Roy Morgan has provided a YouTube video of its "The Future of Retail: Latest Industry Trends" webinar. This is an 18 minute video presented by Michelle Levine, the CEO of Roy Morgan, and Ross Honeywill, a social scientist and author, and the moving force behind the premium.net.au website. He has a unique and interesting approach to markets and marketing.

It's really worth setting aside 20 minutes or so to watch the webinar:

The agenda

One of the most useful functions that these quick introductions from Roy Morgan perform is to develop and discuss a relevant agenda for retail over the following six months or so. Roy Morgan also brings a unique point of view, which is driven by the company's extensive research into consumer opinions and choices.

That said, however, it's also true that there are times, especially when the company crosses over from markets to broader economics, when the analysis needs to be questioned. It's an understandable expansion, as economics has in recent decades crossed over into psychology/sociology (think Richard Thaler with behavioural economics, and even Robert Shiller in his suggestion that housing markets are driven by opinion), but it tends to lack something in rigour. But, at the very least, Roy Morgan provides a good point of departure for discussion.

In this particular "Future of Retail" summary, the agenda was outlined as follows:

While the above generally portrayed retail as having a positive future, the webinar also pointed to some potential problems:

Christmas 2021 retail sales

According to Ms Levine, in looking at retail sales for Australia overall:

The good news is that our brilliant data modelling team has forecast retail sales in the run up to Christmas to match last year's record high. This is terrific news for the retail economy. You can see from this slide that the Roy Morgan predictive engine, the green dotted line has a very close correlation with actual sales. That's the solid black line back to January 2019. But what matters is going forward and looking forward, we expect Christmas sales to be more than 11% ahead of 2019.

Of course, that is a bit of a mixed message. Essentially, while the sales do indicate growth over the pre-pandemic period, they are essentially flat going back to Christmas 2020. Nonetheless, it is better news than a projected decline.

For Sydney retailers, the rise is expected to be 10%, while for Melbourne retailers it will be 11% over the Christmas 2019 figures. Tasmania is expected to grow by 15% over 2019, which is 4% more than Christmas 2020.

In terms of retail categories, hospitality is expected to post a gain of 12% over Christmas 2020. However, the household goods category will decline from Christmas 2020, but still be 14% higher than for Christmas 2019.

Black Friday/Cyber Monday

While the Roy Morgan forecast concentrated on those two days - at least nominally - it's evident that "Black Friday" applies to a period of between six to 10 days around the US Thanksgiving holiday. While there are some wild apocryphal aetiologies provided for the term, its initial significance was simply that this marked the start of the Christmas sales season.

In fact, US President Franklin D. Roosevelt (FDR) moved the holiday, from the last Thursday in November, to the fourth Thursday in November, to avoid the situation, as in 2018 and 2023, when the previous timing would have reduced the Christmas sale season to less than a month.

Cyber Monday was a term coined after online retailers found that online sales soared on the Monday following Thanksgiving (though really it was late in the Sunday night instead, initially).

Whatever the origin, Roy Morgan sees this season as being especially big during 2021. As Ms Levine states:

Roy Morgan is forecasting another lift. We estimate that $5.4 billion will be spent over the four days of Black Friday, Cyber Monday. That's just ahead of last year's record.

That estimate is somewhat above other market estimates.

First quarter 2022 retail sales

The biggest question for most retailers is what is going to happen during the first two quarters of calendar 2022. As Dr Honeywill puts it, referring to the predicted surge in Christmas sales:

The big question, though, is can it sustain past Christmas? Or, what we might call the "rebound party"? And when [will] we return to some kind of normality?

The answer from Ms Levine is surprisingly positive:

Our predictive engine, all things going as planned, has January [2022] 15%, up on 2020. It has February 14% up and March 4%, ahead of March 2020. And comparing the first quarter next year to the same period this year, the news remains positive.

But, as she quickly points out, that prediction is based on ongoing positive business sentiment:

But so much relies not only on the confidence of people, but on the confidence of businesses to invest in their future by lifting wages, opening more stores and employing more Australians.

Potential problems

Like any good forecasters, rather than just nominating a number, Roy Morgan provides an overall context to their predictions. In this case, that context comes in the form of developments that could introduce considerable downsides to the forecast recovery from the COVID-19 pandemic.

