution at Bunnings.
    I was having a discussion with our Dulux rep the other day, and I showed him the figures going back five years, where we have basically reversed what we sell. We put Haymes in about five years ago, or probably less, and now we are doing around $140,000 with them a year. Previously, we were doing over $140,000 with Dulux, and now we are doing only $70,000. So I've grown the paint segment, but as I told the rep, the Dulux part of that has nearly halved.
    We only have a little bit of the trade paint and will broaden it with Haymes; we are a Haymes trade depot. But it is really hard yakka in Sydney, it seems to be.
    It just comes down to dollars. All major paint brands all make good paint for all different levels, for premium and for entry-level. It's horses for courses. Tradies who are coming in to do offices and that, we say don't buy a $200 can of 15 litre, we can sell you a $110 can, and it will last the two years it needs to last, until the next refurbishment.

    In fact, Grant has been quite active when it comes to finding brands in paints, coatings and stains that work better with his store.
    You may know Feast Watson, which makes Intergrain, are exclusive to Bunnings. That has caused a lot of friction in the industry. We've always been a large timber stockist because the local area has a lot of timber, so we had full shelves of Intergrain. We felt like telling them they can take them all and put them where the sun don't shine! [Laughter.] Instead, we decided to sell the stock off at a steep discount.
    Orica wasn't happy with us, because we put it up on our website, "Return of sale because of exclusivity to the green shed". Anyway, the state manager rang up and said they wanted us to take that down. Feast Watson said, "Why are you doing that when we already offered to take the product back?" I replied that after supporting their brand for 30 years I felt that I could earn more money discounting it than receiving a credit.

    Grant has replaced Intergrain with a range of alternative brands, including Haymes, Sikkens and Cutek. He says that as a result, the store did not see any drop off in sales revenue from that category. Grant is particularly enthusiastic about the Australian-made Cutek.
    Cutek is the big mover with architects and specifiers. They buy the tin, and buy the stain, separately, so they can add it in themselves. So a landscaper will buy a big drum and he will pour out what he needs. Their cleaners are fantastic, great for stripping off products like Cabot's Aquadeck. These will actually strip it all off. They are amazing, they will keep working for a week.

    While the store currently stocks Flexovit, Grant admits he wants to shift to Klingspor, but hasn't found time to make the necessary data changes in the POS system to accommodate that. Other suppliers have also lured him with special offers.
    We've been buying a large amount of cutting wheels from Makita lately. They have set deals where you can buy 200 boxes of wheels and we can get a proper price. They have an unusual pricing system. There is a large disparity based on size of the order. There are not many incentives for small guys to push the brand because the next discount level is quite high. So that makes it really hard sometimes to achieve the sale because you are competing with someone who is on a better discount level.
    It would be easier if the pricing was a flatter structure. I understand you are giving some of the big guys deals, but then the big guys can always shaft you. In general, though, I think Gavin [Keane] has done really well to get HBT on special prices with Makita and other suppliers, that's really helped.

    While Grant is a strong fan of Makita power tool accessories, as with many smaller retailers, selling the actual power tools is another thing.
    Makita are a good brand, they are a good tool. We're not too concerned about the sales volumes on the Makita tools. If we sold $50,000 worth of power tools for the year, we are selling $150,000 of accessories and accessories. The accessories are selling at 55% gross profit margin, and power tools are selling at 15% gross profit margin. The power tools themselves are there to say I sell power tools, and I sell accessories.

    One of the tricks Grant uses to better utilise the small space to provide all that people need is to not take a "one of each" approach, but to rather carefully select which brands he does stock.
    We have just about everything our customers need in the store. Well, it's what they need 90% of the time, and the other 10% of the time we will get it for them.
    It is interesting, in the industry you used to get a "good, better, best" in the range. I've been with a focus group for quite a long time and we would go on store visits. Two of the stores we went to were Kents at Orange, and Camerons at Batemans Bay. Both are pretty good operations but a few of us said when we got there, what's with all these rows of silicone?
    I said they are all different, but also they are all the same. At this store we decided over time that this kind of stocking was really a failure of the staff selling the product. They think they have to have several different brands to sell basically the same product. And that takes up a huge amount of space.
    For example, we are selling the HBT brand of silicone, which is 100% silicon for $3.99 a cartridge. So there's no real need to buy the cheap stuff. The funny thing with that, we sell Soudal, we've got a roofer that buys boxes off us, and we gave him the HBT one and we said it's the same thing, and he said to us, no it's not. So I asked Soudal, can you 100% guarantee me that it's the same? They said it's 100% the same. But the roofer said, "I'm still not sure..."
    When we were at other stores, for the study group, they told us, 'We understand your problems with space'. I told them, guys, you have no idea. I pointed out to them that they were using space for no real reason. The shops looks really smart from the outside, but when you get in them and you look at them the way we do, quite critically, all of a sudden we found stock hidden behind doors, stairwells. There were trowels and boxes of tiles, etc.
    And then the paint department, it was one-deep and had the same product displayed four times. But all the paint accessories were at the back of the store. We asked why are they out there? Our trays and brushes are directly opposite the paint cans. That's the best way to pick up additional sales.

    A little surprising for overbuilt Balmain, Grant says the store does a good trade in gardening products as well.
    People are amazed at how well we do with gardening products here but people in Balmain have smart little gardens. We've had two local gardening stores close down recently, but we go through a tremendous amount of potting mix, and stuff like that. But we don't sell anything that's alive - no plants. That's dead stock - literally! We used to stock seeds a long time ago but that was such a nightmare. The reps needed to change the packets due to the expiry dates. We eventually just said, forget it, it's too hard.

    There are some products that Grant has an obvious liking for, which he gets a great response for from customers as well. Walking down one aisle, he grabs a big bushy broom off the rack, and holds it up to us to smell.
    Hand-made brooms made in Australia. Smells like hay, made from millet. From Tumut. We sell six to seven at a time to people at Christmas, They are the biggest selling thing so far on our website at the moment. So we like putting the Sabco next to it, which isn't a bad brand, at $25, but people still like to buy handmade brooms for $70. I make people smell them before they buy them!

    Grant is also serious about ecommerce, and has developed his own website. As everyone does, he's had a few issues with this. Some of those issues are major, but others are small and annoying. For example, while Grant is a great supporter of Haymes paints, he's had real problems just getting images from them to use on the website, while companies such as Dulux are keen to help him out.

    Grant admits that some of the numbers when it comes to ecommerce for smaller stores may not work out all that well, but the issue is larger than only profit.
    I don't think [ecommerce] is hugely viable to a large degree, but I think it's a leakage issue. For example, one of our issues is the amount of people who buy Velux [skylights] online, and Velux don't give those guys the same deal we get, because we are a stockist, we display the product etc, but the margins are so slim it doesn't matter. It's a bit like selling power tools. It doesn't matter if you're not making anything on it as long as you're selling it. So it's about leakage, about stopping people going elsewhere.
    We said to Velux we need a flat 12.5% across the board otherwise it's not viable having it on the website. Velux are the best company to deal with in the industry. Their margin for stuff-ups is like 0.02%. In 15 years of dealing with them they've only stuffed up about four jobs. It doesn't happen very often. But they are very disciplined. People ring up and say but I want to get some Velux product today. Well, it just doesn't happen. [Laughter.] You have to wait like everyone else.

    While the website might not directly supply much profit, Grant sees it as helping to develop a lot of secondary business as well.
    People have been contacting us through the website and we've had a couple of really good jobs from Spantech out of it, like $2500 worth of posts and steel beams.
    Download the full article

    This is a summary of the original article. To read the full article, please click on the link below to download your free copy of HI News 4-02:
    HI News Vol.4 No.2: The hardware activist
    The buying group puzzle
    Mapping buying groups along the competitive axes
    HNN Sources
    A grid that represents the axes of competition
    The activities which strengthen retailers/weaken brands
    Give to Amnesty International
    Over the next 15 months or so many Australian independent hardware retailers will make core decisions that will affect their businesses for five to 10 years to come.

    There are multiple reasons why the remainder of 2018 and much of 2019 will be "decision time" for independents. While there are a couple recent, direct events that have helped to "trigger" the need to make choices, what is more important is that several industry forces that have been around for some time are coming into tighter focus. In the reasonably cautious "wait and see" balance many retailers adopt, we've now moved more into the "see" portion.

    For many individual independent retailers the key question at the moment is whether they should remain with their current buying group affiliation, move to another buying group, or simply forgo the expense of any affiliation. Or, to put that a little differently, what are the real benefits of belonging to each buying group, and how are these benefits likely to change over the next five years or so?

    While that might seem a difficult question to answer, it is possible to work through the models the main buying groups plan to implement, and to arrive at some understanding of the differences.

    Along the way, it seems necessary to gain some understanding of two basic questions, as well:
  • What are the core economics of the wholesale/retail hardware market in Australia?
  • In a highly price-constrained market, with a relatively low level of innovation, how and where do retailers and suppliers find margin and profit?
  • Background

    What shifts have taken place for the major players engaged with the Australian hardware retail market over the past two years?

    After a year and a half of converging the Home Timber & Hardware Group (HTH) with Mitre 10, the industry is starting to see the outlines of Metcash's Independent Hardware Group (IHG) become visible. With much of the management team from HTH let go, it's no surprise that this tends to lean a bit more towards Mitre 10 than HTH in terms of culture.

    As announced at the IHG Expo in Adelaide in mid-February 2018, the decision that Metcash will develop Mitre 10 as the main brand out of the four store brands currently operating has been made. The implementation of this has been delayed until early 2020. It doesn't seem clear whether during those interim two years the HTH brand will receive equal treatment to Mitre 10 in terms of resources such as advertising expenditure.

    In any event, internal survey results from IHG released at the Expo would indicate this outcome might not suit many HTH members. It's also not the answer that the investment analysts were looking for. Amalgamating the brands would result in an additional $5 million added to earnings before interest and taxation (EBIT) annually, according to some estimates. The delay is another indication of a certain fragility to the current alliance between independents in Mitre 10 and HTH.

    Meanwhile, a smaller but rapidly growing competitor for independents, the Hardware & Building Traders (HBT) group, after over a year of operating under the guidance of "the two Mikes" - Mike LoRicco and Mike Coates - has recently appointed a new CEO, Greg Benstead. Interestingly, both Mr Benstead and IHG's CEO, Mark Laidlaw have experience working for Metcash's main retail business, the Independent Grocers of Australia (IGA), to which IHG is a corporate sister.

    There's little doubt that HBT sees itself as providing a good option for HTH stores that are interested in alternatives to IHG. As Mr Laidlaw mentioned in response to an analyst's question at the presentation of Metcash's first half results for FY2017/18, the few HTH stores that IHG have lost so far migrated over to HBT.

    In the independent area, the National Building Suppliers Group (Natbuild), has an unusual profile, with just 34 long-term members operating 140 trade outlets in Australia, generating $1.8 billion in trade sales a year. It has a long-term strategy of seeking larger, more successful retail operations as members, which are especially attractive to suppliers due to their market clout and stability.

    While Natbuild has been overtaken by IHG, which looks like it will generate over $2 billion in sales a year, there are indications that the latter company is still not getting the same level of volume-based discounts from suppliers the former does. Recent allegations of IHG staff gaining knowledge of deal terms through unauthorised access to the Natbuild website (allegations made in October 2017 and then withdrawn in late February 2018) may give some hint of the degree of competition between the two companies.

    Outside of these major players there are a number of smaller buying groups, most of which have either a speciality or regional focus - or sometimes both. They offer varying degrees of support and access to supplier deals, and for many hardware retailers provide an excellent solution to their needs.

    Then there are speciality hardware franchises such as Total Tools. The company calls itself "Australia's largest trade and industrial tool retailer". Its website states that it features over 7000 tools in its stores, with access to a total of 60,000 products across Australia.

    Finally there is the emerging category of retailers who operate primarily online. Sydney Tools is perhaps the best known, and it has continued to expand its offline presence by opening new stores in Melbourne. Added to that are emerging specialist ecommerce retailers such as Monsta, which is building a paint business online. Amazon Australia, while it is devoting some attention to an online home improvement section in its store, is unlikely to have much of an impact until mid-2019.

    Australia's largest hardware and home improvement retailer, the Wesfarmers-owned Bunnings Australia & New Zealand (BANZ), continues to be the single largest force in the Australian hardware market. With revenue for its most recent half of $6.6 billion, up by over 10% on the previous corresponding period, and earnings before interest and taxation (EBIT) of $864 million, up over 12%, it remains the dominant player in terms of both market share and market growth.

    Power-tools represent a good example of the influence of BANZ on the overall hardware market. Bunnings has pioneered low prices in this category. Many independent hardware retailers will admit that their power-tool sales return very slim margins when they attempt to be at least price-comparable with Bunnings, and that they only stock these tools so as not to disappoint loyal customers, and as a gateway to selling the far more profitable power-tool accessories.

    While Bunnings does apply specific strategies to the power-tool category ("captive" brands, exclusive distribution, wide range, everyday low pricing), its ongoing success is less dependent on well-developed strategies in individual categories, and more on an overarching, carefully applied strategy. In fact, Bunnings is the only retailer in Australian hardware that has a clear answer for the two pressing questions we are looking at here: they know where their margin/profit comes from, and have a clear vision of the changing economics of the wholesale/retail hardware market.

    This is evident in what is perhaps the company's most revealing statement made by former managing director of Bunnings John Gillam in 2015. In response to an analyst's question about why Bunnings did not increase its prices, Mr Gillam responded by stating that "the margin is the outcome". Unwound, one of the meanings of this statement is that pricing is effectively set by the market itself, not the retailer. Given that, margin is not a matter of "cost-plus", it is a matter of controlling the supply-chain so as to produce low supply costs, producing better margins.
    The shape of the market

    Over the past 25 years the Australian hardware market has been subject to a number of disruptions. While many see Bunnings as being a principal cause of that disruption, it is probably more accurate to see the disruption as being somewhat external to the hardware market, and Bunnings as the only hardware retailer that really understood and used those disruptive forces.

    The major shift from the early 1990s to today has been from largely dominant suppliers and brands, to the dominance of retailers and the stores themselves. Brand names continue to matter in some specific areas (such as interior/exterior house paints), but in most other areas their influence has faded, and continues to decrease.

    These cycles of domination by brands and then by retailers has been extensively studied by one US-based economist, Robert L. Steiner, who has brought a unique perspective to his analysis. Far from being an "ivory tower" theoretician, Mr Steiner obtained an MA in economics on the US GI Bill after World War II (in which he flew 35 missions over Germany in B17s), then went on to become president of the Steiner family-owned toy manufacturer Kenner Products. This was a very successful company which developed (among other products) the Easy Bake oven for children, marketed Play-Doh and Spirograph, and was the original licensee for Star Wars toy figurines.

    After his time at Kenner, Mr Steiner was appointed senior staff economist at the US Federal Trade Commission, where he was mostly concerned with competitive policy. He authored over 20 academic papers, three or four of which are quite seminal. His work was greatly enriched by his "hands-on" experience as a supplier in the fast-moving consumer goods market. That experience frequently contradicted the accepted wisdom of more academically-based economists.

    In more recent years, the economist Michael P. Lynch has built further on Mr Steiner's work. Writing in 2003, he outlines concisely how ignoring the retail/wholesale aspect of economics distorts the reality:
    For more than three decades Robert Steiner has been arguing that economists have neglected both retailers and the competition between retailers and their manufacturer suppliers. The most extreme form of neglect is to act as though retailers do not even exist; manufacturers or importers are assumed to sell directly to consumers.
    Steiner calls the latter "single stage" thinking in opposition to his "dual stage" theory in which both retailers and manufacturers play an important role in determining consumer prices and the quantities and types of goods sold.

    While many of Mr Steiner's papers are worth reading, the one that is most helpful with the Australian hardware market is entitled: "The Inverse Association Between the Margins of Manufacturers and Retailers". There is an extensive commentary on this paper by Mr Lynch, entitled: "Why economists are wrong to neglect retailing and how Steiner's theory provides an explanation of important regularities". These can be downloaded in one document from the following link:
    Why economists are wrong to neglect retailing and how Steiner's theory provides an explanation of important regularities
    The axes of retail/supply

    The main insight that Mr Steiner offers is that competition in the retail/supplier sector can be viewed along two "axes". The horizontal axis is made up of like participants competing with like - stores with other stores, brands with other brands, and products with products. The vertical axis runs up the actual supplychain, where retailers compete with suppliers, and suppliers compete with retailers.

    What makes Mr Steiner's work of particular interest is that he interrelates competition along these two axes. His statement regarding this is:
    In a dual stage environment, the market power and the margins of an individual manufacturer or retailer are a joint function of its horizontal competitive position against firms at the same level, and its vertical bargaining power with firms at the other stage.

