A development application (DA) has been lodged by the Bunnings store in North Launceston (TAS) to use part of its land to create a commercial building for bulky goods sales.

The proposal for the site at 80 Lindsay Street, Invermay, is being advertised by the City of Launceston, according to The Mercury.

Under the proposal, the new building would be at the front of the site. The main retail space in the new building - the future tenant of which is yet to be chosen - would be about 1520sqm, with space for back of house, an office and workshop.

The maximum building height would be 7.5 metres. There will be 25 new parking spaces. In a report, building surveyors and engineers Pitt & Sherry said:

One loading bay will be provided on the western side of the site and will be accessed by a new vehicular crossing from Lindsay Street. This area will be surrounded by a 2.7-metre high transparent mesh fence. Landscaping is proposed along the Lindsay Street frontage.

As the future operator of the new building is unknown, the applicants estimate there will be approximately six members of staff onsite.

Hervey Bay

The new store in Pialba, a suburb of Hervey Bay, will provide the community with access to a six-lane drive-through timber yard, a bigger paint department, tool shop, nursery, landscaping and bagged goods and more than 430 carparks.

The precinct will also include a new kitchen design centre, which is a first for the Fraser Coast.

Bunnings Hervey Bay complex manager Jackie Roberts said all hands were now on deck. She told the Fraser Coast Chronicle:

The team has been working tirelessly to ensure the store is ready for customers when we open the doors to the new Hervey Bay warehouse for the first time.

As part of the store opening celebrations, the team has provided some hands-on support to local community groups. Ms Roberts said:

The team really enjoyed working alongside the Hervey Bay Spinners, Weavers and Fibre Artists to refurbish the historic Old Schoolhouse and meet some passionate local residents. We helped landscape the surrounding garden and freshen up the deck, entrance stairs and ramp, making the entrance safer...

The new store will also have a range of sustainability initiatives that will reduce its environmental impact including LED lighting, on-site water reuse and solar energy.

Related

After helping to launch the first Tool Kit Depot store on the eastern seaboard, Tool Kit Depot Gympie store manager, Braden Bunker, said his team was looking forward to meeting local tradies and helping them with their next job. He said:

There has been strong demand for online orders to Queensland, so we are glad to now be able to provide Queenslanders with the opportunity to shop in store and become a trusted trade partner with locals....

Our team worked hard ... getting products on the shelf in preparation for the store opening. It's been a huge effort by all involved and we're really proud of what we've achieved.

With sites already operating in South Australia and Western Australia, Tool Kit Depot said the new Gympie store provides tradies and serious DIYers with a one-stop-shop for tools, outdoor power equipment, storage, welding and construction equipment, safety and workwear, as well as a workshop for repair and services.

Its in-store tool repair centre sets the brand apart from its competitors. Customers can have their tools serviced on site, with genuine expert advice across all product ranges including specialist carpentry equipment. Stores will also provide a battery bar service.

In addition to a premium range of products from suppliers such as Festool, Husqvarna, Hard Yakka, Milwaukee and Makita, the Tool Kit Depot range extends to products from AEG, Irwin, Empire, Kango and Full Boar.

In addition, there will be trade nights and invitational events such as beer and pizza nights, where tradies will get a chance to see demonstrations by product company representatives and sample the latest product lines and services.

Spanning 1,200 square metres, the new store represents a $3 million investment in the Gympie community and has created 14 new jobs for locals with trade experience. It is located at Tenancy 2, Hall Road, Glanmire, across from Bunnings.

Related

David O Jones Mitre 10

Store owner Simon Jones said he and fellow owners David and Margaret Jones are currently negotiating a new lease agreement with landlords, because their current agreement expires in January 2023. While negotiations previously resulted in a stalemate, Mr Jones said both parties had finally reached an agreement. He told the Ararat Advertiser and Stawell Times:

We haven't wanted to leave the premises, and we won't be leaving the premises as well, I'll make that clear right now...We met with them again and have come to an agreement, pending us seeing the new leasing agreement, which is amended...

Mr Jones clarified jobs were staying in Ararat, and that he'd even explored other property options in case current negotiations fell through. He said:

It would have been extremely difficult, but we still would have been trading at another site in Ararat had we vacated the Campbell Street site. There was never any question about a Mitre 10 presence in Ararat, and never a question about the Jones' being in Ararat either. We were always committed to that.

Mr Jones said Ararat residents had been very supportive of the store, particularly during recent difficult years, with business expected to grow even further for the "silly season".

Our Christmas period has already been very, very good, both from a retail point of view and our trade customers as well.

David and Margaret Jones purchased the business from previous owners Max and Bernie Perovich in 2013.

Supermarket group Woolworths has spent $586 million for a 55% stake in Petspiration, the company behind the PETstock brand.

Woolworths chief executive Brad Banducci said the retail giant's market research revealed an opportunity to cater to all kinds of pet owners, including those in regional Australia who have bigger animals with different needs. In a statement, he said:

Specialty pet is a large and growing retail segment in which we have limited presence...Specialty pet is a logical adjacency given the high penetration of pet ownership across Australia and New Zealand.

Australians spend tens of billions of dollars on their pets each year - close to 70% of Australian households now have a pet, with Animal Medicines Australia forecasting that households spend about $3200 on their dogs and $2100 on their cats each year.

This pet ownership trend was magnified over the COVID period while people were working from home during lockdowns, leading some analysts to question whether the growth rates are sustainable. Between 2019 and 2022, dog ownership grew by 25% and cats by 42%.

The rate of revenue growth in the pet goods sector more than doubled between 2020 and 2021, according to industry research firm IBISWorld.

Mr Banducci believes there is still room for growth across the pet-care sector, which now goes well beyond food and toys to services such as virtual vet care, doggy daycare, training and grooming services.

Petspiration has been identified by Woolworths as the number two player in a fragmented industry, but Mr Banducci has big plans. Its major competitor is Greencross/Petbarn/Animates now owned by US private equity giant TPG.

PETstock has a network of 276 stores and established online platforms such as Pet.co.nz, a 2.4-million-member Petspiration loyalty program, and an own brand range such as Caribu and Glow. Its products and services include food, boarding, grooming and veterinary services. Mr Banducci said in a statement:

The partnership will allow us to meet more of our customers' pet family needs with a complementary range of specialty pet products and services, strengthen the Everyday Rewards loyalty program and unlock opportunities for material value creation across both businesses.

We will work together to support Petspiration's growth through access to our retail capabilities in areas such as Digital and eCommerce, Supply Chain, Retail Media, Format and Network Development, and Advanced Analytics.

Woolworths said the new business had turnover of $979 million in the year to September, with estimated net financial debt of around $290 million and lease liabilities of about $380 million as at September 2022. The investment deal puts the enterprise valuation of the business at $1.7 billion. In a statement, Woolworths said:

Petspiration is well positioned to continue to grow strongly, as the business builds out and consolidates its national footprint and brand. The transaction is expected to achieve a mid-teens internal rate of return, with identified value creation opportunities to support strong earnings growth.

In The Age, Mr Banducci said Petstock had experienced a strong earnings growth trajectory over the past 10 years as the beneficiary of what he describes as megatrends.

One in particular that he noted is pet longevity, which has greatly increased as owners spend more on nutrition and exercise, and presumably vet bills. Another will be owners' reluctance to leave the family pooch at home alone. This has led to the increasingly popular doggy daycare, which can rival the cost of childcare, depending on the provider. There is also doggy grooming which can involve booking a week in advance.

The founders of Petspiration, brothers Shane and David Young will continue to run the business, which will operate as a standalone unit. They will hold 45% of the business in conjunction with existing shareholders.

The majority stake was funded by a sell-down of Woolworths' stake in Endeavour Group, the owner of a string of alcohol retail chains including Dan Murphy's and pubs across the country. The sell-off leaves Woolworths with a 9.1% stake in the bottle shop owner. Endeavour was spun out of Woolworths and floated as a separate listed company in 2021.

Related: Woolworths already has a pet insurance offer and has entered a joint venture with Hollard Group's PetSure for an online specialty pet goods business called PetCulture.

Pets Domain

Pets Domain, which previously operated six Tasmanian stores before its local assets were purchased by competitor Petbarn in late-2011, recently opened its 63rd location Australia-wide at Cambridge (TAS). Two more mainland stores were launched in December, taking the total to 65.

Chief executive Jason van Peelen opened his first retail store on Brisbane Street in Launceston after starting out breeding and selling fish from his parents' garage over 35 years ago. He had six stores when Petbarn came knocking. He told The Mercury:

The offer at the time was significant. We decided we would accept, it was not necessarily easy to do, selling the original stores.

However, the injection of capital enabled Pets Domain to undertake a "massive growth campaign". Mr van Peelen said Pets Domain will be opening 25 new stores a year "for the foreseeable future".

Outside the capital cities has been a focus for Pets Domain. He said:

Because of our roots in Tasmania, we identify with regional Australia better than metro. Our network of stores is predominantly in regional Australia, it seems to be a good fit for us.

Pets Domain is also investing into more than just bricks-and-mortar stores. Last year, the company established "Australia's largest fish wholesaler", Aquarium Industries, which breeds from a farm in Queensland.

There is also a manufacturing and importing division, Nature's Best, which produces lines such as Peckish, Tidbits, and Dan & Sam animal fashion accessories. Many of these products are stocked in Pets Domain.

PET Circle

E-commerce pet supplies company PET Circle has a new fulfilment centre near Brisbane to deliver faster to its Queensland customers, reports The Courier-Mail.

It measures 26,000sqm, or close to four football fields, and currently has 13,000 unique pet products and has the capacity for up to 30,000 unique products.

Related

One of Australia's largest agribusinesses, Elders said the investment in PGG Wrightson (PGGW) is part of its geographic diversification strategy. The company said in a statement:

Elders does not currently intend to initiate a proposal to acquire control of PGG Wrightson.

Similar to Elders, PGGW is an agricultural supplies and services business, dealing in livestock, wool, horticulture, water and irrigation, agribusiness, real estate and insurance.

The company is New Zealand's largest rural services firm and is listed on the New Zealand Stock Exchange with a market value of about NZD312 million, according to The Australian.

It employs more than 1800 people in 170 locations throughout New Zealand. In October, it said it expected full-year earnings to fall because of rising costs caused by inflation. PGGW's shareholder is Chinese controlled Agria with a 44% stake.

Elders has been a player in the primary sector in New Zealand throughout much of the 20th century, but sold its finance arm in 1999 to Hanover Finance, and then its remaining 50% stake in a rural services in 2014.

Elders AGM

The company announced underlying earnings before interest and tax of $232 million - a 39% increase on 2021 - at its annual general meeting in Adelaide (SA). Rural products sales and real estate were the main contributors to its latest results. Retail products sales rose 44% to $2.4 billion, while wholesale products sales rose 22%.

Elders reported a profit of AUD162.9 million for the year ended September, a rise of 8.7%.

Chairman Ian Wilton said reinvestment played an important role in Elders growth strategy. The company announced a $25 million investment in a world-first automated wool handling business this year, while it acquired 13 businesses in ten locations with 115 new employees during the course of the 2021/22 financial year. Mr Wilton said:

The business development pipeline for the coming year is also encouraging, with numerous successful businesses expected to join Elders in the next 12 months and furthering our growth.

Related

The departure of the hardware retail group's chief operating officer Simon McDowell has created an opportunity for Bunnings to restructure its senior management, according to an exclusive report in The Australian.