Problem 1: Inflation

Quite correctly, Roy Morgan has identified inflation as being a potential risk to a post-COVID recovery. However, this is one of those areas where, just as economists sometimes struggle with market psychology, the company does make some assumptions that are, at least, somewhat contentious for economists.

Introducing the subject, this is what Ms Levine has to say:

Inflation has both a practical and a psychological impact on retail spending. And of course, as with everything, there are winners and losers. So those who are living off interest or investment earnings with their home paid off are winners in an inflationary environment. They aren't by the way, typically big spenders.

On the other hand, those who are paying rent or have big mortgages, particularly with variable interest rates will be playing catch up in an inflationary time. And so these typically bigger spenders will have less to spend, and when possible, they'll spend on assets or investments that they believe will grow with inflation, not discretionary spending.

Perhaps the best thing that can be said about this introduction is that it is not entirely complete. To quote from the European Central Bank Economic Bulletin:

Other things being equal, when economic agents anticipate that inflation will increase, they perceive the real interest rate to fall. As a result, they spend more and save less to optimise their consumption and investment over a long horizon.

There is a less-technical article on the website of the US White House that describes the issues around inflation post-COVID. It's authored by Jared Bernstein, chief economist and economic policy adviser to the US Vice President, along with Ernie Tedeschi, a senior policy economist with the US Council of Economic Advisers.

One comment from that paper worth noting:

We expect that moving from a shutdown economy to a post-pandemic economy-with demand fuelled by pent-up savings, relief funds, and low interest rates-will generate not just somewhat faster actual inflation but higher inflationary expectations too. An increase in inflation expectations from an abnormally low level is a welcome development. But inflation expectations must be carefully monitored to distinguish between the hotter but sustainable scenario versus true overheating.

The role of inflation post-COVID

For both the US Federal Reserve and the Reserve Bank of Australia (RBA), increasing inflation is a target. The RBA has clearly indicated that it essentially plans to increase inflation to around 2.5%, and sees 3.0% as an acceptable upper range.

In the US, while there are concerns being raised about the level of inflation, it's difficult to know how much of that is sound economic analysis and how much is purely political. One factor that observers don't always understand about the economic actions of the current US administration is that its economic stimulus plans are aimed not just at repairing the economic problems of the COVID-19 pandemic. They are also an attempt the heal the lingering wounds of the 2008 global financial crisis (GFC).

Of course, too high a level of sustained inflation is bad. That is due to some cyclical factors. Once a higher level of inflation gets embedded in an economy, it tends to continue to increase. In a simple form, the price of goods increases, wages increase to match those increases, which lifts production costs, which means the price of goods increases, and so on.

Yet while too much inflation is bad, some inflation can be very good. The reason for this is that inflation tends to promote growth, as it encourages consumers to make purchases now, rather than later, and because it can provide an additional discount on the interest charged on loans, which encourages larger capital expenditure (CAPEX) from businesses.

A frequent criticism of the RBA since 2018 has been that it underestimated the deflationary impacts on the Australian economy from 2016 onwards. Many of those occurred in the retail sector. Increasing competition, including from overseas sources via online purchases, more price transparency due to online price comparisons, the entry of Amazon into the Australian market, and further utilisation of less expensive labour in China and throughout south-east Asia, all exerted negative pressure on prices.

This helped, especially in retail, to push retailers towards a business model focused on cost containment, with low levels of CAPEX investment. One key problem with this is that productivity improvements have been, at best, incremental. According to OECD figures, for the key productivity measure of growth in gross domestic product (GDP) per hour worked at constant prices, Australia ranked outside the top 20 OECD nations in 2019, and in 2020 was ranked 37th. Of course, the latter result is affected by the COVID-19 pandemic, but so were the countries ranked above Australia.

Inflation, wages, productivity

Where things get really interesting is in terms of wages and inflation. One of the main reasons the RBA is pursuing a higher rate of inflation is to improve overall growth in wages, which has remained at exceptionally low levels for around a decade.