    That is, he sees the vertical competitiveness of a retailer or supplier as affecting its horizontal competitiveness, and vice versa. High-performance retailers can demand more from suppliers. High performance brands enable suppliers to demand more from retailers. But also, importantly, there are tactics that both retailers and suppliers can use to influence this relationship. Retailers can make use of "home brands", and suppliers can alter the balance through the use of advertising.

    As it turns out, considering the relationship between these twin axes is very helpful when it comes to understanding what is going on in the Australian hardware market.
    Download the full article

    This is a summary of the original article. To read the full article, please click on the link below to download your free copy of HI News:
    HI News Vol.4 No.2: The hardware activist
    Wesfarmers-Bunnings 2017-18 H1 results
    Bunnings results for fy2017/18 first half
    HNN Sources
    Wesfarmers managing director Rob Scott
    Homebase results prior to being bought by Bunnings
    Click to visit the HBT website for more information
    On 20 February 2018 Australian conglomerate Wesfarmers announced its results for the first half of FY 2017/18. This followed on from an announcement two weeks prior that it would make a writedown of over $1000 million for losses and revaluations associated with its Bunnings United Kingdom and Ireland (BUKI) operations, and its Target department store operations based in Australia.

    Following on from this, on 16 March 2018, Wesfarmers announced its intention to "demerge" the operations of Coles, a supermarket, convenience store and liquor business based in Australia. While Bunnings was not directly involved in the demerger, Wesfarmers managing director Rob Scott did comment on how this move would affect the home improvement retailer, both as an individual division, and through some company-wide initiatives that will be implemented.
    Company results

    Revenue for Wesfarmers improved mildly, reaching $35.903 billion, up by 2.8% on the previous corresponding period (pcp), which was the first half of FY2016/17.

    One-off, significant items had an impact of $1237 million on earnings before interest and taxation (EBIT), and an impact of $1323 million on net profit after tax (NPAT). This meant that EBIT fell by over 54% as compared to the pcp, and NPAT declined by 86.6%.

    Excluding the significant items, EBIT was $2350 million, down by 3.3% on the pcp, NPAT was $1535 million, down by 2.7%, and basic earnings per share fell 3.2% to $1.356.
    Divisional results

    EBIT for Coles fell by 14.1% on the pcp, to reach $790 million. Department stores (Kmart and Target) lifted EBIT to $415 million, up 7.2%. Officeworks returned $68 million in EBIT, up 9.7%. The consolidated industrials division of Wesfarmers returned EBIT of $449 million, up by 19.1% on the pcp.
    Bunnings Australia & New Zealand

    Sales revenue for Bunnings Australia & New Zealand (BANZ) was $6566 million, up by 10.22% on the pcp. EBIT came in at $864 million, up by 12.21%. Total stores sales growth was 8.8%, up from 8.4% in the pcp. Store-on-store (comp) sales growth was 7.5%, a full percentage point above the pcp's 6.5%.

    The managing director of Bunnings, Michael Schneider, introduced the figures for BANZ by saying that the consistent and strong results from BANZ were pleasing.
    The business has demonstrated strong momentum, delivering growth across consumer and commercial, in all trading regions and categories. It is worth noting that sales in the corresponding prior period were affected by a late start to spring, and the stock liquidation activities of the Masters business. EBIT increased as the business remain focused on cost control, and we continued to drive value for customers. Ongoing favourable property market conditions led to positive outcomes on property divestment. Higher earnings, and a continued focus on disciplined capital management resulted in a 7.9% improvement in return on capital, which reached 46.94%.
    Our ongoing focus on even better customer experiences was supported by the completion of even more store upgrades, and category refresh work, in addition to further investments in customer value. During the period 11 new trading locations were opened, including eight new Bunnings warehouses, two smaller formats stores, and a trade centre.

    According to supplemental information, BANZ now has 253 warehouse stores, 77 smaller format stores, and 33 trade centres. NSW has 74 warehouse stores, VIC 57 and QLD 42. New Zealand has 21 on the North Island, and six on the South Island. Four warehouses were closed during the half.

    Mr Schneider continued to outline some of the strategic priorities for BANZ:
    The business remains committed to three key areas in our strategic agenda. Creating better experiences for customers through deeper engagement in store and within our local communities, as well as accelerating our digital capabilities, as reflected in the recent launch of the extended range online that I will speak to shortly.

    Focus also continues on strengthening the core of the business, including driving safety across all areas.

    As of late February, Bunnings in Victoria now offers the opportunity to purchase items from its "special orders" range directly online. This a graduated step, as essentially all that has happened is that the mechanism of ordering has shifted from a verbal process to a digital one, with other aspects, such as picking and shipping, likely remaining unchanged. Products that can be ordered via this process include much of Makita's 12-volt power tool line, as an example.

    BANZ has also introduced a means of checking for in-store stock online. The details appear when items have been looked-up on the Bunnings website. This indicates if a product is available, is available only in limited numbers, or is not available. Early testing of this feature by HNN indicates that there are a few flaws in stock-tracking by Bunnings: items that appear on the database as being in-stock - especially older items - can sometimes not be found in the warehouses themselves. That's only to be expected on the introduction of such a system.

    Respected retail analyst Michael Simotas of Deutsche Bank asked Mr Schneider how much of the improved performance was due to internal changes, and how much was due to external influences on the pcp which might have depressed those comparative results, such as poor weather and the effects of high levels of discounts at Masters Home Improvement as it exited the market.

    Mr Schneider responded that it was likely a combination of different factors that had led to the good result for the half.
    I think we talk consistently about the way we model pricing in the business, seeing gross margins go down, which we have been very successful at doing over quite a long period now. [That] upstream work has downstream benefits in productivity gains and efficiencies in-store. [That includes] the use of technology, and more reliability around the stock flow process, particularly going into Christmas.
    Obviously, as we cycle out of deep clearance activity from other players in the market, that will shift reactions to things, but it is not about putting prices up. I think we were very clear during the Masters clearance time, that that was clearance activity, so we didn't really move on pricing then, in response to that, and obviously that has meant that we have been able to continue to invest in pricing now.
    For the weather point of view, it is obviously an impact when you get sustained, challenging weather conditions, and that shifts the mix of products which will obviously shift the mix of prices and margins. But really it is all about continuing to invest in the value proposition for the customer through productivity improvements, and also product innovation, as well as improved buying practice. So I think when you build some of those together, it delivers some solid outcomes for you, as you can see in the result.

    In a similar vein, an analyst from Goldman Sachs asked about whether changes in the property price cycle in Australia can be expected to have more of an effect on BANZ. He suggested that, while in the past Bunnings had been underexposed to these changes, its shift to a larger, more diverse store network encompassing a wider market, might make it more vulnerable.

    Mr Schneider replied by pointing out that the products BANZ sells are quite diverse.
    Some of those are necessity, as I said before, and some are discretionary [purchases], and that takes place across both consumer and commercial (effectively the trade market). So that does give us a degree of flexibility.
    There is no doubt that when housing churn is high there is a benefit to be gained, because obviously everyone is doing something to their home before they sell it, and the new owners then want to do something to it to make it their own. But the reality is, as housing prices have grown, and it becomes very expensive to swap out of one property to another - and from our research I think overall lending values on a lot of established mortgages are actually quite low - there is a desire and appetite for Aussies and Kiwis to invest in their own homes to make them a better place to live.
    So we sort of see a degree of resilience that comes through from from that. We don't, or normally I wouldn't talk about regional performance. The sort of challenge that I have with the team is that we want to perform better than the market. So if the market is negative, and we are less negative, then we see that as a positive outcome. And if the market is going well, then we want to be performing on the high side of that.
    Bunnings UK & Ireland

    As highlighted at a special presentation at the start of February, performance at BUKI has been very poor for the half. EBIT was almost 2.5 times worse than in the pcp, and revenue fell by 15.7%. As has been described in the previous edition of HI News, this has led to a large writedown in the BUKI business, and to Wesfarmers undertaking a review as to whether the business is worth continued investment. The result of that review will be released at the Wesfarmers' Strategy Day in early-June 2018.

    Challenged by respected Morgan Stanley Bank of America analyst David Errington on whether the delay of four months was justified, and might result in further harm to the Wesfarmers business, Mr Scott replied that he did not think reports of the demise of BUKI in the British press should be taken too much to heart.
    The first point I would say is that I would be careful [not] to draw too many inferences or conclusions from what you read in the British press. The facts that we are more influenced by are what our team members are saying, what our suppliers are saying, and we do engage very closely with our suppliers.
    Clearly the news we came out with the other day is disappointing for us, and disappointing for shareholders - as well as disappointing for the BUKI team. I think what you will find, and this feedback has certainly been reiterated to us through Damian McLoughlin, and the team on the ground in the UK, we've been very open and honest about this, we've been upfront as a group, we've said we've made a number of mistakes. What we're doing to remedy that is to strengthen local talent, and really starting to listen to our local team members. [We are] making sure we have people over there running the business that really understand the UK market.
    That honesty, and that openness, has been very well received by the team. And we are actually finding some good support and action there off the back of that openness.

    Mr Scott went on, in response to Mr Errington's original question, to offer some insight into his thought processes over waiting for a review and, in effect, giving the Homebase operations of BUKI a chance to trade out of the situation they are currently in.
    It's really easy, David, as a new CEO to come in and just wipe the slate clean. I do not think that that is necessarily in the best interest of our shareholders. Where we sit today, the best thing we can do right here right today, is to improve the trading losses, and that is what we are focused on.
    So the team in BUKI are absolutely focused on reducing the cash losses, setting the offer up, we've got a lot of stock there, and were coming into a really important trading period, through spring and summer, and let's make the most of this opportunity.
    Obviously we have some broader strategic questions, and I've been very clear that we will update the market on that in June. I don't want to preempt that. So the focus short-term: reduced losses, improve trading performance, and irrespective of what we choose to do, post June, we will be in a much better position in June if we can reduce those trading losses.

    On further prompting from Mr Errington as to whether the announcement itself was unhelpful to BUKI's future prospects, Mr Scott finished the topic by saying:
    We set the bar pretty high at Wesfarmers, particularly around capital allocation, and frankly we just have to take it on the chin, right? We have to take it on the chin, that we made a few mistakes, we are disappointed by that, and we are happy to cop a bit of flack. But what is most important is that the decisions we take from here on in are in the shareholders' best interests.
    Bunnings UK pilot stores

    In that spirit, Mr Schneider was thorough and accurate in recounting the problems that BUKI is facing. However, he did point to what he regards as positive signs when it comes to the Bunnings UK format stores that are being slowly rolled out by BUKI.
    We had 15 Bunning's pilot stores trading at the end of the half. We continue to receive positive feedback from our customers, and really good engagement from local communities. We have worked hard to ensure that we are offering the widest range of trusted brands, and we have been pleased with the strong supplier support we have received. The performance of the pilot stores is encouraging, although as Rob said earlier this month, the growth did moderate over the winter months, and we are now looking to see how the pilots perform during the peak spring summer period.

    He went on to outline more of the process that is in place to thoroughly test the different formats and approaches of all the pilot stores.
    We currently have 19 of these open, with a further five to be opened by the end of the financial year. We have an assortment of pilots with a range of formats, size, capital spending and market environment. We will carefully analyse and monitor the performance of each pilot to help inform our future plans. There is clearly a lot of hard work ahead of us, and I will give you an update on our progress at the strategy day in June.
    Revitalising Homebase

    Both Mr Scott and Mr Schneider pointed to Wesfarmers' efforts in securing more local knowledge and experience in the Homebase team as being crucial to at least radically reducing the losses in that store network. Mr Schneider in particular highlighted the addition of Mr McLoughlin and ex-Officeworks executive David Haydon to the management team as being important.
    Over the last six months, a lot of work has gone into identifying, attracting and recruiting talent in areas such as merchandise, supply chain, and store development. We now have a greater depth of talent, more attuned to the local market, and a structure that allows for improved clarity of responsibility, and accountability.
    The combination of Damian McLoughlin, and David Haydon, with strong merchandising and operational backgrounds, and knowledge of the UK market are a real positive, and a good complement to the rest of the team. We've also sharpened up merchandising, promotion and operational plans to drive better performance, and place significant emphasis on much improved execution in all aspects of the business.

    Mr Schneider also went into more detail about the planned reduction in the size of the Homebase store network.
    In terms of the Homebase network, we have closed five loss-making stores in the first half, and are currently undergoing a more comprehensive review of the store portfolio.

    Elsewhere Mr Schneider affirmed the planned reduction in the size of the network:
    There is also significant amount of work going into looking at the store portfolio of Homebase. As Rob called out two weeks ago, a detailed review is underway and likely to result in the closure of 20 to 40 stores.
    Download full version

    This is a summary of the article. To read the full article, please download your free copy of HI News from the link below:
    HI News Vol.4 No.2: The hardware activist
    Big box update
    Bunnings Gregory Hills in NSW took over the ex-Masters store along Camden Valley Way
    HNN Sources
    Bunnings Wangara in WA is being marketed as a "big drawcard" for potential tenants of a development in nearby Landsdale
    A proposed Bunnings store in Queensland, New Zealand has been rejected
    Click to visit the HBT website for more information
    Bunnings continues its roll out of traditional store fronts around Australia and its New Zealand subsidiary has faced a significant obstacle in establishing an outlet in Queenstown.
    Bunnings store starts and openings

    Western Australia, New South Wales and Queensland will have more bricks-and-mortar Bunnings stores. Outlets are being launched or planned over the next several months.

    The WA-based Bunnings Wangara store on Hartman Drive is set to open in April at the former Masters site after the big box retailer received development approval last year.

    Bunnings general manager - property Andrew Marks said once completed, the Wangara warehouse would span more that 13,000sqm. He said:
    We can confirm we are completing necessary conversion and reformatting works at the new Bunnings Warehouse Wangara.

    Bunnings Wangara is also being marketed as a "big drawcard" for potential tenants of a development in nearby Landsdale. Property group Raine and Horne Commercial has used the retailer as a selling point for two warehouse developments on Mullingar Way.

    Raine and Horne Commercial agency associate Daniel Romeo said the entire site had been transformed over the past few years and that commitment from Bunnings taking over the previous 3.18ha Masters store added to the "desirability" of the area. He told Community News:
    It will increase passing traffic and exposure for businesses. It will be good for business in the area in general, attracting more tradies, potential customers for other businesses and attract new buyers/tenants to the area.

    Raine and Horne Commercial director Anthony Vunlinovich said the Wangara/Landsdale area was "hit pretty hard" in the last two years with the general retail and real estate slump.

    The $38 million Bunnings Warehouse located at 540 Yaamba Road, Norman Gardens (QLD) is officially opening across two weekends in March, according to The Morning Bulletin. The new store moved to a former Masters site, just down the street from its original premises.

    The current Bunnings Warehouse is 8,000sqm and the new space is 12,000sqm, an increase of 4,000sqm. It includes a nursery three times the size of the previous store.

    Complex manager, Glen Reid, who has been part of the Bunnings team for nearly seven years, said it is always looking for opportunities to contribute to local causes. He said:
    We have been part of the Rockhampton community since 2001...Team members have supported a number of community groups including working with the Cancer Council to refinish the centre's veranda, helping Glenmore State Primary School with a gardening project to create a quiet and tranquil space and supporting Riding for the Disabled to refurbish their veranda and outdoor area.

    A Bunnings store will be opening in Baldivis (WA) in April. It will be located at Lot 9050 Safety Bay Road.

    Newly recruited team members have been active in the local community sharing their skills. Staff have created an outdoor space at Baldivis Volunteer Fire Station and will visit Baldivis Primary School to help build garden beds, outdoor furniture and a barbecue area for pupils to use as part of their kitchen classes

    They will also conduct projects at Tanby College, pulling out the existing garden, and then placing a new water tank system for the school to use on their vegetable gardens.
    Gregory Hills

    Bunnings Gregory Hills in NSW will open in April after the big box retailer took over the ex-Masters store along Camden Valley Way. Mr Marks told the Camden Advertiser that conversion and reformatting works were currently under way at the site. He said:
    The new site ... will span over 13,000 square metres.

    Bunnings lodged an application with Camden Council in January to "amend the layout and description of an approved development to facilitate [a] new operator of the premises".

    The new $15 million Bunnings Shellharbour store in NSW is opening soon. The retail warehouse is almost complete and located at the former Masters site at 15 Shandon Circuit, Albion Park.

    Bunnings Shellharbour complex manager Greg Sutton has worked at Bunnings for over 15 years and said the team will continue to actively go out into the community and engage with projects. Staff recently went to Albion Park Public School to help work on a sensory garden. He told the Illawarra Mercury:
    The team has also provided materials to Albion Park Men's Shed to help construct seating for their garden and supported Northcott Disability Service with a garden bed and sustainability workshop.
    Bunnings NZ rejected for Queenstown store

    Plans for a Bunnings store on the outskirts of Queenstown, New Zealand are being reviewed after three council commissioners refused to grant consent to the company.