It has promoted Ryan Baker to chief customer officer and Ben Camire to head of store operations across Australia and New Zealand. Mr Baker and Mr Camire have essentially split the former role of chief operating officer between them. Bunnings managing director Michael Schneider said in response to questions from The Australian:

We're pleased to confirm Ryan Baker was appointed to the role of chief customer officer a few months ago. Ryan has been with the Bunnings business for over 20 years and brings an enormous amount of experience and success as a retail leader into this role.

Mr McDowell joined Bunnings in 2021 as COO, and no official reasons have been given for his exit. The COO role was the second most important position in the organisation, with Mr McDowell often running Bunnings when Mr Schneider was overseas.

Related: It has recently been reported that Bunnings may have begun a round of redundancies at its head office and support centres that will eliminate about 140 roles, revised down from an estimated 300 roles.

"DIY summer": Bunnings MD

Mr Schneider provided The Age with some comments relating to the Christmas holiday spending period that continues into early 2023.

Despite customers facing intense cost-of-living pressures, rising interest rates and speculation about a slowdown in the nation's housing market, he believes Australians will still be spending up big on DIY projects during long summer days, and into 2023.

With our DIY customers, if housing churn slows - and there's no clear evidence it has at this point, customers go from spending money on their homes to get ready for sale or spending money on their homes because they've just bought it and are personalising their space.

He is confident customers will be out in force for gardening projects into next year, with the group's shopper surveys suggesting families have been sprucing up their spaces in the lead-up to Christmas.

One in four customers was working on a project for outdoor entertainment in November - which means the maintenance of those things will carry through into the summer period.

When we start to see those long hot summer days, in late January and early February, when the tennis is getting going, I think you'll find a lot of people are out in their gardens, out around their decks, and doing things to stay active to make the most of the sunshine.

Mr Schneider said as households absorb higher interest rates, the company's pledge to have the lowest prices on items in the market remains Bunnings' edge over its competitors.

Customers are very much focused on value for money ... Bunnings positions itself very well in that space.

He also highlighted the power of Bunnings' broad ranges.

Whether it's paint rollers or potting mix, you have an array of products at different price points - so that customers have choice. Also, if the first product they were looking for isn't available or isn't available at the quantity they want to buy, we're able to offer them an alternative.

Australians have kept the spending momentum up going into the festive season, but the market is anticipating households will moderate their interest in home goods and furnishings in 2023 as the pandemic-fuelled spending splurge of the past two years ends. Mastercard Spending Pulse data for November 2022 showed a 5% increase in overall spending for the month compared with same period in 2021 but home furnishings saw the biggest drop, down 4.1%.

Mr Schneider said the more cautious spending environment is a reminder of the importance of getting the basics of retail right, including staffing.

That is, a well-presented store, a team that is really friendly ... we've got people with years and years of experience on the tools, whether as builders or electricians, and we've got people who have built really fantastic careers over decades.

Related

New Zealand's Commerce Commission alleges a company operating a Mitre 10 Mega store bought land in Tauranga and tried to prevent a Bunnings Warehouse from being built on it.

The commission has filed proceedings in the High Court in Wellington in an anti-competitive land covenant case against NGB Properties Ltd for allegedly contravening section 28 of the Commerce Act.

NGB is a sister company of Juted Holdings Ltd and operates the Mitre 10 Mega in Tauranga, the commission said in a statement.

Section 28 prohibits land covenants that have the purpose, effect, or likely effect of substantially lessening competition.

The regulator has alleged that NGB bought a property in Tauranga and placed a covenant on the land to prevent Bunnings from building close to a Mitre 10 Mega store owned by an NGB-associated company Juted Holdings.

That amounted to a purpose of substantially lessening competition for the retailing of hardware and home improvement goods in central Tauranga, according to the commission.

The commission and NGB had agreed on a settlement to resolve the proceedings, and a penalty hearing in the High Court at Wellington will be scheduled shortly.

Because the matter was before the court, the commission was unable to comment further for now, it said.

Bunnings director of store operations and New Zealand, Ben Camire confirmed the commission's case against NGB Properties Ltd was related to a land covenant allegedly lodged to prevent a Bunnings Warehouse from being built in Tauranga. He said:

As the matter is before the courts, we are unable to provide further comment.

A Mitre 10 New Zealand Ltd spokesperson acknowledged the negotiated settlement in the case.

NGB Properties is an independently owned business which shares directors and shareholders with another business that is part of the Mitre 10 co-operative. Mitre 10 New Zealand was not involved in the matter...

Background

The Commerce Commission action is the first step in a crackdown it plans against the anti competitive use of land covenants and lease exclusivity agreements, that it said are used by big, established retail chains to protect their dominant market positions.

There have previously been ugly turf wars in hardware retail, between incumbents such as the Mitre 10 Co-ops, and more recent arrivals including Bunnings. In Queenstown, the Environment Court found the Mitre 10 Mega owner had abused court process in its attempts to stop a new 8100sqm Bunnings store opening 500 metres away. Mitre 10 owner H&J Smith was ordered to pay the maximum NZD60,000 in legal costs.

And in 2011, the Commerce Commission issued warnings to Mitre 10 and Bunnings over misleading advertising in which both claimed to have the lowest prices.

Attempts by challengers to open new stores have been subject to continuing delays. Four years ago, the owners of Bunnings in Whanganui announced plans to open a new 8400sqm store, spending NZD19 million in the town and creating 50 new jobs. Locals welcomed the news, saying it would "give Mitre 10 a run for their money". But today, the land beside the BP on London Street remains vacant. The project has been tied up, first in resource consents and now in other unspecified delays.

According to Commerce Commission analysis, the three largest merchants hold more than 80% of sales of key building supplies, though this is slightly diminished from five years ago. In some regions, there are only a couple of building retailers, limiting competition in prices.

There are several key factors in finding suitable sites. These include location - retailers need sites with plenty of customer traffic, and easy access to facilitate delivery of materials to building sites. The site needs to be large enough for a building supplier, which can be particularly challenging in urban areas, given that merchants need a large amount of land. And the land must be appropriately zoned for development.

The commission has found that some suitable blocks of land come with exclusive lease agreements or covenants attached. This is registered by a previous owner or tenant, and restricts how that land can be developed or used.

Fuel retail chains, supermarkets and building supply merchants all use this tactic to stop competitors coming onto their turf. It's such a problem in supermarkets that the New Zealand Parliament in 2022 passed a law nullifying such covenants, and the two big supermarket chains agreed to get rid of them.

But large, established building supplies incumbents like Mitre 10, Carters and Placemakers have been slower to change. The problem is such that the Commerce Commission is now warning it will use its new powers under section 36 of the Commerce Act, to stop them engaging in behaviour that will "have the effect of substantially lessening competition".

The commission has identified 60 restrictive covenants set in place for building merchants, and another 80 exclusive leases that potentially limit competition.

Most of the covenants block competition for years to come - and the remaining ones don't have a fixed expiry date. Sometimes new merchants are precluded from operating on a site, long after the merchant who benefits from the covenant has left the area.

The covenants are over land adjoining, or near, land leased by a merchant, where the landlord has agreed to lodge a covenant for the merchant's benefit.

Metcash has released its results for the first half of its FY2022/23, which includes the six months from May to October 2022. Overall the company reported that revenue came in at $8.9 billion, up by 7.8% on the previous corresponding period (pcp), which was the first half of FY2021/22. Earnings before interest and taxation (EBIT) were $255 million, up 10.3% on the pcp. That results in net profit after tax (NPAT) of $126 million.

The company notes that on a three-year basis - referring to results prior to the pandemic, from May to October 2019 - revenue increased by 32% and EBIT by 64%.

Unfortunately, Metcash has not posted a recording of the results presentation, so this report is derived from the company's press release, its slide presentation and ASX filing.

Hardware results

In terms of overall hardware sales, including both the Independent Hardware Group (IHG) and Total Tool Holdings (TTH), revenue including charge-through sales, was $1732.6 million for the half, an increase of 16.8% on the pcp. However, some $134 million of this was from new joint-venture and company-owned stores, which means organic growth was 7.7%.

EBIT for hardware came in at $116.6 million, up by $17.7 million on the pcp, an increase of 17.9%.

In comments provided in a press release, the new Metcash CEO, Doug Jones, had this to say about Metcash's hardware operations:

Our independent retail networks performed well. Overall network health continued to strengthen, and retailers are operating with a high level of confidence and reinvesting to further improve the quality of their stores and offer.

The success of our investments in Total Tools and IHG, and significant growth in the underlying performance of the Hardware pillar, has led to a rebalancing of the Group's earnings profile with Hardware now the largest contributor.

We now have ~160 company-owned or joint venture stores in our hardware network that together are delivering significant sales growth.

IHG

Sales at IHG came in at $1.4 billion, an increase of 7.9% on the pcp. Metcash also claims the wholesale EBIT margin was 2.8%, while the overall EBIT margin was 4.9%.

However, like-for-like (comp) sales were up only 4.1%, with trade rising by 5.2% and DIY/consumer sales by 1.5%. The company states that trade sales continued to represent 64% of overall sales, despite the growth disparity.

The company states that some 30 Thrifty-Link and True Value stores have been converted to Home Timber & Hardware (HTH) stores, as part of IHG's move to a two-brand strategy of Mitre 10 and HTH. The overall goal is to reach 400 Mitre 10 stores and 200 HTH stores in the network.

TTH

TTH saw sales of $566.7 million an increase of $296.9 million on the pcp, up 93.4%. In organic growth terms, sales grew by 9.5%. The company reports that comp sales were 4.7%. TTH EBIT increased by $13.7 million to $46.8 million, an increase of 41.4%. Two new stores were added to the network during the half.

Analysis

As mentioned above, without the benefit of the presentation recording, it's difficult to fill out the necessary background. However it is worth noting that overall hardware retail sales as provided by the Australian Bureau of Statistics (ABS) increased by 6.9% when comparing the period from May to October 2021 with May to October 2022.

Taking the comp sales recorded by both IHG and TTH, that means that in terms of organic growth from existing stores, both of these actually lost market share during the half.

HNN will be releasing our analysis of Metcash's Investor Day held in October during this week. We had decided to hold off on doing our analysis until the half-year results were released, as in the past we've noted discrepancies in the figures used in those two presentations. Hopefully Metcash will release the recording of the presentation of these results, and we will be able to update this article as well.

Tool Kit Depot area manager Wayne Sheehan and store manager Braden Bunker recently gave a sneak peek tour of the new store in Gympie to the Gympie Times. It is located at Tenancy 2, Hall Road, Glanmire, opposite Bunnings Gympie. Mr Bunker said:

It's exciting to be a part of this milestone, opening Tool Kit Depot's first store on the eastern seaboard, and we look forward to paving the way for more to come. Gympie is a key base for tradespeople who need professional tools and equipment, so it's great to be able to provide them with the best brands, service and value.

The store offers up to 10,000 products across tools, storage, workwear and power, welding and safety equipment as well as a tool repair centre and expert advice. The 1200sqm store is a $3 million investment and has created 14 new jobs.

Mr Bunker said Gympie is a prime location and a "big opportunity" considering the commercial market in tools.

The closest tool shop is 45 minutes away for a decent tool specialist. We think this will be pretty good for the locals.

Before becoming Tool Kit Depot's store manager, Mr Bunker worked as co-ordinator at Bunnings Gympie. He has been part of the Bunnings family for the past 11 years.

The business has sourced all of its staff locally. Half of the team moved from Bunnings while the remainder are tradespeople.