In a higher inflation environment, employers are forced to make annual cost of living adjustments to wages. This includes not only past inflation, but also predicted future inflation. This leads to wage variations, and workers will be attracted to higher wages. The market becomes competitive, and as the competition increases, employers begin to base wages on not only cost of living increases, but also a share of their annual earnings.

That leads, of course, to higher real wage growth, and a better distribution of economic growth throughout the economy. Effectively, in a low inflation economy, only managers in the C-suite share in growth, while in a higher inflation economy this tends to extend to more of the workforce.

This is what is currently taking place in the US economy. That lift in wages then drives further demand, especially at the retail level.

Problem 2: Lockdowns

This is a simple and direct threat: will new COVID-19 variants and/or a return of non-quarantined international travellers create the need for further lockdowns? If so, as Roy Morgan points out, the results could be severe. According to Ms Levine:

There is every possibility that a new COVID variant could emerge somewhere in the world spread to Australia and challenge our vaccination effectiveness. And according to our always-on predictive engine, if that did happen, the cost to the retail sector from a new round of lockdowns could top $4 billion a month. Over the worst of 2021, the New South Wales retail economy had a $14 million hit each and every day. And it was even worse in Victoria at 55 million every day of lockdown.

In an article from The Guardian newspaper, Dr Marc Baguelin, from the UK's Imperial College's COVID-19 response team, and also a member of the government's SPI-M modelling group, suggested that an out-of-control situation would be unlikely:

It is unlikely that such a new virus evades entirely all immunity from past infection or vaccines. Some immunity should remain at least for the most severe outcomes such as death or hospitalisation. We would most likely be able to update the current vaccines to include the emerging strain.

But doing so would take months and means that we might need to reimpose restrictions if there were a significant public health risk. The amount of restrictions would be a political decision and would need to be proportionate with how much this virus would evade current vaccines.

So this could be ranked as a moderately severe risk, but one with a low probability of occurring, and with solutions to hand.

Problem 3: The experience economy

One of the problems for retailers identified by Roy Morgan is the re-emergence of the "experience economy", with a shift back from purchases of goods to purchase and/or subscription to experiences. During the webinar, Roy Morgan used the following diagram to illustrate its view of how the experience economy functions:

The core difficulty Roy Morgan identifies is that retailers will be disadvantaged by a shift in spending from purchases of goods to purchases of experiences.

McKinsey & Company has also done some interesting research into this area, and what happens to spending post-COVID. This research can be accessed online:

While the research does not cover Australia specifically, it does include details from the UK and the US, which have some similar characteristics. One element of the pandemic consequences McKinsey points to is that, unlike other economic crises, this one affected goods and services differently:

As the diagram illustrates, services were especially hard hit, a consequence of both social distancing requirements and the hard lockdowns of commercial businesses.

One comment on this is that the return of the experience economy seems more like a problem for 2023 rather than 2022, as it will take most of the coming year to fully come to terms with the COVID-19 pandemic. If retail will be hit by a renewed experience economy, it's not likely to have too much of an effect until the second half of calendar 2022, at the earliest.

Decline of online retail

Roy Morgan sees difficulties with timely delivery of goods ordered online as potentially limiting future growth in ecommerce. According to Ms Levine:

[Delivery delay] is a real threat to digital acceleration continuing at the same rate of growth through 2022. There's no doubt that online and omni channel retailing in particular is here to stay. But if consumers are turning their mind to experiences, and at the same time are frustrated by delays in deliveries, it's a stumbling block for retailers.

Again, this is a pretty complex area. For example, how do you model the influence of click and collect on online retail and deliveries? What is the role of Amazon, which has pretty much evaded delivery concerns, at least through its Prime delivery subscription services?

It's helpful to unpack that a little. If retailers have seen online retail purchases grow from 10% in 2019 to 20% of total revenue in 2021, only to contract by, say, 5% in 2022 as delivery concerns continue, what happens to that 5% of revenue absent from online sales? Does it leave the retailer entirely, or will a proportion shift to click and collect and/or direct in-store purchases? Will it simply go to Amazon?

It's a bit difficult to see a scenario where someone wants to order a $200 set of headphones, sees that delivery will take three weeks, and decides to spend the money on a flight to Queensland or New Zealand instead.

What does seem likely is that retailers who can sort out and solve delivery issues are likely to see their online sales do better in 2022 than those who do not. This also creates an opportunity for specialist delivery services.