    The proposal was declined amid concerns over the appearance of the large 8119sqm store on State Highway 6, at Frankton Flats in Queenstown. The site would have included a main retail area, timber trade sales, outdoor nursery and landscape yard, with buildings up to 12m high.

    Bunnings New Zealand general manager Toby Lawrence said the company was disappointed with the decision, but would take the feedback on board.

    Despite the fact the big box retailer proposed to reduce its use of corporate colours on its signage, the commissioners said in their decision that the visual effects of a proposed 9m high sign - reduced to 6m during the hearing - and signage on the building, were more than minor. In addition, landscaping and visual effects were a problem.

    The commissioners were also concerned with the building's height, bulk and mass and its impact on the street scene. Some urban design effects were more than minor, they said.
    However, it is our view that these issues could be addressed with a reduced building form and potentially a different vehicle access and car parking agreement.

    The commissioners agreed with the company that the loss of 1.62 hectares of industrial-zoned land, or about 1.4% of industrial-zoned land in the district, to a retail store was no more than a minor issue.
    The Bunnings activity is complementary to and compatible with other activities within proximity to the site and would support construction activities.

    Overall the commissioners concluded that the proposal would have more than minor adverse effects and was contrary to the objectives and policies of the District Plan and Proposed District Plan.

    Under the district plan, the land where Bunnings had proposed, the store could not be used for retail unless it was "ancillary to the primary land use", the commissioners said.
    Bunnings New Zealand national property development manager Brett Moody told us that Remarkables Park was not as attractive, as it is hard to access, and that Bunnings sought to be in a visible location.
    We concur with the applicant that there are limited options within Queenstown where a Bunnings could establish and operate. However, our premise should not be that just because it may not be able to easily locate elsewhere, that it should be able to locate on this site or in the activity area E1 sub zone.
    Indie store update
    Farmcraft Kalbar was named CRT Community Member for the Year at the national conference in Perth
    HNN Sources
    Big box stores influence Fairy Meadow store closure
    Tyler's Rural celebrates 30 years in business
    Click to visit the HBT website for more information
    CRT 2017 stores of distinction honoured at its national conference; a hardware store in Fairy Meadow (NSW) is closing its doors; and Tyler's Rural in Victoria reaches its 30 year anniversary.
    CRT acknowledges its best

    Farmcraft Kalbar was named the CRT Community Member for the Year at CRT's national conference in Perth recently.

    It has been an integral part of the community for 25 years, and Farmcraft Kalbar managing director Alistair Ross said they were all about giving back. Some of the local organisations to benefit from its support include the Fassifern Cricket Association, Fassifern Falcons AFL Club, Fassifern Men's Shed and the Beaudesert High School.

    This involvement has led to an understanding of the community and an ability to rally those around them in difficult times. When a young local was seriously injured in a car accident, Farmcraft Kalbar helped to raise funds to support his recovery.
    Taree Produce

    The Taree Produce team was named the NSW CRT Business of the Year for 2017 at the event, taking out the title for the fourth consecutive year.

    Principal of Taree Produce, Craig Allport spoke of the efforts of his team in securing the award. Mr Allport is reported as saying:
    Sue and I have worked hard, along with our store managers, David Moscatt and David Leach to ensure our team can continue to support our community in every endeavour. As a business we can never stop adapting to their needs and ensuring we have the most up to date knowledge to help them succeed.
    Knowing how many fantastic CRT businesses there are across NSW, we are really proud to have defended our title again this year.

    Greg O'Neil, executive general manager of CRT, on behalf of Ruralco Holdings Limited, is reported as saying:
    Their continued success and outstanding performance really speaks to the strong culture Craig and Sue have established within the business. Their reputation within their community, but also within the CRT group, is something to be admired.
    Finance partnership

    A strategic partnership between Agfarm and CRT, also announced at the conference, will see Australian broadacre farmers gain more access to affordable input finance this planting season.

    Agfarm's input finance program "Accelerate" has been in the market for the last five years, and is now being offered through all participating CRT stores based in broadacre cropping areas. Mr O'Neil is looking forward to the roll out and said in a statement:
    CRT is always looking for ways to improve our service offering and assist our clients to expand and improve their operations, so the introduction of Agfarm Accelerate to the broader CRT network is great news.
    Most CRT stores currently offer a limited range of finance models to broadacre farmers, however, in many cases they have been restricted due to a number of factors, in being able to offer seasonal finance more broadly. The introduction of Agfarm Accelerate will allow post-harvest payment terms, which will better suit their farming clientele.

    CRT (Combined Rural Traders) was formed in 1970 in Orange (NSW) by a small group of businesses determined to get a better deal for the region's independent rural retailers and their farming customers. Today, the original member base of six has evolved into Australia's largest group of independent rural retailers with over 300 stores.
    Fairy Meadow store closure

    A Hardex Hardware Plus store in Fairy Meadow (NSW) is holding a closing down sale of its stock after owner Rene Tummers said he was hit with a 50% drop in customers when the Bellambi Bunnings store opened last October. He told the Illawarra Mercury:
    When Masters was going to open up in Jardine Street, that's only 50m away, I thought that's the end for us. It's a death of a thousand cuts. It's just a torturous way to go. We resolved that the day they opened up their doors is the day we'll close ours.

    The Masters store never came, and when Bunnings bought the land at Bellambi Mr Tummers believed it was just a "chess manoeuvre" in its battle with Masters. It was not. He said:
    They had a 'soft opening' and from that very first day I lost half my sales. I thought OK, people get curious, they want to go have a look. We recovered a bit but not enough to sustain us. I thought we'll see if people come back. Some do - but we've still lost 30 to 40%.
    I wasn't surprised; I was just caught out a bit at the timing. From Christmas on we had our closing down plan. I knew Bunnings was going to kill me.
    I could probably count eleven hardware stores in the Illawarra which have closed as a result of this phenomenon, which is 'big box'. You think 'OK, that's the nature of the beast', but I do worry about where it's going to end up.
    Some of the customers were practically in tears about us leaving. They felt lost, that they wouldn't be able to go to their favourite store and have somebody solve their problems for them.

    Mr Tummers and his brother Theo purchased the store in 1999. Theo has since passed away and was considered the driving force behind the business.
    Business milestone for Tyler's Rural

    Tyler's Rural started with two brothers at Rupanyup (VIC) in 1988 and since then purchased hardware stores at Stawell and Murtoa to become a prominent franchise in the area.

    As the business celebrates 30 years, owner Kelvin Tyler said it was a huge achievement. He told the Stawell Times:
    It all started with myself and my brother Adrian and now we employ up to 14 people.

    Mr Tyler said the business branched into the Stawell township to reach more agronomy clients. The farm supplies and hardware store is in its fourth year at the town.
    There are a lot of agronomy clients in this area. So the move into Stawell was to make it more convenient for them, because some of them were having to travel about 60 or 70 kilometres to reach the other two locations.

    Mr Tyler said after a "tough" first year of business at Stawell, sales were steady. He said:
    It hasn't skyrocketed, but it is steady and we are finding there is more and more demand.
    Supplier update
    The Adelaide Brighton Cement plant in Birkenhead, South Australia
    HNN Sources
    James Hardie's North America fibre cement division grew seven per cent in the third quarter
    The M7-1 series is the largest tractor ever manufactured by Kubota
    Subscribe to HNN weekly e-newsletter
    Boral CEO said all three of the company's main divisions of Australia, the United States and Asia were "primed to take advantage of a synchronised step-up in growth"; Adelaide Brighton said there are no signs of any fall-off in demand for construction materials; Kubota Australia looks to expansion; James Hardie said it is on track to increase manufacturing capacity; Assa Abloy acquires UK-based architectural hardware firms; and Hilti to drive productivity on construction sites through digital technology.
    Boral poised to benefit from infrastructure

    Profit for building materials supplier, Boral rose 13% in the first half to $173 million, but growth was capped by significant items, including $41 million in costs of integrating the Headwaters business it bought in the US. Excluding significant items, profit was up 44% to $213.9 million.

    Revenue from Boral Australia, the company's biggest geographic division, increased by 12% to $1.8 billion for the six months ended December 31. Boral Australia generated a 12% rise in earnings before interest, tax, depreciation and amortisation to $294 million and is expected to deliver full-year growth in the high single-digits.

    Boral chief executive Mike Kane said the company would largely be in an "infrastructure play" for the next five to eight years as it fed the investment boom. Spending on roads, freeways, subdivisions and bridges in Australia is speeding up, and forecast to jump by 17% over the full year.

    "We are stretched," Mr Kane said of the infrastructure supply challenge in Australia as construction firms used rising volumes of concrete and asphalt.

    Mr Kane also said housing markets in Australia would slowly and steadily unwind from their historical highs, but this would leave Boral untroubled this time around because of its heavy exposure to infrastructure spending and an expanded geographic reach in the United States.

    Mr Kane believes new housing starts remain at strong levels even though they were six per cent lower in the first half of 2017-18 at 224,000 across the country. He said:
    I don't see a lot of speculative over-build.

    A decline in housing starts in NSW, Queensland and Western Australia in 2017-18 was being partially offset by an increase in Victoria and South Australia, largely driven in those states by increased multi-residential construction.

    Supplier update: Boral's US acquisition - HNN
    Adelaide Brighton posts full-year results

    Cement and masonry supplier, Adelaide Brighton has delivered its 2017 full year results, noting "strong demand" contributed to increased revenue.

    The company said revenue for the 12 months to December 31 jumped 11.7% to a record $1.56 billion while its earnings before interest and tax (EBIT) marginally increased 0.2% to $266.5 million. In addition, Adelaide Brighton's net profit after tax rose 2.2% to $182.1 million while its profit before tax slightly increased - by 0.1% - to $254.4 million.

    Adelaide Brighton said robust residential activity, along with increased non-residential building and infrastructure activity, had boosted its full-year performance in VIC, NSW and QLD - particularly on the latter state's Gold Coast and Sunshine Coast. It said demand picked up in SA due to major infrastructure projects and had stabilised in WA.

    The company forecast higher sales volumes for cement and clinker as well as pre-mixed concrete and aggregates during 2018. It is pushing through another round of price increases for concrete, cement and aggregate on April 1 as demand rises.

    Despite this upbeat forecast, shares in the company dropped 6.2% on 21 February, 2018 to $6.58.

    Currently market speculation is that residential activity and construction will continue at a low to moderate growth rate.

    But a strong opposing view is that actual residential commencements will continue a slow decline. This more pessimistic forecast accounts for the 6.2% decline in Adelaide Brighton shares. It is also an indication that the market does not see infrastructure construction filling the gap created by the decline in residential construction.

    However the Melbourne-based Barro family believes in a strong future for the company. As reported by Fairfax Media, it used the share price dip to try to purchase an extra 19 million shares in the company in a sharemarket raid handled by Deutsche Bank. The Australian Financial Review's Street Talk column revealed the $128 million buy-up plan, based on $6.75 per share.

    Raymond Barro is on the board of Adelaide Brighton and the Barro family is already the company's largest shareholder. If successful, the move would lift its stake to 41%.

    There is speculation that this share buy back could eventually lead to Adelaide Brighton being taken private, in a further buy-out.
    Growth plans for Kubota Australia

    Dropping "tractor" from the name has signalled change for the Australian subsidiary of Kubota Corporation. It aligns with Kubota's plans to expand and innovate its product mix.

    Kubota Australia managing director Shigeo (George) Koto told Farm Weekly the timing for the name change was fitting, with the company recently launching a new range of professional farming equipment, including the M7-1 tractor. He said:
    Over the past four decades...we have built a reputation for high performance, quality and reliability. We are so much more than tractors, and we are fully committed to the expansion of our brand. We want our name to represent the scale of our goals, the variety of our product mix, our dealer network, and customer base. We want our brand to transparently represent our intent in continuing to grow with our customers.

    Mr Koto said Kubota Australia intends to grow the company's footprint in the region. This year will see the first major deliveries of stock from Kubota's American subsidiary Great Plains Manufacturing, a sowing and tillage implement specialist. The range includes precision planters designed for broadacre machinery as well as smaller equipment suited to the European and small landholder market.

    In 2017, Kubota launched a new range of mid-sized farm tractors, including the largest tractor the company has ever made, the M7-1. At 125 kilowatt (170 horsepower), the M7-1 indicates that Kubota recognises the trend towards rationalisation of Australian farmland which means it will need to appeal more broadly than the smallholding market.
    James Hardie improves profit guidance

    Building products group, James Hardie boosted its profit guidance and lifted earnings in its key US market. The company's earnings before interest and tax (EBIT) also rose by 32% to USD143.9 million (AUD182.4 million), compared to USD108.7 million (AUD137.8 million) a year ago.

    James Hardie said net operating profit for the three months to December 31 was USD79.9 million (AUD111.9 million), down from USD87.9 million (AUD112.8 million) a year ago.

    It also booked a 9% drop in third-quarter profit after it paid down debt and recorded an increase in income tax expense.

    However its share price increased 6.8% to an all-time high of $23.65 on February 2, 2018 as investors embraced James Hardie's revised full-year operating profit forecast of AUD260 million to AUD275 million - a narrowing of the AUD245 million to AUD275 million range given in September.

    Net sales for the three months to December 31 grew nine per cent to USD495.1 million (AUD627.8 million) driven by a higher average net sale price in its North America fibre cement segment and higher sales volumes in the international fibre cement division.

    Chief executive Louis Gries said the international fibre cement division grew 15% in the quarter on the back of strong volume growth in its Asia Pacific business.

    James Hardie expects steady growth in the US housing market over the full year and said the single family new home construction market and repair and remodel market will grow similarly to the year-on-year growth experienced in the past financial year. It forecast new construction starts between about 1.2 and 1.3 million.
    Assa Abloy makes UK acquisition

    Dale Hardware and Excel Architectural Hardware (Dale & Excel), a supplier of architectural hardware to UK-based builders' merchants, is now part of Assa Abloy following its acquisition of the Progress Ventures Group.

    The are commercial synergies between Dale & Excel and the Assa Abloy Security Solutions business unit. The acquisition is expected to create opportunities for both businesses by offering a wider innovative product range to its customers.

    Both Dale & Excel will continue to operate as autonomous businesses as part of Assa Abloy Security Solutions. Neil Vann, market region manager and managing director of Assa Abloy UK, said:
    I am very pleased to welcome Dale & Excel into the Assa Abloy Group. Dale & Excel [have] an extensive product portfolio, a strong track record of growth and new innovative product development. Dale's products will extend the Union [brand] offering into the commercial market in the UK.

    In the UK, Assa Abloy is best known for the Yale and Union brands.

    Dale Hardware was established in 1974 and has its headquarters near Leeds. The business employs approximately 70 employees and 2018 sales are expected to reach around GBP19 million.

    Excel Architectural Hardware began in 2012 as a distributor of architectural hardware. It offers 2,000 specially selected products from companies such as Scrigno, Frascio and Masterlock, and has its own branded Excel range.
    Hilti driving jobsite productivity with digital

    Hilti Group has entered into a strategic partnership with mobile field management platform Fieldwire, making an undisclosed investment in the company and joining its board.

    San Francisco-based Fieldwire connects workers in the field with their counterparts in the office, promising efficient task management and real-time collaboration.

    According to the company, the typical construction worker spends only 30% of their time on actual construction work, with the remainder spent on coordination and communication. Fieldwire's software aims to give back time to those in the field by enabling them to capture, organise and access information such as up-to-date drawings and files using a mobile device, both online and off.

    The partnership with Hilti will combine Fieldwire's digital offering with the tools used on the construction site, such as Hilti's line of range meters, making them more easily accessible. By integrating digital technology with the analogue tradition, the two companies seek to empower construction workers by creating an end-to-end experience on the field. Joerg Kampmeyer, chief financial officer at Hilti said:
    Fieldwire's approach to jobsite productivity stands out in the construction tech scene and aligns very well with Hilti's mission.

    In recent years, Hilti has made major efforts to digitise the construction industry with software solutions for planning and designing fastening solutions, bringing BIM (Building Information Modelling) to the field or for asset management. Hilti is also connecting construction professionals with its experts through platforms like "Ask.Hilti.com".