It is expected to open by December 12, to be followed by an official opening soon after.

Related

B&Q is expanding its presence on the high street in the UK with new B&Q Local convenience stores.

The DIY and home improvement retailer has plans to launch two stores in London's Palmers Green and Camden districts with the new name in the first quarter of 2023. They will be the first to bear the B&Q Local brand, which B&Q recently applied to register as a trademark. In a statement, Graham Bell, chief executive of B&Q, said:

Depending on the test and trial we could probably see quite a few, there are 50 odd catchments where we're not represented. But it's finding the physical location and getting planning permission.

Retail veteran Mr Bell, who previously worked for Asda, said B&Q had looked to the success of the big grocers' convenience stores for inspiration. He said:

Grocers have led the way with [ventures like] Sainsbury's Local and Tesco Express.

B&Q's smaller stores themselves offered a "takeaway range that's probably most of the DIY generic bits and pieces" but also allowed shoppers access to "the full proposition you would get in one of our large stores", he said.

You'll still be able to plan and buy a complete kitchen and order lots of goods in larger stores and get them delivered the next day for click and collect.

However, Mr Bell stressed B&Q planned to continue opening larger stores as well as the convenience outlets. B&Q had cycled through "a lot of different names" before deciding on B&Q Local. He added:

Customers have this expectation and they want a bit of clarity. We've tried to do something with the fact that they're local communities, local stores and local access for convenience.

There were "huge populations" that struggled to reach B&Q's larger stores, he said, particularly in urban areas.

London is a huge catchment and we obviously can't get the representation of the large stores that we'd like. It's areas we're not so represented in and allowing those communities ease of access.

Related

Screwfix France

The first Screwfix France store officially opened in Wattrelos in Lille, with three to four more stores set to open by the end of January 2023, all in the Hauts-de-France region.

The store openings follow the successful launch of the Screwfix banner as an online retailer in France in April 2021. The website, www.screwfix.fr, has seen a positive response from customers to date, with strong traffic and conversion rates and growing brand awareness across the country.

Screwfix France aims to gain a share of the significant trade professional market in France, which has an estimated total market size of over GBP20 billion. The business will be based on the proven Screwfix model in the UK and Ireland, with product ranges adapted to the French market.

Each Screwfix France store will offer around 10,000 products aimed at trade professionals with an additional 5,000 products available online - ranging from plumbing and electrical products to power tools and workwear. Customers will be able to click & collect from store in as little as 10 minutes.

In preparation for serving the growing business, Screwfix France opened its first distribution centre, in Nanteuil-le-Haudouin, Oise, earlier this year, enabling next day delivery to home or site. Thierry Garnier, Kingfisher CEO, said:

Kingfisher's strong relationships with French suppliers, combined with our deep knowledge of French customers and ranges, mean we are perfectly placed to bring the proven Screwfix model to France.

After a positive response to Screwfix France as an online retailer, we are now building the business for meaningful growth, from opening a new distribution centre to investing in scalable new IT. The expansion is being led by experienced teams made up of talent from across Screwfix UK, Kingfisher in France and beyond.

We are very happy to be opening the first Screwfix stores in France and believe they offer tradespeople a proposition unlike anything else in the market.

The official opening of the Bowens Warragul store in regional Victoria was attended by hundreds of invited guests, according to the Warragul & Drouin Gazette.

Since opening its doors in September, Bowens said the Warragul store has worked largely with small to medium-sized builders and trades, and attracted over 500 new customers.

It predicts that over the next 12 months, the store will make approximately 12,000 plus deliveries to local builders and homes throughout the region. The store has already created over 30 jobs in the community. Bowens director and chief investment officer, Andy Bowen, said:

We are excited to officially celebrate the opening of the Warragul store with the local community. A part of our continued store operations strategy is listening to our customers, their feedback and experiences are part of the secret to our success, and we are looking forward to connecting with them directly and further supporting the Warragul community.

Related

Melton store

As part of acquiring Melton Timber & Hardware (MTH), Bowens has kept on its previous owners Brad and Scott Morton to lead the team for the store's next evolution.

MTH has been a mainstay of the local community for decades after their father, Ken Morton first started trading in 1969. Ken originally worked for Bowens at its North Melbourne store prior to starting MTH so the acquisition represents a full circle moment.

The store currently has 16 staff, with Bowens planning to grow the team and servicing capabilities. Long term, Bowens will relocate the store to the recently purchased 5ha industrial site at Cobblebank in Melton. Mr Bowen said:

As a market leader in the industry, Bowens is committed to supplying the best quality products and advice to builders and trades alike, especially in areas experiencing significant growth. We recognise Melton as a key growth corridor and are thrilled to be ensuring the long-term serviceability of building supplies to the Melton area.

We will continue to lean on Brad and Scott's community knowledge and experience to tailor our service to local builders and ensure the seamless integration of Bowens and Morton family business values.

We intend to maintain the best elements of MTH while adding further value, where possible. It is our job to ensure the local community feel comfortable with the changes and, most importantly, receive the building products they require on time and in full...

Store manager, Scott Morton, said:

Since our father founded the store, we have witnessed first-hand the growth of Melton and the surrounding community. As the area grows, so does the demand for high quality building materials and increased support. Bowens ensures both in the long term and will enable us to continue to deliver for the Melton community...

Since October, the Bowens Melton store has been a service centre until the new, larger store in Cobblebank has been built. It is expected to be finalised in 2024 and will be the 18th Bowens store in Victoria.

Related:

Lowe's has announced its goal to reach net-zero emissions across the company's scope 1, 2 and 3 greenhouse gas emissions by 2050, in accordance with guidelines from the Science Based Targets initiative (SBTi), the global body enabling businesses to set emissions reduction targets in line with climate science.

To meet interim SBTi targets, Lowe's has also committed to decreasing its scope 1 and scope 2 emissions by 40% and reducing scope 3 emissions by 22.5% below 2021 levels by 2030.

To reach net-zero emissions by 2050, Lowe's reduction strategy includes:

Chris Cassell, Lowe's vice president of corporate sustainability, said:

This new target marks a significant expansion of our previous climate commitments. Through strong collaboration, this challenging but critical work will drive meaningful improvements across our full value chain, from our suppliers to Pros' worksites, to our customers' homes and our communities.

Related

The Home Depot solar

The Home Depot has pledged to produce or procure 100% renewable electricity equivalent to the electricity needs for all of its facilities by 2030. It has also joined the SBTi to reduce global emissions, committing to set goals for Scope 1, 2 and 3 emissions by 2023.

The big box retailer is purchasing 100 megawatts (MW) of solar energy from National Grid Renewables at its Noble solar and storage project in Denton County, Texas (known as Noble). This purchase will generate the approximate equivalent of nearly 8% of The Home Depot's total electricity usage.

Since 2010, The Home Depot has reduced electricity consumption in its US stores by 50% and currently operates rooftop solar farms on more than 80 stores and electricity-generating fuel cells in more than 200 stores.

The Home Depot currently purchases solar power from a 75 MW facility and is under contract for another 50 MW of solar capacity. The company also purchases energy from a 50 MW wind facility.

The retailer expects the combined annual renewable energy generation from these agreements would be enough to power more than 500 stores. Ron Jarvis, chief sustainability officer for The Home Depot, said:

Solar energy is the most abundant energy resource on earth. With this purchase, we are getting a step closer to our goal to produce or procure 100% renewable electricity equivalent to the needs of our facilities. We anticipate about three-quarters of our alternative and renewable energy capacity will come from solar energy by the end of 2023.

Noble is a 275 MW solar and 125-megawatt hour (MWh) energy storage project located in the Electric Reliability Council of Texas (ERCOT). It is projected to avoid 450,000 metric tons of carbon dioxide emissions annually during operation.

Husqvarna's Xcite[tm] zero-turn mowers, the Z350 and Z380, has the latest in grass-cutting technology with a best-in-class suspension system, industry-first on-stick controls, and blades designed to last up to five years. (See Note 1)

Both models utilise Husqvarna's SmoothRide[tm] customisable comfort technology and suspension featuring adjustable springs with 10 comfort settings and a 4-bar link system, creating a smooth ride with no rocking or wobbling. (See Note 2)

Both models also have a seat that measures 15" on the Z350 and 18" on the Z380, with the main difference between the two models being in size and subsequently, cutting power.

Husqvarna's SmartControl[tm] heads up driving introduces on-stick controls which provides users with the ability to start and stop the engine at their fingertips. The controls also allow for an easy way to engage the blades and display mower status alerts, so mowers can keep their eyes focused on the lawn ahead.

Both models also feature an LCD digital dashboard with a fuel gauge to easily track mower statistics, receive service reminders and check fuel levels to ensure there are no surprises when it's time to mow.

The Xcite[tm] Zero-Turn mowers employ DuraSharp[tm] blades with Husqvarna's patented blade technology to help keep blades sharp for up to five years, reducing the need for blade sharpening and replacement while setting users up for easy maintenance. (See Note 2)

On the turf, all-terrain tires keep the Xcite planted while the 54" fabricated cutting deck with foot-operated lift system and 12-position cutting height selector maintain precision cutting.

The Xcite Z350 and Z380 models will be available for purchase in the US through select Husqvarna dealers and Lowe's stores beginning in February 2023.

Native Grace at Robertson, launched by Luke and Catheryn Maitland in November 2020, has been awarded the Best Small Retail Nursery at the Nursery and Garden Industry NSW & ACT (NGINA) awards.

Hosted by ABC Presenter, Costa Georgiadis, the awards recognise wholesale/production nurseries, retail garden centres, allied suppliers, apprentices and the next generation of industry leaders from across NSW and the ACT for being at the top of their fields.

Luke and Catheryn, reinvigorated the 60 year old centre, one of the oldest in the Southern Highlands which had been closed for ten years prior.

Luke Maitland is a horticulturist who specialises in native plants and the centre has hundreds of plants, a cafe and a retail store. He told Southern Highland News:

It is an honour to be recognised by the industry for all the hard work the team have put into the nursery over the last 12 months.

Having launched in November 2020 we've had major challenges including COVID and floods so it's a great way to end the year on a high winning this award. It was an exciting moment to be presented the award by legendary gardener, ABC talent Costa Georgiadis.

We'd like to thank the Nursery Garden Industry NSW ACT for this Award and for their support and efforts, it's really terrific to have such a strong industry body who supports businesses.

According to the judges, Luke and Catheryn Maitland created a "little gem of a place" at Robertson. They said:

It is a clean, neat, tidy and impeccably presented garden centre. It has a design studio creating sustainable Australian Native gardens for clients, a gift shop focusing on Australian products and bush foods and there is an onsite cafe van. The stock is top quality, and it is a winner in so many ways.

Petries Mitre 10 Dubbo

The team at Petries Mitre 10 Dubbo is preparing for the national title announcements in early 2023 after winning 2022 NSW Garden Centre of the Year for Independent Hardware Group.

Judging criteria included the best use of space, range of stock and stock presentation, sales, signage, customer service and more.

B&Q's ecommerce range is expected to grow from 300,000 to more than four million in coming years, as its online marketplace grows. At the same time, the Screwfix website is expected to become a hundred times faster through re-platforming.

Both results are predicted as parent company Kingfisher capitalises on Google Cloud's infrastructure, platform services, and artificial intelligence (AI) solutions. It should provide customers with faster and more intuitive searches, as well as improve the efficiency of deliveries such as its less-than-one-hour Screwfix 'Sprint' service.

Adopting Google Cloud technologies will also allow Kingfisher to experiment with advanced testing environments at much lower cost.

