The Australian Bureau of Statistics (ABS) has released hardware retail turnover stats to June 2024. The trailing 12 months to June are equivalent to the Australian financial year, so we will be referring to these as FY periods.

As the chart below for retail sales across Australia shows, while the year has not been regarded as being an especially good one for retailers, nonetheless record levels of sales were obtained in four out of the 12 months, and in another two months (July 2023 and April 2024) sales reached the previous equivalent high.

However, with the Consumer Price Index (CPI) running at 3.8% through the FY, it is likely that sales have, in real terms, declined significantly. We say "likely" because the true inflation figure for the year is tough to work out, and we will not obtain a better view of this until the National Accounts figures come out in early September 2024. We've already seen the effect of this in some FY reporting by listed retail companies, where sales have nudged upwards, and earnings before interest and taxation (EBIT) has fallen significantly.

In terms of winners and losers for FY2023/24, New South Wales (NSW) and Victoria (VIC) stand balanced, in dollar terms. NSW is the biggest loser for the year, down by $156.9 million, or 2.1% on the previous corresponding period (pcp) which was FY2022/23. VIC gained $153.0 million, a lift of 2.4% on the pcp.

In percentage terms, Northern Territory (NT) was the sharpest loser, down 9.6%, or $27.1 million on the pcp. Western Australia (WA) showed the steepest rise, of 4.0% or $110.5 million. Arguably, WA was the outstanding state in terms of overall performance for the FY.

Outside of NSW and NT, there were no other declines. South Australia (SA) grew revenue by 0.93%, Australian Capital Territory (ACT) went up by 0.9%, Tasmania (TAS) was positive 0.6%, and Queensland (QLD) was up 0.44%.

Overall, Australia saw an increase on the pcp of 0.5%, or $127.8 million.

New South Wales

It's not surprising that NSW follows the national numbers fairly closely, in that it is the single largest contributor. The two main differences are slightly higher numbers for September 2023 and April 2024.

Victoria

VIC saw revenues for FY2023/24 above the pcp for 10 out of 12 months, with all-time highs for five months: August through October 2023, January 2024 and May 2024.

Queensland

Perhaps the most interesting characteristic of the QLD chart is the stability that has developed over February to June 2024. Both FRY2020/21 and FY2021/22 were volatile in that period, and FY2022/23 had some volatility, but the recent FY is quite stable. That period also saw FY2023/24 well above the pcp, where for the rest of the FY it underperformed, or tracked closely to the pcp. All-time highs were reached in January and February 2024.

South Australia

SA's revenues for the reporting period closely followed those of the pcp, except for higher levels during September and October 2023. Technically, revenues hit all-time highs for eight out of the 12 months, but for both July and August 2023 revenues just nudged ahead of those months in 2022.

Western Australia

Every month of FY2023/24 outperformed the pcp, though December 2023 figures were very close to those of December 2022. The state had a particularly stronger than usual finish to the FY from April through June 2024.

Tasmania

Turnover in TAS followed the pcp very closely, though with a significant drop in December 2023. The state set all-time highs for revenue in April and May 2024, and just nudged ahead of February 2022 in February 2024.

Northern Territory

While FY2022/23 was a relatively good year for the NT, FY2023/24 was less so. The latter underperformed the latter for every month (though February 2024 was close). Instead the FY tracked closely to FY2021/22.

Australian Capital Territory

ACT set all-time highs from July to October 2023. After that, the territory closely followed the pcp, with the exception of December 2023, when it underperformed significantly.

Analysis

The chart below shows the percentage change in retail turnover.

While VIC has done well in FY2023/24, it could be argued this is something of a belated compensation for its poor performance in the two preceding FYs. WA remains the only state to have truly indicated growth during the reporting period.

There have been a number of indications that early results from July 2024 indicate a further downturn in hardware retail revenue. Once again, we need to restate the fact that this downturn has been deliberately engineered by the Reserve Bank of Australia (RBA), with the intent of bringing inflation back into the 2.0% to 3.0% range.

While there have been some rather lightweight suggestions by more fringe economists that this is somehow unnecessary, it is clear this is only responsible path to take. Experience in the US economy, where inflation rose even higher than in Australia, indicates that it is both possible to bring inflation down, and to do so with minimum stress on other aspects of the economy, such as employment.

Of more concern, structurally, is whether the high level of spending during the COVID pandemic will prove to be not merely episodic, but in part a bringing forward of expenditure, and hence leave a kind of "hollow" in future hardware retail spending. Though what is more likely is a series of "mixed" trends, where that plays a part as does further expansionary spending. This will likely vary across categories, with spending in "essentials" actually boosted, while more "discretionary" categories slump.

Independent hardware retailers are going to struggle over the next two financial years (FYs). That will be a result of two major forces: a declining market, and actions from the two major corporate players in the market, the Wesfarmers-owned Bunnings and Metcash's hardware division, which consists of the Independent Hardware Group (IHG) and Total Tools.

The equation for Bunnings is simple: growth in its prime DIY market is slowing, and even contracting. At the moment the least expensive expansion opportunity is in trade and commercial, with a side of industrial. We can expect the big box retailer to go harder in areas such as truss manufacture, where it has already introduced highly automated assembly plants. And remember, this is the company whose ultimate head, Wesfarmers managing director Rob Scott, referred without exaggeration to its investment in Tool Kit Depot as being basically "a rounding error".

On the Metcash side of things, while its hardware division did run into a rough patch for FY2023/24, it will really ramp things up business in calendar 2025. What we expect to see is a shift in strategy from defining growth in terms of the number of stores in-network, to figures that relate both to genuine growth in desirable markets, an a greater attention to profitability per store.

We also expect Metcash to turn up its acquisition strategy, making two or three purchases each year of really significant hardware store mini-chains. As far as Total Tools is concerned, one of the reasons Metcash hired one of JB HiFi's best former executives is they realise boosting trade tool sales is very much about marketing and developing truly compelling offers.

We all know that one thing independent hardware retailers love doing is running down the corporate opposition. In reality, however, the only number that comes out of either Metcash or Wesfarmers that matters is the topline total revenue. That's the measure of how much marketshare they get. If it becomes a game of who can hold out for the longest at a lower level of profitability, the big guys are pretty much going to win.

So what can independent retailers do? One of the major advantages they have is that many suppliers are not only on their side, but they are, today, developing and marketing products that are specifically aimed at boosting business for independent retailers.

HNN thinks these products are really not getting the exposure and attention they deserve, so we thought we would try to give some of them a bit of boost. These are our first round picks from the goods on display at the 2024 HBT Conference Tradeshow.

Senix Tools

HNN has said for some time that the advantage Bunnings enjoys through its exclusive Ryobi brand tends to be underrated. While it is often dismissed as being an under-specced DIY brand, the reality is it provides a near-perfect value-for-money curve not only for the slightly serious DIYer, but also for professionals in trades such as building maintenance.

While there have been several attempts to slot something into that space for independents, such as Kincrome's Katana brand, none have really had an approach that worked.

Senix looks like being the brand that finally does it. The modern origin story behind the Techtronic Industries (TTI) brands Ryobi and Milwaukee Tool (as well as Ridgid and AEG) is that they arose out of suppliers in China's Pearl River Delta that made tools for major brands such as Stanley Black & Decker. Senix is essentially doing the same thing, only in relation (un-confirmeed sources have indicated) to TTI itself.

One product highlighted at the HBT Conference is the 60 Volt Max 53cm Cordless Brushless Mower, available both in push and self-propelled models.

Its seven-position single point height adjustment lever tailors grass cutting height from 40-100mm. It features both a mulching side discharge for clippings, as well as a bagging facility, using a 65 litre bag. It delivers 65 minutes of runtime on a single charge with the included 60V 8.0 Ah battery.

What the numbers don't tell you is that this mower has a great "store presence". It's a bit of a monster of a mower, but the design has the crisp lines you would expect from a mower designed primarily for the North American market.

Gorilla Ladders

With Bunnings launching its Citeco line of value ladders for trade, Gorilla has clapped back with a boost in design that adds both lightness and improved durability to its aluminium ladders.

Better engineering has reduced the amount of aluminium used to construct the ladders, making them lighter.

Changes such as dropping the height of the lowest step have helped to boost structural rigidity, make the ladders less likely to become deformed and fail.

Unipro

Long a favourite of independent retailers, Unipro is lifting its profile above its utility range of painting tools and accessories, with the introduction of its Professional lines of accessories.

Its Professional Handcrafted brushes have a range of features to boost their performance over more standard brushes. This includes a taper that is 30mm instead of the standard 20mm to increase paint holding capacity, as well as a higher percentage of Poly Butylene Terephthalatel (PHT) filament mixed into each brush head, which helps to deliver a better paint finish.

The brushes come with a range of display options, including an on-counter wire rack.

Wagner

Wagner is launching its "light trade" range of paint sprayers and accessories. It's a range that features Click & Paint, a way to simply and rapidly change or add accessories to spray painters with a simple twist. The range is aimed specifically at independent hardware retailers.

The Wagner Flexio Elite features an adjustable spray jet width, variable delivery rate and variable airflow, making it possible to set up the ideal rate of application. There is a Universal Extra Extension, which adds 60cm length to the sprayer, making it easy to reach both the top and bottom of walls in a single sweep.

The Flexio Elite has a 630W motor, a max flowrate of 500ml per minute, and weighs just 1.7kg.

Work has begun on the Portland North Employment Precinct in regional Victoria that will feature a new Bunnings store as an anchor tenant. Construction of the store will span 5,300sqm and have 120 car parking spots when it opens in 2025. Bunnings regional manager Dave Roddis said:

This investment will enable us to serve the growing Portland region which our team is excited about, and we're pleased construction is underway.

The precinct has been made possible by $2.5 million in funding from the Allan Labor Government's Portland Economic Diversification Plan, as a way to boost local jobs and economic growth.

The Labor Government said its investment in the precinct including upgraded drainage and road infrastructure has been instrumental in attracting this major investment to Portland.

Preliminary works, including the construction of an access road on New Street, are underway with expected completion by the end of the year.

Led by Regional Development Victoria, this project marks a milestone in the ongoing development of Portland as an industrial hub. The project is a part of the government's record $45 billion investment since 2014 in projects and programs that support regional and rural Victoria to be an even better place to live, work and stay. In a statement, Minister for Regional Development Gayle Tierney said:

The arrival of Bunnings at the Portland North Employment Precinct will drive economic growth, create more local jobs, and position Portland as a hub for major employers, benefiting the entire Great South Coast region.

Glenelg Shire Mayor Karen Stephens said:

The Portland North Employment Precinct has been a long-term project that is starting to come together. It is an engine room for jobs and Bunnings will certainly provide those when it opens, with more than 50 ongoing jobs in addition to around 50 during construction.

According to a report in The Warrnambool Standard in 2022, Glenelg Shire Council had received a planning application for a Bunnings store.

Related

"Blueprint" for 2025

In its new fiscal 2025 plan called "Better Together", Bunnings will address the perception of alleged mistreatment of a number of its (mainly greenlife) suppliers following the public criticism it received from during the Senate supermarkets inquiry earlier this year.

The inquiry heard from aggrieved plant, flower and nursery businesses, and Bunnings, Woolworths and Coles were reprimanded in the inquiry's final report.

The plan details how the hardware retailer will deepen current supplier links and focus on the better use of store space, improved stock flow and productivity, reports The Australian.

There is also a focus on a more seamless offer for shoppers as they switch between channels, in store and online. In a letter to suppliers seen by The Australian, Bunnings chief customer officer Rachael McVitty and chief operating officer Ryan Baker wrote:

Later this month we'll celebrate 30 years since the opening of our first warehouse store in Sunshine, Victoria.

A lot's changed over that time and there is plenty that has stayed the same, but one consistent part has been our relationship and shared success with our suppliers and partners.

We have also kept a focus on deeper trust and partnerships with our suppliers. So many of our suppliers have longstanding relationships that have seen mutual growth over decades, and we don't ever take that for granted.

The "Better Together" theme is about looking for a better connection with suppliers and staff. The Bunnings letter to suppliers also said:

The outcome of this plan will be determined by how we bring 'Better Together' to more than just a slogan.

We met with 1200 team members last month to launch the plan and said to them that all of the focus points will have a key lead and will mean different outputs to different teams.

Innovating and expanding our ranges are led by Merch (merchandise team) but can't be achieved without input and offers from suppliers, then having those products marketed correctly and making sure team are trained and excited to fill the bays with stock and correctly answer customer questions.

While there will be a focus on reducing injuries, which will include looking at how products are packaged and designed to improve safety considerations, innovation will be driven by working closer with hardware suppliers.

As Bunnings changes its store layouts to take in new categories such as pets and expanded offer in home cleaning, it is seeking to capture better productivity and a better experience for the shopper in 2025. The letter said:

Better use of space or seamless customer offers across all channels will only work if Bunnings share that information and decision process with suppliers.

Improved stock flow, handling and deliveries has the potential to deliver big benefits, but will require collaboration from our stores, logistic companies, distribution and fulfilment centres and of course suppliers.

Related

British outdoor clothing and equipment retailer Mountain Warehouse plans to open four new stores in Australia by the end of the year. It launched its first Australian store as part of DFO at Skygate in the Brisbane Airport (QLD) in July 2024.

The retailer positions itself as a low-cost family focused alternative to Kathmandu, Macpac, Anaconda and The North Face. Prior to the Brisbane store, it has been operating an online presence for the past seven years, annually turning over about $10 million.

In the second half of 2024, Mountain Warehouse will open stores at DFO Moorabbin, DFO Essendon and DFO Uni Hill in Melbourne.