Price as market stimulus

While this is presented by Roy Morgan as playing a part in post-pandemic retail recovery, the issue of addressing markets less dependent on lower prices was a concern of the company pre-pandemic. This draws heavily on the work by Dr Honeywill, which relates to his ideas concerning the formation of a market segment he terms the "New Economic Order", or NEO. This segment is motivated by product experience, including design, innovation, and quality of construction. Outside of that segment is what Dr Honeywill identifies as the "traditionalists", who remain motivated mainly by price.

The best introduction to this segmentation is provided in an animated video on YouTube:

Essentially, what is being suggested is that high-value consumers can be identified in the marketplace through their attraction to specific forms of consumption. Retailers who continue to market to the traditionalist segment will experience slower growth than those who market to the NEO segment. As Dr Honeywill puts it:

The real threat is that too many retailers think the 10 million price-based consumers - the traditionals you mentioned - are all there is, that they are the entire economy. So they constantly drive prices down into the commodity space to attract these traditional consumers and ignore the huge upside that comes from premium consumers and the premiumisation strategy.

Analysis

The major takeaway that most retailers should get from the Roy Morgan retail update is that the crucial period to focus on will from March 2022 through to the end of the third calendar quarter, in September 2022.

There are certainly going to be challenges in December 2021, January 2022 and February 2022. However, many of those challenges are going to be the sort that are "good to have": shortage of supply to meet demand, moderate price inflation, logistical problems created by the volume of orders, finding enough staff to handle customer numbers, and so forth.

One pattern that has repeated throughout the pandemic is that the economy and supply chain are placed under temporary stresses that overwhelm it for a transitory period of time, as there is no systemic solution available. For example, the toilet paper shortage of early 2020 was partially caused by hoarding and "panic" buying, but it was also the result of genuine supply problems.

The core problem was that demand for domestic toilet paper increased by around 40% as more people were forced to stay home, rather than going to workplaces, shopping or recreational facilities, such as gyms. There was a surplus of business grade toilet paper, but that would have been difficult to repurpose in the home. It would not have made sense to convert many factories to producing consumer toilet paper, because that investment would not be recouped, since eventually demand would revert.

The same thing is happening with container shipping today. There are only so many container ships, and also only so many containers to go on those ships. A container ship takes close to three years to build, so there is little point in accelerating construction plans in 2020, only to see demand fall again in 2023, just as they came online.

In the hardware retail industry in late 2021 we're seeing some of the same forces at work. Building demand is soaring in residential detached dwellings - which intersects with both the big box retailer, Bunnings, as well as smaller independent retailers. Fortunately, the building industry is a little saner in this regard than many other industries, and what we will see with that high demand is that it will spread itself out not only through all of 2022, but probably into early 2023 as well.

The real risk to the hardware retail market will originate in the housing market. We are currently in a puzzling time where ultra-low interest rates, and a changed view of the values of homes, have resulted in a surge in house prices. It is very difficult to see how that will not lead, certainly by 2023, to some rapid falls in house prices, particularly as the certainty of increased interest rates grows closer.

That's the risk, at least in terms of the trade business. The consumer/DIY end of the business will likely experience some of the same slowdown as more general retail from March 2022 onwards. The risk will be that hardware retailers pivot from DIY to their ongoing strong trade business. That will reduce the resilience of retailers, which could be important if the industry sees a downturn in trade business in 2023.

Adrian and Liz Scialpi have run the hardware store in Pearcedale (VIC) for 21 years, building up a loyal customer base that included farmers and boat builders, according to ABC News. On its Facebook page, they posted the following message on November 20:

Today after 21 years we have had to walk away from our hardware business. It's been an amazing journey only to be ended by corporate greed.

To the Pearcedale community and surrounding suburbs THANKYOU for all your support. But most of all the friendships we have made and the bonds we have created.

We wish you all the very best and we will never forget our time at 3912.

There have been dozens of certificates of appreciation stuck on the wall above the shop's entrance, thanking them for their donations to organisations such as the local school, CFA and pony club. Mr Scialpi told ABC News:

I used to call on this little shop as a [sales] rep back in the late 90s. When it came up for sale ... I went home, and I said to Liz, 'Do you want to buy a hardware store?', and you know, her jaw hit the ground!