In addition, Kingfisher plans to create a new, real-time order system that will vastly improve stock accuracy, and deploy visual search using Google Cloud AI tools to help customers discover the product replacements that most closely match their needs.

A long-time user of SAP software, Kingfisher, has begun moving its legacy data to Google Cloud. JJ Van Oosten, chief digital and technology officer at Kingfisher, said:

At Kingfisher, we have an ambitious technology strategy in place. Google Cloud is an engineering organisation at its heart, while simultaneously understanding the complex retail landscape. As we look to the next phase of growth and the kind of talent we want to attract, this meeting of minds was a real draw for us.

To reach our goal of creating a world-class engineering centre, we need a technology stack that will support us to experiment and move quickly. Google Cloud is helping to position us as a true digital leader, and our global teams and customers will benefit as a result.

Related

The Australian Bureau of Statistics (ABS) has released retail stats for October 2022. This comes against the backdrop of a series of unusual weather events throughout the spring. The map below, from the Bureau of Meteorology, shows how much above average the rainfall for October and November 2022 has been.

In particular, there is news that Bunnings is seeing reduced sales for the spring season, resulting in its incurring high charges for warehousing excess stock.

While Bunnings might have seen some adverse effects from the weather, the story for Australia overall is more positive. In Chart 1 and the subsequent charts, HNN is using periods consisting of the trailing 12 months to October, which are designated with a "p" prefix. So p2021 refers to the period from November 2020 to October 2021.

As the top graph in Chart 1 illustrates, p2022 has been very much a record-setting period. With the exception of May, every month has seen hardware retail sales reach a monthly record for Australia. As the lower graph indicates, there has been steady growth throughout the period, the dark red line tracking just below 10% growth for seven months of the period. While growth for October 2022 is close to zero, sales for that month are nonetheless the second-highest ever achieved for Australia (the highest being in December 2021).

New South Wales

New South Wales (NSW) does show a significantly lower sales figure for October 2022 than October 2021. However, the sales figure for October 2021 was the record for the state, at $767.2 million. The October 2022 number was $705.2 million, which represents the third highest monthly sales for the state, indicated by the top graph in Chart 2.

It's likely that the retail figures for November and December 2022 will tell more about the state of hardware retail in NSW than the October numbers, given the exuberance of the October 2021 sales.

As the lower graph indicates, for p2022, there were two main periods of growth, from January to April 2022, when growth was around 5%, and from May to August, when growth was above 10%. The average growth for p2022 was 6.49%.

Victoria

Perhaps the most interesting feature that is developing in the sales chart for Victoria (VIC) is how contained sales for October have remained. In fact this applies to some extent for the entire early spring sales, from August through to October.

The upper chart shows a similar upward slope for those three months, and the lower chart shows that, in fact, the highest growth rate did not occur during the p2020, p2021 and p2022 pandemic years, but in p2019.

What this brings up is that much of the expansion in the VIC hardware retail market has been contra-seasonal, in that expenditure has increased from March to July. Looking at that period in the lower chart, there is the broad upward arc for p2020 (the green line), which is countered by the inverse arc for p2021 (the blue line), and then "evened out" by the flatter line for p2022 (the dark red line).

It is Interesting to compare pandemic sales growth between NSW and VIC. In the pre-pandemic period p2019, NSW had total sales of $5.78 billion and VIC had sales of $5.64 billion. For p2022, NSW had sales of $7.67 billion, an increase of $1.89 billion, or 32.7%. VIC had sales for p2022 of $6.64 billion, an increase of $1.00 billion, or 17.9%. However, on a population basis, VIC had sales of $1.01 million per 1000, and NSW had sales of $0.94 per 1000.

Queensland

Perhaps the best summary for Queensland (QLD) is that sales in p2022 have followed fairly closely to the pattern set in p2021, with additional growth.

As the lower graph indicates, growth for p2022 averaged 7.49%, peaking in June 2022 at 15% and exceeding 10% in March and April 2022. Total sales for p2022 were $5.40 billion, up by $1.36 billion from p2019, or 33.61%.

South Australia

In contrast with the NSW, VIC and QLD, we would have to conclude that p2022 has been an exceptionally good period for hardware retail in South Australia (SA). Prior to p2022, the highest level of monthly sales was $145.7 million in October 2021. Not only was that surpassed in October 2022 with $163.3 million in sales, it was also exceeded in December 2021 ($156.2 million) and September 2022 ($148.6 million) - and very nearly equalled in November 2021 ($144.6 million). Viewed in another way, p2022 set a record for monthly sales for every month, except May, where sales for May 2020 were slightly higher.

The average increase for p2022 over p2021 was 20.86%. Total sales for p2022 were $1.68 billion, an increase of $502 million over p2019, up by 42.69%.

Western Australia

In Western Australia (WA) sales for October 2022 represented an all-time high for the state, at $262.1 million. In fact, p2022 delivered the four highest ever sales results, for November and December 2021, and September and October 2022.

Total sales for p2022 were $2.69 billion, up by $697 million on p2019, or 35.03%. Average monthly growth for p2022 was 10.34%. As the lower graph indicates, in contrast to p2020 and p2021, growth was comparatively steady around that 10% mark, with only April 2022 and June 2020 showing a high and a low respectively further outside the range.

Australian Capital Territory

Ever unique, the sales results for Australian Capital Territory (ACT) show the territory closely following sales from p2020 from April 2022 onwards, as indicated by the upper graph.

The lower graph shows what we've come to expect from the ACT - a period of normality, followed by a period of, well, "crazy". Though in this case the "crazy" really has little to do with p2022 and lots to do with p2021, specifically the sudden drop in hardware retail sales for August and September 2021, followed by the sudden spike upwards in October 2021. That's reflected in the growth numbers, with 34% growth in August 2022 and 44% growth in September 2022, followed by -0.2% growth in October 2022.

Average growth for p2022 came in at 13.40%. Total sales for p2022 were $534 million, up by $162 million on p2019, an increase of 43.89%. The ACT does have one of the highest per-capita expenditures on hardware in Australia at $1.17 million per 1000.

Analysis

As HNN commented about the September 2022 retail sales figures, it seems quite clear that the increase in the target interest rate since May 2022 has had little discernible effect on the hardware retail industry. Obviously, inflation is playing some part in these sales figures, but it is clear that for most states and territories, sales are continuing to grow beyond that.

While it's understandable that this is good news for the industry, it also does bring with it certain troubling concerns. The governor of the Reserve Bank of Australia (RBA), Philip Lowe, has made clear that the RBA is engaged in a quite particular fight against inflation. What has made inflation different this time around is that its cause is split between the "demand" side (what people buy) and the "supply" side (what is available for them to buy). That is very different from inflation in the recent past, which was largely driven by surges in demand.

In practical terms, to beat inflation caused on the supply side, it is necessary to drive down consumer demand, not back to, say, the average level of the four or five years before inflation, but down to a level beneath that, one which matches the actual level of supply. The difficulty, as a number of economics commentators have pointed out, is that after two or more years of largely curtailed spending, many Australians have a "buffer" amount of savings. As higher interest rates reduce their spending capacity, they are utilising savings to retain their "normal" spending patterns.

With a bit of luck, some of those supply restrictions might lift a little during 2023. Petrol prices have already fallen, though not back to the levels of the time before Russian invaded Ukraine. Building material costs are continuing to come down, but not universally. It seems unlikely, however, that the supply issues will be resolved before the end of 2023.

It is quite clear from other comments by Dr Lowe that the RBA is settling in for a longer fight. The point that has to be reached is one where there is some reduction in external supply issues generating prices increases, interest rates are beginning to become of more concern, and - rather dauntingly - Australians are sufficiently concerned about the national economy that they voluntarily curtail their spending.

The question remains as to what exactly will be curtailed. Will it be only "high discretionary" items, such as eating out at restaurants and cafes, or will it extent to less discretionary items such as basic household goods, including hardware? The concern is that this slowdown in consumption could coincide with the end of the backlog of construction work that has built up, and thus produce a slump in hardware sales.

Related

In Dubbo (NSW) Bunnings' development application for an expansion of its current site has progressed with Dubbo Regional Council.

The expansion with an estimated value of $11.5 million will include a main warehouse, outdoor nursery, bagged goods canopy, trade sales area, building materials landscape yard, bulk trade yard, new internally relocated cafe and playground, an additional trolley bay and 33 standard and one accessible carpark spaces.

Bunnings property development manager, Tim Wilkinson, told the Daily Liberal and Macquarie Advocate:

If approved it will create one of the top 10 Bunnings in terms of size, and certainly bigger than any of the regional Bunnings in this vicinity.

Mr Wilkinson said the expanded store will give them more opportunities to recruit even more people from the local community. That's in addition to the construction jobs that will take place during the building phase, which is expected to take around a year to complete. He said:

Furthermore, there's a safety impact that's worth mentioning; being able to have the trucks ingress and egress through the proposed design along the rear boundary of the site and ensuring there is no trucks mixing with consumer cars will be really beneficial.

In addition to a second goods area where the smaller trucks that are both dropping off and picking up bulk loads can do the same through the rear boundary, we think that's a real beneficial point.

The extension will mean council has to relocate the sewer line and access easements. Councillor Richard Ivey said it was a "win-win" situation for the business to add to their existing infrastructure with further infrastructure that will complement what it already has. He said:

It's so much better than moving to another site and therefore having to do something with the old site. Being able to expand what's there and end up with something that's much, much better than what's there now is win-win, it's great.

Portland

A majority of councillors on Glenelg Shire Council has granted a proposed planning application for a new Bunnings store at the end of 68 Richardson Street in Portland (VIC) to go ahead.

The store will have a total retail floor area of 5382.62 sqm and include an enclosed covered main warehouse building measuring approximately 2113.45sqm, a fully enclosed timber trade sales areas of 1685.29sqm, and 127 car parking spaces.

According to the planning application, the Portland community will be able to generate jobs, develop its economy, and reinforce its role as a shopping and employment destination. Mayor Scott Martin The Warrnambool News:

It's fantastic having Bunnings invest into the Glenelg Shire, so it's showing faith that we are very much a high growing area.

We do have Bunnings stores out in the country but we've obviously got a lot of industry, and I guess like most places around Victoria at the moment it can be very hard to get a builder, so that's a bit of Bunnings' niche there, they supply a lot of timber and tools, so they see an area where they can do business.

Roadworks will be required to be undertaken once the development of the site commences when the development process commencement is yet to be announced.

Mr Martin said the parties hoped the development to begin in 2023.

With the UK undergoing somewhat linked political and financial crises, it's hardly a surprise that forward-looking statements from hardware retailers are couched in cautious terms. Where hardware retail markets in the US and Australia show a degree of robustness and stability even as interest rates rise, the UK (and French) markets seem to have become flat, possibly trending backwards if inflation is taken into account.

In particular, with winter coming on, there is grave concern about the impact of increased energy prices, both for customers but also for retail businesses themselves. The flip side of this is that there is some increase in retail sales of products that will help consumers conserve energy in their homes.

Kingfisher

Kingfisher's major home improvement chain in the UK, B&Q, reported sales of GBP935 million for its third quarter FY2022/23. In constant currency terms, this was down 2.7% on the previous corresponding period (pcp), which was third quarter FY2021/22. In like-for-like (comp) terms the decline was 3.5%.

The company reports strong demand for products such as insulation, while the bathroom and storage categories retained sales. Unseasonably warm weather meant that outdoor category sales fell. Online sales continue to grow, and B&Q's Tradepoint product, for tradespeople saw sales increase.