Established in 1997, Mountain Warehouse will have more than 400 stores around the world by the end of the year, mainly in the UK, with about 50 in Canada, a small presence in the US and stores in Poland, Germany and Austria. New Zealand is currently its third-largest market with 24 stores.

Mountain Warehouse has men's, women's, and children's clothing as well as footwear and equipment. About 30 per cent of its turnover is currently from online sales. In the beginning it was a multi-brand store selling other brands' products, but it transitioned away from that and now only sells its own brand.

The new Australian stores are part of a global rollout of 50 stores in 2024.

London-based founder and chief executive Mark Neale said Mountain Warehouse's range is different to its rivals and many products were up to 30% cheaper than comparable goods sold by the opposition. In The Australian, he said:

Our offer is a bit broader than some of the other guys and its definitely better value for money. That's always been our positioning. It's more of a family offer. We sell a lot of kidswear. Most of the other guys who you might think of as in our competitive space have pictures of guys with an ice axe hanging off a glacier. It's about value for money. We have pictures of a family taking their kids for a walk with their dog in the woods.

Mr Neale would not make any specific forecast about its new Australian business, which he said will have "the full offer" including a summer range of shorts, T-shirts, thongs and travel-related products such as backpacks.

We will see how the four stores go and if they get off to a good start we'll be looking at more next year as well as a distribution centre in Melbourne.

Six years ago, we opened a store in Queenstown New Zealand and we didn't know whether that would be one-of-one or one-of-many and it went well. In six years, including three during the Covid pandemic, we built it out to 24. There's a lot more people in Australia than in New Zealand so we'd like to think we will do more than that.

In 2018, UK-based private equity firm Inflexion took a 20% stake in Mountain Warehouse for GBP45 million, which is helping to fund its retail expansion.

In an interview with Retail Gazette, group AI director at Kingfisher Mohsen Ghasempour explains his team's efforts have been focused on creating initiatives that improve customer experience and internal operations - many of which have helped to increase sales under each of the group's banners.

(Kingfisher is the parent company behind UK retailers B&Q, Screwfix and French brand Castorama.)

Hello Casto is the first AI-powered assistant in the home improvement industry that uses generative AI to help customers with their DIY projects. Mr Ghasempour said customers can use the online tool, which is currently available at Castorama France, in their "natural language" to ask DIY related questions that they might typically ask a sales assistant in store.

When you talk to Hello Casto, you explain your problem, 'I want to remove my old wallpaper', and then our agent will tell you 'you need wallpaper remover, you need this part of product, you need this and you need that to do your project'.

It's quite new and we have to educate both internally and people to use this technology, but it's one that's potentially going to have a very big impact on the younger generation, especially those getting into DIY because we're providing that level of advice digitally to our consumer.

Mr Ghasempour said the team is working on launching an English version of the assistant for B&Q and Screwfix.

Product recommendations are also a key area. Last year, Kingfisher launched a suite of "best product" solutions for its app and online, as well as in multiple formats such as "frequently bought together" carousels, "substitute products" or direct personalised offers based on customer shopping trends and preferences.

For B&Q, where the solutions have been in place the longest, more than 10% of its ecommerce sales had come from product recommendations.

On top of that, its own recommendation engine had driven a more than 100% increase in online sales from product recommendations compared to its previous third-party solution.

Mr Ghasempour said it uses machine learning technology, which has been trained from the group's product data and sales history, to deliver the right recommendations.

The algorithm can also spotlight a very similar product if the one it would typically recommend is out of stock - something its previous third-party solution was unable to do.

Internal efficiencies

Mr Ghasempour notes the potential to use AI in the supply chain is huge, as there is "so much manual effort going into that process".

At the moment, Kingfisher uses AI for demand forecasting - predicting the quantity of products consumers will want - as well as working out how to clear stock in a more beneficial way for the business. Mr Ghasempour said:

About 12 to 18 months ago, we started a big project around mark down and promotions for B&Q [looking at] using technology to identify the best route to mark down a product.

When you want to mark down or get rid of a product, it's very important for you to understand discount you can put on the product and what period you have to leave it for.

The pilot tested in the first half of last year delivered encouraging gross margin improvements, while increasing the sell-through of seasonal stock and improving the efficiency of range changes.

Similar technology is being used for promotions, which combines demand forecasting and optimisation to provide "the best price for Kingfisher's customers", he said.

In our major strategy issue, HNN looks into the plans of the Wesfarmers-owned Bunnings, Metcash's hardware division (including both Mitre 10 and Total Tools) and the HBT National Buying Group.

Download here:

The most recent Wesfarmers Strategy Day in May 2024 proved to be a somewhat feisty event - in a good way. While the background of high inflation competing with unexpectedly high interest rates from the Reserve Bank of Australia (RBA) has seen retail spending curtailed, Wesfarmers has pushed ahead with its medium- and long-term vision. Central to this is OneDigital, we see Wesfarmers as one of the few large Australian companies taking innovation seriously, and understanding we're on the cusp of seeing markets radically reshape themselves.

Wesfarmers managing director Rob Scott was, as always, steadfast in defending and explaining his strategy, while investment analysts provided a rare level of engagement. The result is almost a conversation about how Australian business should shape itself moving into what could be a radical shift in the future.

Similarly, Metcash's Investor Day, held in March 2024, revealed a radically refurbished company, that is set to undergo further changes during FY2024/25. There are new CEOs heading up both the Food and Liquor divisions, along with a new CEO starting at Total Tools. An interim CEO has been assigned to the Independent Hardware Group (IHG), with long-term hardware stalwart Annette Welsh stepping aside. Results for FY2023/24 full-year reveal good performance from Food and Liquor, while Hardware has lagged overall.

Metcash CEO Doug Jones provided a rare look into Metcash's "meta-strategy". This consists of the company developing well-defined strategic "plays", which it can institute across its divisions, to acquire, grow organically and expand markets.

At HBT National Buying Group, managing director Greg Benstead outlines where the buying group for truly independent hardware retailers is headed. Much of this means making both technology and professional advice accessible to its members, while pursuing its overall goals of increasing volume of orders through its preferred suppliers so as to gain maximum rebates for members.

Bunnings Warehouse Property (BWP) Trust has reported $180.2 million profit for the 2024 financial year, up from last year's profit of $36.7 million.

In The Australian, BWP said it recently bought two properties - the Southport Showrooms (QLD) and Broadmeadows Homemaker Centre (VIC) for $10 million and $20 million respectively - as it looks to expand.

These acquired sites afford potential options for Bunnings' expansion, over time, and enable additional income generation for BWP...

These deals added to BWP's $540 million acquisition of the listed Newmark Property REIT that was completed in June. The merger provided BWP with nine properties.

BWP is also re-purposing and re-leasing properties vacated by Bunnings. At Hervey Bay (QLD) it put retailers Amart and Super Retail Group into a site. It is also re-purposing the ex-Bunnings Warehouse property in the Melbourne suburb of Fountain Gate.

BWP has sold sites in Wollongong and Belmont in NSW, in Albany (WA) and is looking to sell a former Bunnings Warehouse in Port Kennedy (WA).

Established and listed on the ASX in 1998, BWP Trust invests in and manages commercial properties throughout Australia.

The majority of the Trust's properties are large format retailing properties, in particular, Bunnings Warehouses, leased to Bunnings Group Limited.

Blood pressure trial

NSW residents have a new way to conveniently check whether they have hypertension (high blood pressure) at a Bunnings store.

The "Shop2Stop Hypertension" research study aims to identify more people with high blood pressure - the top risk factor for death in Australia - and raise community awareness by placing SiSU Health stations in 30 Bunnings stores across NSW.

This innovative approach to detecting hypertension comes from The George Institute for Global Health and UNSW Sydney in partnership with SiSU Health.

Alta Schutte, professor of cardiovascular medicine at The George Institute for Global Health and UNSW Sydney, said:

Efforts to reduce the rate of high blood pressure in the community have stopped being effective over the past 10 years, and the profile of those affected is changing.

For example, raised blood pressure is increasingly linked to stroke deaths in men aged 25-49 years but they wouldn't think of themselves as being at risk. We needed to think creatively about reaching this and other groups at high risk, in the places they already go, and Bunnings stores are a great way to do that.

Doing a screening at a SiSU health station takes about five minutes. Customers are asked a series of questions about their age, lifestyle and family history, and given the opportunity to accurately weigh themselves, check their blood pressure and measure their heart rate. They can also sync up with the SiSU Health app to capture their results and track their progress. Prof. Schutte said:

The check is free, and the self-operated machines are in discreet locations, so it's only the individual who sees and hears their results in the store.

Importantly, the SiSU kiosk gives people recommendations on how to reduce their blood pressure and, if needed, directs them to see their GP straight away. The good news is that if someone finds out they have high blood pressure, it can be effectively treated with medication and lifestyle changes.

TradeMutt

Bunnings Trade announced a three-year partnership with social impact workwear brand TradeMutt, to raise funds and awareness for mental health support among tradespeople. It officially launched in late July with a National Funky Shirt Friday Brekkie, according to the Mi3 website.

The partnership aims to support the free mental health care counselling service, This is a Conversation Starter (TIACS), founded by TradeMutt creators, Dan Allen and Ed Ross.

Allen and Ross, both tradies, started TradeMutt after Allen lost a close friend to suicide. The brand's colourful work shirts are designed to spark conversations about mental health, breaking down barriers in industries where such discussions are often stigmatised.

Bunnings Trade desks nationally will display "TIACS for your toolbox" cards, highlighting how to easily access the professional and confidential counselling service.

Bunnings Trade x TradeMutt work shirts and water bottles will be available in-store at Bunnings Trade desks, with 100% of profits from sales going directly to TIACS.

Ben Camire, Bunnings director of operations & commercial, said the retailer is committed to improving mental health support within the trade community.

Many of us can be unsure on how best to start a conversation about mental health, so we've partnered with TradeMutt to encourage our team and customers to check in with each other and raise awareness and funds for TIACS, a valuable resource there to help tradies.

We are committed to improving mental health support within the trade community and know the positive impact the simple act of starting a conversation can make. Breaking down barriers so tradies feel comfortable reaching out for help will help drive cultural change in our industry.

Related

Product packaging

Bunnings is changing its packaging and storage of lead products after concerns were raised about customers and workers being exposed to the material in its stores across the country.

Officials from the Shop, Distributive and Allied Employees' Association (SDA) in at least three states have inspected sites and contacted work safety authorities. Vision and photos supplied to the ABC showing potentially hazardous dust gathering on shelving.

Bunnings told the ABC it received "expert advice" the way the product was sold poses "little risk" but it is updating packing and labelling as "an additional safety measure".

In a report to SafeWork SA, the SDA alleges the state's work health and safety laws were being broken, with lead sheets stored "without an appropriate container" or safe handling equipment.

The report also alleges because the lead products were not being kept correctly, they had rubbed together forming dust on the shelving.

Bunnings director of merchandise, Cam Rist, said there was "nothing more important" than worker and customer safety.

While we've received expert advice that confirms the way the product was sold poses little risk, we have worked with our supplier to update the packaging and labelling as an additional safety measure.

Bunnings has liaised with work safety authorities in New South Wales, Queensland and South Australia about the changes it has made and says no formal notices have been issued against the company.

Areas of stores where the products were kept have been cleaned with specialist vacuuming equipment, wipes and appropriate personal protective equipment (PPE).

In a statement, Workplace Health and Safety Queensland said follow-up inspections showed the products were "no longer on shelves".

A SafeWork SA spokesperson said products "only pose" a risk of lead contamination if they were handled unprotected.

This can be avoided by appropriate packaging and the wearing of gloves.

Mitre 10 has leased warehouse and distribution space in a former Masters Home Improvement store located in North St Marys, approximately 47 kilometres west of Sydney.

The property's owner is investment manager and developer Centennial which recently undertook a major refurbishment and expansion to reposition it as a logistics asset. Centennial acquired the facility for $35.3 million from HMC Capital (formerly known as HomeCo) in 2022.

Mitre 10 is leasing 4114sqm at 243 Forrester Road in North St Marys for an initial seven years, according to Real Estate Source.

Key features a warehouse area of around 3,725sqm including an open plan office space over two levels (383sqm).

The warehouse has high clearance up to 11m (approx.) with 10m wide awnings for all weather loading and access via four on-grade roller shutter doors.

It has an ESFR (Early Suppression Fast Response) sprinkler system throughout and generous hardstand areas, allowing for multiple larger vehicle movements.

There is flexible industrial zoning to suit a wide range of uses (subject to Council approval) and ample on-site parking, separated from loading areas.

The property is located within 2km of the Pacific National St Marys Freight Terminal and within 3.3km of the Great Western Highway and 5.4km of the M4 motorway.

It is also close to Sydney's major distribution centres, Amazon's Fulfilment Centre and the future Western Sydney International (Nancy-Bird Walton) Airport, which is on track to begin operations in 2026.

Tradelink

New Zealand's Fletcher Building has sold its Australian plumbing supplies and distribution business Tradelink for AUD170 million and said it will use that to repay debt.

The company announced it had struck an agreement to sell the business to Metal Manufactures, a subsidiary of United States-based Blackfriars Corporation.

Fletcher will get AUD160 million cash payable on the settlement at the end of next month, according to the New Zealand Herald. In a statement, it said:

There are no regulatory or other conditions to be satisfied to complete the transaction. The remaining AUD10 million will be a deferred cash payment based on achieving separation milestones. Separation is expected to take up to two years and be completed by September 2026.

Fletcher acting chief executive Nick Traber said they were pleased to have signed the Tradelink sale agreement, and to have achieved an "attractive outcome for both parties".

We believe Metal Manufactures is an ideal proprietor for Tradelink given their long and successful history operating in the Australian trade distribution sector.