    While digital has already revolutionised construction planning and design, the focus is now shifting toward disrupting the way people work on jobsites.
    Europe update
    Bunnings United Kingdom & Ireland has plans for a 50,000sqft store in Ashford, Kent. Picture courtesy Indigo Planning.
    HNN Sources
    The Knipex stand at the 2018 Cologne International Hardware Fair
    B&Q is cutting jobs at its head office in Easteigh in Hampshire, England
    Click to visit the HBT website for more information
    Ashford and London Penge are the latest locations for Bunnings stores; organisers of the 2018 International Hardware Fair have reported an increase in attendance; Kingfisher is cutting staff at B&Q head office and Brico Depot in France; Grafton has purchased a decorators' merchant business; and Travis Perkins has reported a second, consecutive profit decline.
    BUKI plans for Ashford, opens in Penge

    Bunnings United Kingdom and Ireland (BUKI) has submitted a proposal for a store in Ashford, a town in the county of Kent, as part of Drovers Retail Park.

    Kent Online reports that developer Davies Street Castle City has revealed the plan for a 50,000sqft store. It would be the big box retailer's first purpose built store in the UK. The developer said:
    If the scheme is accepted and consent is granted, we will begin construction next year and the new store could be open in the summer of 2019 ... The scheme will provide a step change in the home improvement market and help keep expenditure in Ashford. It will deliver jobs and investment as well as choice and competition for shoppers.

    Artists' impressions of the site indicate the new store would be built in a wave shape and use natural materials to complement the nearby woods. It would be joined by a 37,000sqft retail terrace containing four units for kitchen and furniture companies. The site would also have room for a 2,000sqft unit and a drive through coffee shop.

    The type of retailers which could open stores in the location would be restricted by Ashford Borough Councils planning rules, to prevent a negative impact on the town centre. But Ashford Borough Council leader Gerry Clarkson said the plan was exciting for shoppers, and will complement the existing John Lewis at Home store. He told Kent Online:
    The Drovers roundabout has good road interconnections. That's what out of town retailers want, they need good parking facilities and roads for people to drive there ... I met the developers and in principle the scheme is to be welcomed.
    We have to be cautious, as the scheme is yet to come before our planning committee. We have to be smart on this. It means we can't have stores of the same type as we have got in the town centre. These developments are always subject to the proper planning approvals and we will keep an open mind. We will see if the plans meet the high standards we need and if they fit with the overall economic strategy we have for Ashford.
    Penge launch

    Bunnings also officially opened its doors in Penge, a district of south-east London, recently. The new store is over 40,000 square feet. To celebrate the opening, ex-professional footballer Mark Bright, joined a welcome breakfast for team members. Complex manager, Andy Leontiou, said:
    All our team members have worked really hard to get the store ready for opening and have undertaken many hours of training to make sure we have the expertise to help customers with home or garden projects.
    Cologne Hardware Fair 2018

    The International Hardware Fair in Cologne, Germany recently closed after four days of fully-booked exhibition halls, crowded aisles and a stimulating event program, according to organisers Koelnmesse GmbH.

    This year's show focused on the digitalisation of the industry. EISENforum was a two-day summit with expert talks and lectures that discussed the topic. Companies such as Amazon Business also exhibited.

    A Start-up Village was set up in cooperation with the European Federation of DIY Manufacturers (fediyma) and with the support of Richard van Hooijdonk, a trend scout and futurist from the Netherlands. It showcased their digital know-how.

    There was also an event and exhibit highlighting 3-D printing, specifically additive and spare part production. It featured an overview of additive production for DIY stores, as well as insights into new business models with 3D printing.

    The fair offered opportunities to exchange information and network in the form of the BME Buyers Days, the Hardware Seminar and Trainee Day.
    Growth in numbers

    The main show statistics include 2,770 exhibitors from 58 countries and over 47,000 trade visitors - an increase of 9% - from 143 countries. Katharina C. Hamma, chief operating officer of Koelnmesse GmbH, said:
    Furthermore, the trade fair was able to once again increase its level of internationality. Eighty per cent of exhibitors and over 70% of trade visitors come from abroad. One hundred and forty three countries were represented among the trade visitors, an increase of 19 countries.

    There were more visitor registrations from Asia, especially from Japan, from North and South America, Africa and the Russian Federation. There was a 12% rise in visitors from the USA.

    John W. Herbert, general secretary of the European DIY Retail Association (EDRA) and Global Home Improvement Network (GHIN), provides an explanation for the growth:
    EISENWARENMESSE - Hardware Fair Cologne 2018 was a total success for us. The renewed adaption of the duration of the fair was particularly welcomed by our international guests. The number of buyers, whom we were able to welcome here in Cologne, was correspondingly high. Our major member companies each attended with up to 15 top buyers...That is a very good development and underlines the international significance of the event...

    For the fourth time, Koelnmesse and its partners conferred a number of awards on the first evening of the fair. The EISEN CSR Award sponsored by BHB went to Knipex. The Innovation Award 2018 sponsored by ZHH was given to Hazet for its HiPer fine-toothed reversible ratchet 916 HP, Knipex for its 95 62 160 rope cutter and Wiha Werkzeuge for its Wiha SpeedE e-screwdriver.

    The next International Hardware Fair Cologne is scheduled to take place from 1 to 4 March 2020.
    B&Q cutting 200 management roles

    UK home improvement retailer, B&Q is getting rid of 200 senior roles in a bid to cut costs and simplify its operations amid tough conditions in the DIY retail market. The retailer said 130 jobs in its head office would be cut, along with a further 70 travelling "field-based" roles, but no in-store workers would be affected.

    Helena Feltham, B&Q's HR director, said the cuts would "improve efficiency, simplify ways of working, and reflect recent changes in the market and the number of B&Q stores".

    B&Q has closed dozens of stores as UK consumers have turned away from doing DIY due to a fall in home ownership and technical skills. Ms Feltham said in a statement:
    We want to be the leading home improvement company and make home improvement accessible to everyone. That means delivering great quality at prices that are truly affordable. To do that, we must operate differently.

    B&Q's owner Kingfisher employs 2,000 people in its Southampton head office, some at B&Q and others in its buying and IT teams.

    Last year Kingfisher's chief executive Veronique Laury said the firm was feeling "cautious" about Britain's economic prospects.

    Ms Laury has been under pressure to sell-off the firm's better-performing Screwfix division, which caters to tradesmen and whose revenues climbed 16.6% in the company's third quarter.
    Brico Depot

    Another Kingfisher brand, Brico Depot is also reportedly set to cut more jobs in France.

    Brico Depot has over 121 outlets and has an in-store presence in over 100 Castorama shops. News agency Reuters has reported 409 jobs would be cut by Kingfisher in France, while 102 jobs will be created and 164 positions will be transferred.

    Kingfisher is two years into its five year "ONE Kingfisher" project, designed to bring more unity to the business. This includes streamlining the products it offers across its outlets, widespread changes to its IT system and closing B&Q stores.
    Grafton buys decorator stores for GBP80m

    Builders merchanting group, Grafton has acquired decorators' merchant business Leyland SDM for GBP82.4 million.

    Leyland SDM is London's largest independent specialist decorators' merchant. Grafton said it is regarded as one of the "most recognisable and trusted" decorating and DIY brands in central London selling paint, tools, ironmongery and accessories.
    It prides itself on high levels of customer service, maintaining long standing relationships and carrying a strong reputation with both trade professionals and DIY customers.

    Leyland SDM operates through a portfolio of stores which have been built up over the last 30 years during its period of family ownership. Its network of 21 convenience-led and predominantly high street stores, are situated in some of London's most prominent locations including King's Road Chelsea, High Street Kensington, Shaftesbury Avenue, Victoria, Clerkenwell, and Notting Hill.

    In the last two years, it has further expanded its footprint with four new stores in Battersea, Mile End, Clapham High Street and Putney as well as a distribution centre at Wembley.

    The Leyland SDM "small box" convenience trading format is a proven business model in central London that "complements the company's larger Selco branches" located in greater London, according to Grafton.

    Leyland SDM's revenue and underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) was GBP47.8 million and GBP7.3 million respectively for the year ended December 31st, 2017.

    Grafton chief executive Gavin Slark said the acquisition was a "unique opportunity to acquire a leading brand with exceptional locations in central London". It would, he said, expand the company's presence in a "resilient segment of the merchanting market located at the heart of one of the world's leading cities".
    Travis Perkins' second straight profit fall

    Britain's biggest supplier of building materials, Travis Perkins, reported a 7% fall in annual core earnings, a second consecutive decline, and said it remained cautious on the market outlook.

    The group, which trades from over 20 businesses including Travis Perkins, Wickes, BSS, Toolstation and City Plumbing said adjusted operating profit was GBP380 million in the year to December 31.That was below analysts' consensus forecast of GBP384.8 million and GBP409 million made in 2016.

    Travis Perkins said it anticipated the mixed market backdrop would continue in 2018. As a result it would focus capital investment behind its key priorities, and slow investments elsewhere. Chief executive, John Carter, said:
    2017 was a challenging year for the Group, with continuing uncertainty in our end-markets, and declining consumer confidence throughout the year. The main focus for our businesses has been to recover the significant cost price inflation encountered and on the whole, this has been achieved successfully.
    Despite the challenging environment, we have continued to make disciplined investments in our customer proposition for the long term. Both the General Merchanting and Consumer divisions were held back by this investment in a higher cost base which ran ahead of volume growth. The Contracts division delivered another excellent performance, with strong revenue growth generating good operating leverage.
    USA update
    Home Depot tops estimates in its fourth quarter
    HNN Sources
    Ace Hardware sales climb 5% in 2017
    Home Depot is using big data to determine many of its marketing activities
    Click to visit the HBT website for more information
    Hurricane recovery and rising home values drive Home Depot's performance in its fourth quarter; the big box retailer will also be selling Tesla batteries; artisanal website makes a difference to Ace Hardware's Q4 results; and the role of big data at Home Depot.
    Home Depot beats Q4 expectations

    More shoppers visited Home Depot stores and spent more per trip, as reflected in the big box retailer's fourth-quarter earnings and sales which topped Wall Street's expectations.

    Its sales rose on the back of the US housing boom, with an extra boost from hurricane-recovery efforts in Puerto Rico and the southern states. A push by Americans to fix up their properties - using money generated by rising home values - also helped lift Home Depot's same-store sales by 7.5%.

    Home Depot has also benefited from investments in its technology and customer service - part of a strategy that has focused on generating more sales from current stores, rather than opening new ones.

    Revenue rose 7.5% from a year ago to USD23.9 billion in the fourth quarter, exceeding the average estimate of USD23.7 billion. The company said its customer transactions rose 2%, while the average ticket increased 5.5% (to USD64 per person).

    The push to provide an "interconnected retail experience" has also helped fuel productivity and earnings, chief executive officer Craig Menear said. Chief financial officer Carol Tome told TheStreet.com:
    We have really invested in this interconnected experience, which has paid huge dividends. We had 21.5% sales growth online last year and the business now makes up 6.9% of our overall business. More importantly, 46% of those sales were picked up inside of a store. When a customer comes into the store, they are buying something else.
    We are not an item retailer. We are a project retailer. That is very different than selling consumable items. It's just very different. We also help you when you have a problem. If your bathroom is leaking water, that's a very different need than if you are trying to match a sweater to your eye colour. And then housing is a good asset class.
    So do we have an Amazon protected moat around our business? Of course not. But do we have barrier islands around our business? Yes, we do. Our job is to continue to invest in those barrier islands.
    Selling solar

    Home Depot is also bringing new merchandise to its stores, having recently signed a deal with Tesla to sell the carmaker's residential solar panels and Powerwall (batteries) at 800 Home Depot locations.

    According to a report by Bloomberg, the physical products won't be available in Home Depot stores, but Tesla will have massive presence to showcase them. Tesla will be setting up a designated retail space inside Home Depot stores across the US to promote and sell its solar panels and Powerwall batteries. The spaces will include 12-by-7-foot displays, and some shops will offer demonstrations of the products.
    Mobile job app

    To meet demand in a tight labour market during its busy spring selling season - when revenue reaches its highest point in the year - the company has automated much of the job-application process to make it faster and easier.

    It has been using a new tool, "Candidate Self-Service" that is available at all times on any device and allows job applicants to schedule in-person interviews themselves. The home improvement retailer is expanding the use of this tool because it needs to fill more than 80,000 seasonal positions for spring. Candidates who have completed an application for an open job can choose the most convenient interview appointment available.
    The Grommet boosts sales at Ace Hardware

    US retail hardware co-operative, Ace Hardware said new store growth and its acquisition of online platform, The Grommet were the main drivers for its fourth quarter revenue increase.

    It reported a 6.8% year-over-year increase in fourth quarter revenue, to USD1.3 billion. Same-store sales rose 3.1% in Q4.

    Sales for the fiscal year were solid as well, with revenue at USD5.4 billion, up 5.1% compared to the previous year. Same-store sales were up 3.6% for 2017. John Venhuizen, president and CEO, said:
    I'm also encouraged to report that 2017 marked the fifth-straight year of increased customer transactions at retail, the sixth-straight year of net new store count growth, the eighth-straight year of increased same-store-sales, and the eleventh-straight year receiving the J.D. Power award for highest customer satisfaction.

    Net income was USD14.2 million for the fourth quarter of 2017, a decrease of USD7.3 million from the fourth quarter of 2016. This decrease included a charge of USD4.1 million due to new tax legislation enacted in 2017 as well as additional warehouse costs incurred as part of the warehouse "network reconfiguration".

    Ace Hardware acquired a majority stake in e-tailer The Grommet last year in order to access the retailer's e-commerce knowhow and fulfillment capabilities. It has been leveraging The Grommet's artisanal focus to give Ace's brick-and-mortar stores something unique.

    The e-tailer was folded into a subsidiary, Ace Ecommerce Holdings, which brought in USD21.6 million in Q4, according to Ace.

    Ace added 152 new US-based stores in fiscal 2017. This brought the company's total domestic store count to 4,418, an increase of 55 stores from the end of fiscal 2016. On a worldwide basis, Ace added 236 stores in fiscal 2017, bringing the worldwide store count to 5,121.

    USA update: Ace Hardware invests in e-commerce startup - HNN
    Big data at Home Depot

    Home Depot is known for its big stores, and its ability to generate big sales to its "Pro" customers who purchase large ticket items. These factors contribute to the successful integration of its website and bricks-and-mortar stores but the retailer's biggest advantage might come from its use of big data.

    At its Investor & Analyst Day Conference in early 2018, chief marketing officer Kevin Hoffman walked through Home Depot's digital marketing efforts based on its accumulation of customer data.

    Mr Hoffman said nearly 50 million households had been active at Home Depot in the trailing twelve months and that, through those interactions, the company was generating 1.7 trillion data points per week. While the data sets grow larger, the intent is for Home Depot to effectively get smaller so it can interact with its customers on a more personal level.

    Mr Hoffman said this immense amount of collected data will allow Home Depot to "tailor" its marketing messages to the individual consumer, rather than appealing to the lowest common denominator among a diverse group of customers. In his presentation, transcribed by S&P Global Market Intelligence, Mr Hoffman said:
    Our data allows us to know our customer at a more individual level. Our targeting capability will help us get to them at the right place at the right time, and we aspire to have all of our messages be tailored to the audience ... Customers will expect retailers to speak to them at an individual level. The world of traditional one-size-fits-all messaging is quickly falling behind us. We've got diverse customer groups.
    Here, you see an affluent baby boomer, a Pro and a millennial who happens to be a new homeowner. The reality is ... we regress to a lowest common denominator approach. We try to find the one message that somewhat appeals to all of them. But each of these customers has different needs and a different level of expertise.
    So, for instance, when these three different types of customers -- an affluent baby boomer, a Pro, and the new millennial homeowner -- go to purchase a new water heater each will be marketed with different material and given a different "Home Depot experience.

    The baby boomer's experience will be geared toward having a new water heater delivered and installed that day. The Pro will be given information on inventory, pricing, and delivery options. The millennial's experience will be heavy on content, so they can decide on what size and type of water heater might be best for them.

    Home Depot's marketing is so targeted that even when these individuals live on the same street in the same neighbourhood and are watching the same game on television, they will see different ads. When customers from different areas of the USA visit Home Depot's home page, they will also see different products highlighted.

    But Home Depot has found ways to tailor marketing beyond just making it more personal for each consumer. The home improvement retailer is also experimenting with its weather-triggered ads. Mr Hoffman said:
    These ads are only deployed and invested in when the weather is right.
    New products
    Hitachi's NP18DSAL cordless pin nailer is about job site functionality and ease-of-use
    HNN Sources
    Bosch introduces a trio of three plane levelling lasers
    Crescent has new diamond tip screwdrivers
    Click to visit the HBT website for more information
    Hitachi said its cordless pin nailer is set to take carpentry to the next level; the latest lasers from Bosch feature exclusive VisiMax technology which monitors the laser's temperature to ensure maximum diode performance; Crescent screwdrivers allows users to apply greater torque and get jobs done faster; and Lufkin Self-Centering tape has improved comfort and control.
    Battery-powered pin nailer

    The Hitachi NP18DSAL 23 gauge cordless pin nailer is 100% battery-powered. With the lightweight BSL1830C 3.0 Ah Li-Ion battery, this sequential-firing pin nailer can drive 2 to 3 pins per second, shooting approximately 3,000 pins total per battery charge.