Screwfix, Kingfisher's trade-oriented rapid service brand, fared better, with revenue of GBP610 million, up by 4.9% in nominal terms. However in comp terms, sales fell by 0.5%. The company reported that demand from trade customers remained strong, especially in building, joinery, bathroom and storage. Sales in tools, hardware and the electricals, plumbing and heating categories remain constant. Screwfix continues to expand, opening 17 new stores in the UK and Republic of Ireland, as well as its first two stores in France.

In Kingfisher's French businesses, Castorama reported sales of GBP564 million which represented an increase of 0.8% in constant currency terms. Sales were steady from DIY and do it for me (DIFM) customers, with heating products and energy efficiency solutions helping to drive sales.

Brico Depot recorded sales of GBP533 million, an increase of 0.2% in constant currency terms. Building and joinery as well as insulation helped to drive sales.

Other international sales, including France, Spain, Portugal and Romania reported overall sales of GBP621 million, an increase of 8.4% in constant currency, and comp growth of 6.7%.

Overall, Kingfisher Group had sales of GBP3263 million for the quarter. In constant currency, this represented growth of 1.7% and comp growth of 0.2%. From a year-to-date (YTD) perspective, in constant currency, the group has negative growth of 1.4%, and negative comp growth of 2.7%.

On a three-year comp basis, the revenues have grown by 15.3% for the quarter, and 16.2% in YTD terms.

Kingfisher has dropped its guidance for pre-tax profit from GBP770 million to a range of GBP730 million to GBP760 million.

Wickes Group

While Wickes does not release much detail, the company says that trading stabilised during third quarter 2022/23. Where its core business had negative growth on an annual comparison basis for the first two quarters, in the third quarter it reported 0% growth.

However in its DIFM (Do-It-For-Me) business, Wickes reported growth of 12.2%, resulting in total growth for the quarter of 2.6%.

According to the company:

Local Trade sales performed strongly, with our TradePro customer base continuing to increase by 10K per month to [circa 720,000], as we continue to grow the awareness and appeal of the scheme through its compelling value proposition. DIY sales remain below last year although with no signs of further softening since our July trading update.

Analysis

Chart 1 shows the sales for the UK hardware market, as provided by the UK Office of National Statistics (ONS). This is based on a 100-index.

As this indicates, while the UK market did experience some of the same lift to the hardware retail market, in their case in May 2020, that market has also seen wide fluctuations, and has been gradually moving back to convergence with the pre-pandemic market.

This is shown more clearly in Chart 2, which tracks the percentage change in the index.

It can be clearly seen that in the most recent p2022 (the green line) this consistently tracks in negative territory, as the market drifts back towards its pre-pandemic levels.

For the first time since the pandemic, 30 suppliers put up a stall at Tamworth Building Supplies for tradies, DIY enthusiasts and renovators, and offered information about the industry.

Manager Steven Brazel told The Northern Daily Leader he was pleased to put on the event, and celebrate moving past the issues caused by the pandemic. He said:

The supply issues aren't actually a big problem at the moment for our industry. It's actually fairly stable now, so there's actually a bit of a glut of timber and things like that.

However recent floods affecting New South Wales and extreme weather has held up the process of getting materials out west, and to Narrabri. Mr Brazel said:

You just can't get there. Wherever it's flood affected, it is hard for us to get gear to them.

Usually tradespeople spend the lead up to Christmas "running around", according to Mr Brazel. He said:

It usually is a madhouse leading up to Christmas. Because everyone wants to get into their new house, or finish a renovation.

But this year is slightly different, with homeowners feeling the sting of interest rate rises, he said.

One of the stall holders, Hyne Timber, participated in the trade event to raise awareness for its new product range. NSW sales manager Richard Dawson said COVID-19 put a strain on the sawn timber producer's staff numbers.

But the biggest issue for the company remains the black summer bushfires of 2020 in northern Australia. It will take a decade or more for the forestation to bounce back, he said.

We're still working through those numbers, and pulling timber from other areas of NSW for service as normal.

UBS has become the first investment firm to raise concerns over a slowing sales momentum at Bunnings as wet weather conditions constrict some seasonal sales for some categories throughout spring and summer.

In The Australian, analyst Shaun Cousins increased his earnings guidance for Bunnings owner Wesfarmers in 2023 and 2024 driven by its Kmart and its chemicals arm. However, it will be somewhat offset by moderating growth at Bunnings and Officeworks.

Mr Cousins revised his sales and earnings outlook for Bunnings, and has reduced his 2023 sales target by 2.1% and his pre-tax earnings target for the hardware chain in 2023 by 0.9% to around $2.17 billion

Mr Cousins has highlighted a growing concern that poor weather conditions on the east coast of Australia is having a detrimental effect on Bunnings' key outdoor categories. He said in his report:

Reduced Bunnings sales and earnings before tax due to lower revenue per Bunnings store ... due to lower DIY revenue - wet weather delaying, and overall reducing, spring sales, plus a more conservative outlook - albeit still above pre-COVID due to a better network.

While some categories are growing at a double-digit pace, key categories sensitive to weather conditions - such as outdoor furniture, gardening, barbeques and air-conditioning - have slowed. However, this has not been a material impact on Bunnings' profitability at this stage, and recent improvements in weather conditions have seen customers return to these categories.

He also noted that Bunnings was gaining share in a larger addressable market, and greater category participation by consumers.

Mr Cousins said Bunnings should benefit from strong housing demand and more sales to trade and professional customers. In his report, he said:

Looking forward, the Australian consumer is facing significant headwinds from the rising cost of living across energy, food, fuel and housing costs, with house prices falling.

These headwinds have yet to weigh on spending with the strong labour market (low unemployment and rising wages despite falling purchasing power) and elevated recent household savings key supports as the consumer returns to traditional spending patterns and engages in catch-up spend after difficult years with COVID.

For Wesfarmers, the company is comparatively well positioned for a slower consumer environment, especially in its larger retail businesses Bunnings and Kmart. Each holds a strong value proposition for consumers with a track record of lowering prices/holding back prices in the face of cost inflation.

Stockholdings

Bunnings is facing higher warehousing costs for stock it pre-ordered to support expected strong sales over spring and Christmas, only to see a downturn in demand because of poor weather across much of the country.

According to The Australian, Bunnings has been forced to pay higher than usual rates for third-party warehouse spaces. In some instances, the hardware retailer has had to book warehouse locations that are less than ideal as it faces heavy competition from other retailers that need similar space.

As a result, Bunnings has had to actively explore options to secure more of its own warehouse space rather than relying too heavily on third party providers, including the possible construction of a warehouse in South Australia. Bunnings Group managing director Mike Schneider told The Australian

As we do every year, we use warehouse space to support seasonal stock, and over time we have grown warehouse capacity in line with business growth. Given the cooler and wetter conditions in some markets, sales in outdoor-related categories have been softer, which means some of our additional warehouse capacity may be maintained. Like all retailers, we will continue to manage our stock position to ensure our customers can access the products they need.

To manage uncertainties relating to the continued supply chain disruptions from China, closed ports and other dislocations along its global supply chain links, Bunnings ordered more stock to fill shelves for spring and summer, which are normally bumper months. Bunnings managers have also been building inventory over the past year back to pre-COVID levels.

But now conditions are changing. Weakening consumer demand leaving many retail chains such as Bunnings with bloated inventory levels with more stock on hand than expected. It is now alleviating the problem by taking on more warehouse space from third-party landlords.

Bunnings has always operated a hybrid supply chain model, with its own warehouses and third-party facilities. To support peak trading and seasonal stock, Bunnings has typically used outside storage facilities for its short-term needs.

However, its need for warehouse space - and therefore warehouse costs - has increased in line with its business and sales growth trajectory.

In the current environment, where industrial land is scarce, third-party warehouse costs are hundreds of thousands of dollars a month higher than usual.

Ta Ann Tasmania (TAT) general manager Robert Yong said the partnership with Australian Sustainable Hardwoods (ASH) is an example of the growing demand for products for the building industry. He told The Burnie Advocate:

TAT and ASH have been working together to develop engineered flooring with our Smithton plant supplying a high-quality substrate and ASH adding a Tasmanian Plantation oak laminate facing.

We have been working with ASH since August last year doing trials of our base substrate panel for their engineering flooring. ASH will laminate 4mm thick sliced hardwood veneer and cut into 200mm-wide tongue and groove flooring strips and then pre-coat into a range of architectural finishes.

ASH director Daniel Wright said that it would be the only pre-finished engineering flooring product on the Australian market that was not imported.

Previously, we produced part of it overseas, sending our feedstock to have it pressed to their plywood and then bringing it back to Australia for coating. But quality and coordination have become more difficult in recent years.

We have a third-party reviewed chain of custody certification under the Australian Forestry Standard and the Program for the Endorsement of Forest Certification schemes (PEFC) for all our products, as does TAT, so this gives us much better control to ensure wood used in production comes from certified sustainable sources.

Mr Wright said it aimed to have the flooring available on the Australian market by 2023.

Circular Head mayor Gerard Blizzard welcomed the announcement. He said:

An increase in locally-manufactured building materials is greatly needed to meet the Australian-wide demand to build more homes, as has been acknowledged in recent federal and state budget announcements. Here in Circular Head, we are keen to grow the population and look forward to increased local employment...

The owner of the site that houses Bunnings and Australia Post in the Melbourne inner suburb of Brunswick is flipping the property.

The 3700sqm site at 409-419 Sydney Road sold quickly in 2020, according to The Age. At the time, Bunnings was planning a larger store on nearby Glenlyon Road, but locals objected, and the proposed new outlet was quashed at VCAT (Victorian Civil and Administrative Tribunal).

Records seen by The Age show the purchase settled in March 2022, with Sydney property developer Sam Ballas paying $13.82 million to a syndicate of northern suburbs investors. It was a well-timed sale for the vendors because the latest quote looks similar to the old price, $13 million-plus.

Melbourne Acquisitions agent James Latos and Dom Gibson, who are selling it again, said it is one of only three sites on the strip larger than 3500sqm not in planning or under construction.

The frontage to Sydney Road includes five double-storey Victorian terrace facades. The rear includes a modern warehouse. Tenants pay about $415,000 a year in rent for the site, which has 58 car parks at the rear.

Bunnings' 10-year lease runs until 2025, plus it has two five-year options.

Related

New Zealand

Bunnings still has a lease on the property in central Hastings (Hawkes Bay, NZ) that is for sale, for another four years. It has an option to continue leasing the site for a further five years after that.

The site is known as 207 and 301 Market Street North and includes an area of about 9000sqm.

The owner of the property has decided to sell, and the site is being marketed by Colliers. Colliers Hawke's Bay director Danny Blair said it was a great investment opportunity. He told Hawkes Bay Today:

Bunnings is one of the most recognisable brands across the New Zealand retail landscape and are long-term occupants at the site.

With future rental growth locked in through the current lease, this represents an outstanding offering for buyers who have the opportunity to secure a top-quality asset with an established occupant.

In addition to the Bunnings building, there are about 100 car parks on the site.

Colliers says the annual rental income from the current lease agreement with Bunnings is NZD521,551 plus GST.

The Australian Construction Industry Forum (ACIF) has released its forecast for the construction industry going into 2023 and 2024. The ACIF states that the report forecasts a decrease in expenditure on both new housing and alterations and additions (renovations).

However, on a more positive note, the forecast sees commercial building continuing to grow. The forecast concludes that the net result will be an increase in building work done by 1% to $251 billion.