According to The Australian, Metal Manufactures imports, manufactures and distributes metal tubing, electrical, lighting, data and thermoplastic products, security and monitoring equipment, and sign, digital and display solutions. It has more than 4000 staff.

The company's owner, Blackfriars, operates across the US building sector with interests in electrical, plumbing and plastics. Blackfriars in controlled by the low-profile US-based billionaire Colburn family.

In a statement to the ASX, Fletcher said that based on the forecast net sale proceeds, it expected to record a non-cash impairment of the Tradelink business of about $32.5 million in its 2024 financial year accounts.

Seven Group chief executive Ryan Stokes said it was interested in acquiring the BGC cement division and associated assets after spending $1.9 billion to buy out Boral.

In July, BGC confirmed that it was back on the market and expected to fetch more than $600 million in a sales process.

Mr Stokes said Seven wanted to expand Boral in WA and that the BGC business was a good fit. In the Australian Financial Review, he said:

We look to invest where we can see growth, in quarry, in our cement supply, as well as in our concrete batch plants. In WA, we would like to see how we can expand and that could be through organic means, it could be through inorganic steps.

Mr Stokes said it was clear the BGC assets could deliver on those ambitions, but it would come down to price and how it stacked up against alternative options.

In the past year, AdBri has been purchased by Irish group CRH, CSR has been bought by Saint-Gobain, while Seven Group purchased Boral, and BGC sold its plasterboard business to Belgium-based Etex in what has become a period of consolidation in the listed building materials sector.

Mr Stokes said the demand and supply imbalance in Australia's capital cities pointed favourably to greater home building activity.

We've had housing supply issues in every capital city, and it just highlights that we do need to see a step-up in housing construction. What gives us confidence is we look at the core issue - you've got record population growth and a shortage of supply. We know that that needs to be addressed.

BGC was up for sale in 2022, but buyers were unwilling to take on the family-owned company's loss-making home building unit. That part of the business has since been separated.

Related

Iplex pipes

Sydney law firm Baker McKenzie has filed class action against Iplex in the Victorian Registry of the Federal Court.

The case against Iplex Pipelines Australia Pty Ltd is the latest development in the saga, which has impacted thousands of WA homeowners.

The class action is on behalf of "all persons in Australia who acquired Iplex Pro-fit polybutylene pipe products manufactured using TYPLEX-1050Resin at any time from July 1, 2017."

Lead plaintiff in the class action, Tracey Watters, from Perth, said she had experienced 10 separate water bursts and leaks in the past four years. She told The West Australian:

These instances have caused damage to my property and possessions including ongoing damp and mould issues, and at times my family and I have had to relocate to alternative accommodation while repairs have been undertaken.

This has caused severe stress and anxiety for myself and my family, and I am constantly living with the uncertainty of when another burst or leak will happen.

Iplex is a subsidiary of New Zealand-based Fletcher Building, which denies its product is defective and blames pipe bursts on poor installation by builders, most specifically BGC Housing, which used Iplex's polybutylene pipe products extensively in its new builds.

It is understood the suspect pipes have been installed in more than 30,000 homes across the country.

Related

The hardware retail co-op group recently unveiled its new store model called "ELEVATE3 Ace" that focuses on the customer experience. This experiential format will roll out over the next five years in both new and current stores, supported with a USD1 billion investment. John Venhuizen, president and CEO, said:

Elevate Ace is not just a new store format, it's our vision to become famous for four things in the neighbourhoods we serve namely Paint, Power, Backyards & Barbeque, and Home Preservation.

We believe in the power of local, and this initiative strengthens our community ties by creating experiential spaces that are not only places to shop but also places to connect. Our neighbours will benefit from locally relevant, premium products, expert advice, and immersive retail innovation. With Elevate Ace, we are setting a new industry standard as we aspire to truly be the best, most helpful store on the planet.

Key features of the ELEVATE3 Ace store model include:

In an interview with Retail Dive, Dale Fennel, vice president of merchandising, said:

[We] wanted to create more than just a space where customers could come shop but a space in which they could connect.

We think that Elevate Ace is a fundamental change in our store model.

Experiential retail is "one of the absolute imperatives" for the company, he added.

The store will focus on the handful of brands and categories that are behind most of the company's current growth. Mr Fennel said:

We set out to really elevate those brands and create this immersive shopping experience that you can't find anywhere else.

Ace Hardware last updated its store design five years ago, and the industry has since changed. Mr Fennel said the company is working to improve the customer experience by offering extra training to frontline associates. These employees will be able to serve as brand advocates who can help walk customers through purchases. He said:

We really are focusing in on trying to understand what the customer wants, whether it be by brand or features and benefits, and serving up to them all the products that are available at Ace either in store or in the case of grilling, for assembly and delivery.

Ace Hardware opened 111 new stores through June and plans to open 200 by the end of the year, its 100th anniversary year.

Globally, there are over 5,800 stores in 60 countries. Elevate Ace will launch in 4,994 stores.

Ace's latest store growth has been fuelled by existing retailers opening additional locations, competitor stores converting to Ace, and new investors opening their first Ace Hardware store.

Its cooperative business model offers local entrepreneurs the ability to be owners of their local store operation, and also become one of a limited number of shareholders of Ace Hardware Corporation.

Digital shelf technology

Software through its digital shelf labels from VusionGroup is expected to provide rapid, real-time updates of pricing, ensuring accurate price management as well as LED displays in stores.

Ace Hardware plans for the partnership with VusionGroup to maintain high standards of customer service while modernising its retail network.

With over 5,000 locations across the US, the implementation of VusionGroup's technology will help streamline operations, allowing store managers and associates to be more agile and responsive.

This partnership also positions Ace Hardware to explore further advancements, such as out-of-stock detection and in-store media solutions.

The Australian Bureau of Statistics (ABS) has released its retail turnover figures for the period up to April 2024. For hardware retail they have largely continued the trends of the previous three months, which is to say that while there is limited positive growth, there has also been limited negative growth as well.

In looking at this data we consider them in terms of "periods" running from May to April. So "p2021" refers to the period from May 2020 to April 2021.

Contrasting p2023 with the current p2024, Australia-wide there has been only 0.03% of growth. That's basically flat, with the added caveat that inflation is running at an annualised rate of over 3.5%. To that we can add a "reverse" caveat that some building supplies are going through disinflation, which means the inflation rate for hardware retail is difficult to determine.

The largest percentage gain in revenue for hardware, contrasting p2024 with p2023, was Western Australia (WA), which increased by 3.3%, with revenue up $88.9 million for a total of $2824.2 million. In revenue dollars, Victoria (VIC) was the strongest state, increasing by $136.0 million, or 2.1%, with total revenue for p2024 of $6633.1 million.

Negative growth in percentage terms peaked with Northern Territory (NT), down by 8.0% or $22.5 million to $259.3 million. In dollar terms, New South Wales (NSW) had the steepest fall, down by $208.4 million to $7547.6 million, a drop of 2.7%.

Both Queensland (QLD) and Tasmania (TAS) were close to flat. QLD had a loss of 0.6%, or $30.0 million to $5323.9 million, while TAS had a gain of 0.6%, up by $3.3 million to $607.9 million. South Australia (SA) rose by 1.8% or $30.6 million $1769.7 million.

The Australian Capital Territory (ACT) managed a gain of 1.9% or $9.8 million to reach $538.7 million.

As mentioned above, Australia saw overall revenues lift by 0.03% or $7.7 million, to reach over $25.504 billion. This represents a gain of 24.9% from p2020 to p2024.

New South Wales

The April 2024 result for NSW could be seen as a slight improvement over the March 2024 result. It manages to be above the result for both p2023 and p2021, though it is below p2022.

The weakness in p2024 originates in the four key months from September to December 2023. For the rest of the 12-month period results track closely to p2023.

Victoria

As with NSW, the VIC result for April 2024 falls within the range of the past three years, slightly above the turnover recorded for the same month in 2021 and 2023.

In some ways, VIC has had the most unique pattern of pandemic and post-pandemic retail turnover. The peak period for VIC was p2021, whereas for most states it has been p2022 - the second pandemic 12-month period. For VIC both p2022 and p2023 saw a contraction in turnover. In fact, it is the state that has benefitted - in percentage hardware retail turnover growth terms - the least from the pandemic.

Queensland

The April 2024 turnover number for QLD has proved surprisingly positive, just nudging above the April 2022 result, to produce an all-time high for this month. Similar highs were reached in both January and February 2024.

South Australia

For SA p2024 has been very positive. Out of the 12 months, only four have trailed behind results for p2023, with the other nine months setting all-time monthly highs for the state. This includes the result for April 2024, which just bested the April 2023 result.

Western Australia

As with SA, WA has seen significant growth in p2024. In fact, every single monthly turnover result has set a new monthly high for the state. Contrasting with p2023, the April 2024 result - which was flat to the March 2023 result - exceeded its p2023 equivalent by the largest margin for the period.

Tasmania

Ever since October 2021, hardware retail turnover in TAS has followed a very tight pattern. Results for p2024 closely matched those for p2023 from May 2022 through to November 2022, then underperformed for December 2022. Since February 2024, the results have improved over p2023, with its April 2024 result setting a new monthly high.

Northern Territory

For NT p2024 has performed significantly below p2023, though somewhat in line with p2022. The April 2024 result has shown a significant improvement, after low turnovers from January 2024 to March 2024.

Australian Capital Territory

While p2024 started off well for the ACT, with new monthly highs set from May 2023 through to October 2023, November 2023 through to January 2024 saw it underperform both p2023 and p2022. However, from February 2024 through to April 2024 the results have been very close to those for the two previous periods.

Analysis

The general news reflected by the ABS hardware turnover results for April 2024 is that there has not been much of a significant shift since the previous year. Any real economic news for the sector will emerge with the results starting from August 2024. Those stats won't be available until October 2024.

The April results, however, provide an ideal position to look at the pandemic-based performance of the states and territories. While the initial pandemic surge in sales did take place in March 2020, April 2020 was the first full month in which the pandemic had its effect.

Also, it's arguable that FY2024/25 will be the first full year that isn't pandemic or post-pandemic. Instead, this financial year represents something of a switch back to "normal" - whatever that is going to mean. Which is to say that the traces of the pandemic in the economy - including higher commodity prices - are no longer transient and based on misalignment of supply chains. Instead, they are at least semi-permanent.

We can also reasonably expect the current elevated spending on hardware, the legacy of the pandemic "jump" of around 25% in topline turnover, to continue for at least over the next couple of years. Turnover might drop back to FY2020/21 levels, but even that seems unlikely with the ongoing demand for housing, and the centrality of dwellings in Australia's culture.

This focuses attention away from the fortunate increase in overall revenues, and towards the prospects for future growth. From that perspective, we begin to see the immediate future does not seem so bright as the immediate past.

Take, for example, the chart of period-on-period percentage increases for turnover:

Comparing the pre-pandemic growth for p2020 with the most recent period (p2024) there is a definite downwards trend (with the exception of TAS).

This can be further clarified by the chart showing these percentage change in a stacked bar format:

One surprise is the extent to which VIC has not benefitted as much from pandemic growth as the rest of Australia in percentage terms (excepting NT). But it is also evident that we are seeing a dynamic slowing in growth, and this seems likely to continue through FY2024/25.

From the immediate perspective of independent hardware retailers, this is concerning, but probably not so consequential. The increase in retail sales has given them a much needed lift and enabled smaller stores to reinvest so as to improve their businesses and reduce ongoing operating costs.

It is a different story, however, for the two major retail operations, Bunnings and Metcash's Independent Hardware Group (IHG). Bunnings in particular is under pressure not only because growth has slowed, but because other retail segments is parent Wesfarmers - notably Kmart - have managed to find growth even in a flattening market.

As HNN discusses in more detail in the upcoming issue of HI News, the core problem with Bunnings is that it has reinvested its "windfall" earnings boost from the pandemic, but those investments - Tool Kit Depot and Beaumont Tiles - are longer-term investments, and unlikely to generate contributory returns before FY2026/27. (That's actually a general problem that Wesfarmers is experiencing.) While additions such as a pet food and accessories line are helpful, rejuvenated growth in 2025 will likely require structural change.

For IHG the picture is somewhat different. With the exit of Annette Welsh as CEO of IHG, and the advent of a new (and highly competent) CEO for Metcash overall, much of the "moral imperative" to retain the initial framing of the acquisition of Home Timber & Hardware Group (HTH, aka Danks) in late 2016 has been lost. That framing was that the acquisition would be more about preservation than transformation.

In the new environment, with decreasing growth per-store, it's likely that IHG will increase its acquisition and joint-venture activities in its lead brand, Mitre 10. While this is, to some extent, "non-organic" growth through simple acquisition, it is also a structural shift from wholesale-only to wholesale plus retail margins.

A somewhat feisty debate has developed about what happens now and in the near future with renovations in Australia. The conventional view is that when dwelling construction activity declines, spending on alterations & additions (alt-adds) increases.

However, as we've often pointed out at HNN, we are not currently living in conventional times.

One factor that seems difficult for many to acknowledge is that the Reserve Bank of Australia (RBA) is determined to bring the inflation rate down to something under 3.0%. That means slowing the economy, and part of slowing the economy is slowing the rate of value growth in the housing market, as this represents inflationary consumption.

This struggle with inflation is something of a global condition, and includes the US, much of the EU, and the UK. One important contrast with economies such as the US is the rate of productivity growth over the past few years. To quote from a US Bureau of Labor Statistics press release dated 6 June 2024:

Nonfarm business sector labor productivity increased 0.2 percent in the first quarter of 2024, the U.S. Bureau of Labor Statistics reported today, as output increased 0.9 percent and hours worked increased 0.6 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the same quarter a year ago, non-farm business sector labor productivity increased 2.9 percent, the largest four-quarter increase since the first quarter of 2021, when the measure increased 5.9 percent.