What we did is we actually fell in love with this place, we fell in love with Pearcedale, we fell in love with the people and lifestyle of Pearcedale, and it's just become our life now.

The store was their retirement plan. They hoped to rebrand it and work towards selling it, believing they could get a few hundred thousand dollars. But they say things began to look shaky when their lease lapsed in 2019, and the owners wouldn't sign a new agreement with them.

They were on a month-by-month arrangement, when in May this year their property agent emailed them a new leasing agreement. The landowners were tripling the rent - from $29,687 a year to $88,638 a year. Mr Scialpi said:

[I was in] disbelief. I couldn't believe what they were asking. So for my little store here, which is 180 square metres, in a country town, they're asking me for nearly $100,000, in rental, [if you include] outgoings as well. So it's a huge jump. It's impossible to survive.

The ABC reports that a perusal of commercial rents show it's substantially more than what other landlords are charging in nearby towns like Somerville and Hastings, where the population is double that of Pearcedale. A similar-sized shop in Hastings, in a prize spot next to the local Kmart, was just rented for $68,540 a year.

It's even cheaper to rent a similar-sized shop in one of Melbourne's most desirable suburbs, with one retail spot currently available in Brighton for $55,000 a year. Mr Scialpi said:

The little shopping strip here services purely just our local residents, so we have no passing traffic at all.

There's a limited market of 3,000 people that live in town, and the rate of $500 per square metre, which is what they're asking, is almost double the market value.

The Scialpis admit they were on a good deal previously, and say they were willing to pay more. They sought legal advice and put in a counter proposal to increase the rent by 50%, but it was rejected by the owners.

Moving isn't an option, said Mr Scialpi. The closest shopping centre in Somerville 10 minutes away already has a hardware store, while the next closest shops in Tooradin don't have a property big enough.

The Scialpis have closed their doors for the final time, with losses they estimate at more than $300,000. Both of them will need to find other jobs. Mr Scialpi said:

We're going to have to walk away with nothing. It's just devastating. I mean, we put our heart and soul into this place ... to walk away under these circumstances, it's pretty hard to take.

Rent increases

Pearcedale locals didn't bat an eyelid when the owners of United Petroleum - Avi Silver and Eddie Hirsch - bought the shops in 2015, under a company called Jasman Pty Ltd. Both Mr Silver and Mr Hirsch are worth a combined $3.6 billion, according to The Australian newspaper's 2021 rich list.

But now, they are concerned that transaction may cost them the heart of their town. In addition to the hardware store, two other shops have closed their doors for good, with fears more will follow, after Mr Hirsch and Mr Silver hiked the rent substantially on some tenants.

The other businesses are still under existing lease agreements, protecting them from dramatic rent changes.

While Mr Hirsch and Mr Silver own the Pearcedale shops through their company Jasman Pty Ltd, they rent them out through United Petroleum. In a statement to the ABC, a spokesperson for Jasman Pty Ltd said it was seeking new leases in line with the rental market.

As the rental the tenants enjoyed for [a] number of years was well below market rental rates, the tenants have decided to not take up new leases and leave the shopping centre.

Jasman has honoured a small number of historical leases with below-market rents for some years. Jasman has every right to negotiate market rentals with its tenants as new leases are negotiated.

But Alexi Boyd, from the Council of Small Business Organisations Australia, believes the increases are unreasonable. He told the ABC:

I think it's really disappointing to see a large company like this take advantage of a situation for small businesses where things are really difficult, we're trying to get back up on our feet again, and then they get hit and slugged with this enormous rent increase.

It doesn't just impact this small business person, it impacts all of their workers, their community. Often these shops are really an integral part of a small business community and part of the community as a whole.

Several valuers the ABC spoke to, said the owners would struggle to get new tenants in, while it would be tough for those who decided to stay to keep afloat.

The increases bucked the general trend of rents in and around Melbourne, which were flatlining as retail rental vacancies rose due to the pandemic.

While home improvement in Australia and the UK has shown positive growth, which seems set to continue into 2022, the earnings picture in the UK and European Union (EU) is less certain.