The ACIF says it sees residential demand being affected by three main factors:

Additionally, the ACIF also sees increased risk for builders themselves. They cite banks as being less willing to make interim loans to help builders meet costs and clients being more reluctant to finance construction projects that have been considerably delayed. They warn that there could be an ongoing increase in builder insolvencies as a result.

In terms of the overall shape of the market, the ACIF states:

While there is work in hand in an enlarged construction pipeline, the drop off in new projects will result in reduction in the volume of work done this year and a deeper dive in 2024-25.

Balancing out the diminished market in residential construction, the ACIF forecasts an increase in non-residential construction. They see offices, other commercial and industrial experiencing a small surge, with a slight increase in retail and wholesale trade construction. ACIF also projects good prospects for government funded construction in both the health care and education areas, with infrastructure construction set to growth 3.8% in FY2022/23.

For more details, and the chance to purchase the complete forecast from the ACIF, please use the link below.

The view from the RBA

Some commentators remain puzzled as to exactly why the Reserve Bank of Australia (RBA), in its continued aggressive stance on increased interest rates, has sought to diminish these markets. The governor of the RBA, Philip Lowe, explained some of what is going on in speech given to the Committee for Economic Development of Australia (CEDA) on 22 November 2022.

The core point that Dr Lowe had to make was that the type of inflation currently being experienced by Australia - and many of its trading partners - is quite different from other bouts of inflation experienced since the 1970s. Past inflation has been largely driven by the "supply side" - a steep rise in aggregate demand, which led to localised shortages, driving up prices. Current inflation is driven by robust demand in the context of an actual shortage of supply.

While Dr Lowe acknowledges that many of these shortages do seem temporary in nature - including interruption of production and supply due to COVID-19 concerns, and the energy shortage brought about by Russia's invasion of Ukraine - he also suggests there are longer term issues at work as well. These include:

Dr Lowe explains this last:

There is very significant investment in renewable energy around the world as we transition to green energy. But, at the same time, the existing capital stock that is used to produce energy is depreciating quickly, through decommissioning or lower levels of sustaining investment. It is difficult to make predictions here, but it's probable that the global capital stock that is used to produce energy will come under recurring pressure in the years ahead. If so, we could expect higher and more volatile energy prices during the transition to a more renewables-based energy supply.

The solution to most of these problems is, of course, increases in productivity.

In the meantime, Dr Lowe left the audience with no doubt as to how determined the RBA is to bring inflation under control, even though this does mean there will be short-term economic distress. In terms of wages, he had this to say when responding to questions after his speech:

So I know it's very difficult for people to accept the idea that wages don't rise with inflation ... and people are experiencing a decline in real wages, that's tough. The alternative though is more difficult. And, if we can ride through this period with wages growth staying broadly in the current range, maybe a bit higher but broadly in that range, and the supply side problems resolve, then inflation will come down and it can be painless, relatively. But, if we all buy into the idea that wages have to go up to compensate people for inflation, it will be painful. So best avoid that.

Dr Lowe also addressed the issue that is raised by many in hardware retail and construction, the delay between the introduction of higher interest rates and their real impact:

All of our models say that, when we tap the interest-rate brake, the maximum effect on output is 18 months to two years, so we operate with a lag. I think at the moment it's quite likely the lag is going to be a bit longer than it normally would be, and that complicates our task as well, and I say that for a few reasons.

The first is that, over the past couple of years, Australians saved an extra $250 billion over what they would normally save ... that's a lot of money. So that's sitting there and that's supporting consumption.

A second thing we saw during the pandemic was people take out fixed-rate loans. In Australia, in the past, maybe 10% of the population would take out a fixed-rate loan. Well, during the pandemic, it got to 50%. So a lot of people took out fixed-rate loans. So they're not yet paying the higher interest rates, but they will start paying them next year.

Analysis

What the ACIF forecast really acknowledges is a stark truth that is still being absorbed by both the business community and the general community in Australia. As Dr Lowe has outlined, even though current inflation is not being driven by excess aggregate demand, but rather by supply shortfall, the only means the RBA possesses to solve inflation is by cutting demand.

What this means is that monetary policy will be tightened until it reaches the point where demand is diminished. This could mean reducing demand below the level that would normally be "affordable" by the economy. While the RBA is not going to say this, that could mean some businesses fail, and the unemployment rate increases.

In plain terms, the economy will likely be steered as close as possible to having a negative quarter as it can get, and we are likely to experience at least two quarters of real austerity, as prices increase, wages do not, and many Australian households find themselves going backwards economically.

That kind of change could have a major impact, and it is likely to strike around first quarter calendar 2024, just as the construction backlog is finally dealt with.

Bunnings is expecting to make several office-based roles redundant as it looks to manage a different economic environment, post-COVID. Economists have indicated that consumers cut back their shopping from January as higher interest rates, bills and everyday item costs continue to drain household budgets.

Sources have told The Australian that the hardware retailer will be restructuring its head office and support centre teams. Bunnings hopes to minimise any impact on current team members through redeployment and it expects the proportion of its team leaving the business to be low.

A management review of the company's back-office workforce is to be carried out and expected to find that "some support office roles" around Australia "will no longer be required" now that the COVID-19 period of disruption and lockdowns seem to be over. In the Daily Mail Australia, the review reportedly said:

Now that we're on the other side of the most disruptive part of the pandemic we're reviewing our support centre resourcing to ensure we're set up for the future. We periodically review our team resourcing to make sure we have the right skills and capabilities to support our growth strategy.

Bunnings has not confirmed exactly how many positions will be made redundant but the overall loss is estimated to be around 300. Sources said there will be some job losses through attrition. But the job cuts will also take into account jobs currently unfilled, so not every lost position means a lost job.

Bunnings overhauled its development teams during the COVID lockdowns and added to its staff numbers, but this timely review will focus on it support centre resourcing to ensure it is set up for the challenges facing the Australian economy.

It has already been shifting its training, human resources and skill development programs to an online format.

Brand recognition

Bunnings has topped YouGov's Best Brand Rankings, retaining a dominant position among Australian consumers with a score of 48.4.

Consumers were asked about their views on brands across various markets, which allows YouGov to build a picture of how these brands are perceived by the general public.

The rankings are based on YouGov BrandIndex's Index score that is a measure of overall brand health calculated by taking the average of Impression, Quality, Value, Satisfaction, Recommend and Reputation.

The rankings show the brands with the highest average Index score between 28 September 2021 - 27 September 2022 compared to 28 September 2020 to 27 September 2021. The scores are representative of the general population of adults aged over 18 (and some are online representatives).

Neilsen

As part of its inaugural Brand Sustainability Report, data and market measurement firm Nielsen has revealed its 2022 Brand Sustainability Rankings, with Bunnings rating highly in consumer sustainability perceptions.

Neilsen surveyed 8,430 Australians consumers to determine the perceived sustainability credentials of 247 core brands across 18 categories.

Each of the 18 categories was assigned a "social ranking", "environmental ranking" and an "overall ranking", with the latter being a combination of the social and environmental rankings. As opposed to focusing on how brands are positioning their sustainability practices in the marketplace, the findings reveal how consumer perceive companies across key sustainability metrics.

Amongst home goods retailers, Bunnings had the top performance across all three metrics.

In Mumbrella, Andrew Palmer, Nielsen head of media analytics in Australia, said:

Consumer expectations of the sustainability efforts of brands are changing rapidly. Increasingly, they want to know that their environmental and social claims can be substantiated and aren't just 'greenwashing'.

Each of the categories used in the rankings were selected based on their relevance to the Australian consumer market, in terms of market share, prominence, and additional data from Neilsen. No company was involved in the selection process, and none had the option of being excluded.

US-based big-box home improvement retailer Lowe's Companies has announced its results for Q3 of its FY2022. One highlight was Lowe's sale of its Canada-based operations, including the Rona store chain. This follows years of not being able to make the more northern operations match the US-based stores in terms of profit and performance. The sale was made to US-based private equity firm Sycamore Partners for USD400 million, plus unspecified performance benefits. Previously Lowe's had acquired the Rona store chain for USD2.4 billion in May 2016.

The result of this sale was that selling, general and administrative (SG&A) costs took a heavy hit. Sales for the reporting quarter were USD23.48 billion, down by 2.45% on the previous corresponding period (pcp), which was the third quarter of FY2021. SG&A came in at USD6.44 billion, up by 47.34% on the pcp. Consequently, operation income was USD924 million, down 66.87%, while net earnings were USD154 million, compared to USD1896 million in the pcp.

For the nine months year-to-date, sales were USD74.61 billion, down slightly on the number for the pcp, which was USD74.91 billion.

In the press release from Lowe's, the company's CEO, Marvin Ellison is quoted as saying that the company's store-on-store (comp) sales rose by 3.0% in the US, driven by a 19% uplift in Pro/trade sales, and continued strength in DIY sales.

Analysts' presentation

Mr Ellison opened the presentation with some comments about how Lowe's sees the market in the US developing. While he acknowledges the impact of high interest rates, and the US Federal Reserve Bank's commitment to slowing the economy to ward off continued inflation, he remains optimistic that the fundamentals of the home improvement market will continue to support strong sales through 2023.

You've heard me talk about this before, but demand drivers for home improvement are distinctly different from those that drive home building, so it's important not to confuse the two. And as a reminder, at Lowe's, the three highest correlating factors of home improvement demand are home price appreciation, age of housing stock, and disposable personal income.

So, let's start with home price appreciation. Even if there is a broad-based decline in home prices, homeowners currently have a record amount of equity in their homes, nearly $330,000 on average, which remains supportive of home improvement investment.

...

Second, the average age of homes in the US is over 40 years old and roughly three million more homes built during the housing boom in the mid-2000s, will be entering prime remodelling years by 2025, which is a key inflection point for big-ticket repairs. This is one of the key reasons why two-thirds of home improvement spend is non-discretionary on repair or maintenance projects that cannot be delayed.

Third, consumer savings are near record highs, while disposable personal income remains strong. And more than 90% of homeowners either own or home or are locked into a low fixed mortgage insulating them from rising rates. On top of these three factors, there is a persistent $1.5 million to $2 million undersupply of homes, and 250,000 first-time millennial homebuyers are expected per year through 2025.

This unique combination of factors is causing homeowners to trade up in place, preferring to invest in repairs and renovations, to make their current homes meet their families evolving needs rather than buying a new home.

And this is why we're so confident about the outlook for the home improvement industry even in a period of high inflation and rising interest rates because the key drivers of our business remain supportive.

What Mr Ellison terms "trading-up in-place" is, in fact, a central part of Lowe's strategic overview, as the CEO made clear in his response to one analyst's question.

We talked about trading up in place, and that is a phenomenon that we're seeing because the 1.5 million to 2 million shortages of homes and the high-interest rate environment is just incentivising homeowners to keep their low fixed rate and modify their existing home. And so, because of that, you're seeing a combination of older homes getting the maintenance and repair that falls in that two-thirds. But then you see the other one-third that simply upgrading and improving the environment, a new kitchen, finishing the basement, a new bathroom, etc. And so, we're seeing a combination of all of those things.

One of the areas that Lowe's highlighted as being a growth area was its paint business. This was described by Bill Boltz, the executive vice president for merchandising.

Paint delivered strong positive comps this quarter across both Pro and DIY. Many of our Pros, especially those who focus on repair and remodel work, paint as part of their larger jobs. In other words, these are Pros who paint rather than professional painters.