Meanwhile, in Australia, according to a summary from the Australian Bureau of Statistics (ABS) for March quarter 2024 national accounts:

Labour productivity was flat. Output per hour worked was largely unchanged compared to the previous quarter and the March quarter 2023. Overall, we worked similar numbers of hours as the previous quarter, although hours worked in government-supported industries like health, education and social assistance grew faster.

Productivity is important because it represents the best "exit strategy" for inflationary economies. If you can make more for less, you gain growth without the creation of scarcities, and growth is likely to be channelled towards activities with higher productivity. Overall, that tends to be deflationary for prices.

Poor productivity growth narrows the options available to the RBA. It is perhaps worth remembering that in mid-2008, with the consumer price index (CPI) indicating that inflation was up around 4.5%, the RBA set interest rates at over 7.0%. What seems to have wiped this from collective memory is that from December 2011 through to March 2021 - just shy of 10 years - inflation as measured by the CPI remained below 3.0%, and from December 2014 to December 2019 it was mostly below 2.0% as well.

Given this history, current interest rates could easily be somewhere around 6.0%. The reason such aggressive interest rate rises are not in play is that the Australian economy overall is not doing well. That relates to the gross domestic product (GDP), which grew at just 1.1% quarter-on-corresponding-quarter for March 2024 - the continuation of a slide that started in December quarter 2022, and well below a desirable rate.

In close to simplistic terms, looking after the economy can be seen as something like looking after a lawn. If you put on lots of fertiliser (economic stimulus), the grass (economy) grows, but so do the weeds (inflation). If you put on weedkiller (higher interest rates) to get rid of the weeds, then the grass will also start to die. What works (somewhat) is a combined weed-and-feed supplement (productivity).

However, that weed-and-feed supplement seems to be in short supply in Australia. At the moment the only way forward for the RBA is to continue to apply the weedkiller in judicious amounts, so that the grass, though affected, does not actually die out.

A second factor at work is that since 2020 Australian society has come to - culturally - place a higher value on housing. The extreme COVID lockdowns were something of a shock, and it will likely be another couple of years before people stop - at least unconsciously - planning for the next pandemic. In particular, that has reduced the attractiveness of multi-unit dwellings, and thus created an even tighter market for detached houses.

Given all this, it would seem evident that the convenient cycle of "house construction goes down, alt-adds go up" is unlikely to be as much a given as it was in, say, the 2010s.

The dwelling market

What is the current state of the dwelling market? Perhaps the best stats to look at are from the ABS dealing with capital city dwelling markets. In this case we're using periods that consist of the June, September, December and March quarters, so p2022 runs from June 2021 through to March 2022.

Median house prices

Let's start by taking a quick look at the median house price for capital cities.

To summarise these charts briefly, there are two separate trends evident. For Sydney, Brisbane, Adelaide and Perth, median house prices have continued to rise. For Sydney and Brisbane there was a decline in median values, or at least a flattening of growth, for p2023, but this has to some extent reversed for p2024. Both Adelaide and Perth show continued growth straight through both p2023 and p2024.

For Melbourne, Canberra, Hobart and Darwin, there was a similar slowdown in p2023, followed by further falls for p2024.

Transfers of established houses

The ABS stats for the number of transfers of established houses (excluding new builds) gives an overview of market activity.

Looking at these charts from the perspective of comparing the number of transfers from p2023 with p2024, the first thing to notice is that with the exception of Darwin and Adelaide, the number of transfers for the most recent March quarter is below the number for March quarter 2023.

Broadening that regard to the entire p2024, Canberra, Brisbane, Hobart, Melbourne and Perth all show at least two quarters in p2024 where transfers were below those for the previous corresponding quarter. On the other hand, Sydney managed to set a seven-year high for transfers in September quarter 2023.

Conclusions

There is variance between the different geographical markets - as you would expect. Overall though, the alarming trend is that, despite the additional increase of 0.25% as recently as November 2023, higher interest rates, comparing p2023 with p2024, have become "normalised" in the markets.

To give some idea of just how "out of kilter" things are, we can look to a speech by the RBA's Jonathan Kearns, head of domestic markets, entitled "Interest Rates and the Property Market", which he delivered in September 2022. He stated:

In the April [2022] FSR [Financial Stability Report] we used a user-cost model to estimate that a 200 basis point [2.0%] increase in interest rates - which increases mortgage payments and so the cost of owning - would lower real housing prices by around 15% over a two-year period. While this 15% decline was commonly reported as being a forecast for housing prices, it was not actually a prediction of how much housing prices would change. Rather it was an estimate of how sensitive housing prices are to interest rates , assuming that all the other costs and benefits to housing don't change with interest rates.

Between April 2022 and September 2022 interest rates increased by 2.25% with little real discernible medium-term effect on house price growth in markets such as Sydney through to 2024. The reason for this likely rests with that last phrase by Mr Kearns, the caveat "assuming that all the other costs and benefits to housing don't change with interest rates".

As mentioned above, one factor that continues to dominate the housing market is the aftershock of COVID. Added to a period of very low interest rates, against a background of three decades of poor management of housing in most states, you end up with a housing market that is somewhat out of control.

The renovation market

How has all this played out in Australia's renovation market? As HNN has discussed in the past, measuring alt-adds is something of a difficult task. In this case, we're looking at three sets of ABS stats. The first and simplest is the stats from ABS building approvals, the original monthly data that relates to approvals granted through to May 2024.

The second set of stats is from the same basic series, but instead of original data, it is quarterly data for chain volumes. Chain volumes adjust for price differences (brought about by inflation and other causes). Chain volumes thus tend to provide a more "pure" reflection of demand.

The third is derived from the National Accounts stats relating to final state/territory demand. For those stats we're also using chain volumes.

NSW

While these charts tend to look both dynamic and confusing, in the end this chart shows that the value of alt-add approvals for NSW has been relatively stable over the past three periods. There was a decline of just 0.3% for p2024 over p2023, and an increase of just 1.6% for p2023 over p2022.

That said, the manner in which that value is delivered is radically different, with the noticeable spike in December 2021 probably a consequence of influences related to COVID lockdowns.

Equally, the activity for April and May 2024 (not covered by the other quarterly stats) is interesting as it suggests an increase in these approvals.

Dealing with much of the same data (excepting April and May 2024), this shows a quite different outlook, with the value for approvals in p2024 falling somewhat below those for p2023, and p2023 very much below p2022.

This shows roughly the same situation as the previous chart, though the increase from p2022 to p2023 is moderated, and the decrease from p2023 to p2024 is much larger.

As the Sydney market has shown ongoing increases in house values, this supports the legacy forecast that an active house market will see a decline in spending on alt-adds activities.

VIC

Again, while this chart looks slightly chaotic, p2024 is only 1.3% above p2023, and p2023 has lost just 1.0% on p2022.

This shows the extent of the actual decline in alt-adds from the highs of p2022, though there is an uptick for p2024 for March quarter 2024.

Looked at through the lens of national accounts, there is far more synchronicity between p2022, p2024 and p2024. The decline for p2024 is also more marked, especially for December quarter 2023.

Here we see something of a contradiction to the legacy analysis of countervailing markets for houses and alt-adds. Even as the housing market declines, so too does the alt-adds market.

QLD

The original data for QLD shows that new highs were achieved in six of the 12 months of p2024. That's despite the fact that median house values continued to increase. Overall, approvals for p2024 were 8.0% up on those for p2023, while p2023 were up 1.3% on p2022.

In this case the chain volume measurements reflect the original data, with p2024 following a similar pattern to p2023, but at a higher value level.

There are broad similarities with the previous chart, but with an interesting lift for activity in the December quarter.

Again, this broadly supports the legacy view regarding countervailing markets.

SA

It seems evident looking at this chart for SA that p2024 was a year of high growth for alt-adds. Seven months show new highs, and one month matches the previous high. In fact, overall p2024 grew by 12.8% over p2023, while p2023 grew by 4.1% over p2022.

In this case, the chart for chain volumes casts the previous chart's data in a new light. Overall for p2024 there was a 2.0% decline over p2023.

This chart essentially corroborates the previous chart, cancelling out the lift for December quarter 2024

Given the ongoing strength in the SA housing market, this again supports the legacy view that housing and alt-adds markets are countervailing.

WA

As this chart clearly indicates, alt-adds have grown significantly in WA. For p2024 the state grew by 31.4% over p2023.

That picture of growth is moderated using chain volume measures, but it still remains significant, with p2024 growing by 17.4% over p2023.

National accounts using chain volume measures moderates this increase slightly, but still shows a breakaway December quarter 2024.

WA represents a different departure from the legacy view. The house market is flourishing, but so is the alt-adds market.

TAS

This shows a general increase for alt-adds in p2024 of 8.0%.

This chart largely accords with the previous chart. Adjusted for chain volume, the increase in alt-adds for p2024 over p2023 remains around 8.0%.

Again, this chart broadly reflects the two previous.

The data for TAS broadly supports the legacy view. With a declining house market, alt-adds spending has increased.

NT

The sharp rise in October 2023 all but guarantees alt-adds for p2024 are above those for p2023. In this volatile market the increase for the 12 months is 27.9%.

The chain volume measure is more clear, indicating p2024 outperformed p2023 outside of the December quarter.

The national accounts do show a more mixed picture, with p2024 underperforming p2023.

Darwin and the NT are difficult markets to understand. Both the performance of the overall housing market itself and alt-adds are somewhat mixed.

ACT

With alt-adds building approvals touching on seven year lows for seven of the 12 months, it's clear that this sector is performing below p2023 during p2024.

This chart largely supports the conclusion above, but with unexpected strength in December quarter 2023.

This chart draws a very clear picture for underperformance for p2024 as compared to p2023.

With the ACT housing market in decline, this goes against the legacy view of how that market relates to alt-adds. However, as with NT, this is a highly volatile market.

Analysis

What these stats for alt-adds demonstrate is that this area is somewhat complex to understand and forecast at this point. It is certainly the case that the pattern which has dominated much the 2000s and the 2010s - of dwelling investment shifting between house building and renovations depending on market conditions - still has a major effect on the market.

However, it's also true that a range of other forces are likely at work as well, as in demonstrated by both VIC and WA, as well as the ACT. HNN would speculate that in some markets, expenditure on alt-adds has increased due to the ongoing surge in the housing market. At some point, the price of new houses becomes simply inefficient, and homeowners realise they can obtain the features of a new house on their existing property at a lower cost through alterations and additions.

Similarly, given high average house prices and increasing cost of living pressures, alt-adds have become the best coping mechanism for many homeowners. Economic uncertainty has enhanced the value of taking a more conservative approach.

All this means that alongside the behaviour in some markets of switching between the housing and alt-adds markets based on current prospects, there is an additional behaviour where when the housing market surges, the alt-adds market does as well - though to a lesser extent.

The local community in Wagga Wagga (NSW) continues to wait for new plans for Bunnings' relocation to one of the city's busiest intersections, according to a report in The Daily Advertiser.

In late 2023, plans were rejected by Wagga councillors for Bunnings' proposed move to 64 Pearson Street.

Car Wash owner Steve Kenyon - whose business is located on Person Street - said he has been talking directly with Bunnings over recent months, and there have been meetings with various stakeholders. Mr Kenyon is waiting for Bunnings to come back with a new plan that no longer include a traffic light outside his location's driveway. He said:

We have no objection to Bunnings going there, but we just want to make sure that the traffic movement doesn't affect the businesses on Pearson Street. The ball is in Bunnings' court as to going with a few of our wishes and changing their application.

The $25 million move that was initially approved with conditions by Wagga City Council in 2021. The rejected plans by Bunnings included traffic lights, a median strip, a Pearson Street exit and reduced on-street parking.

However discussions are continuing between Bunnings, council and regional transport and roads minister Jenny Aitchison, according to Wagga City Council general manager Peter Thompson. He told The Daily Advertiser:

While there has been some progress in relation to the issue, the concepts under discussion still present challenges. Discussions will be ongoing between all parties, including the community representatives and the businesses in the area.

Related

Greenlife suppliers

The federal government recently announced it would adopt every recommendation from the independent review of the Food and Grocery Code of Conduct led by economist and former Labor trade minister Dr Craig Emerson.

However, plant growers were disappointed the review decided Bunnings should not fall under the code alongside other big retailers such as Woolworths and Coles.

Greenlife Industry Australia (GIA) CEO Joanna Cave told The New Daily while she was pleased the code would be strengthened, the decision to leave Bunnings out was "deeply disappointing". She said:

The issue's acknowledged, but greenlife growers are left out in the cold. They're effectively the only growers within the whole of the horticultural sector that don't benefit from a code of practice protection, which is why we were asking for them to be included in the first place.

The review has recommended Bunnings work with GIA to develop a document setting out expectations about the supply of nursery plants, and progress of the relationship could be reviewed in two years' time.

The government's response to the review also outlined concerns about allegations of retailer conduct towards nursery plant suppliers, and said it would "continue to monitor conduct in the nursery plants industry".

Ms Cave said GIA would approach negotiations with an open mind, and she hoped Bunnings would do the same. She said Bunnings had placed some rebates under review, including one in which the volume of plants it bought had a direct effect on the discount growers were obliged to give it.

They've been very careful to say that any measures are likely to be temporary. We're interested to see what sticks now that the government has made its position clear that they won't be admitted to the Food and Grocery Code.

Will Bunnings breathe a sigh of relief and go back to business as usual? Or have they learned their lesson and are they willing to make some changes for the benefit of the greenlife growers?