Yet while Kingfisher, the number one UK home improvement retailer through its B&Q and Screwfix stores, has seen revenue decline for 2021 over 2020 numbers, it still remains strongly positive in terms of 2019 sales.

In other news, Homebase, which Wesfarmers sold for a nominal GBP1.00 in early 2018, has returned to profitability. In April 2021 it seemed for a while that it would even be sold for GBP300 million, but the deal failed to close.

Kingfisher

UK big-box home improvement retailer Kingfisher has released its results for the third quarter ended 31 October 2021. The group overall reported revenue of GBP3246 million. That is a decline of 6.3% compared to the previous corresponding period (pcp), which is the third quarter of 2020. Excluding the contribution of the company's Russian operations, which were sold off in September 2020, revenue fell by 4.2%. However, on a two-year, like-for-like basis (2YLFL) with constant currency, this represents an increase of 15%.

UK & Ireland

Regionally, sales for UK and Ireland were GBP1544 million, a decline of 2.1% on the pcp, while in 2YLFL this represents an increase of 15.7%. Breaking this down further, home improvement retailer B&Q saw sales fall by 5.3% on the pcp, while Screwfix grew by 3.9%.

The company reports that the strongest categories were outdoor, building, and kitchen. The company's own exclusive brand of kitchens were a particularly strong performer. B&Q's Tradepoint initiative, focused on the trades, saw sales on the pcp increase by 5%.

France and international

For France overall, sales were GBP1111 million, a fall of 9.5% on the pcp, but a gain of 14.1% on a 2YLFL basis. Castorama sales fell by 12.0% on the pcp, while Brico Depot fell by 6.7%.

For the other international operations of Kingfisher, excluding Russia, sales were GBP591 million, up by 1.2% on the pcp, and up 15.3% on a 2YLFL basis. Poland returned sales of GBP420 million, a lift of 1.4% on the pcp, and up 12.7% on a 2YLFL basis.

The company is predicting a strong end to the year, with sales in the fourth quarter up by 0.4% on fourth quarter 2020, and up 13.2% on a 2YLFL basis. For the full year, Kingfisher is predicting adjusted pre-tax profit to be near the upper end of its forecast range of GBP910 million to GBP950 million.

According to Kingfisher CEO Thierry Garnier's prepared remarks:

We continue to grow our market share, driven by strong execution of our new strategy. We are pushing forward with investments in key areas of the business to drive long-term growth, including further enhancements to our e-commerce proposition and Screwfix's launch in France.

Since the start of this year we have maintained, and in many cases improved, our product availability, which is amongst the best in our industry. This has supported our market share gains and allowed us to upweight promotional initiatives in the quarter. We have also continued to manage inflation pressures effectively, while retaining highly competitive pricing.

Homebase

Homebase, the UK home improvement big box retailer previously owned by Wesfarmers, and planned as an international extension to Bunnings, has continued its recovery.

For the previous year ending 29 December 2019, the company provided GBP3.2 million in EBITDA profit, up from a loss of GBP114.5 million in 2018. The company has continued to be profitable since then. In April 2021 the company's current owner, Hilco, was reportedly close to selling Homebase to British entrepreneur Hugh Osmond for GBP300 million, though that deal did fall through.

Homebase was turned around after Wesfarmers sold it in 2018 by reverting to the approach which had made it revenue neutral shortly before Wesfarmers acquired it. That involved a "softer", home furnishings approach to home improvement, and the incorporation of many store-in-store concessions from a range of British retailers.

The Reserve Bank of Australia (RBA) has completed a review of retail payments regulation. The main focus of this review has been on least-cost routing (LCR) of debit card transactions. The review included examining costs, especially as these apply to smaller merchants.

In addition, the RBA has also looked at providing merchants with the option to add a surcharge to buy now, pay later (BNPL) transactions (something currently largely excluded in agreements with BNPL suppliers), and provided guidance around competition and regulation concerns about "mobile wallet" payment systems, currently offered by providers including Apple, Alphabet and Samsung.