And these Pros are starting to see the value of our new MVPs Pro Paint Rewards program paired with our expanded job site delivery for paint. These enhanced benefits and capabilities are making it more convenient and cost-effective for Pros to purchase their paint directly from Lowe's, earning us more of their business.

In our continued partnership with Sherwin-Williams, we are also upgrading our paint departments across the US, including a new colour wall that converts all HGTV colours to Sherwin-Williams colours, which resonates with both DIY and Pro customers ... We are also resetting some categories to pull relevant, higher-margin, and more frequently purchased products closer to the front of the department, making it easier for customers to get everything they need for their paint project in one trip.

Analysis

With a major investor conference planned for early December 2022, the analysis offered by Lowe's at these results was somewhat muted. However it is interesting to explore this particular strategic view. It is fairly common for commentators on the US home improvement market to see underlying growth primarily driven by increases in household formation. The view suggested here is that a relatively static number of households, with reduced building and sales of new homes, will continue to produce growth through maintenance and in-place upgrading of residences.

While this certainly has some relevance, there is a contrary theory that sees the possibility of home improvement spending reaching a saturation point. That could be driven by the past two years representing something of a "pull forward" in overall demand for home improvement, and also the possibility that the current fad for living better through better homes will fade to be replaced by more externally oriented expenditure.

Two factors that need to be taken into account are the lingering effects of COVID-19 and the influence of climate change. If infection rates from COVID-19 continue to be contained through the northern hemisphere winter, it's likely that economies will shift into a new phase, with more expansionary spending.

Climate change has been incidentally mentioned in the results for both Lowe's and Home Depot. It is simply a fact of the industry that no matter how appalled we may all be at floods, hurricanes, tornadoes and fires, these end up contributing to the home improvement sales. However, at some point, if these continue to increase, we could see this motivate a lessening investment in homes, due to perceived risks.

Related

IKEA's Sustainable Living Shops have started to open around Australia, including at its Rhodes, Marsden Park, Canberra, Springvale and Perth locations. The retail concept will also be rolled out at its Adelaide, Tempe and Logan stores in December, to be followed by Richmond and North Lakes in early 2023.

In-store, shoppers can find products designed to assist with reducing their climate footprint at home by using less energy and creating less waste. IKEA is also positioning the shops to manage higher cost-of-living expenses.

Many products in the Sustainable Living Shops are designed to bring about savings, such as not having to buy lightbulbs as often, or batteries, or run heating and cooling systems.

For example, LED lightbulbs that last 25,000 hours, energy-saving light control systems, rechargeable batteries, blinds that trap heat, cooling pads, and mattress protectors that help control the temperature while sleeping. There are also energy-efficient induction cooktops, home solar systems and water-saving showerheads.

Despite some of the cost saving benefits associated with habits such as energy saving lightbulbs, or reducing food waste, a recent survey conducted by IKEA Australia revealed over half of Aussies (52%) believe living sustainably would increase their cost of living.

The research also revealed that 60% of Aussies think they should adopt more sustainable practices in their home, however over a third are holding back from making their home more sustainable due to cost.

In the survey, Aussies said they would have to see an average return on investment of $55 per week to consider being more sustainable.

The survey was conducted as part of IKEA Australia's annual Sustainability Report that outlines IKEA Australia's sustainability initiatives and achievements from the past 12 months, as well as goals for the future. Mellisa Hamilton, country sustainability manager - IKEA Australia said:

Right now, the cost of living, energy and food are all rapidly increasing and we understand the challenges consumers face when it comes to living sustainably at home. There's still a perception that introducing sustainable products or habits in the home will cost too much, but it's quite the opposite. There's never been a better time to help Aussies to reduce their climate footprint at home with affordable products and low-cost solutions from IKEA which can also save them money longer term.

Related

Global building materials supplier Knauf Insulation is planning to operate a glass recycling facility in Townsville, QLD to produce crushed glass for use in insulation.

A purpose-built facility is planned for 1.16ha of vacant land at 164 Webb Drive, Mount St John, QLD. The project involves a warehouse comprising 1950sqm of gross floor area and an ancillary office of 200sqm, fronting Webb Drive.

The development requires a Material Change of Use from medium to heavy impact industry zoning, and the application is currently on public notification.

According to the application, glass bottles will be sourced from the Containers for Change Scheme with the bottles crushed into a glass cullet product. The bottles will be trucked to the facility and stored in a bunker in the warehouse.

Glass will be processed via crusher/breaker units to produce the cullet. Any ferrous or aluminium material will be removed via an overhead magnet and eddy current process. Paper labelling is to be separated by barrel dryer and dust will be collected via two cyclone units at the barrel dryer and a trommel. The glass cullet will be bagged into one-tonne bags and loaded into shipping containers for export.

The proposed facility is designed to process of 10 tonnes of glass per hour.

For the third quarter of 2022, Ace Hardware posted revenues of USD2.2 billion, an increase of 10.0% from the same period last year. Third quarter net income was USD100.6 million, an increase of 1.3% from 2021.

In the quarter ended October 1, total retail revenues for the quarter were USD193.4 million, an increase of USD4.3 million since last year. Wholesale gross profit was USD272.5 million, an increase of USD34.4 million since Q3 2021.

The approximately 3,600 Ace Hardware retailers who share daily sales data reported a 5.8% increase in US retail same-store-sales during the third quarter of 2022. Estimated retail inflation of 11.2% helped drive the 9.5% increase in the average ticket price. Same-store transactions were down 3.4%.

Ace also added 35 new domestic stores in the third quarter of 2022, and closed 10 stores. It announced earlier that it has already opened 130 new stores in 2022, and is planning to open at least an additional 40 stores in Q4 for more than 170 by the end of the year. John Venhuizen, president and CEO of Ace Hardware said:

My sincere thanks to the entire Ace team for their determined and relentless pursuit of our three strategic imperatives - service, convenience, and quality - which delivered yet another quarter of record sales and profit. Revenue and income ... now stand 44% and 66% higher than just three years ago. Despite, and in some cases because of rampant inflation, the Ace team continues to deliver superior financial results and exceptional customer service to and for our neighbours.

Related

Channel Nine's long-running "reality" television series "The Block", ended on what many have felt is a kind of failure. Five properties that had been built and renovated in the regional area of Gisborne, Victoria, were put up for auction at the end of the series, with the highest sale price determining the winner. While one property did sell in a range above the $4.0 million to $4.4 million suggested by the show's producers, three of the properties were passed in. The one that did sell did so just $20,000 over the reserve price, disappointing the contestants.

Had the show's producers taken a closer look at the available statistics, the surprise might not have occurred. While there was a surge in property purchases and developments in regional Victoria at the height of the pandemic, these have since fallen off sharply.

HNN has teased out those stats for the five states most affected by the move to regional areas. We've taken the number of building approvals, and divided them by the total number of approvals for each state, to provide the percentage of all approvals that were regionally based.

These are presented in 12-month periods, ending in September (the month for which the most recent stats are available). We refer to these with the prefix "p", so p2020 would be the period from October 2019 to September 2021.

New South Wales

New South Wales (NSW) has always had more complex patterns than the other states when it comes to regional building stats. That's because the state has a number of regional centres. By contrast, the next most populous state, Victoria (VIC) really only has one (Geelong), and it is quite secondary by size.

Chart 1 shows the contrast between building approvals issued for Sydney, and for the rest of the state.

The top graph shows the percentage of overall building approvals made up by approvals issued outside of Sydney. Perhaps what's most surprising is the degree to which the pandemic years altered seasonality more than numbers. Previously September had ben a high point in terms of proportion, but in both p2021 and p2022 September came to represent a low point.

Looking at the middle graph, of building approvals in Sydney, it can be seem why, as city approvals spiked during those two periods. Correspondingly, as the bottom graph shows, regional approvals were not at their lowest level, but far off the high as well.

As the bottom graph shows, the period from February 2021 through to August 2021 showed the highest number of approvals. Over the same period in the subsequent year, levels were elevated over pre-pandemic periods, but far off the highs of the previous year.

Victoria

These are the graphs that the Nine Network should have consulted before commissioning the recent "Block".

As the top graph shows, the proportion of regional approvals climbed steeply from October 2020 through to May 2021. There was an additional spike for March 2022, but for most of the rest of the time the pandemic regional approvals have been in line with pre-pandemic seasonal trends.

Contrasting the middle graph for Melbourne approvals with the bottom chart for regional approvals, its clear that regional approvals did make a considerable impression through p2021, trending well above the usual seasonal activity. Yet this seemed to come to an abrupt end at the start of p2022, in October 2021, outside of some additional activity in February and March 2022. Approvals basically reverted to the pre-pandemic norm from April 2022 onwards.

Queensland

Queensland (QLD) is, of course, its very own unique case as well. In fact, as the top graph of Chart 3 indicates, the proportion of regional building approvals reached its highest levels during p2022, peaking in March 2022, and from June to September 2022.

What is most striking about the middle graph, for approvals in the Greater Brisbane area, is that after a high level of activity from February to September 2021, the number of approvals has moved much closer to the historical average.

Meanwhile the bottom graph clearly shows that regional approvals have tended to trend well above the historical average for both p2021 and p2022.

South Australia

While QLD indicates ongoing activity in regional areas, South Australia (SA) shows a very strong upshift in regional approvals. As the top graph in Chart 4 indicates, in terms of proportions, SA reached its highest for regional approvals in September 2022.

The middle graph shows that while approvals in Adelaide reached peaks during p2021, approvals were still above average, but had retreated considerably. In contrast, the bottom graph shows that regional approvals in SA were well above average for both p2021 and p2022.

Western Australia

As with QLD, it's interesting to note that for Western Australia (WA) the proportion of regional approvals reaches a seasonal high for July to September 2022 as shown in Chart 5.

The middle chart illustrates just how astounding p2021 was for WA, with 11 of the 12 months setting new record highs for approvals in Perth. That's echoed in the bottom graph for regional approvals as well, with regional approvals tending to trend just above averages.

Analysis

What the executives at the Nine Network missed was that it is evident the transition to regional housing was very much a response to the pandemic, and not part of a longer term restructuring of the real estate market. That restructuring is more evident in many of the other states, where there has been more persistence in regional building approvals during p2022.

To a large extent, for VIC, this reflects a surprisingly centralised structure - given it is one of the smaller states geographically. NSW has its separate regional areas, and QLD has vast ex-urban areas that have long formed their own sub-regions.

US big-box home improvement retailer The Home Depot has released its results for the third quarter of its FY2022. Sales came in at USD38,872 million, up by 5.6% on the previous corresponding period (pcp), which was the third quarter of FY2021. Operating income was USD6148 million, up by 6.1% on the pcp. Net earnings for the quarter were USD4339 million, up 5.1%.

Home Depot had 409.8 million transactions during the quarter, down 4.3% on the pcp. However, average transaction (ticket) spend did increase, from USD82.38 in the pcp to USD89.67 in the reported quarter, a rise of 8.8%. Sales per square foot also increased, by 5.3% to USD618.50. (This equates to USD6711 per square metre, roughly $10066.) The company reports that inflation accounted for roughly 200 basis points (2%) in ticket growth. Sales over USD1000 increased by 10% compared to the pcp.

Business cycles

Home Depot has not altered its forecast for net sales growth of only 3.0% for its FY2022 - which means that as year-to-date growth is around 5.1%, that the company expects to have lower sales for Q4 2022 than in Q4 2021. The CEO of Home Depot, Ted Decker, confirmed this in response to an analyst:

Our transactions have been stronger than initially thought with this inflation. I mean, that's why we have raised guidance throughout the year, is that the price sensitivity wasn't as strong as we thought it would be. However, our guidance implies that fourth quarter comps will be the lowest for the year, albeit positive and we have tougher comps from Q4 last year.