In a statement to The New Daily, Bunnings managing director Mike Schneider said the company welcomed the recommendation that retailers outside the supermarket and grocery industry are not be taken into the code.

We note the report's suggestion that we work collaboratively to set out expectations relating to the supply of nursery plants, and we look forward to continuing to engage with suppliers and relevant industry associations.

We recognise that good supplier relationships are essential for the continued success of our business.

New code mooted

Ms Cave said GIA had been approached by the Department of Agriculture, Fisheries and Forestry to discuss potential nursery code of conduct. It is likely it would emulate the food and grocery code, but be more specifically tailored to the needs of greenlife growers.

Ms Cave said one of the areas in most need of attention included stronger commitments between the retailer and greenlife growers. A common complaint from growers is that Bunnings would not commit to buying specific volumes of plants, leaving many out of pocket.

A nursery code of conduct would also need to include an anonymous complaints mechanism, similar to the one that will become part of the food and grocery code, thanks to the review's recommendations.

In the current situation, Ms Cave said growers had little to no avenues for recourse when facing problems.

Bunnings does operate a complaints procedure of its own. But you can understand why growers would feel very reluctant to use a complaints procedure managed, funded and organised by the very organisation it wants to complain about.

And [regarding] the [Australian Competition and Consumer Commission], for example, the burden of proof is on the growers. It's very hard to successfully make a claim through that avenue. It takes a long time, costs money.

That's why we've been lobbying for a code that contains within it decent dispute-resolution mechanisms, because without that the growers really have no way of raising concerns.

Related

A Sydney Tools outlet has opened next to Wodonga Homemaker Centre in Victoria. Store manager Jerico Johns said there has already been a positive reaction to the "one stop shop".

A rival Total Tools store is being built less than one kilometre away adjacent to Bunnings, but Mr Johns is not concerned. He told The Border Mail:

One hundred per cent we will beat anyone's price. But we shouldn't really have to, we have the market covered.

He said customers, particularly tradies, are enjoying the range of "exclusive products".

Albury-based customer Kurt Jensen was searching for a nearby Sydney Tools and was excited to see one had opened in Wodonga. He said he saved "a few hundred dollars" by shopping at the store.

It's good to have a bit more competition. A bit more range, variety is always great.

Local resident Eckhard Greiner said the store looked good but "just like anything, it will be interesting to see how long they last". He said there seemed to be enough tool stores on the Border but he did walk away with a purchase of drill bits.

Sydney Tools has more than 90 retail stores across the country including one in Wagga (NSW), just over 134kms away.

Another customer Jason Toogood had previously shopped at the Wagga store and said it was great to see they were now on the Border as well. He said:

Competition is what we need.

A grand opening for the Wodonga store is tentatively scheduled for July 18, according to The Border Mail.

Reece

Plumbing supplies group Reece has opened one of its largest multisite locations with four different branches - Plumbing, HVAC, Fire, Irrigation and Pool - in Berrimah (NT), close to its previous premises, at 47 Pruen Road. It will be the first time Reece's Fire and Irrigation and Pool have been available in the Territory.

Reece general manager Ben Counsel said Territorians had previously been serviced by individual outlets.

Prior to the opening of Berrimah, Reece primarily served the Northern Territory through our network of eight plumbing branches across the Territory.

The investment to expand Reece Fire and Reece Irrigation and Pools into the Territory represents our commitment to continue investing in and supporting allied industries that maintain and support the development of essential infrastructure in the Northern Territory.

Centrally located, the new multi-site is designed to provide Territory customers more access to a wide variety of quality products, convenient delivery to site, and a dedicated team of experts across different industries.

Tradelink

Sydney-based private equity firm Allegro Funds is believed to be in a strong position to buy Fletcher Building-owned Tradelink, according to a report in The Australian. This comes after an earlier report that Los Angeles-based Pacific Avenue Capital Partners submitted a non-binding indicative bid in The Australian Financial Review (AFR).

It is now understood that Pacific Avenue Capital Partners has fallen away from the sale process. Also no longer believed to be bidding is turnaround specialists Anchorage Capital Partners.

Sources told the AFR that offers for the underperforming plumbing and bathroom supplies division have come in between $150 million and $175 million.

Fletcher Building is due to release its full-year results on August 21. Sources say binding offers for Tradelink are due to be collected at the end of July, with a signed deal expected to be signed in the first half of August.

Tradelink was placed up for sale by Fletcher Building after the company started wrestling with large debt levels of about $2 billion against a $2 billion market value and lower earnings as recessionary conditions in New Zealand and a weaker trading environment in Australia affected its bottom line.

Any buyer for Tradelink would want to know the extent of liabilities connected to the company's leaky Iplex pipes in Western Australia, as Fletcher Building negotiates a settlement over liability. WA builder BGC has blamed the pipes for the leaks, but Fletcher Building claims the problem rests with the installation.

Related

Big River Industries recently announced the acquisition of Specialised Laminators (SLQ), a Queensland-based panel products company. The move enhances Big River's panel product offerings and adds to its presence in the industry.

Established in 1977, SLQ has earned a reputation for producing high-quality decorative and functional panel products. Now it is part Big River's Timberwood Panels division across Australia. John Lorente, CEO of Big River Group, said:

Bringing SLQ into the Big River family is a significant milestone in our mission to offer top-quality panel products to our customers. This acquisition allows us to expand our specialised panels division, providing customers with a broader selection of innovative and high-performance panel solutions. The synergies between SLQ and Big River create exciting opportunities for growth and product development.

John Closter, one of SLQ's founders and general manager Wayne Austin, will continue to lead the business under the Big River umbrella, ensuring continuity and leveraging their expertise to drive future success. Mr Closter said:

Joining Big River Group is an exciting new chapter for SLQ. We are confident that our combined expertise and resources promise enhanced product availability, improved supply chain efficiencies, and innovative panel solutions tailored to meet diverse construction needs.

Big River has been operating for over 120 years, manufacturing and distributing timber and steel formwork products, timber flooring, building products, structural plywood and related timber products. It also distributes MaxiWall and MaxiFloor, primarily to the commercial, residential and infrastructure construction market segments.

Related

Fletcher Building and BGC

Fletcher Building has accused BGC of a "crude attempt" to pressure negotiations to resolve the bursting water pipes crisis in Perth (WA).

As the manufacturer of the controversial Iplex piping, Fletcher Building released a statement to the stock market rejecting BGC's claims the rate of pipe bursts was getting worse. It said:

The public claims made by BGC are a crude and apparent attempt to place pressure on those negotiations. The conclusions shared by BGC have not been verified, shared with Iplex and are, in many respects, inconsistent with evidence we have gathered first-hand or been provided by other parties.

The West Australian revealed BGC's claims, which included that bursts were over 20% higher than the same period (June) last year.

BGC is the largest builder to use the "defective" Iplex piping, accounting for about 65% of installations in new homes. It claims the pipes were faulty and has blamed the manufacturer, which in turn denies the claims and says incorrect installation is the cause of all the leaks.

In its statement, Fletcher Building said it hadn't changed its view.

Fletcher Building stands by its views on causation shared with the market previously.

Both companies are participating in mediation organised by the WA State government to find a way out of the impasse, with affected homeowners calling for their houses to be re-piped. The dispute is over who will wear the steep cost.

As revealed by The West Australian, the State Government has put $30 million into a fund, that has so far accumulated $130 million to $150 million to remediate homes. BGC had earlier walked out of negotiations, but was persuaded to return.

In its statement, Fletcher Building said it remained "committed to a sensible, data-led and proportional solution from all parties and to playing its part in that process".

We continue to participate in mediated discussions alongside the WA Government and many WA builders, including BGC, to finalise an industry response to the plumbing failures occurring in Perth. These negotiations are confidential and have not yet concluded.

On average it cost AUD80,000 (NZD86,000) to do a full pipe repair in BGC homes, and it was a pipe manufacturing problem, according to BGC's general manager of strategy and commercial Sam Gray.

However some estimations put the cost of replacing all Iplex piping at more than $1 billion.

Related

Sydney-based independent pet retailer PetO has tripled its business and taken on 66 new branches, following Woolworths successful bid to acquire 55% of pet goods business PETstock.

The deal was scrutinised by the Australian Competition and Consumer Commission (ACCC) and ultimately gained approval in January 2024 after PETstock offered to divest 41 stores and 25 vet clinics. All of these have now been bought by PetO, a network of 17 stores that began in Sydney's northern beaches, for an undisclosed sum.

With PetO's acquisition, its revenue triples to about $200 million and its store footprint expands out of NSW to Victoria, Queensland, Western Australia, Tasmania and the ACT.

At the time of the acquisition, PetO co-founders and brothers Nick Greenhalgh and David Rowe had not decided whether to rebrand all the stores to PetO or retain some existing brands. In WAToday, Mr Greenhalgh said:

We've just got to evaluate the brand equity and how it resonates with the customer. We really want to go through that process first just to see what it tells us, and it will give us some clarity once we've done that.

PetO's core range will be introduced to the newly acquired stores, while retaining well-performing product lines that are popular among certain locations or demographics. Mr Greenhalgh said:

We're really quite comfortable and confident we'll get to the point where we're crystal clear about what's ahead of us in phase one, which is about stabilising the business. Phase two will be to harmonise the business. The third phase, or the third horizon, is to launch our road to even more growth.

Mr Greenhalgh, whose role focuses more on people and operations while Mr Rowe oversees store rollouts, product, finance and forecasting, said the acquisition had removed a lot of uncertainty for store staff who had already seen at least one ownership change less than two years ago when acquired by PETstock.

They've gone through quite a lot of turmoil and in a relatively short period of time ... People want a sense of belonging, they want to be supported.

Although the ink has barely dried on the paperwork on the acquisition, the co-founders are already looking at future expansion to be a "credible third player" to compete against Petbarn and PETstock. Mr Greenhalgh said:

If we can put another 100 stores on it from 60, let's say to 160, we still wouldn't be the equivalent of number two. So there's a lot of runway.

PETstock, Australia's second-largest pet retailer with more than 200 stores, was also founded by two brothers, Shane and David Young, from Ballarat. The $10 billion pet sector is led by Petbarn (owned by TPG's Greencross).

The sector is considered a crowded space after a COVID-19 puppy boom. Not only has Woolworths entered the sector, Wesfarmers' Kmart also sells a huge amount of pet products, and Bunnings has expanded significantly into food and accessories for cats, dogs and birds. They compete with e-commerce players such as Pet Circle, owned by TDM Growth Partners.

Mr Greenhalgh acknowledged the tighter market conditions, but said it was immaterial in pet supply given PetO sells essentials, "and people do not cut back on kids and pets". PetO offers two-hour deliveries and 30-minute click-and-collect as well as dog washing and harness fittings in store.

Mr Greenhalgh said the expansion came at the perfect time for PetO. In The Australian, he said:

Australia is right now experiencing record levels of pet ownership and increased demand for pet products. We couldn't think of a more exciting time to be expanding across the country.

At PetO, we think of ourselves as the cat and dog specialists. We know your furry friend is more than just a pet, they're a member of your family - that's why our business is centred around exceptional customer experience and expert advice.

Related

Home improvement retailer Lowe's has piloted an Apple Vision Pro-powered kitchen design experience at three locations across the US.

The Lowe's Style Studio app enables viewers to explore kitchen projects with Apple's new mixed-reality headset and design a kitchen while immersed in a virtual 3D environment.

During the free, 45-minute one-on-one appointment with a Lowe's kitchen specialist, customers are set up with an Apple Vision Pro headset so they can personalise their kitchen using Lowe's Style Studio.

Users can explore preset styles curated by Lowe's professional designers as well as customise hundreds of real-world materials, fixtures and appliances all available at Lowes.com or in store.

Then, customers can save their selections or share them with friends, designers and contractors (tradies). They can additionally shop the products they selected to build their real-world kitchen.

Lowe's executive vice president - chief digital and information officer, Seemantini Godbole said:

We believe Apple Vision Pro can enhance in-store kitchen design experiences, empowering our customers to visualise their dream kitchens using advanced spatial computing technology.

Following the pilot program, the Lowe's Style Studio app will still be available for free for Apple Vision Pro.

Home Depot

Home Depot's delivery partnership with Instacart is being made available at 2,000 of the company's stores. In a statement, Jordan Broggi, president of Home Depot's online division, said the aim is to give customers "a seamless interconnected experience".

We're increasing flexibility for our customers ... no matter how they choose to shop.

The deal allows an Instacart customer to order items of modest size that Home Depot sells, "from garden essentials and building supplies to light fixtures" but also to use a special Instacart service that specialises in items up to 60 pounds (27.2kgs), such as BBQs, ladders and large boxes, said a Home Depot spokesman.

Customers who have "Instacart+" memberships will have free delivery. Others will pay a delivery fee.

The partnership, one of many Home Depot has with companies that provide deliveries, was finalised after the companies ran pilot projects of the arrangement, the spokesman said. He said the trial programs were conducted for several months in three markets, but declined to say which ones.

Online transactions accounted for 14.8% of Home Depot's business last year, about USD22.6 billion, the company said.

Related

The Australian Bureau of Statistics (ABS) has released its Producer Price Indexes through to March quarter 2024. The charts in this series are taken from statistics for "Input to the House construction industry, six state capital cities".

As the main chart above shows, the general trend has been for housing construction inputs to begin a steep rise in June quarter 2021, which continued to around December quarter 2022, and then have increased at a slower rate.

Timber categories

The chart for the timber categories, as a weighted average of the six state capitals, shows three trends: the standard trend described above, an extreme increase that has been maintained, and a sharp increase that has trended down since December quarter 2022.

Timber windows follow the extreme trend, with an extreme rise that has not declined, while structural timber rose to a high index, before continuing to decline through to March quarter 2024.