    Brand new to market, it is Hitachi's first tool to feature the brand's newly patented "No-Push" safety nose tip. Designed to reduce work related fatigue, users simply place the tool nose against their work surface and pull the trigger. This nose design also helps to prevent surface marring.

    Hitachi added a built-in counterweight to virtually eliminate tool recoil. Other user-friendly features on this cordless pinner include a slim nose (for serious accuracy between tight trim grooves), an ergonomic comfort grip handle, and tool body bumpers.
    Three-plane levelling lasers

    Bosch has introduced the GLL3-330CG, GLL3-330C and GLL3-300 three-plane levelling and alignment line lasers for the US market, beginning March 2018. The self-levelling lasers provide one 360-degree horizontal plane and two 360-degree vertical planes with references that cover the floor, wall and ceiling to serve all levelling needs. The two vertical lines cross at 90-degree angles so the user can quickly arrange and square the layout of the room from one mark.

    The GLL3-330C (red beam) and GLL3-330CG (green beam) are Bluetooth connected. With upgraded diodes and brighter beams, these plane lasers offer a visible range up to 200 ft. diameter, increasing to 330 ft. diameter when paired with an optional Bosch LR8 or LR 6 receiver for full jobsite coverage.
    Better grip for turning screws

    Crescent has revealed its new Diamond Tip Screwdrivers that are initially available in Phillips and slotted styles.

    A diamond-infused powder coating gives the tips up to four times the grip of non-coated tips, reducing slippage and cam-out. The handle design features thermoplastic rubber moulded over a tri-lobe shaped acetate core. The grip and comfort provided by the tri-lobe design allows users to apply up to 20% more torque than with more traditional handle styles. The translucent acetate used on the handles is specially formulated to provide superior impact and UV resistance.

    Slotted styles feature square shanks and red acetate handle bases. Phillips styles have round shanks with blue handles. All styles have black oxide blades with laser-etched markings.
    Tape engineered for longer life

    Lufkin has introduced a redesigned version of its self-centring tape measure, which makes finding the midpoint of measurements quick and easy. Improvements include a new ergonomic case and a quad-rivet end hook.

    The Lufkin Self-Centering Tape Measure features unique blade markings, resulting in a tape that takes the maths out of finding the midpoint of any measured distance. A black upper scale shows the actual measurement; a lower scale directly beneath it shows the midpoint in red. For example, if the upper scale reads 2-1/4", the lower scale will show 1-1/8".
    HI News V4 No. 1: Doncaster Blue Bloods
    Download the latest issue of HI News Vol. 4, issue no. 1
    HI News
    Wesfarmers managing director Rob Scott
    A close up of the multi zone use where Doncaster Mitre 10 is located
    Click to visit the HBT website for more information
    Ian Corwell's Mitre 10 store in the Melbourne suburb of Doncaster represents some of the best ways one generation can pass on the business to the next generation. Mr Cornwell seems to have done a very effective job of re-inventing the business for his son, Matt. At Doncaster Mitre 10 hardware retailing is an appealing career choice for savvy, technology-focused millennial.

    Simply click on the following link to download this edition:
    HI News V4 No. 1: Doncaster Blue Bloods

    We also take a closer look at Bunnings United Kingdom and Ireland's (BUKI) writedown of a projected $165 million in the first half of FY2017-18. At a presentation before investment analysts and mainstream media, Wesfarmers managing director, Rob Scott, announced a review. Anything, including closure, is on the table, according to Mr Scott.

    Grocery, liquor and hardware wholesaler/retailer Metcash Limited released its

    results for its first half FY 2017/18 (May to October) on 4 December 2017. These results include revenue and EBIT from Metcash's acquisition of the Home Timber &

    Hardware Group (HTH). As Metcash has chosen to combine revenues from HTH with those of Mitre 10, it's not possible to provide a true comparative


    The December 2017 retail figures available from the Australian Bureau of Statistics (ABS) show that retail sales have declined overall as compared to calendar 2016.

    In other news, UK building materials supplier and retailer Travis Perkins benefits from its tools hire business. Acquisitions are also made by Stanley Black & Decker, Energizer and Briggs & Stratton.

    The Honda Power Equipment and Victa brands are featured in this edition. There are also brand new products such as the Guardian water leak prevention system and the patent pending ZZem Screw.
    Doncaster Blue Bloods
    A close up of the multi zone use where Doncaster Mitre 10 is located
    HNN Sources
    Matt Cornwell is a fourth-generation hardware retailer and oversees the trade business
    The timber yard at Doncaster Mitre 10
    Click to visit the HBT website for more information
    It takes about five seconds looking at the planning map for the area surrounding Ian Cornwell's Doncaster Mitre 10 to realise that Ian is a brilliant man.

    The online mapping software supplied by the Victorian government shows a sea of red shading, surrounding a small triangle of dark green, with the designation "MZU". MZU stands for "multi-zone use". And the red shading that surrounds it for dozens of kilometres on all sides? That's standard residential zoning.

    It is also one of Melbourne's more prestigious suburban areas, with an average dwelling price that has now crept up over $1,300,000. It's just barely in the "golden zone": under half an hour's commute by car to the Melbourne CBD, an hour by public transport, or 75 minutes on a bike. The main wave of building, replacing orchards with big, spreading residences, took place in the 1970s and 1980s, though a second wave of building, at greater density, has been sweeping through since 2010.

    And that MZU triangle? That's where Doncaster Mitre 10 is located. If having its own special zoning designation is not enough, the store is also positioned along a major transit route, Anderson's Creek Road, and next door, sharing the same lot, is a heavy building materials business, with big trucks moving in and out carrying loads of sand and other heavy goods throughout the day.

    It is a store location and position to truly be envied. There is not only the new building of apartments, but also a steady upgrading of existing homes, some renovation, some tear-down and replace. Added to that, as the population trends upwards, are infrastructure projects for schools, care facilities and council buildings. It would have looked pretty good 20 years ago, when Ian first took over the property in 1997. Today it looks simply terrific.

    As you might expect, this good a situation did not happen all by itself. It really traces its origins all the way back to 1928, and over the three past generations of the Cornwell's history in hardware retail.

    It's also a bit more than that family history, of course. The Cornwell family was an early convert to the Mitre 10 cause. Even though there has been some change of circumstances in the group - moving from the original independent group, to the acquisition by Metcash, and now the addition of the Home Timber & Hardware Group (HTH) - retailers of Ian's generation see loyalty to Mitre 10 as an important ingredient to their success. In fact, Ian used an expression that is not heard that often nowadays, calling himself a "blue blood", one of those dedicated to Mitre 10 through and through.

    The other strong influence on the business has been the Cornwell family's efforts to assist in broader movements in the hardware industry. Ian's father was involved with the forming of the original Hardware Federation back in the 1950s (and Ian still has copies of the minutes from that group's meetings). Ian himself started to get involved, concentrating on the associations for independent retailers, in the 1990s. Since then he has served in senior positions with Hardware Australia, including as chairman.

    This understanding that independents need to present a united front might be the result of a long history in an industry that has gone through some tough times. Cornwell's Paint Shop opened at 460 Sydney Road, Brunswick, in inner Melbourne, Victoria in 1928. Which was, on reflection, not the best year to choose to start a new enterprise. When the Great Depression came to Australia, most businesses were reduced to doing whatever they could just to keep going.
    The Brunswick store, it started off as a paint shop. That was back in the late 1920s. The depression hit, and I remember that my Dad would just go around and simply look for stock that he could sell. That's what happens.
    That business then evolved from paint and wallpaper into selling pots and pans, potties, anything that they could sell. They continued really to evolve the store, you know, Mum and Dad. Because they were in what is largely an Italian area, they moved into Italian glassware, all that sort of thing.

    Ian himself joined the hardware business full-time shortly after he graduated from LaTrobe University with a degree in chemistry in 1979. After a talk with his father, he decided he would give working in the family store a trial for six months or so, then they would assess the situation. They never got around to assessing the situation, and 37 years later Ian is still working at the family business.
    The Doncaster store

    The first attempt at finding a second location did not work well, with a potential deal for a store along Doncaster Road falling through (it later became a Mercedes Benz dealership). At least, though, Ian's attention had been shifted to the Doncaster area, and the location along Anderson's Creek Road came to his attention. The only problem was that, at that time, the location was being used as a nursery.
    There was a full-blown nursery here. They used to operate a nursery on the side, and on the bottom [down the slope of land on the site], the original owners operated a sand and soil company that is still running next-door. As you may know, a nursery can actually operate on residential land.

    What happened next is what one assumes often happens when Ian gets involved: what might seem an insurmountable obstacle turns out to be more flexible than imagined.
    When we first moved in, we sort of took over the site as though we were a nursery. Then we went to the area council with a zone change request, and the owner did not object, which was really nice, so we were able to get the zoning change to a mixed use zone. I would have to say, that probably the landlord was not exactly entirely aware of what was going on. It was a change from a premium classification down to a lesser one, and not many people would've gone along with that.
    But we got away with it. And that change meant that we could then trade as a hardware, because a hardware store technically cannot trade in a residentially zoned area.
    So that's why this Mitre 10 store could be established on what was once a residential location.

    The site was selected not just because it was situated in the midst of a residential area. Ian was also applying knowledge he had picked up on overseas study trips.
    The reason I thought the site would work, was very much due to a conclusion I'd reached when we had gone on trips overseas, and had seen The Home Depot chain in the US. A bit over 20 years ago when I first went there, they were saying that Ace Hardware could survive where there were satellite stores. What they meant was that you had Home Depot stores sort of sitting in the middle, then you had an independent store here, and an independent store there, "orbiting" the Home Depot store. So in our location here we are sort of on a feeder route that runs through to Warrandyte and onto the Bunnings in Nunawading. 
    The thing is, basically people stop at different points to save different amounts of money - if that makes any sense. Some people will drive all the way to Bunnings just to save 20 cents, other people will only drive to Bunnings if they can save $100. You pick off different people at different distances depending on their circumstances, and what they're looking for. The position of the store was right to maximise some of that traffic.

    Of course, like most savvy, independent retailers in Australia today, he keeps a careful, watchful eye on what Bunnings is up to, and how it is going to affect his future. With good reason: what finally put an end to the long-running Brunswick store was the opening of a smaller format Bunnings, virtually right across the street.

    The current location is more protected from competition, again because of the unique zoning situation.
    We are lucky enough, because of what's around, that it is difficult for Bunnings to get in, or John Bowen to get in, or any of the rest. So that means not having to compete with too many retail hardware sites, as we are protected from others moving in to the immediate area.

    Though, of course, no independent is every entirely in the clear.
    Having said that, Bunnings is going to put a store in nearby at Westfield shopping centre. Which will be interesting, you know, they are a competitor wherever they go, but, perhaps naïvely, I don't think it's going to have all that much of an effect.
    It did have an effect on the Sydney Rd, Brunswick store, because the businesses were so similar. But our model here at Doncaster of being more trade-oriented, that's something where they would struggle to compete with us. Even with that new site it would be a place where it would be awkward for tradies to get in. With the store integrating apartments, the need for parking for those apartments, and the traffic that gets created, it's likely that Saturday mornings are going to be very interesting, for example.

    One thing that becomes clear in speaking with Ian is that, being a third-generation hardware retailer himself, he really understands some important things about family success in retail. He himself knew that, as much as he respected their legacy, he didn't want to do exactly what his parents had done.
    The reason I wanted to expand the old store at Brunswick was that I didn't want to spend all my time just serving behind the counter. Not that there's anything wrong with that, there are lots of people who do that and are happy. But I didn't want to just do that myself.
    My role totally changed, once we grew bigger, and the job became managing two stores, and whatever. So you become more about being a people manager, and get more involved in more strategic stuff, and that sort of thing. That's more of what I enjoy, so it is a welcome development.
    That is especially so with running two stores, and it's only been since November 2017 that we shut Brunswick down. At the same time the store at Doncaster has just been growing, and growing. We used to say that every $1 we spent at Doncaster would return $10, while every $1 we spent in Brunswick would return something like $1.50. So, Doncaster, this was the store for the grandchildren.

    An important key not just to succession, to to keeping going in retail, is being able to get your head around the need to change, Ian says.
    Retail really is about shifting. You have to enjoy what you're doing. But you also have to be prepared to change in retail. And I guess every business has to do it. You know milkbars have come and gone and instead we have convenience stores, the taxi industry with Uber is another prime example. Business has to alter because of competitors coming into the market.
    The thing is that years ago if I told my father that the eighth-inch drillbit was not going to be the biggest selling item that you had in your hardware store, he would have thought I was crazy. You know there are these things that are called self drilling screws now, you don't really need drill bits? Everything changes in the end. So you can't let yourself get into a deadlock, all those products that you're selling now and that you think you will be selling in five years time, the reality turns out to be totally different.
    The move to trade

    As it turned out, one of the keys to Ian securing family succession at Doncaster Mitre 10 was making a big change, from being consumer-focussed to being trade-focussed. It was through trade that Ian's son, Matt Cornwell, become involved in the business as a manager.

    The Brunswick Street store remained dedicated to consumer retail throughout its history, up until it finally closed in November 2017. While the Doncaster Mitre 10 store started out with a focus on consumer, it moved to trade around 2007.
    The business was certainly very retail to start with. We took over the nursery, and we kept running it as a nursery, until we put hardware in. But as time has gone on, we've moved further away from the nursery as you can see. Instead, trade in timber has taken over more of the business, and the mix of the business has totally changed. All that happened just through necessity, I guess.
    When we started trade it was really sort of out of the back shed, though we had a good trade manager at the time. He had applied for a job at the Brunswick store. He had been out of industry for a while, and at the time I said, "Not really a place for you at Brunswick, but we're thinking about doing timber at Doncaster, is it too far to drive?" He used to live out near Tullamarine [Airport] on the other side of Melbourne.
    He was great. He didn't mind the travel, he just started at 7:00am and drove all the way across.
    So he got us up and running, because, you know, trade is not actually my background. There are different types of hardware retailers, you have some who have a hardware background that's mostly pots and pans, others who have a timber background. I was more the pots and pans background, I guess. That was because of growing up with the store at Sydney Road in Brunswick, which which is more of a traditional store. So I needed somebody from the trade side, and this guy was good at that.

    Not that things started running smoothly just because the Doncaster store had a good trade business manager.
    So in the early days, people would ring up and say "I need a pack of flooring", or this and that, and we would tell them "yeah not a problem," then we'd get off the phone and say, "Okay now how the heck are we going to get that?" That was just how it started, you know, you never say no!

    Meanwhile, Matt had started working at the store in 2008, and he began working in the trade area. It was a situation that suited both Matt and Ian.
    Timber is also complex, and it is not a forte of mine. So, Matt was lucky enough to learn under this guy, he was a good manager, and a good role model for him. That manager decided to move on, I guess maybe five years ago, at which time Matt would of been around 25 years old, so I asked him "So, do you want to have a crack at managing trade yourself?" And he right away said, "Yep."

    This is an abridged and shortened version of this article. To read the full article, please download HI News Volume 4, Number 1 at:
    HI News Vol.4 No.1: Doncaster Blue Bloods

    (It's free, of course.)
    The BUKI Billion Blitz
    Wesfarmers managing director Rob Scott
    HNN Sources
    Homebase prior to Bunnings' move to improve it
    Early plans for Homebase
    Click to visit the HBT website for more information
    Australian retail, mining and chemical conglomerate Wesfarmers announced on 5 February 2018 that it was taking what amounts to a $1.026 billion write-down on its home improvement retail operations in the UK & Ireland.

    The trigger for the write-down was that Bunnings UK and Ireland (BUKI) suffered an accelerated loss during the first half of FY2018. BUKI produced estimated pre-tax losses of $165 million for the period from 1 July 2017 to 31 December 2017. This contrasts with a market forecast of losses of $110 million - for the entire 2018 financial year.

    The core reason for this write-down, according to Bunnings, was a decline in its retail sales from mid-November to the end of December - or, to put this in more accurate and less euphemistic terms, BUKI saw sales collapse during the core of the Christmas retail season. While that decline included both the 240 stores that are still branded as Homebase as well as the 19 Bunnings pilot stores, the company says it intends to concentrate on improving the returns from the Homebase network over the coming year.

    Wesfarmers' response to this failure has been to launch a review. According to a statement issued by Wesfarmers:
    A review of BUKI has commenced to identify the actions required to improve shareholder returns. The review is focused on options to improve the trading performance of Homebase as well as further evaluating the performance of the pilot stores to inform the future plans for BUKI.