Key points of interest

Stakeholder concerns

The RBA outlined the concerns expressed to them by retail merchant stakeholders which helped to shape the review in Box B: Implications of the Review:

Central to [the stakeholders'] concerns was the low take-up of LCR by merchants, arguing that most merchants were not benefiting from the considerable savings that could be made through LCR. This was occurring at a time when changing payment behaviour - such as the ongoing shift towards contactless, mobile and online payments (and card payments more generally), as well as the rising popularity of BNPL products - was putting upward pressure on smaller merchants' payment costs. Merchant representatives also argued for the removal of the no-surcharge rules that are imposed by most BNPL providers, consistent with the approach that has already been taken by the Bank in relation to card payments.

Managing LCR

While most retailers are familiar with LCR, it's worth going over the details briefly.

LCR applies to the way in which payments made by debit cards are managed. Most consumers are familiar with the "old" way of paying via a debit card: the card was inserted into the payment terminal, the personal identification number (PIN) typed in, and then a selection would be made between a "CHQ/SAV" option and a "CR" option. If the first was chosen, the transaction would be routed via the eftpos network, while the CR option routed it through the credit payment systems run by VISA Debit or Debit MasterCard.

The consequences for consumers would be similar, with the amount withdrawn directly from their bank accounts. The merchant experience would be quite different. As the RBA puts it:

For many merchants, payments via the eftpos network can be significantly less expensive than payments via the Debit Mastercard or Visa Debit networks.

Where this gets more complex is when contactless payments are made. As the RBA explains this:

When a customer makes a contactless ('tap-and-go') payment with their dual-network debit card, the merchant may choose to send the transaction via the debit network that costs them the least to accept. This is least-cost routing (also known as merchant routing). If the merchant chooses not to route, the transaction will be sent via the default network which is programmed on the card, typically the Debit Mastercard or Visa Debit network.

If a merchant uses least-cost routing, it should not affect which deposit account the funds are paid from, and the three networks offer similar protections to the cardholder from fraud and disputed transactions. A customer can always select a particular debit network by inserting their card and selecting a network rather than tapping their card. And least-cost routing only applies to dual-network debit card transactions; it will not affect customers using credit cards.

Modern complexities

While the RBA has enjoyed some success at encouraging LCR, there are new challenges emerging. One of these is the mobile wallet system available on smartphones. As the RBA puts it:

The Bank has observed a number of emerging challenges to the viability of LCR over the longer term. One challenge is that technological changes have driven a significant shift away from the use of physical (plastic) cards at the point-of-sale to the use of new 'form factors', such as mobile wallets, which is increasing the pool of transactions that cannot be routed.

This shouldn't be confused with another issue regarding mobile wallets, where Apple restricts access to the near field communication (NFC) technology needed to implement a mobile wallet, thus making itself the only possible provider. That's an enquiry being pursued by the ACCC (Australian Competition and Consumer Commission).

What the RBA is concerned about is that, effectively, most mobile wallets are like other contactless payment systems, but don't give the merchant the option of LCR. That is because the routing depends on arrangements established by the provider of the mobile wallet, and these favour the large international providers.

While there have been some efforts to overcome these difficulties, they remain technically complex. What enhances the protection mobile wallets offer against fraud is that they never transmit or reveal any of the details of the consumer's account. Instead they generate a single, unique token (a cryptographic entity) that identifies the transaction itself.

To introduce LCR, it would be necessary to either decrypt that token, so the payment could be re-routed, or for two tokens, one for each payment system, to be produced. The first would undo much of the extra security layer, and the second introduces considerable complexity.

In responding directly to this issue, the RBA stated:

Accordingly, while the benefits of enabling LCR in the mobile-wallet context could be substantial, the Board's view is that these would likely be outweighed by the significant implementation costs, as well as other legal and practical challenges. The Board is also mindful that mobile payment methods could change significantly in coming years (through, for example, the use of quick response (QR) codes).

The use of quick response (QR) codes has grown in popularity in China (though its initial implementation was in Japan). Both Alipay and WeChat rely on this system of mobile payments. PayPal added this capability in 2020 to its mobile app. Since the start of the COVID-19 pandemic, QR codes have offered an option that requires no contact at all, which has further advanced its popularity.

It is, however, somewhat more time-consuming and complex than the simpler wallet systems. While it might be attractive in nations where contactless card payment are not popular, its ability to penetrate the highly contactless Australian market would be limited.