Tile and brick categories

The chart for the tile and brick categories, as a weighted average of the six state capitals, shows a range of trends. Ceramic tiles, it turns out, saw milder price rises than other categories, and a decline during both September and December quarters of 2024, before rising again in 2024.

Terracotta tiles were relatively stable through to September quarter 2021, then rose sharply in price through to December quarter 2022. The other three categories began a more gradual price increase in June quarter 2021, and have continued to increase in price since then.

Building materials categories

The chart for building material categories, as a weighted average of the six state capitals, shows three unique trends.

Sand has seen the steepest rise, cement a more moderate increase, and ready-mixed concrete a more subdued lift. The increases came later than in other categories, beginning around June quarter 2022.

General materials categories

The chart for general materials, as a weighted average of the six state capitals, shows a constant, continued increase in price indexes September quarter 2021 onwards.

Plumbing materials categories

The chart for plumbing materials, as a weighted average of the six state capitals, shows three sets of trends.

Sheet metal sanitaryware shows the sharpest increase, which began in September quarter 2022. Taps and valves, as well as copper pipes and fittings, shows the least rise in price index. Plastic pipe and fittings remains relatively subdued until March quarter 2022. The rest follow a relatively slow and gradual increase in price indexes.

Metal materials categories

The chart for metal materials, as a weighted average of the six state capitals, shows a basic trend, with two exceptions.

The general trend sees the upswing in the price index start in September quarter 2021 and continue through to March quarter 2023 before flattening out. The two exceptions are steel beams and sections, as well as metal garage doors.

The former starts to rise steeply in June quarter 2021, hist a peak in September quarter 2022, then declines through to December quarter 2023, and is almost flat for March 2024.

The latter rises very steeply in June quarter 2022 through to September quarter 2022, then rises more gradually through to December quarter 2023, before flattening into March quarter 2024.

Electrical materials categories

The chart for electrical materials, as a weighted average of the six state capitals, shows some distinct trends.

While switches and distribution boards, as well as the "other" category, have been relatively stable after a price index bump in June quarter 2020, electrical cable and conduit also rose in June quarter 2020, then started a very steep climb in June quarter 2021 through to June quarter 2023.

Analysis

The good news here is in structural timber and steel beams and sections, both vital categories for dwelling construction, which came down in price through calendar 2023. However, other construction input prices have remained stubbornly high. Some, like metal garage doors, and speciality items, but others, such as timber windows, are common to most construction jobs.

Bunnings recently made an internal announcement regarding changes to its executive team that led to the departure of its chief commercial officer Ben McIntosh, chief transformation officer Leah Balter, and general manager of corporate affairs Maria McCarthy. It was first reported by the Australian Financial Review (AFR).

Other changes include chief customer officer Ryan Baker being appointed as chief operating officer, while current chief financial officer Rachael McVitty will become chief customer officer. Michael Howard, currently at Wesfarmers, has been appointed chief financial officer from July 1.

Director of merchandiser Jen Tucker has also decided to leave the business following a family bereavement. Managing director Mike Schneider told the AFR:

I would have said it's a reshaping, rather than a restructure ... This is not a cost thing.

Mr Schneider said the reshuffle was designed to bring the commercial and customer teams closer together, and the cost savings would be minimal.

We want to stay laser-focused on customers.

Mr Schneider also dismissed any connection the "restructure" was part of a succession plan that involved his potential departure. In the AFR, he said:

I've got really, really strong plans. I'm a Bunnings lifer through and through.

The changes come in the wake of what many have seen as an underperforming first half for Bunnings in FY2024. Revenue grew by just 1.7% over the previous corresponding period (pcp), which was FY2023 H1. Store-on-store revenue increased by 1.2%, versus 2.8% in the pcp, while total store sales growth came in at 1.9%, versus 5.1% in the pcp.

This comes as its fellow Wesfarmers retailer, Kmart Group, increased earnings before taxes from $475 million in the pcp to $601 million for FY2024 H1.

As Mr Schneider has pointed out, the Bunnings model has now been in operation for 30 years. Many of the challenges the hardware retailer faces actually originate in its outstanding success over the decades.

As Wesfarmers managing director, Rob Scott, pointed out in his opening remarks for the conglomerate's Strategy Day in early May, the market retailers operate in is now splitting between cashed-up baby boomer and Gen X retirees, and the ever-growing base of Gen Y and Gen X, who are struggling in a tough economy.

The challenge for Bunnings is how to keep the "rusted on" deep fans of Bunnings from older generations happy, while reaching out to the new market represented by younger generations. This is likely one of the reasons for Bunnings' expansion into the pet category - aside from the very good margins - as pets reach across generations.

Much of Kmart's success has been put down to its successful Anko home brand, which has managed to have that broad appeal across generations, offering a value/price combination that has proved popular. In contrast, it's clear that the basic Bunnings store concept may be in need of revitalisation. It has also not succeeded in better integrating newer categories, such as Smart Home, into its overall offerings.

That said, the company has managed to improve its very popular website in ways that bring it into best practice for online retailers. It is also reaching out into new forms of advertising and marketing, including a TikTok campaign aimed to better acquainting tradies with financial complexities such as depreciation.

Bunnings employs more than 55,000 people across its stores.

Supermarket prices review

Bunnings has argued its sales of flowers and plants, and some grocery items don't warrant classifying it as a supermarket retailer following the final report released by the Greens-led Senate Select Committee on Supermarket Prices Inquiry.

The report also suggested that the Food and Grocery Code, which is currently voluntary, should be made mandatory and expanded to include greenlife industries and all retailers stocking food and groceries. Both suggestions would bring in Bunnings, given its large greenlife offer and its recent push into home cleaning products such as dishwasher tablets.

However, Bunnings managing director Mike Schneider said there could be unintended consequences of including it with the supermarkets and placing it under the Code. He told The Australian:

We note the recommendations in the select committee's final report but maintain our view that as the Food and Grocery Code was tailored for the supermarket and grocery industry by Coles, Woolworths and the Australian Food and Grocery Council, it should not be extended to retailers in other industries.

We agree with Dr Emerson's comments in the Food and Grocery Code of Conduct interim review report, that there could be unintended consequences. We operate in the home improvement, building materials and lifestyle product sectors, which have fundamentally different characteristics to the supermarket and grocery sector.

Although Bunnings was outside the terms of reference when it was invited to contribute by the Senate committee towards the end of its process, the hardware retailer fully engaged. It made two written submissions to respond to the evidence from Greenlife Industry Australia (GIA) and aggrieved greenlife growers. Mr Schneider said:

We appeared at the hearing, responded to questions on notice and invited the committee to ask further questions if it wanted more information.

But the final report noted that Mr Schneider did not personally appear before the inquiry:

The committee was disappointed that the Bunnings chief executive officer did not appear personally to give evidence.

In response to some of the claims made by nursery owners, plant growers and greenlife industry body GIA at the Senate inquiry, Mr Schneider said he had written to all of Bunnings suppliers to get their feedback.

We highly value our suppliers and work hard to build enduring relationships. On hearing GIA's concerns, I wrote to each of our greenlife growers inviting their feedback as we know we can always learn and improve.

We have engaged with many of them through the forums we run annually across the country and spoken with a number of industry associations. It's been heartening to receive positive and helpful feedback. I'm proud of the relationships we've built with our greenlife suppliers and over half of them have been with us for more than 20 years, which demonstrates the strength of our commitment to achieving shared success.

GIA chief executive Joanna Cave applauded the recommendation that "growers be protected from unfair trading practices via Bunnings' inclusion", saying it brought them a step closer to "a decent and equitable trading relationship" with Bunnings.

The Senate Select Committee on Supermarket Prices Inquiry report made 14-recommendations designed to tackle the price of food and reign in the power of Coles and Woolworths through increased competition, new legislation and strengthened regulations.

Dr Craig Emerson is due to present his review of the Code by June 30. An ACCC Supermarkets Inquiry is also expected to table an interim report no later than August 31 with a final report due next February.

Related

Milton Vadoulis, owner of Vadoulis Garden Centre, recently announced on social media that his Gawler-based garden centre in South Australia is shutting down for good. In the Messenger-Eastern Courier, he said:

After 64 years, three generations and two sites, it is with a heavy heart and mixed emotions that I have to announce the closure of our Gawler operation.

I'd like to thank you, all our beautiful loyal customers, our fantastic staff and wonderful suppliers for a great journey and wonderful memories.

For me personally, after running the business for 47 years, it is time to hang up my secateurs.

Vadoulis Garden Centre has been in operation since 1960 and a fixture in the local community since 1969 after growing too large for its original Barossa location. The 4000sqm site is stocked with a range of plants, outdoor furniture, giftware, books and jewellery and has been staffed by a team of 15 full-time and casual workers.

The social media post received hundreds of likes since it went live, with customers and other businesses offering words of support and sharing their sadness at the community's loss. Amanda from Barrow and Bench Mitre 10 wrote:

You should be proud of the welcoming garden retail experience you created over many years Milton.

McCourts Garden Centre described Mr Vadoulis as "a leading light in our industry and inspired and mentored our business from when we started 26 years ago".

Mr Vadoulis is regarded as Gawler's unofficial mayor and said "red tape" behind the scenes of the business was becoming impossible to keep up with. He told the Messenger-Eastern Courier:

It's very difficult to run a business currently ... all businesses like myself, small businesses, not garden centres, we're always saying 'the red tape is killing us'. Everyone says, 'yeah, yeah, yeah' but then they keep putting more and more on us, it's just the reality.

It's just too hard, I think that we will be lucky to have a small business around in five years, because they're just putting too much compliance and red tape in front of us all the time.

Mr Vadoulis didn't dispute that rules relating to health and safety were important but said the vast difference between large businesses and small ones made it hard to cope. He said:

If you're a big multinational, you've got a department that can handle that, but you know, a small-business person is sitting around a kitchen table trying to sort all these papers.

Mr Vadoulis said many of his friends in business were experiencing the same difficulties, with some already closing and others considering the "emotional" choice.

I think in the next year, maybe even 18 months there is going to be a lot go through (closure), and there is many reasons for that, but the main one - it's just too hard. And it's a shame ... I mean we have been here 64 years, we're in the third generation.

Choosing to close affects owners, staff who lose their jobs as well as loyal customers. Mr Vadoulis said:

I've had customers coming in [since the announcement] and hugging me and crying every couple of minutes, saying 'Where am I going to go now?'

When I closed up last night, I walked through and shed a tear because it's what you've worked your whole life for - and it's disappearing before your eyes. Unfortunately, I doubt very much that another garden centre would take over from us in Gawler, who knows, but in my experience it won't happen.

The centre is running a closing-down sale and offering product discounts, while the cafe will continue to operate as usual until June 30.

Tradelink

It is understood information memorandums have been sent out by Miles Advisory which has been hired to sell the Tradelink business by New Zealand-based owner Fletcher Building, according to a report in The Australian.

Tradelink has over 100 showrooms and more than 230 branches across the country, supplying products such as vanities, bathrooms, toilets fixtures and fittings for bathrooms, kitchen and laundries.

It is valued at about NZD150 million, but some in the market say it could possibly sell for more, with such businesses selling for seven to eight times their annual earnings before interest and tax. Yet NZD122 million was wiped off its carrying value in February this year.

One prospect which could be pitched to prospective buyers is the opportunity to gain a distribution network where sites could be repurposed.

The view is that Metcash will take a look, with the business potentially a good fit with its hardware division including Total Tools and Mitre 10 stores. It is understood industry groups Reece and GWA have already passed on the Tradelink opportunity. But it is believed both trade groups and private equity firms have already expressed interest.

Related

Tilling Timber Townsville territory manager Rita Fisher said Townsville and Newcastle had been selected as the first locations for an ambitious regional expansion by the company.

A long-term lease was signed for the former Bunnings Trade Centre warehouse at 8-16 Jay Street, Bohle in the northern part of Townsville. It opened in the new location just before Easter and recently held its official opening. Ms Fisher told the Townsville Bulletin:

They've identified Townsville as an area that's going to grow quickly once building starts picking up again.

We're really supporting the timber retailers ... [like] Cleveland Trade Centre, Parkside Timber and Hardware Parks, Big Hammer Building Supplies, and the Bunnings network ... It's probably more for builders and homeowners looking for a lightweight, renewable and energy efficient option instead of concrete for their subfloors.

According to its website, the Tilling Group is Australia's largest wholesaler of engineered wood products including the SmartFrame range of timber I-Joist, laminated veneer lumber and glued laminate beams. Ms Fisher said Brisbane had previously been the nearest distributor for engineered wood products.

[Townsville's] an area that's very under serviced by the industry at large. [If] something went wrong on a building site, it would take weeks to fix it, whereas now we can get someone sorted out within a couple of hours.

It's about servicing the industry, making sure that when work picks up, we're ready and we're organised, fully stocked so that builders can worry a little bit less about lead times and running out of materials like they were dealing with after COVID.

Ms Fisher also said there were "great signs of life" that building was starting to pick up in the region, with confidence growing and "a lot of high-end construction underway".

Once interest rates level out, I think Townsville will kick on really quickly and we'll start seeing a lot more building happening.

Established as a small factory in Eltham (VIC) by Norm and Judy Tilling in 1963, the business initially set up in Townsville in the late 1980s, where they imported solid timber products like Douglas fir from the US. They made the decision to relocate its business to Melbourne and shift focus on engineered wood products.

Today, the company is under the management of the Tillings' son Glenn.

Home Depot posted a bigger-than-expected drop in quarterly same-store sales as cautious US consumers spent less on big-ticket items while focusing on small-scale home repair and maintenance tasks.