    The recently appointed managing director for Wesfarmers, Rob Scott, is quoted in the statement as saying:
    We will take a disciplined approach to further capital deployment in BUKI and provide an update on the outcomes of the business review and our plans for a broader conversion to Bunnings at our Strategy Briefing Day in June.

    The current managing director of Bunnings, Michael Schneider, is reported as making the following comments in the statement:
    It is clear that a significant amount of change has been driven through Homebase since the acquisition and the disruption caused by the rapid repositioning of the business has contributed to greater than expected losses across the Homebase network.
    Sales have been affected as non-core categories and concessions were exited ahead of the implementation of the Bunnings format, and investments in price and new ranges have not offset these lost sales. Trading was particularly weak during the latter part of the first half of the 2018 financial year.
    Our focus is on improving the profitability of Homebase through improved ranging and execution in stores, while continuing to develop plans for a broader conversion to Bunnings. The team has been strengthened, including through the addition of strong local expertise, to support improved outcomes.

    The same statement also announces the retirement of the managing director of BUKI, Peter (PJ) Davis. Mr Davis is being replaced by BUKI's chief operating officer (COO) Damian McGloughlin. Mr McGloughlin was recruited in mid-2017 from Kingfisher's UK home improvement retail operation B&Q, where he had worked for 34 years. Former Officeworks executive David Haydon, who had previously been appointed as general manager at BUKI, will step into Mr McGloughlin's former position as COO.

    Mr Scott offered a valedictory comment on Mr Davis's retirement, stating:
    PJ has been instrumental in driving the growth and success of Bunnings for the past three decades and in the establishment of the Bunnings Warehouse format in Australia in the 1990s.

    The statement reported a comment from the current managing director of Bunnings, Michael Schneider:
    Mr Schneider said he was grateful for the contributions Mr Davis has made to the Bunnings organisation and the culture of the business.

    The media and ASX release gave notice of the write-down itself and the departure of Mr Davis, but Wesfarmers made use of a combined investment analyst/media presentation to more fully articulate a general change in the direction of its strategy for BUKI.

    This event was hosted by Mr Scott and recently-appointed Wesfarmers chief financial officer (CFO), Anthony Gianotti. Held on 5 February 2018 at 11am AEDT, this 80-minute event began with an eight-minute introduction by Mr Scott, followed by 45 minutes of questions from analysts, and finished with 25 minutes of questions by members of the mainstream media, including News Limited, Reuters, and several reporters from Fairfax Media.

    While Mr Scott gave some strong indications of a change of direction in BUKI's strategy, the discussion contained only hints of what might actually happen over the coming four months. Mr Scott's repeated answer was to say that the review mentioned earlier would have to be concluded first, with decisive action to be announced at the June 2018 Strategy Day.

    That said, what Mr Scott did deliver was an early preview of some of the analysis the company has made of exactly what is going wrong with BUKI, indicating the areas where the retail operation needed to change. Those areas were:
  • The operations of the refitted Homebase stores.
  • The importance (or unimportance) of kitchens.
  • The strategy for the conversion of Homebase stores into pilot Bunnings UK stores.
  • Refitted Homebase stores

    Much of the discussion during the presentation about the poor performance of BUKI as a whole concerned what Wesfarmers now regards as poor choices made in the rapid refit of the Homebase stores in the year following their final acquisition in April 2016.

    In general terms, the new Wesfarmers viewpoint is that as Homebase was profitable when it was acquired by Wesfarmers, it should either have been left alone, or undergone only mild, and slow changes to its retail offer. This was spelled out fairly clearly by Mr Scott in response to a question by a Morgan Stanley analyst, who asked whether Wesfarmers should simply "pull the plug", and abandon the entire enterprise. Mr Scott responded:
    It certainly would not be the preferred outcome. What we are mindful of is that a lot of the issues we are dealing with today have been, to be frank, self-induced. Two years ago Homebase was a business that was profitable. We now have a team that understands the UK market, we have a number of opportunities to improve performance, and that is very much what we are focused on. But all options are open, and we will go through this review in a very detailed way, with a very strong focus on improving performance and reducing the cash losses. We will be able to update on the outcomes of that review in June.

    This followed on from some of the introductory remarks of Mr Scott, where he stated:
    In summary, the trading losses [at BUKI] are a function of lost sales of exiting ranges such as kitchens, bathrooms, and decorative lines, together with various retail concessions. The expansion of ranging in core home improvement categories, together with a significant investment in price, did not offset the loss of sales and margins as a result of these changes ... The initial strategy was to rapidly reset the Homebase business, to facilitate conversion to Bunnings. The pace and nature of this change was not well received by traditional Homebase customers.

    Later, in a response to a question by J.P. Morgan retail and consumer analyst Shaun Cousins on the difficulty in returning Homebase to profitability, Mr Scott expanded on what he sees as the faults in the handling of the Homebase refit:
    It is premature to be giving guidance, and the focus of this review that we are undertaking is really to better inform us on the opportunities and the actions that will improve profitability. So we will have more to update in June.

    While I think that conceptually the decision to exit various retail concessions was probably the right decision over time, the pace at which we exited those concessions, and the failure to present other range, other products that resonated with Homebase customers really contributed to some of these losses.

    Mr Scott is placing blame for the failure of the Homebase transformation on both execution and strategy, in particular the rapid shift in customer base. This is a sharp change in Wesfarmers' approach. From the time of the original acquisition up until the last annual results presentation for Wesfarmers in August 2017, the strategy of rapid and radical transformation of Homebase received support. At the annual results presentation for Wesfarmers in August 2016, this is how then-Bunnings Group CEO John Gillam described what was happening at Homebase in his prepared remarks:
    We've rolled our sleeves up, and dived into a comprehensive and rapid repositioning of the Homebase business. From our due diligence work we knew that the business we acquired had a poor and confusing offer, with very low stock availability and low stock levels. New trading strategies have been formulated and implemented across merchandising, pricing, marketing and operations. We are exiting all non-core product, as well as removing all the concession operations in the store network. The offer is now very firmly focussed on the home improvement and garden market.
    To support the repositioning we have invested approximately GBP60 million to both widen product choices and increase stock depth. We have also completed a restructure of the support team, and incurred costs associated with the repositioning agenda. This has resulted in GBP30 million in costs in total, and the modest EBIT result we reported for the period is offset by that amount. The Homebase team is energised by the opportunity, and we have commenced a strong supporting investment program aimed at developing our new team.
    All this work is essential to creating the platform we need to implement our acquisition plans. We are pleased that the inevitable disruption has been well-managed.
    Encouragingly we have seen store transactions increase by 7.5% on a like-for-like basis across the period of ownership, and that trend has continued at a similar level into July.

    One specific area that did come in for some criticism was the failure of Homebase to provide the right seasonal products for winter. In response to an analyst's question, Mr Scott said:
    As I said earlier there are clear seasonal differences there. To be frank it's not surprising that if we don't have the right product in-store at the right time that it is going to impact our sales. Clearly we haven't got that right.
    As I mentioned earlier, categories such as storage, cleaning products, are particularly important to these months. Also heating, lighting, some of the adjacent categories to kitchens and bathrooms, such as tiling, flooring, and plumbing.
    All of these categories are increasingly important in the winter months, and really comes back to having the planning in place, to ensure you have the stock in-store at the right time and that this aligns with your promotional activity. Clearly we did not have that in place through the winter months.
    The importance (or unimportance) of kitchens

    Those who have been following the progress of BUKI will know that one of the main faults revealed by Mr Davis was a difficulty in selling the Bunnings idea of a kitchen, both at the Bunnings UK pilot stores, and in the Homebase stores. At the analysts' presentation for Wesfarmers FY2016/17 results, Mr Davis, responding to a question from respected Merrill Lynch analyst David Errington, stated:
    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 re-establishing that right now.

    He went on to add:
    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 [that] 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.

    What was at issue here was that the UK and Irish kitchen market consists in large part of installed kitchens. According to the UK Houzz Kitchen Trends Survey for 2017 (the most recent), 49% of those surveyed employed a kitchen fitter, 47% employed a kitchen designer, and 33% employed an architect when building/renovating their kitchens. That contrasts with the numbers from the Australian Houzz Kitchen Trends Survey for 2017, which shows that only 32% employed a kitchen designer, and 14% employed an architect.

    Somewhat surprisingly, however, according to Mr Scott's comments at the recent presentation, not only has the kitchen problem been completely solved, but it also really was not much of a problem to begin with. In response to a question from a Citigroup analyst, his comment was:
    Kitchens have been problematic, but I wouldn't call them out as necessarily the most material contributor [to the loss]. What we found is that it took longer than we would've liked to come up with our new format around the kitchen offer. So this is more of the flatpack version, that you've seen in Australia. So it took a bit longer than we would've liked to actually get that in-store.
    We now have it in-store, it is selling, it is selling pretty well. We've seen some positive signs there. But we are dealing with a much lower average sell price, and we are obviously starting from scratch on this. So while there have been some encouraging signs with our new offer, we are starting off a very low base and it took quite a while to get it online.
    The other thing to remember is that there are a whole lot of other related categories, off the back of kitchens. Examples of that would be flooring, tiling, and plumbing, which really go hand-in-hand with the kitchen offer. And those three lines which I mentioned - flooring, tiling and plumbing - my view is that we don't have our offer right yet in those adjacent, related categories. So clearly more work to do still on kitchens, bathrooms, and related categories.

    In fact, the kitchens are doing so well, that their sales success has managed to cross the border from the Bunnings UK stores to the Homebase stores, as Mr Scott pointed out in response to a question from a Credit Suisse analyst:
    Just a very simple example of that is the new Bunnings format kitchens are actually selling quite well in Homebase. So the team has a sense of optimism around the opportunities.

    Of course, what might be going on here is something of a confusion about what "kitchens" means. For Mr Davis, kitchens would likely include at least the plumbing component, and certainly countertops, and so forth. Perhaps for Mr Scott, with more of a "numbers" focus on shareholder returns, "kitchens" refers simply to a specific set of stock-keeping units (SKUs).

    In any event, it remains puzzling that while the problems clearly associated with a major part of the UK home improvement business are being described as "not material", that same business has produced unexpectedly very poor retail sales results.

    It is perhaps worth noting that the UK kitchen comparison website kitchen-compare.com awarded Kingfisher's B&Q with the title of "Lowest Priced National DIY Retailer of Kitchens for 2017". According to the description on that company's website:
    For 2017, the "Lowest Priced National DIY Retailer of Kitchens" accolade has been awarded to B&Q for consistently having the most lowest priced kitchens when compared to Homebase and Wickes. Every day during 2017 we monitored and logged the prices of comparable kitchens sold by the UK's National DIY Retailers Wickes, Homebase and B&Q. We did this using a typical 8-unit kitchen model layout.
    Conversion of Homebase to Bunnings UK

    A major challenge facing BUKI is how, when and if it should continue to convert Homebase stores to Bunnings UK stores. On a scale basis, part of that challenge relates simply to cost. The current cost of conversions is running at over GBP2 million per store. Mr Scott suggested, in response to an analyst's question, that this cost could be cut in half:
    As you would expect in the early pilots you do tend to over-capitalise. For example the cost of removing mezzanines on a bespoke basis rather than at scale ... So you could use the number of around GBP2 million. But going forward, a number of the lighter conversions - which we feel will still drive a good improvement in sales density - are in the order of GBP1 million of cost per store.

    Additionally, in responding to another question, Mr Scott noted that the number of stores that would be converted is likely to be reduced as well.
    It has been clear through our review that there are a number of stores that we do not think will justify further investment by way of conversion to the Bunnings format, and indeed the losses generated from some of the stores are essentially holding the business back into the future. We have also found that through the Bunnings conversions, there have been some instances where we have delivered much better returns by closing an existing store and taking out a new lease on a better located better quality store. A good example is Folkestone.
    So the provision in relation to the store closures, we are talking about in the order of 20 to 40 stores. These generally relate to the stores that generate the greatest amount of operating losses, and where we have identified the potential for improved national outcomes for the group based on lease tenure and terms and so forth. So we will be able to update more on the outcomes of this review in June.

    Even with cost reductions and being more selective about store conversions, you would potentially be looking at, to be generous, 190 stores at GBP1.3 million each on average, which gives a total of close to GBP250 million, or $443 million (at current exchange rates). Added to that would be the cost of lease buyouts for the non-converted stores, so the overall cost would likely be over $450 million. While that expenditure would be spread out over two to three years, it is difficult to contemplate in the face of the over $1 billion that has already been spent to produce an underperforming network of home improvement stores in the UK and Ireland.

    This is an abridged and shortened version of this article. To read the full version, please download HI News Volume 4, Number 1 at:
    HI News Vol. 4 No. 1: The BUKI Billion Blitz

    (It's free, of course.)
    Big box update
    Approval has been given for a Bunnings Warehouse to be located at 89 West Street, Mount Isa QLD 4825
    HNN Sources
    Bunnings to pull pesticides allegedly linked to bee deaths
    First official day of trade at East Albury store
    Click to visit the HBT website for more information
    Bunnings have gained approval for a store in Mount Isa (QLD) while building work has begun for its Warwick (QLD) store; Bunnings stores will no longer stock products that have pesticides found to be harmful to bees; East Albury store welcomes customers; and Albany outlet in WA will become twice its size.
    Mount Isa approval, Warwick start

    Mount Isa City Council has given the go ahead for the Bunnings store to be located at 89 West Street. It will have a total retail area of 5607.5sqm.

    The matter was discussed in closed session at the council's meeting in mid-January and the decision was approved with 61 conditions listed in the report. They include a 1.8m acoustic fence which must be installed on the southern boundary to reduce noise and a 3m wide densely planted landscaped buffer.

    The developer will also need to install artificial turf or green coloured concrete on the Alma Street verge. Allowable opening hours are from 6am-9pm Monday to Friday and 6am-6pm Saturday, Sunday and public holidays.
    Construction on Warwick store

    There are signs that building is about to start on a larger Bunnings Warehouse store on Canning Street, Warwick (QLD).

    Several site offices and fencing have been erected on the site, according to the Warwick Daily News. Bunnings general manager - property Andrew Marks told the newspaper that Hutchinson Builders have been appointed as the builder of the new Warwick store. He said:
    They are currently on site with works to commence shortly. Hutchinson Builders will engage local contractors from Warwick to work on elements of the new warehouse where appropriate.
    As part of the development approval process, we are required to undertake road upgrades which will see the unsealed sections of Condamine and Canning Streets bitumen sealed.

    Mr Marks said the new store is expected to open in late 2018.
    Bee pesticide banned by Bunnings

    Bunnings will pull a pesticide from its shelves that has allegedly been linked to the deaths of bees. The move affects all stores across the United Kingdom, Ireland, Australia and New Zealand.

    In a statement, Bunnings Warehouse said it will remove its Neonicotinoids -- often referred to as neonics -- products, like Yates Confidor, from shelves by the end of the year. It said the timeframe will give them time to educate customers about natural alternatives. 

    Neonicotinoids is a class of pesticide -- which some studies suggest affects bees' navigation and immune systems, resulting in colony death. They are a popular insecticide worldwide, found in soil and seed treatments, and domestic and commercial lawn care products.

    The big box retailer made the decision in November last year to remove the product from its UK and Australian stores amid declining British bee populations, but admitted it was based on precautions rather than scientific evidence. The move appears to be part of a growing movement towards chemical-free gardening.

    A Bunnings spokeswoman told Fairfax Media:
    There's a lot of conflicting science out there...we decided to err on the side of caution.

    Gardening company Yates said while they respected Bunnings' decision it was comfortable that neonicotinoid products did not harm bees.

    A spokesman for the Australian Pesticides and Veterinary Medicines Authority (APVMA) said neonicotinoids registered for use in Australia are safe and effective. He said:
    This class of pesticides has been used in Australia since the early 1990s and APVMA continue to monitor potential adverse experiences of the chemicals.

    More than 30,000 Australians signed a petition, launched by global consumer group SumOfUs, calling on Australian retailers to stop selling insecticides containing neonicotinoids.

    A Bunnings spokesperson said the company was aware of the petition, but reached its decision independently. Bunnings chief operating officer Clive Duncan said the company has been working with suppliers and partners around the use of neonicotinoids. He said:
    [Bunnings ensures] we keep abreast of the evolving science and issues impacting bee populations.