As Mr Decker, pointed out in his remarks and responses to analysts' questions, you can take two views on that. One is to see this as a lacklustre result, with lower growth prospects ahead. The other is to see this as a real "victory", as not only have past gains been retained, but growth - however slow - continues.

Here's how Mr Decker summed up the situation in response to an analyst's question:

When you go back now, what are we, we're 11 quarters into this pandemic. And the first five, six, we had tremendous transaction growth, right? We all know the story of what happened. Not necessarily a lot of cost inflation at that point.

And then the last six quarters, we start to lap that tremendous activity. But also saw for all the reasons we know, supply chain, commodities, global cost pressures, we saw significant cost in our business, and comps were driven as they were this past quarter with ticket over transactions.

What we see now as we step back approaching three years is our transaction run rate, our sort of three-year CAGR [compounded annual growth rate] at this point, is more or less pre-pandemic rates. And you could look at that at one hand and say, wow, here's the slowdown.

On the other hand, Richard [McPhail, chief financial officer] used the term "holding serve". You can look and say, oh my gosh, this industry erupted with demand for a year and a half. Then it cycled significant cost increases. The customer hung in there and was resilient. And your net over this three-year period up in transactions and units despite, what we believe, you'll hold on to these price levels.

I think that all goes back to my opening comments of what is the dynamic of this overall industry and the health and the engagement level of this customer. And if we normalise from here, gosh, more than great.

Mr McPhail summed up the current trading conditions very succinctly in his prepared remarks:

We find ourselves in a unique environment with many cross currents. We are operating in a broad-based inflationary environment not seen in four decades while managing through constrained global supply chain conditions, all against a backdrop of monetary policy shifts intended to moderate demand.

To put those together, these are the four sets of conditions that the hardware retail industry, both in the US and Australia, has had to work through:

March 2020

High demand, both trade/Pro and DIY, under COVID-19 retail constraints. House prices at first decline, then begin to accelerate.

March 2021

With high demand and constrained supply, prices of core construction materials such as timber begin to spike higher. Demand in DIY begins to moderate, but trade/Pro demand continues to grow. House prices continue to rise.

May 2022

Central banks in the US and Australia sharply raise interest rates as inflation beings to surge out of control. Prices of some construction materials decline, but the construction industry faces a backlog of residential construction work that will take until the end of calendar 2023 to resolve. House prices reach a peak in mid-2021.

November 2022

Increasing interest rates begin to have some effect on markets, including a decline in building approvals. Building supplies continue price declines, but remain above historical price levels. Complicating factors, such as extreme weather events and an increase in fuel prices due to Russia's invasion of Ukraine, support ongoing inflation. House prices decline, but not steeply.

How should hardware retailers respond in circumstances such as these? It's evident from Mr Decker's response to analysts that his strategy is to find out where the areas of ongoing growth are, then to concentrate resources there. To do that requires a kind of constant questioning, as illustrated by this partial response to an analyst asking about forecasting:

We did see some deceleration in certain products and categories. And again, that's difficult to get at the root cause. Is it a consumer pulling back in general? Is there a reaction to price inflation? Do we have some pull forward in certain categories that people bought so much of certain categories during the pandemic? Or are they moving on to other projects?

Remaining aware of the price sensitivities of different product categories is vital, as Mr Decker explains:

On certain commodities, lumber, copper wire, where we're pricing to market weekly, you see a much more classic reaction to price and unit productivity. With other categories, and I hate to bring up grills again, but there's some classic price points on some plastic grills. And when we saw those grills get up over USD600, we saw a more dramatic drop off in engagement. And when Jeff [Kinnaird, executive vice president of merchandising] and the team work those prices down even to the low USD400s and - or high USD400s, low USD500s, you saw a response with unit productivity.

The real positive, however, at least in the consumer market, is that product innovation continues to be a driving factor.

Across the board, though, there has been - and Jeff mentioned this, there has been so much innovation across our categories. If you think of the dramatic shift of outdoor power equipment in power tools, in appliances and what the features and benefits of these products are, the technology embedded in these products.

I'm not sure it's quite an iPhone, but we're getting close to power tools being in that genre. And people love the newness and the innovation and they're, albeit higher prices, but people are responding in buying. So I think it's a mix, Brian, across the categories, and that's what Jeff and our merchant teams do such a great job managing every day.

That innovation is also something of a protection against customers choosing to "trade down" to less expensive products, Mr Decker explains:

We are not seeing a trade down. If you take my grill or appliance example, it's not that people ultimately bought and they traded down. I think it's that people have already purchased in the past few years. And when people do purchase, again, they're buying innovation. Our Traeger business, for example, is incredibly strong, and as they bring out innovation, customers respond.

The trade business

While the consumer business is important to Home Depot, they are also experiencing growth through the trade/Pro business. As Mr Kinnaird explained:

We are also encouraged by the momentum we continue to see with our larger Pro customers. These medium to large repair and remodeller pros continue to post strong double-digit comps.

Mr Decker pointed to some of the services that Home Depot has started, to ease the major "pain points" the Pro market experiences.

Our Pros tell us that finding qualified, skilled labor is a pain point in their business. To that end, we recently announced our 'Path to Pro' platform, connecting skilled tradespeople with hiring trades professionals. This unique and proprietary platform is available at no cost to all Pro Xtra members. It already contains thousands of candidates, and pros have begun posting their open jobs.

Aside from this, of course, there is a constant push to increase the productivity of in-store, customer-facing staff. One recent development by Home Depot is the Sidekick app, which helps direct staff to the most productive tasks.

We are currently launching a new application on our in-store mobile devices called Sidekick, which is an in-aisle tasking tool designed to direct associates to the highest value tasks in real-time. The tool will direct associates to key bays where on-shelf availability is low or outs exist. By simplifying our operations, we can generate productivity and enhance both the customer and associate experience.

Analysis

In terms of the general economic picture in the US and Australia, there are two main complicating factors going on behind the scenes. The first is that "capitalism" - or, more simply, globalised markets - does not, at first, seem to be working the way it should. High demand and limited supply resulting in increased prices is supposed to trigger more supply. That's not happening, because it's easy to forecast that demand is going to fall steeply once the supply-lag is solved. For example, there is only limited building of new container ships despite a current shortage, because the current supply of container ships will likely be adequate to service trade in 2025.

The other side of that problem is what we've seen recently with major tech companies in the US. Encouraged by the surge in demand during the COVID-19 pandemic, they staffed-up to build adequate infrastructure. However, while demand did not diminish, it did stop growing at a high rate. This led to large layoffs of staff during October and November 2022. (Though it is more complex than that, with Apple effectively ending growth in Meta's [Facebook] advertising business by making privacy controls the default on its mobile devices.)

The second fact is that the economy - and many commentators on economics - do not fully understand what the Reserve Bank of Australia (RBA) is doing with interest rates. The RBA's goal is clearly to cut consumption back to the low levels of early FY2020, if not below that. In fact, it's likely planning to manage one quarter of negative, or near negative growth, during the current financial year.

What the accumulation of these factors have led to is a slightly odd economy. There is certainly demand and growth present still in 2022, but it's regarded as ephemeral. The resulting contradictions are considerable. Business investment, as a percent of gross domestic product, is at the lowest level it has been in 30 years - all the way back to 1992. Business conditions are rated as being 20 points above average, the second highest level in 30 years. Business confidence is positive, but close to average. And capacity utilisation is around 87%, the highest it has been for 30 years.

Typically, when utilisation goes up, so does business investment (as well as confidence). In this case, however, instead of investing in more plant and machinery (and software), businesses are hiring more people, driving the unemployment rate sharply down. It's also likely we're going to see poor productivity figures emerging for FY2023 as well.

While all this matters in terms of the next two to three years, the real question that continues to linger, and will become increasingly important, is: after the COVID-19 nightmare is finally over, what kind of economy will Australia be left with? Looking at key numbers such as business investment, which has been in historical decline for the past decade, it's difficult to form an optimistic answer.

Japan-based power tool manufacturer Makita Corporation held a presentation of results for the first half of its FY2023 (six months to 30 September 2022) on 8 November 2022. The company has recently released those materials.

Makita reported revenue for the half of JPY391.32 billion ($4.17 billion) up from JPY364.23 billion in the previous corresponding period (pcp), which was the first half of FY2022. This was an increase of 7.4%. Of this, JPY61.82 billion was domestic revenue, constituting 15.8%, with the rest derived from overseas sources. Operating profit for the half was JPY21.92 billion, down by -58.0% on the pcp. Profit before income tax was JPY18.24 billion, representing a drop of -65.3%.

The decline in operating profit was due to a range of factors. A decline in sales volume accounted for only 3.8% of this, according to Makita. Others were a 12.9% increase in costs, sales, general and administration (SG&A) costs up by 7.6% and a 7.3% hit on exchange rates, as the Japanese Yen remained highly valued.

Revenue growth in Japan showed a mild boost during the half of 2.0% growth. Eastern Europe declined by -1.1%, while Western Europe fell heavily, with revenue down by 14.1%. North America was down by 1.3%. Oceania (including Australia) showed good growth of 11.2%.

During the results presentation, Makita reported that its outdoor power equipment which had switched to cordless battery electric power had achieved a compounded annual growth rate (CAGR) of over 50% from FY2017 to FY2022. As part of that, the share of Lithium-ion battery products had grown from around 30% in FY2015 to over 70% in FY2022, displacing petroleum-fuelled and corded electric products.

Makita was also very clear that it planned to "aggressively expand" its current line of 40V cordless tools. This has been a great success for the company, and it sees these products as a means to expand in existing markets, and to enter new markets as well.

Analysis

The Makita results, in context, reveal that the company is facing the same circumstances as most power tool manufacturers: a burst in sales during the COVID-19 pandemic years, followed by declining markets and higher costs.

Strategically, Makita has always been interesting. The company's launch of its 40V XGT power tool range was masterful. While there has been plenty debate about whether this will become the core range for the company, displacing its 18V/20V range, what isn't debatable is that these tools have proved very popular with both existing customers and new customers. It's a line of tools that fits snugly in the middle between Stanley Black & Decker's FlexVolt 54V line, and Milwaukee Tool's split between powerful 20V tools and extra-heavy duty MX 72V line.

That said, as HNN has pointed out in the past, Makita is the only major power tool company to not fully develop some version of the "connected tool". Techtronic Industries (TTI, owner of Milwaukee Tool), Stanley and Bosch have all developed some kind of extra Bluetooth linked capability in their tools - with TTI clearly leading the way. The most that has emerged from Makita is a Bluetooth linked dust extractor that turns on when the tools does.

That may be about to change. In a typically quiet manner, Makita recently announced the opening of its imaginatively titled "Electronic Control Development Center" in Tokyo. Reading between the lines, this is Makita's effort to tap into the electronic engineering resources located in that major city, and it seems likely one of its tasks will be the development of some kind of connected tool.

Not setting aside the considerable capacity of Japanese technology when it comes to electronics, there is a lingering question as to whether Makita may be almost too late to this game. We've already seen tools emerge from TTI which based their design in part on feedback received through connected tool links. Has Makita timed its entry to take advantage of a better-developed aspect of the industry, or is it too late to develop the needed skills to stay competitive in 2025?