Customers have cut discretionary spending and put expensive, large-scale renovations on hold as they adjust to higher borrowing costs and elevated inflation.

As interest rates remain high, consumers have been reluctant to move out of their homes and into new ones - the kind of turnover that often inspires home improvement projects.

In the fiscal first quarter that ended April 28, customers made fewer visits to Home Depot's stores and website and tended to spend less when they did. Customer transactions declined 1% to USD386.8 million and average ticket fell 1.3% to USD90.68.

Comparable sales of items priced higher than USD1,000 were down 6.5% in the quarter.

Inflation may also be playing a role in that pullback, as consumers spend more money on essentials and have to make trade-offs when spending discretionary income.

Home Depot reported revenues of USD36.4 billion for the first quarter of its fiscal year, down 2.3% from the same period a year earlier. It had net earnings of USD3.6 billion during the three months, roughly 7.7% below a year ago.

However, chief financial officer Richard McPhail said Home Depot is not seeing customers trade down to cheaper items, like less expensive power tools or appliances. He reasoned that the company's softer sales in large part on consumers' "deferral mindset" and a housing market that has slowed dramatically. He told CNBC:

When we have seen mortgage rates decrease slightly, as we saw at the beginning of this quarter, the housing turnover seems to respond quickly and sharply in a positive direction.

And so we think that's an indicator that there is a tremendous amount of pent-up demand for household formation and housing turnover and the larger projects that are associated with housing turnover.

Weather pressured sales, too, in the recent quarter, he said. Spring is the biggest sales season for home improvement retailers. Yet customers delayed outdoor purchases because of colder and wetter weather in many parts of the country. Those spring purchases have begun to pick up as the weather improves, he said.

To overcome slower sales, the home improvement retailer has revved up its strategy to attract professionals, since they tend to buy larger quantities and offer a steadier source of sales.

Home Depot has a growing network of distribution centres across the US that can store and deliver roofing shingles, insulation and other supplies straight to job sites.

It also announced in late March that it would acquire SRS Distribution, a Texas-based specialty distributor of roofing, landscaping and pool supplies, for USD18.25 billion in the largest acquisition in the company's history. Mr McPhail said the deal is still on track to close this fiscal year, which ends in early February 2025.

Along with targeting professionals, Home Depot is trying to drive growth by opening about a dozen new stores this year and adding features to improve its online and in-store experience.

Mr McPhail also said Home Depot stores are fully staffed and have the best in-stock levels they have had in years. Transportation costs have fallen. While organised retail crime remains a challenge for the industry, he said shrink, a term that refers to items lost, stolen or damaged, declined at Home Depot year over year, too.

Home Depot has also added technology to make sure it has items on shelves when customers need them. For example, it is using computer vision to make sure that products for sale are damage-free and to prevent theft when customers use self-checkout, said Ann-Marie Campbell, senior executive vice president who oversees US stores and operations.

Home Depot has a workforce of about 465,000 operating 2,337 retail stores.

Related

US-based Briggs & Stratton is understood to be exiting the region and placing its Briggs & Stratton Australasia arm for sale. It is the owner of heritage power tool brand Victa, maker of petrol-powered walk-behind mowers, blowers and chainsaws and accounts for 43% of its net sales, based on a report in The Australian Financial Review (AFR).

Any sale will include exclusive distribution rights for other Briggs & Stratton-owned brands such as ride-on mower maker Ferris and specialty turf equipment brand Billy Goat, and the right to distribute third-party brands including Echo, Shindaiwa and Oregon.

Briggs & Stratton's customers include a 1300-strong network of dealers, original equipment manufacturers and retailers such as Bunnings and Mitre 10.

In the sales documents seen by the AFR, details of Briggs & Stratton's top-line financials feature $115 million in net sales forecast for this financial year. But its earnings are in single digits, forecast to hit $7 million this year.

The decision from US headquarters to exit Australia is driven by the company's desire to focus on its core business. In 2023, Briggs & Stratton divested its North American retail-facing business in an attempt to simplify operations.

The Australasian arm comprises a local management team, 100 or so staff, a main distribution facility in Sydney and smaller operations in Melbourne, Auckland and Kuala Lumpur. The company said:

Given the AusAsia business is largely stand-alone and has the capability to continue to distribute Briggs & Stratton brands outside of the group's ownership, the priority is to simplify global operations.

In addition, while trading performance is still rebounding, there is a recognition that the business will also benefit under new ownership with greater levels of support than the current group strategy affords.

Briggs & Stratton hopes to return pre-COVID sales levels and double-digit earnings next financial year. It experienced a significant revenue boost from COVID-19 as cashed-up consumers focused on beautifying their homes. However, softer macroeconomic conditions have impacted the category.

The Australian division acquired the Victa lawnmower brand in June 2008 from ASX-listed GUD Holdings for $23 million.

At the time, then-GUD chief executive Ian Campbell said Chinese small-engine manufacturers with cheaper products had affected Victa. He said the drought meant Victa sales had also declined.

More recently, the sector has been challenged by gardening services such as Jim's Mowing and growth in the number of people living in apartments in Australian cities.

The Australian Bureau of Statistics (ABS) has released retail turnover for hardware stores through to March 2024. We will review the data in terms of trailing 12-month periods, from April to March. So p2022 will refer to the time span from April 2021 to March 2022.

Growth in the most recent period was subdued overall. The highest percentage growth was from Western Australia (WA), with 2.4%, an increase of $64.5 million to $2.806 billion. The highest value growth was in Victoria (VIC), with a gain of $94.0 million, representing a lift of 1.4%, to $6.618 billion.

South Australia (SA) was not far behind WA, with an increase of 2.1% or $36.9 million to $1.767 billion for p2024. Australian Capital Territory (ACT) grew by 1.9% to $0.539 billion, a gain of $9.9 million. Tasmania (TAS) was close to flat, lifting 0.1% to 0.606 billion, up by just $700,000.

The largest percentage loss was from the Northern Territory (NT), which was down 7.2% or $20.1 million to $0.260 billion. In value terms, New South Wales (NSW) lost the most, down by $260.8 million or 3.4% to $7.527 billion. Queensland (QLD) fell by 1.3% to $5.304 billion, down $71.5 million.

New South Wales

The NSW chart for hardware retail sales shows that while p2024 did manage to set two all-time highs - for September 2023 and (curiously) January 2024 - it did trail significantly behind p2023.

While the March 2024 result is below those for both 2022 and 2023, it is still above that for 2021.

Victoria

While p2024 was not quite as good as p2022, it did improve on p2023.

The sales for March 2024 were nearly identical to those for both 2021 and 2023, but well below those for 2022 - as well as 2020, the initial COVID-19 spike.

Queensland

For QLD, the March 2024 result came in below March 2022 but above March 2023.

The lift from February to March 2024 was smaller than in the two previous years, but February 2024 sales set an all-time record in sales as well.

South Australia

As with QLD, the lift from February 2024 to March 2024 was subdued in SA, while February 2024 set a new sales record for that month.

Up until February, except for the peak in December, p2024 closely followed p2023.

Western Australia

WA's performance for p2024 is somewhat unique. With the exception of April 2023, it set new eight-year local records for every month.

Tasmania

Since October 2021, TAS has seen sales for each period closely follow a narrow track. While p2024 was substantially down on the two preceding years for December, it managed to set a new high for February 2024, and finished up on p2023 in March.

Northern Territory

Overall, p2024 was down from p2023, but slightly improved over p2022.

The March 2024 sales, however, were closer to the pre-COVID-19 results.

Australian Capital Territory

As with TAS, the ACT has established a fairly narrow post-COVID-19 track, and p2024 closely followed this.

Analysis

The chart for hardware retail sales across Australia provides a good reference point.

For p2024 hardware retail turnover Australia-wide fell by 0.6% to $25.425 billion, a drop of $146.3 million. It's a result that is safely between the results for p2022 and p2023. In terms of general trends p2024 does seem a further advance on a slightly reduced seasonality, with an increase in both January and February sales resulting in less of a lift in March. Similarly, the end-of-year surge is drifting out early to September. Of course, weather patterns also play a part in these shifts, but some of these weather patterns may become more permanent.

Somewhat revealing is the chart for percentage change in hardware retail over the past six years.

Glancing over this chart, it's evident that the unusual state/territory is actually VIC. It's the only region where the yellow bar, marking p2023, shows negative, and the only actual state where the light blue bar, marking p2022, is negative (as it is for both NT and ACT as well).

The Bunnings store in Ashfield, an inner west suburb of Sydney will close for a major redevelopment that will cost an estimated $60.6 million. Plans have been lodged with Inner West Council and are currently under assessment.

Development plans show that almost all sections of the Ashfield Bunnings store could be demolished as part of a rebuild that will involve almost doubling the amount of retail space, reports the Inner West Courier.

The redeveloped store would span 17,518sqm, a 96% increase on the 8896sqm size of the current warehouse. It would span three levels including two underground carparking areas with 431 spaces - almost 169 more than the current 262 spaces. The third main level retail area would include a cafe, playground, garden centre, back of house facilities and amenities.

The expansion would be accommodated by moving the existing ground level carparking spaces, located at the rear of the store, to underground carparking areas.

Plans also indicate the distinctive clock tower on the corner of Parramatta Road and Frederick Street would escape the wrecking ball. The tower - which records show was built sometime between the mid-1940s and 1950s - would be incorporated into the new development.

In the plans, Bunnings stated the development would address the ageing state of the current warehouse which it described as "functionally sub-optimal" with a "collection of disparate components which results in inefficiencies" and a "diminished customer experience".

According to the plans, the redevelopment would also negate the need to permanently close the store and relocate to another site. It will replace the outdated facility with a contemporary style warehouse with significantly more efficient functionality and improved energy efficiency.

Bunnings has consulted with Transport for NSW to discuss traffic impacts from the redevelopment and there was a "general agreement" that the proposal could be supported.

Noosaville

Known as the Noosa Trade Centre in Noosaville, the new Bunnings Trade Centre will be located on the same block as Bunnings Warehouse on Eumundi-Noosa Road, on a currently vacant portion of the site. It will have separate driveway access to the existing Bunnings Warehouse, via Gateway Drive, and include its own car park, reports Sunshine Coast News.

The development was initially approved by Noosa Council last year, with amended conditions carried unanimously at a recent Planning and Environment Committee meeting.

A report presented at this meeting recommended that a negotiated decision be issued based off the conditions. In Sunshine Coast News, the report stated:

An application for a hardware and trade supplies store was approved by council at its Ordinary Meeting on October 26, 2023, subject to conditions, including required plan amendments regarding the northern exit driveway design, the proposed building's height and provision of an awning to the front facade.

The applicant suspended the appeal period and made representations on December 4, 2023, to the development approval conditions.

Following discussions with the applicant, further plans were subsequently provided to council on March 4, 2024, with the time frame for a negotiated decision extended to enable the application to be reported back to council.

The councillors unanimously agreed upon the amended conditions, which included reducing the building height from 12.14 metres to 10.94 metres. The report stated:

While the proposed building still exceeds the code's acceptable outcome for building height of 10m, the proposed height of 10.94m to the roof pitch is compatible with the height of buildings in the area and will not visually impact on the streetscape.

Some minor amendments are however recommended to the conditions regarding external colours, performance bond, street trees and acid sulphate soils.

There is currently only one other Bunnings Trade store on the Sunshine Coast, located at Kunda Park.

Related

Envy is a concept store, owned and operated by Zac Holm, a Townsville-based golf course greenkeeper turned store manager who has extensive expertise and passion for outdoor spaces. He is supported by an agronomist (lawn scientist) and a groundskeeper for Queensland Country Bank Stadium.

Mr Holm said the store caters for "lawn fanatics", along with those wanting to take lawn care more seriously, often inspired by a neighbour's lawn. He told the Townsville Bulletin:

[We offer] products and services where people can come see, touch, feel the different varieties of grass, and also use the equipment that we've got for sale, and see the different fertilisers that we have.

It's a premium store for lawn and garden care, at the other end of the spectrum from Bunnings.

The business's own-label fertiliser has been popular in preparation for the cooler months. Mr Holm said:

{We have} a lot of knowledge, paired with commercial grade products (and equipment) aimed at the retail market.

The Envy store is one of the first tenants in a newly constructed shed featuring an industrial exterior and retail interior. RWC Townsville leasing agent Troy Townsend was excited about the new addition to Townsville's retail landscape. He said:

Envy brings a unique offering to our community, filling a gap for premium lawn and garden care needs.

Ray White Commercial (RWC) Townsville director Stacie Stockham said Envy Lawn purchased 336-342 Ingham Road, Garbutt in October 2022 before local builder Paul Raiteri of Raiteri Constructions carried out extensive upgrades. It has signed a five-year lease.

The WallWeb product braces the wall from the inside and provides a flat surface to place putty over. It was created by Toowoomba-based Arron French. He said the product came about when he had to fix a doorknob-sized hole in the wall of the investment property he was selling at the time. He told The Chronicle:

It was a nightmare (to patch the hole) - I didn't know how to backbrace it, it kept falling in on the inside and it kept drying and cracking and falling inwards.

We initially thought we'd have it for the DIY market, but tradies use it because it's always a solid repair. Not only are you getting a speedy fix, it's a strong and durable repair.

I can do it within 30 seconds - get the device out of the box, adjust it, lock it in, put the putty in and let it dry overnight.

Mr French said the product was not just designed in Toowoomba, but Toowoomba was also the first place it was sold through stores.

I took this to America with Lowe's and it won a medal for innovation, but the first store to take this on was the local Mitre 10 hardware store...Rodney Bird (of Mitre 10 Toowoomba) was the first person to look at this and realise what we had, and it just morphed from there.

It's just started spreading across Australia - we've sold 10,000 units so far and there was a big order that just came in with Mitre 10 for 6000.