    Woolworths recently told The New Daily it had succumbed to consumer pressure to remove Confidor from its shelves. Coles will also cease sale of insecticides containing neonicotinoids this year, following Independent Hardware Group's - owner of Mitre 10 and Home Timber and Hardware - announcement it would pull all items containing neonicotinoids from its shelves by the end of the year.
    "Minimal effect"

    Despite the ban, apiarists believe it is unlikely to have much effect. Phil Lester is a professor of ecology and entomology at Victoria University in Wellington, New Zealand. He said given the small scale in which over-the-counter products that contain neonicotinoids were used, the Bunnings ban was unlikely to have much of an impact. He told Radio NZ:
    My guess is it will have minimal effect really in the wider scale of things. There are lots of crops ... that utilise neonicotinoids and it's those big cropping systems that utilise much more and the use of the home handy-man, or home gardener will pale into insignificance in comparison.

    Mr Lester said while the effects of the ban would be minimal, the move would likely be popular with consumers.
    I think there will be a lot of people that shop at Bunnings that have heard some media around the use of neonicotinoids, that it's bad for bees and Bunnings will be doing themselves some favours by taking them off the shelves.

    Mr Lester said more data needed to be collected.
    Ban in place at B&Q

    Back in May 2017, UK home improvement retailer B&Q announced that all the flowering plants it sold are to be grown without using pesticides that are harmful to bees.

    B&Q said that from February 2018 it would no longer sell flowering plants grown using the pesticides. It claimed it was the first retailer to commit to such an undertaking.
    Bunnings Albany store in WA to expand

    Bunnings will double the size of one of its WA outlets. The Albany Highway store will increase by 6000sqm across three lots, reports The Advertiser. It is the first large-scale expansion of the store since it opened its doors in 1999. Bunnings general manager - property, Andrew Marks said:
    Bunnings has been part of the Albany community for more than 17 years and is pleased to have received an amended development approval for a major expansion of our Albany store.

    Mr Marks said Bunnings was finalising its development program but could not yet confirm a timeframe.
    The DA [development application] will allow for over 6000sqm of new retail space and we are currently working on a proposed development program to make the most of this additional space.
    East Albury Bunnings doubles in size

    Bunnings' $28 million warehouse in East Albury (NSW) is one of the largest operations of its type in regional Australia. It measures over 18,000sqm with 400 car parks, located on the corner of Borella Road and Drome Street.

    The store recently opened to DIY hobbyists, renovators and "Bunnings-tragics". There are plans for a grand opening celebration now that it has officially commenced trading.

    Bunnings is also transferring its trade centre from a leased property in Romet Road, Wodonga across to East Albury.

    The timber and trade centre is located at the northern end of the warehouse and the garden supplies section at the Borella Road end of the site which is roughly double the size of Bunnings' Wodonga operation on Thomas Mitchell Drive which opened in 2007.

    Bunnings opened its existing Albury store in Young Street in 2003 before an expansion six years later.

    Another Bunnings store in NSW, in Heatherbrae, has also officially opened.
    Indie store update
    A number of buyers are looking to buy the Murray Goulburn stores
    HNN Sources
    Ruralco could be one of the buyers looking at purchasing Murray Goulburn's trading stores
    Willows Mitre 10 in Townsville (QLD) has shut down after a fall in trade
    Click to visit the HBT website for more information
    Diversified agribusiness, Ruralco has expressed interest in a number of MG Trading stores, according to sources; and rising costs and falling trade have been blamed for the shutdown of Willows Mitre 10.
    Buyers for Murray Goulburn stores

    Ruralco is looking to buy Murray Goulburn's (MG) trading stores, sources told Weekly Times Now. The sources said Ruralco subsidiaries expressed interest in a number of MG Trading stores in late 2017.

    This comes as MG has confirmed it has the right to sell the network of 25 stores and six fertiliser depots in Victoria, despite announcing in October it was selling the co-operative's assets to Canadian dairy giant Saputo.

    There are many businesses under the Ruralco banner throughout Australia, including Tasmanian agribusiness and real estate company Roberts, Combined Rural Traders (CRT) and Rodwells.

    Ruralco reported revenue of $1.8 billion and after-tax profits of $30 million last financial year and is understood to be in the mix to buy at least some of MG Trading's assets.

    Saputo, which is set to buy MG's assets for $1.31 billion subject to government agency approval and shareholder support, said dairy processing was its first priority in Australia but it would keep the MG Trading stores operating if required. A Saputo spokeswoman said:
    We are not retailers. That being said, we understand that these trading stores are very important to some of the local communities. If these assets are not sold by MG prior to completion, we will inherit them and put the right management in place and operate the stores.

    An MG spokesman said all the co-operative's operating assets would be included in the Saputo transaction, unless the trading stores were sold beforehand.
    MG does not currently have any formal sale process under way in relation to MG Trading.

    Elders, which also operates rural stores, has plans to extend its branch network and identified Victoria's Western District as one area of particular interest. Elders managing director Mark Allison said he approached Deutsche Bank during the MG sale process to buy the stores but was told the dairy co-operative would be sold as a whole. Mr Allison said:
    We were told that whoever bought Murray Goulburn would sell off parts of the business. But we've had no contact since it has been sold. I would assume they would come to us if they are selling the branch network.

    Mr Allison said Elders was opening a store in Mortlake as part of its branch network expansion.
    Falling trade leads to closure

    Willows Mitre 10 in Townsville (QLD) has shut its doors. It closed in December with a sign thanking its customers and being closed indefinitely.

    Moira Carter of BRI Ferrier, was appointed liquidator, and said costs such as rent and electricity were increasing when trade and income was falling. She told the Townsville Bulletin:
    You just can't support businesses under those circumstances.

    The main debtors for store are Mitre 10 and a bank. Ms Carter said employees had been paid most of their entitlements.

    Townsville Chamber of Commerce president Debbie Rains said it was sad to see small businesses close and urged people to support local businesses.
    From a chamber perspective, it's always very disappointing to see the closure of local small businesses. We encourage people to shop locally as much as possible and hopefully prevent more closures like this.

    Ms Rains said small business was the backbone of the economy, employing a lot of people.
    If people do shop locally and continue to support local business, the dollar goes around 13 times. You are actually helping to spread the dollar further in our local community.
    Supplier update
    Stanley Black & Decker acquires an industrial fastener maker from Doncasters
    HNN Sources
    Spectrum signs deal to sell its Energizer and Rayovac batteries and lighting businesses
    One of the products in the Ground Logic commercial spreader and sprayer product line
    Subscribe to HNN weekly e-newsletter
    Industrial fastener maker, Nelson Fastener Systems has been acquired by Stanley Black & Decker; Spectrum Brands will sell its batteries businesses to Energizer; Briggs & Stratton has expanded its line of standby generators; and Sika beats sales forecasts and expects faster growth in 2018.
    UK industrial fastener maker sold to SBD

    Stanley Black & Decker has reached an agreement to purchase Nelson Fastener Systems, a manufacturer of fasteners and studs, from UK-based Doncasters Group for approximately USD440 million in cash. The acquisition does not include Nelson's automotive stud welding business.

    Founded in 2016, Nelson is a global distributor of fasteners and fastening systems. It manufactures industrial products made from a variety of materials, including carbon steels, stainless steel, alloys and more. The Californian company operates as a subsidiary of Doncasters serving the aerospace, automotive, construction, energy, industrial, marine and military markets.

    The acquisition is expected to enhance Stanley Black & Decker's engineered fastening presence in the industrial market. The transaction is expected to close in the first quarter of 2018.

    Doncasters' divestiture of Nelson comes as the company plans to focus on its core specialised markets: aerospace, industrial gas turbine and specialty automotive. The sale will assist Doncasters in paying down "some existing debt as well as provide necessary capital to further invest in these markets and accelerate growth".

    Stanley Black & Decker recently sold its door and mechanical security business to Dormakaba, and purchased the tool business from Newell Brands for approximately USD1.95 billion in cash to expand in industrial cutting equipment.
    Spectrum Brands sells batteries, lighting

    Diversified consumer products company, Spectrum Brands said it has reached an agreement to sell its batteries and lighting businesses to competitor Energizer for USD2 billion in cash.

    Executive chairman David Maura said in a statement that selling the businesses will allow Spectrum Brands to lower debt, buy back shares and make some acquisitions.
    [It] is a culmination of our efforts to sell the battery business in order to refocus Spectrum Brands and enhance shareholder value. While we have a long and proud heritage in the battery business, this is a key part of our re-allocation of capital strategy towards a faster-growing and higher-margin Spectrum Brands.

    Spectrum makes Rayovac batteries and George Foreman grills, among many products, and said it wants to concentrate on its four remaining businesses: hardware and home improvement, auto care, pet supplies, and home and garden equipment.

    The batteries and appliances businesses, which include Rayovac batteries and Black & Decker home appliances, accounted for about 40% of Spectrum's sales in fiscal year 2017.

    For Energizer, the deal grows its batteries division, while also expanding its international business.

    In 2017, Spectrum added to its headquarters in Middleton, Wisconsin (USA) to accommodate expected growth.
    Sika implements growth strategy

    Construction chemicals maker, Sika said it has beaten both its annual sales target and market expectations in 2017, and is forecasting stronger growth in 2018.

    The company, which has been involved in a takeover battle with France-based Saint-Gobain for three years, reported annual sales of 6.25 billion Swiss francs (USD6.39 billion) for 2017 - exceeding its target of 6 billion francs.

    The 8.9% increase in local currencies narrowly beat the average estimate of 6.2 billion francs in a Reuters poll, and was marked by a growth rate of 12% during its fourth quarter as a number of acquisitions kicked in.

    Read more about the specific acquisitions across its regions here:
    Sika sales exceed 6 billion francs for the first time - Globe Newswire

    Under new CEO Paul Schuler, the company is even more bullish about 2018, saying it expects sales growth of more than 10% and a higher growth rate for operating profit. The improvements reflected Sika's investments during 2017, Mr Schuler said. He has already indicated the company will ramp up its buying spree.
    With nine new factories, three further national subsidiaries, and seven company takeovers, we have made significant investment in growth markets as well as in growth platforms in the form of product technologies and distribution channels.
    These 19 strategic investments, our pipeline with innovative quality products and our global presence - we now have 100 national subsidiaries and more than 200 factories - allow us to look toward the future with optimism.

    Sika said it expected a bigger increase in its 2017 profits, anticipating beating its previous highest net profit of 567 million francs it made in 2016. It said it expected an operating profit of 880 to 900 million francs for 2017. The company is due to report its earnings in late February.

    The Swiss company's takeover fight with Saint-Gobain was sparked by its founding family wanting to sell its controlling stake to the French group. The next court decision -- centring on the family's voting rights -- is expected in the next few months.

    Saint-Gobain bids for control of Sika - HNN
    Briggs & Stratton buys Ground Logic assets

    Outdoor power equipment supplier, Briggs & Stratton has expanded its line of standby generators by acquiring a designer and manufacturer of fertiliser and pesticide spreaders.

    Ground Logic makes commercial spreaders and sprayers for applying fertilisers, pesticides and herbicides. The products are designed for use on mid- to large-size residential and commercial properties.

    The company's spreaders are known as stand-on spreaders, in which workers stand or ride the machines as they operate them. The acquisition will allow Briggs & Stratton to complete its turf product line. With six spreader types, Ground Logic has a larger product line than many of its competitors.

    Briggs & Stratton said in a statement that it financed the acquisition using cash on hand. The company does not expect the deal to have a significant impact on its 2018 profit or cash flows.

    In October 2017, it reported USD329 million in sales in its first quarter of fiscal 2018, up 14.7% from the same period last year. It also reported $1.8 billion in fiscal 2017 revenue.
    Europe update
    Managing director of Bunnings' UK business, PJ Davis, is retiring after going on extended leave in January
    HNN Sources
    Supplier relations help deliver successful hire business for Travis Perkins
    Grafton Group includes the Selco chain and had a better-than-expected performance in the final quarter of 2017
    Click to visit the HBT website for more information
    Damian McGloughlin is to become managing director of Bunnings' UK business, taking over from Peter "PJ" Davis who is retiring; Bunnings opens more new stores; hire business drives growth trajectory at Travis Perkins Group; and shares in Irish builders merchanting group Grafton jumped nearly 7% on the back of a strong end of year trading update.
    Senior executive shuffle at BUKI

    Wesfarmers recently announced that Bunnings UK & Ireland (BUKI) managing director Peter "PJ" Davis, who has been on extended leave since January, is retiring after 25 years with Bunnings. He will be replaced by Damian McGloughlin who previously worked at UK home improvement chain B&Q.

    There were reports at the time that Mr Davis, who was initially taking a three-month break, that the time-out was pre-planned and allowed him to return to Australia to spend time with family. A statement from the big box retailer confirmed that Mr Davis "will be taking three-months' leave starting mid-January".

    While some in the media speculated that the decision was due to poor performance and losses in the UK business, Wesfarmers quashed those rumours and said back then that Mr Davis was simply keen to return home for a short period, adding that "he will be back".

    Mr Davies re-located to the UK to head up Homebase when Wesfarmers acquired the business from Home Retail Group in February 2016. He had been tasked with transforming the chain and launching a Bunnings proposition in the UK market.

    As the new managing director, Mr McGloughlin is expected to be assisted by acting chief operating officer David Haydon, who was previously Homebase trading and commercial manager. Mr Haydon was drafted from sister chain Officeworks to run Homebase, and has worked for Wickes and B&Q.
    Merchandise manager moves on

    BUKI general manager - merchandise, Craig Castelino, is leaving the business, according to a report in Insight DIY.

    It is understood Mr Castelino will be working on special projects and that he and his family will be returning to Australia in April. Once back in Australia, he will be taking on a senior leadership role in the Bunnings Australian and New Zealand business.
    Homebase store conversion continues

    BUKI have now officially opened 19 stores in the UK, with at least another four currently being converted, according to Insight DIY. Two of the stores will be in Waltham-on-Thames, a large affluent market town on the River Thames in Surrey, and Frome, in eastern Somerset.

    A small-format Bunnings will be located in Herne Bay, a seaside town in Kent. A more traditional Bunnings Warehouse will open in London Penge, considered an archetypal commuter suburb in Bromley.

    The following stores have already opened for business.

    This outlet in west London, was one of a number of Homebase branches to be fitted out with a mezzanine floor during a store refit program under former owner Home Retail Group, according to a report in DIY Week. It is over 57,00 square feet and carries the same branded ranges seen in other Bunnings conversions, as well as the stand alone "tool shop".

    This store doesn't have a cafe but has installed a children's play area and seating space on the mezzanine floor.
    High Wycombe

    The High Wycombe store is almost 50,000 square feet, in a large town in Buckinghamshire, which is one of the most affluent parts of England yet still contains some considerably deprived areas.

    This store is over 37,000 square feet in a market town in Suffolk, approximately 105 kilometres north of London. To celebrate the opening, former professional footballer Mick Quinn, joined a welcome breakfast for team members.

    The Bunnings Walthamstow store is in the largest district of Waltham Forest in east London, and measures over 74,000 square feet. Another former professional footballer, Fabrice Muamba, joined a welcome breakfast for team members.

    A new Bunnings store opened in Chichester, a city known for its cathedrals in West Sussex, south-east England. It measures over 80,000 square feet. Sarah Ayton OBE, double Olympic gold-winning sailor, helped to celebrate the opening.

    Another Bunnings store opened its doors in Rochdale, a town in Greater Manchester. This store is the largest Bunnings Warehouse yet, at over 110,000 square feet and occupies a former B&Q site in Sandbrook Park, a retail park. The big box retailer submitted a successful application to occupy the site in August 2017.

    The Homebase store in Sprowston has closed to reopen as a Bunnings Warehouse. Sprowston is a small suburban town bordering Norwich in Norfolk.
    Tool hire delivers for Travis Perkins

    The Travis Perkins Group seems to be on a growth trajectory with the company growing its revenue from GBP4.8 billion in 2012 to GBP6.2 billion in 2016. This is an increase of nearly 30%. As a result, Travis Perkins is now the UK's biggest supplier of construction materials, both to the construction and home improvement markets.

    It has approximately 100,000 different products available from more than 600 stores across the UK.

    Not all parts of the business have grown at the same rate. The tool hire division is a stand-out, now operating from 250 stores - and an additional 250 satellite locations - with 1,200 product lines and more than 80,000 assets available.

    In 10 years, the hire business has gone from having a revenue of just GBP22 million to in excess of GBP100 million, an upsurge of 355%. Travis Perkins group hire commercial director, Yas Swindell told Construction News:
    [The growth] ... probably outstrips most of the competition in terms of percentage growth. We have had a massive impact and TP Hire is now well-established as a national tool hire provider.

    A key part of this growth has been down to some suppliers working more closely with Travis Perkins in delivering a better service. Mr Swindell said:
    It's a new way of challenging suppliers and some welcome that challenge. But change has to happen ... We cannot stand still in tool hire and keep accepting that's all our suppliers can offer. It's not. They really have to partner with us much more than they have done previously. We're challenging every single supplier that trades with us.