They get made in China. We kept everything else in Australia, the artwork, all the attorneys have been Australian, the pack-and-sends have been Australian. We've been using as many local people to keep it as Aussie as we can.

Mr French said Amazon US had made a second order of WallWebs after the first run sold out, and the company has just secured a European distributor. He explains:

We've sold 500 in six weeks on Amazon, and that's pretty unheard of - it usually takes months for the first sale.

We've got a European distributor on board that's going to take on that whole continent. In larger cities, everyone is in their own world, but in smaller communities, people rely on each other to keep their businesses afloat.

You would never get the same level of help and vision outside of a city like this, everyone we've spoken to in Toowoomba has been excited and want to be a part of it.

The company's success began with the sheer determination and passion of founder, Vincent Costello. Having been forced to close his air conditioning business during the oil price recession in the 1970s, Vincent was presented with an opportunity to take over ownership of a small, fledgling hardware store in Deer Park, a suburb on Long Island in New York. With ten children to provide for, he took the risk, despite the challenges of the economy and having no previous retail experience. Michael Costello, Vincent's son, and current CEO, told Store Merchandiser magazine:

It was his strong values and hard work that guided him through the years that followed. Over the course of five years, he transformed that 2300-square-foot store from dismal sales to a thriving location that offered extraordinary customer service. He was a genuine problem solver and 'people person', always advocating for the customer and helping them in whatever ways he thought best. There was an era of consistency about my dad. He was great at building strong and trusting relationships, which led to an incredible alignment between him, customers, vendors, local businesses, and the community.

Dad was driven by the idea of growth, both personally and for the business. He was compelled to make himself smarter every day by taking risks and learning from mistakes, as he knew that growing the business relied on the personal growth of himself and his employees. He built a rapport with his landlord, who then acquired another commercial building and offered him the chance to open another location.

By refinancing his home, he opened the second store, a 5000-square-foot industrial space, in 1982. The same thing happened for our third and fourth stores too, as the landlord developed shopping centres in the little-known town of Nesconset, and then Farmingdale. We were not well-funded back then. Success came through hard work, patience, and doing more with less. Eventually it paid off, which fuelled further growth into larger outlets.

Aside from stores, a major turning point in our history occurred when we became Ace Hardware (Ace) retailers, which was in the early 1980s as we were opening the second store. The partnership had multiple benefits, as being associated with a successful brand gave us instant credibility, lower cost of goods, and freed my dad from the heavy demands of product sourcing, which freed up time for him to do what he enjoyed - helping customers. Also, while Ace was well-known in other parts of the country, ours was only one of two stores on Long Island at the time, so our partnership had opportunities for mutual growth.

Michael has learned first-hand from his father. He said:

I was just ten years old when my dad took over the first store, so although I was too young to work, I hung around - probably causing a nuisance - and helped out where I could with cleaning and putting away stock. I spent a good chunk of my childhood like this, which looking back, gave me an opportunity to learn from scratch and has shaped how I lead the business today.

I have nine siblings in total, with six of us currently involved in the business. My three older siblings had already established their careers or were at college by the time our dad had taken over the first store, so they didn't have the same opportunity to get involved as some of us younger siblings did. With our dad's support and guidance, myself and my siblings, Michael, Jaime, Tim, Dan, Joey, and Bobby, became owners in 2001, opening a 24,000-square-foot home centre, our largest store to date. We have maintained our leadership structure since his passing almost eight years ago.

We are all equal owners and are all active in the day-to-day operations of the business. My sister is our president, my brothers occupy the roles of marketing director, merchandising specialist, district operations director, and IT director. We also have some from the next generation involved too, not in leadership roles just yet, but learning the ropes from their parents as we did from ours.

New growth

While Michael, Jaime, Tim, Dan, Joey, and Bobby have retained their father's hunger for growth, they have changed the company's approach to opening new stores.

Our early growth has historically been ground-up stores, or in other words, leasing an empty building and building a team from nothing. This was fuelled by population growth and changes in competition, which led to the demise of many regional home centre brands.

However, there aren't nearly as many open markets in the areas we operate, so we have shifted our focus over the past ten years more towards acquisitions of existing stores. Growth through acquisition serves us in two ways. Firstly, it decreases risk. We are not starting from the ground, we have a team, a customer base, and history, as in many cases we are acquiring businesses that have been around longer than we have.

Secondly, we get to provide a succession plan for a business that doesn't yet have one, which provides our business with a strong social purpose. We are passionate about helping fellow small business owners in our industry, and we want to continue the legacy they have worked so hard to create, supporting the local community and economy.

We recently acquired Smith's Ace Hardware (Smith's), which saw us take on an additional five Ace stores in New Jersey and Pennsylvania. This was our largest acquisition to date, but it was a successful transition. As Smith's already operated Ace stores, we had many similarities like using the same computer platform and technology, which allowed for seamless integration...

The conversation turns to the current activities of Costello's Ace and how Michael is planning to take the business to further heights of success. He said:

We're currently in the process of relocating one of our stores, as well as building a new site from the ground up in New Jersey. There are a lot of moving parts and we're also preparing to announce another New Jersey acquisition, which is super exciting.

Our growth has historically been one step at a time, so there are always ongoing conversations about growth, whether through additional stores or acquisitions. We have ambitious plans to double the business over the next five years and grow our family to more than 75 stores by 2030 while developing a world-class team and maintaining the high level of customer care we have become known for.

Visit the website here:

Ace Hardware's range of private label Loud Mouth[tm] BBQ sauces and rubs is designed to give the hardware retail group's members a proprietary assortment that enhances their product mix in this category.

They were developed exclusively for Ace retailers and takes its private label product development efforts in a new direction. Brian Wiborg, senior vice president of merchandising for Ace Hardware, said:

[We're] not just introducing a new product - we're igniting a flavour revolution in the world of BBQ ... Our decision to develop Loud Mouth Barbeque was reinforced by the desire for bold, high-quality BBQ products at an affordable price point.

The assortment includes Boom Shaka-Laka - Apple Habanero BBQ Sauce, Kaa-Blamo! - Hot n' Spicy BBQ Sauce, That's Poppin' - Savory Blend Rub, Mmmm Baby! - All Purpose Rub, Whoa There! - Smokey Sweet Rub, Uhh-Huh! - Hot n' Sweet Rub, and Zowie! - Hot n' Spicy Rub.

Melanie Hill, director of advanced concepts and retail innovation at Ace Hardware spoke with Store Brands about the development the range.

Ms Hill said that the job of her team is to think ways of amplifying the Ace brand to build demand and loyalty among consumers. Knowing that Ace is established as a destination for barbecue products, the retailer already carries a lot of top brands but the team were aware that its lineup was ready for something new and "fun". It is always looking for new ways in which Ace can create differentiated and exclusive products.

Ms Hill explained it was a collaborative effort across the company. She said:

Legal helped us with trademarking, our IP and creative teams worked to create the brand, and our marketing team has put together a really awesome launch plan. We took great care to make sure that we included consumer insights by doing taste tests and 'shop alongs' with customers. We partnered with Old World Spice as our vendor that created the product line. They worked with us to make sure the flavour profiles and the formulations would be products everyone would enjoy.

In terms of coming up with the name "Loud Mouth", Ms Hill said Ace wanted a brand that expressed the idea that barbecue is fun and associated being loud with it. The name tapped into the insight that good food can make you want to get loud, and it wanted the brand to have a little bit of attitude and excitement. She adds:

That's what barbecue is all about. You're grilling for family and friends, you're outdoors having a great time.

The Loud Mouth products will be carried in the Ace Hardware warehouse so retailers can select what they need as they need it.

In-store, Ace has created eye-catching point of sale signage that allows consumers to see and experience something new and see what's different about Loud Mouth. It is also doing email marketing, social media, digital marketing and direct-mail pieces to our customers. There will also be demonstrating and grilling with the products as part of Ace's 100th anniversary block party celebration.

The Australian Bureau of Statistics (ABS) has released its Building Activity stats through to the end of December quarter 2023.

As the big question for hardware retail is exactly where the residential construction industry is headed in 2024, the numbers of most interest are those for building activity commenced and building activity not yet commenced.

The first - commenced - gives some clue as to how much housing activity actually got going during the most recent quarter. The second - not yet commenced - indicates how much work is in the pipeline.

The data is presented in calendar years.

New South Wales

The first chart for New South Wales (NSW) paints a fairly clear picture of a slowdown.

In the first two quarters of 2023, the number of commencements remain above only the initial COVID-19 year of 2020, then dive still lower in the third and fourth quarters, to set a seven-year local low record.

Turning to commencements for other residential, the picture is slightly better, but not all that encouraging.

While June quarter 2023 shows an encouraging upwards spike, this is followed by a sharp decline to September and only a mild recovery in December quarter.

Building activity not yet commenced is a more complex measure to understand.

While the continuing gain seems encouraging, given the context of work commenced, it probably is not. Given the low level of commencements, this is less likely to be due to overload of the construction industry resources, and more due to delays from other sources.

Victoria

As with NSW, houses commenced for Victoria (VIC) shows a clear slow-down, setting three local seven-year lows for 2023.

For other residential commencements are more nuanced. While a seven-year local low is reached in June quarter 2023 follow more of the trajectory of 2021, lifting above the numbers reported for 2022.

While there is a degree of seasonality to the increase in the value for not yet commenced building for VIC, it's also likely we are seeing some of the same non-construction factors at play in the increase through the September and December quarters.

Queensland

While Queensland (QLD) shows a counter-seasonal lift in the number of commencements for June quarter 2023, this quickly slides down to seven-year local lows for both the September and December quarters.

Other residential might look to be in similar dire straits, but that's not really the case.

The number of commencements for 2023 is around only a 100 less than for 2022, showing ongoing demand.

Again, for not yet commenced there is an increase.

In this case, the full year of 2023 sets a local seven-year high for every quarter

South Australia

While the commenced houses for South Australia (SA) numbers could not be described as "optimistic", they certainly tell a better story than those for the east-coast states.

More or less 2023 is basically a return to pre-COVID-19 levels of commencements.

The story is a little less sanguine for other residential commencements. While the sharp spike for September quarter 2023 is impressive - and shows a degree of resilience in the market - in fact the overall level of commencements is nearly equal to those for 2020 (the green line).

We see the same pattern - even exaggerated a little - for net yet commenced value during 2023 for SA: a set of new local seven-year highs.

Western Australia

For Western Australia (WA) the best description of the number of houses commenced stats might be that it has not only fallen back to pre-COVID-19 numbers, but low pre-COVID-19 numbers.

That's less the case for the number of other residential commencements, which are hitting local seven-year lows in the second half of 2023.

Not yet commenced values are again slightly contradictory, increasing despite the drop in actual commencements during preceding quarters.

Tasmania

For number of house commencements, the most noticeable number for Tasmania (TAS) is the drop to a new seven-year local low in December 2023 quarter. That runs counter to seasonality, as well.

For other residential commencements, TAS really hit back to pre-COVID-19 numbers in 2022. In 2023, it has further dropped below that.

And yes, again, the steep rise in the value of not yet commenced work.

Northern Territory

Interpreting residential construction stats from the Northern Territory (NT) is always difficult, as its economy is highly affected by local factors. However, we can see that numbers of houses commenced has fallen sharply in the second half of 2023.

Likewise, numbers of other residential dwellings commenced have equalled all-time lows - inasmuch as zero is about as low as you can go.

Value of not yet commenced work spiked for December quarter 2023.

Australian Capital Territory

While the Australian Capital Territory (ACT), like the NT, has something of a partially insulated economy, it still does respond more to national influences. That is certainly the case with number of houses commenced.

That's a very definite low for 2023.

Numbers of other residential is really quite interesting. It's low, but just how low is it?

As it turns out, the annual total for 2023 is lower than the other six years displayed - though not that much higher than 2019.

Value of not yet commenced again shows a new set of highs for 2023.

Analysis

Has the overall economic analysis of the housing industry really been complete? Not really. There is one key element that seems to be consistently missing.

It's fairly evident from these charts that 2023 has seen a reduction in the number of building starts for both houses and non-houses, well the value building work not yet commenced has increased. As a helpful summary, we can review the charts for house builds commenced on an annual basis across the six states.

New South Wales

Victoria

Queensland

South Australia

Western Australia

Tasmania

With the exception of SA, the states show that 2023 comes in below the numbers for five years previously, in 2018. That would indicate that there is a real slowdown underway, and not just a more relative reduction.

The other interesting factor is that, despite the high interest rates and growing price of houses, the market is indicating that there has not been much a shift to non-house dwellings. That's partly a cultural bias, but it also has to do with the construction industry itself: unlike in the US and much of Europe (including the UK), Australian architects and builders are not adept at building higher-end apartments.

But there is something more going on here. In the US, for example, the last couple of years has seen a big surge in the construction of apartment blocks, to such an extent that rents in 2025 are expected not just to stabilise, but to be reduced as well (especially as "move-in" incentives are offered).

Beyond cultural pressures there is another key factor at work here: The US economy is quietly booming. Even with high interest rates, there is a lot of money washing through the economy looking for tax effective investments. The economy grew at a rate of 3.3% in the last quarter of 2023, even as inflation diminished.

The reason for that, more than anything, is the role of "post-industrial" industry such as technology. While technology firms contributed something like 10% of gross domestic product (GDP), the are also though largely responsible for the unexpected high growth in US productivity - which reached 4.7% in the September quarter of 2023.

While we can certainly point to inflation-busting high interest rates, poor city planning, Australians' rampant "NIMBYism" and high levels of migration to city centres as all contributing causes to a confined housing market, the really major, underlying reason is that the Australian economy is not doing well.