    While Travis Perkins now enjoys a better relationship with a majority of its suppliers as a result of the initiative, it says one company stands out from the crowd: Hilti. Mr Swindell explains:
    The relationship with Hilti has been established for more than 10 years now, although I've known them for a lot longer. That really has ramped up over the last 12-18 months when we've been talking to them about issues that the business faces on a day-to-day basis and how they could look to assist us in developing different ways of doing business.

    The evolving relationship between the two companies has resulted in a greater volume of products being available at short notice from a larger number of Travis Perkins outlets. Mr Swindell said:
    We have been developing new ways to bring the product into the business in volume. In the last 12 months, in excess of 10,000 assets have been brought into our current network, which just allows for stock availability. Hilti now represents 20% of our stock.
    Forward planning

    Immediate availability is extremely important to Travis Perkins, given that tool hire still isn't something its customers always plan for in advance. Mr Swindell said:
    It's still very much led by them believing that those tools will be there if they walk into any of our branches across the UK. Hilti has worked with us extremely well to try to alleviate that problem and to introduce product lines that we wouldn't necessarily have done in volume previously.

    Hilti assets now available at short notice don't just include the sort of standard items that customers might expect to be available at short notice, but also more specialised and cutting-edge equipment. Mr Swindell said:
    It's about areas such as diamond drilling, rotating lasers and certainly dust extraction.

    He said the addition of so many product lines brings with it the issue of service and repair.
    Under the terms of the agreement all service and repairs will be undertaken by Hilti at their Glasgow Service Centre, with tool collection to redelivery taking a maximum of 72 hours. This means we can optimise our fleet accordingly.

    It isn't just Travis Perkins that benefits from the new relationship, according to Mr Swindell.
    Hilti benefits too, not just in terms of sales, but also education in relation to feedback from our customers, our workshops and our colleagues in branch. I have to take my hat off to them - 500 stores is a huge challenge to any supplier. They have listened very carefully and formulated a plan with us. The customers have seen the benefits too.
    We want to be offering hire from every location that we have over the next 12 months. Hilti is listening and responding - we can't ask more of them than that.
    Strong rise in revenue for Grafton

    Builders merchant and DIY retailer Grafton Group said it is benefiting from a surge in spending on construction and home improvements in Ireland. The London-listed group owns the Woodie's DIY retail brand but generates more than 90% of its sales from its UK merchanting division.

    In a trading update, the company said its group revenue increased by 8.8% to GBP2.7 billion. Its total Irish revenues jumped by 16.2%, while its UK revenues increased by 4.7%.

    The company noted that daily like-for-like revenues in its UK merchanting operations softened - as expected - with trading conditions in the residential renovation maintenance improvement (RMI) market mixed. Like-for-like growth in UK merchanting in the last three months of 2017 slowed to 3% from 4.7% in the third quarter. Grafton said that the RMI market was impacted by general economic and household uncertainty and a competitive pricing market.

    Revenues in its Dutch operations increased over 49% higher as the broadly based economic recovery there continued to support increased activity in the housing and non-residential construction markets. Its Belgian revenues were also higher, rising by 7.5%, during the year. Grafton's chief executive Gavin Slark, said:
    We are pleased with the progress made across the group during 2017 which reflects the benefits of self-help and strategic initiatives to grow the business.
    We enter the new year in a favourable position well placed to implement our growth strategy supported by good cash flow from operations, a strong balance sheet and low net debt.
    USA update
    Home Depot showcases DIY projects in Pinterest pins
    HNN Sources
    Kroger and Ace Hardware eye partnership
    The Home Depot bids for XPO Logistics to keep Amazon out
    Click to visit the HBT website for more information
    The Home Depot creates built-in pins on Pinterest; Kroger want to add Ace Hardware store-within-a-stores in its supermarkets; XPO Logistics could be at the centre of a bidding war between The Home Depot and Amazon; Home Depot gets into the decor market with recent acquisition; and Lowe's to connect with shoppers through Apple's text app.
    Pinterest platform showcases DIY projects

    The Home Depot has launched a campaign on Pinterest that includes immersive experiences to show people how to execute DIY home improvement projects. The brand's "Built-In Pins" campaign showcase video, images and a 360-degree interactive shopping experience created with virtual reality ad firm OmniVirt, according to Adweek.

    Each 30-second spot illustrates how a couple transformed four rooms - bedroom, kitchen, living room and bathroom - from demolition to furnishing. Interactive views of the rooms let smartphone users look around at the furnishings and tap on orange dots to see details about the products used.

    After tapping on a dot, a pop-up window guides viewers through a mobile checkout at select stores. In addition, the campaign's Pinterest posts include guides on the methods pictured in the videos and which specific products were used. Ad agency 22squared helped develop the campaign.

    The retailer's 30-second videos are tailored to mobile phones, and the 360-degree experience similarly gives smartphone users an engaging look at finished rooms. This approach lets the company better manage the sales process, help shoppers visualise a product in their home and provide information employees may not know off-hand.

    Home Depot's effort underscores how mobile-first video marketing continues to gain traction as more brands use the full-screen vertical format popularised by smartphones. Home Depot's ads also function better inside Pinterest's mobile app than on a desktop browser.

    The promotion is the latest signal that Home Depot is experimenting more with a mobile-first strategy. It was recently among the first batch of retailers to test AR (augmented reality) ads on Oath websites, for example. Its AR ads showed how smartphone users can virtually place products like artificial Christmas trees in their own living rooms and view them from any angle to help decide whether to make a purchase.
    The Home Depot Packs Whole DIY Projects, Start to Finish, Inside Pinterest Pins - Ad Week
    Ace reviewing its in-store grocery presence: report

    US supermarket giant, Kroger is reportedly in preliminary talks to form a partnership that would allow Ace Hardware to open up mini-shops inside its stores, sources told analyst website, TheStreet.com.

    Under the partnership, Ace would have a presence within Kroger stores as a "store-inside-a-store".

    The store-within-a-store concept is nothing new to Ace. Since 2012, it has offered local store owners USD150,000 to adopt the model, in which stores of 5,000 square feet or less and can be located inside grocery or paint stores.

    Ace has a partnership, for instance, with paint chain Benjamin Moore. It has at least 400 Express stores, based on the latest data available. If the Ace set-up with Kroger goes through, the grocer would be Ace's biggest partnership according to the source with knowledge of the deal.

    Ace Hardware CEO John Venhuizen spoke to TheStreet.com in November 2017 about the need for diversification among retailers in the age of Amazon. He said:
    I don't know necessarily that every acquisition [by a bricks-and-mortar retailer] will have to be an e-commerce platform, but if retailers don't offer a differentiated experience and an assortment of goods, they will die" in the face of digital retail.

    More than 100 Ace Hardware locations are currently operated by grocery retailers, according to local reports. Many of the Ace Hardware Express locations are inside - or adjacent to - independent grocery stores and small chains.

    Houchens Food Group, a multi-banner operator based in Kentucky, began operating Ace locations in 2015 inside several of its formats. Jimmy Nichols, chief operating officer of Houchens, said at the time:
    From a product standpoint, Ace Hardware is a natural brand to combine with a grocery store, as it adds to the convenience factor and gives customers more reason to visit. We believe that Ace has a superior offering and has created a program specifically compatible with our mission to offer store-within-a-store convenience for our customers.

    Analysts and consultants have urged grocers, especially since the Amazon Whole Foods deal was announced, to consolidate either with other big players or third-party companies that could offer supply chain innovation or greater product assortment.

    Kroger has about 2,800 stores nationwide, but has been struggling to reverse a sudden drop in sales. Last year's first quarter was the first time in 13 years that it had recorded a decline in comparable-store sales, although it was able to bounce back in late November, posting a 1% increase.
    Home Depot, Amazon battling over logistics company

    Diversified logistics operator XPO Logistics is attracting attention after it was reported that The Home Depot is considering buying the trucking company if only to keep it out of the hands of Amazon.com, which was also rumoured to be interested in acquiring it.

    According to Recode, Home Depot executives held discussions among themselves about making a bid for XPO. It's understandable why Amazon would want the logistics business as it is getting into big-ticket items such as appliances and furniture. It has already assembled an air fleet for delivery and is planning to build a new distribution centre in Kentucky (USA), so a last-mile delivery service to supplement or even replace UPS and FedEx makes sense. But why would the home improvement retailer be interested?

    Investor website, Fool.com believes preventing Amazon from getting its hands on the logistics specialist is one reason, but the amount of money to buy XPO's USD9 billion business needs something a little more concrete than simply playing spoiler.

    Home Depot is already a major retailer of appliances, which represent almost 8% of its USD94.6 billion in 2016 net revenues. It is the second largest appliance retailer in the US, behind Lowe's, which became the industry leader in 2013.

    But Home Depot is looking forward to new opportunities beyond just its stores. At an analyst day conference in late 2017, the big box retailer said it was looking for revenues in 2020 to be around USD120 billion, a significant increase for a retailer that is expected to generate over USD100 billion in sales for 2017.

    It is also already a force to be reckoned with online as industry site eMarketer pegs it as the fourth largest e-commerce site with about USD6.5 billion in online sales that are still growing in excess of 20% annually. Home Depot's third-quarter earnings report indicated e-commerce sales had already hit almost USD5 billion through the first nine months of the year, a 21.6% increase. Perhaps more importantly, 60% of all of its sales whether in-store or online are influenced by a digital visit.

    Home Depot also told analysts it plans to spend USD11.1 billion over the next three years on investments in its omnichannel efforts, which includes expanding delivery options, such as same-day and time-definite options, as well as expanding its shipping options in Canada and Mexico.

    Moreover, it built a network of direct fulfillment centres capable of reaching 95% of the US population in two days or less with parcel freight, and 30% of the population in one day. Yet it specifically noted its appliance delivery business is a stand-alone that it's currently unable to leverage with other big, bulky deliveries. Acquiring XPO Logistics with all of its expertise in these areas would be a significant boost to solving that problem.

    But as much as Home Depot might want to thwart Amazon's continued expansion, it's equally true the e-commerce leader could outbid Home Depot. And strategically speaking, it may have much greater financial wherewithal to complete the deal as well as outlast any other suitor that might emerge. Walmart, for example, would be another reasonable potential buyer, as would UPS and FedEx themselves.

    It's clear XPO Logistics is well positioned to capitalise on retail's intense interest in the next stage of growth and it could become an even more richly valued prize if a bidding war suddenly breaks out.
    Home Depot gets in touch with its softer side

    US home improvement big box retailer, Home Depot has acquired The Company Store, an online retailer of home decor and textile products. It announced it would be acquiring the Wisconsin-based company for an undisclosed amount from Hanover Direct. Not included in the deal were The Company Store's five retail locations.

    The Company Store's website shows the company is focused on bedding, sheets, rugs, and pillows, traditionally seen as the "softer" side of home improvement. In the press release announcing the deal, Home Depot CEO Craig Menear said:
    The acquisition of The Company Store provides product development and sourcing capabilities to help us expand our online decor business into broader categories across the entire home.

    The Motley Fool website points out Home Depot signalled its decor strategy at its Investor and Analyst Conference, just prior to the announcement of the acquisition. It notes that executive vice president Edward Decker said the company sees an opportunity home decor categories. Taken from the transcript provided by S&P Global Market Intelligence, he stated:
    ...[W]e completed extensive research on customer shopping intent and found we have the authority to play and the right to win in several home decor categories. We believe we are well positioned to help our customers ... complete their decor-oriented projects with items like housewares, tabletop, interior furniture, wall decor and textiles. And consumers are increasingly purchasing decor categories online, so our efforts will largely be digital, where we will leverage our traffic and customer base for a natural scale advantage ... We're also investing in our interconnected decor shopping experience, with enhanced photography, shop-by-room or collection capabilities and style guides. And we are leveraging our existing capabilities to reintroduce home decor ... We're pleased with our results and are accelerating our decor investments.

    Mr Decker said that over the past 12 months, the company has introduced over 180,000 decor products from 500 different suppliers. This year Home Depot will sell more than USD25 billion in decor-related products which includes everything from flooring and lighting to window treatments.

    Mr Decker went on to say that this decor-related opportunity was all about "the customer taking us to project completion." In other words, when customers remodel a room they are already going to Home Depot for building materials, paint, and flooring; now Home Depot wants to ensure that customers stay when selecting the right drapes, rugs, and throw pillows to finish the project. This is what the acquisition of The Company Store is intended to accomplish.
    Marketing exposure

    While it's unlikely the acquisition will grow The Company Store's physical footprint, it may boost its visibility in terms of marketing. Home Depot has nearly 2,300 locations through which The Company Store name could be shared, locations in which customers could get that last-mile help putting the finishing touches on whatever home improvement projects they've undertaken.

    Home sales have been a driver for sales of tools and building supplies, creating a one-stop shopping experience, and have thus helped home improvement stores weather some of the industry changes. Home Depot's acquisition of The Company Store could be a strong pre-emptive move against any potential softening in home sales by keeping that momentum going.
    Lowe's shoppers can use Apple's text app

    Home improvement retailer, Lowe's is partnering with Apple for Business Chat that will allow consumers to talk to retail staff through Apple's Message app. Customers can use the solution to ask questions, resolve issues, and complete transactions via their iPhone, iPad and Apple Watch, according to Apple.

    Rather than call a customer service number, users will be able to "text" Lowe's with a dedicated number and have a text-based conversation with a customer service representative. Responding staff can share links to merchandise information, help schedule appointments or deliveries, and enable users to make purchases using Apple Pay.

    All interactions happen directly in the Messages app without having to visit another app or web site.

    Lowe's was attracted to the chat-based service as a means of engaging an increasingly digitally savvy customer base. Gihad Jawhar, VP of digital, said:
    Serving customers now requires us to be more connected than ever before. Our people, systems, processes and efforts must be connected - and they must be in line to create an omnichannel environment that is simple and seamless for everyone.

    Business Chat is also another way for Lowe's to remove friction across its omnichannel experience. Mr Jawhar said:
    We will drive customer engagement by delivering convenience, inspiration, expertise and efficiency across the most relevant moments of the customer's project journey.

    Lowe's will begin offering Business Chat when Apple launches a beta test of the service this year.
    Easy, breezy gardening
    Victa's handheld products featuring Swift-Start technology have auto choke and soft pull start
    HNN Sources
    Victa's Swift-Start trimmers are available with a straight or bent shaft
    The Swift-Start blower is easier and faster to start, enabling a consistent operation
    Click to visit the HBT website for more information
    Victa has released a range of handheld products featuring Swift-Start technology. With its auto choke and soft pull start, these new trimmers, chainsaw and blower are easier and faster to start while enabling a consistent operation.

    They provide stable operation, handling and reliability. Each feature an advanced anti-vibration system with noise conservation that reduces fatigue, according to the company.

    Victa's Swift-Start trimmers are available with a straight or bent shaft. These models are fitted with a Walbro carburetor and 25.4cc engine, a shoulder strap and interchangeable heads.

    The 18-inch domestic chainsaw is lightweight, and finished in steel and durable plastic. Requiring minimal maintenance, it has an on-board tool for easy chain tensioning.

    The Blower/Vac offers a cruise control function to set a consistent air speed. Users simply convert to vacuum operation to complete the job and mulch debris.
    HI News V3 No. 13: Kitchen markets 2018
    Download the latest issue of HI News Vol. 3, issue no. 13
    HI News
    Kitchen markets in 2018
    Bunnings FY2017-18 Q1 results
    Click to visit the HBT website for more information
    Kitchens dominate the last issue for 2017. White kitchens had a major influence on the market this year but the trend will likely fade by the end of 2018. The new kitchen is more modest, less "kitchen-y", and closely integrates with the surrounding rooms. As part of our extensive analysis of this sector, we take a look at the types of surfaces that make kitchen benchtops.

    Simply click on the following link to download this edition:
    HI News V3 No. 13: Kitchen markets 2018

    We also report on the largest corporate players in the Australian home improvement industry: DuluxGroup (Dulux) and Bunnings.

    Bunnings in Australia continues to grow strongly and Bunnings in the UK

    and Ireland is working hard to improve in 2018. Dulux experienced good

    growth in its core paints business but the company faces challenges in the medium term.

    Metcash's hardware entities, along with individual respondents, have filed defence statements in the pending court case brought by National Building Suppliers, alleging a data breach. We explore some of the general issues involved, and provide examples of the defence document contents.

    In the statistics section, we present two views of the housing downturn: the building industry sees this as a medium-term downturn, and the real estate/home

    owner market sees it as more short term. Factoring in RBA intervention, HNN

    agrees with the building industry

    In other news, Kingfisher posts its third quarter results along with US-based home improvement retailers, Ace Hardware, Home Depot, Lowe's and True Value.

    Suppliers featured in this edition include Brighton Best, Hillman, James Hardie, Stanley Black & Decker, and Big River Group.

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