RBA actions

As with many aspects of payment systems, the RBA seems to prefer to set expectations rather than make explicit rules apply. Thus its overall approach is to state:

The Board's preferred policy to promote LCR is to state an explicit expectation that all acquirers and payment facilitators will both offer LCR functionality for device-present transactions and promote the functionality to their merchant customers.

Online transactions and LCR

As with many issues regarding technology, the path the RBA is taking with LCR for online (formally, "device not present" transactions) is a little odd and confusing. Essentially, the RBA is mandating that LCR should be available universally:

First, all acquirers, payment facilitators and gateways will be expected to offer and promote LCR functionality to merchants in the online environment by the end of 2022.

From that point there are two pathways a merchant can take. The merchant can allow the customer to choose which debit network will be used to process their payment, or the merchant can offer no choice.

In the first case, the merchant has to ensure that choice is not overridden at any point. As the RBA states:

This would apply, for example, where the checkout page provided the explicit choice of debit network or where the customer used a mobile wallet with a preselected debit network.

In the second case, the RBA's principles state that:

If a customer has not made an explicit choice of network, and the transaction may be routed by the merchant or another party in the transaction process away from the 'front-of-card' network, there should be reasonable notification that routing could occur. In the case of new recurring transactions, it would be appropriate to notify customers only at the time of setting up the arrangement. In the case of existing recurring transactions, merchants should notify customers that their transactions may now be routed. The Bank is not prescribing exactly how such notifications should occur.

The use of "recurring" is a little confusing here, but it likely refers to whether this is an account setting - for example, an Amazon login, or paying a telephone bill - or a one-off purchase. This is also one of those cases where the RBA is waiting to see what the market comes up with, which it will then comment and criticise.

Where this all starts to get a little difficult is with the examples provided by the RBA as to how this might get implemented.

Anyone with experience in online commerce knows that the payment process is a very delicate one - many purchases are abandoned at this point. The real, underlying problem is simply that, because the choice of payment network has little if any effect on the customer, but does have an effect on the merchant, it's hard to see how leaving the choice up to the customer actually achieves anything at all.

For example, if the merchant does choose the payment network for the transaction, then the RBA recommends a message is shown to the customer stating that: "If using a debit card with two networks, your payment may be processed through either network". It would be surprising if as much as 10% of customers actually know what that statement means, and the general advice that will emerge will be "simply ignore it" - which begs the question of why it should be implemented in the first place.

It's probably going to be worse if the customer is asked to choose a network. Not knowing what that means, they would be forced to make a guess, or spend an hour researching exactly what is going on.

One option that could emerge, especially where routing preferences are part of customer account settings, is to offer some incentive for customers who choose the most cost-efficient option. That might be, for example, providing a small discount on shipping costs, or early access to discount sales.

In general, though, this aspect of LRC seems so poorly thought out that it will likely be revised before the end of 2022.

Interchange fees

While the RBA expressed itself satisfied with the overall structure around interchange fees, it did consider there was one class of transaction where problems emerged. This related to relatively low value transactions that were charged at the set fee rate of $0.15. As the review points out, this would mean that a transaction worth $15.00 would be charged an effective interchange fee rate of 1%.

Equally, however, the RBA noted that adopting an "ad-valorem" - value based - approach would not work, as the interchange fee should reflect the underlying costs, and most of those costs for debit cards are fixed on a per transaction basis. The RBA set out an alternative:

Instead, the Board favoured a reduction in the cap on debit card interchange fees that are set in cents-based terms, which will reduce the possibility of very high effective interchange rates on low-value transactions, without significantly changing the overall interchange framework.

In practice, this means:

The Board favoured a modified version of the proposal for lower caps presented in the Consultation Paper, whereby the 15-cent cap on debit interchange fees set in cents-based terms would be reduced to 10 cents for transactions on both SNDCs and DNDCs.

Surcharging

It has been previously established by the RBA that merchants can charge an additional fee on transactions where processing costs are high. Just such a scheme has been implemented recently by Amazon in Australia (and previously in Singapore) where transactions using Visa cards are charged an extra 1% fee.

However, BNPL transactions have escaped that requirement, even though the RBA sees this as a relatively helpful tool:

The Board's long-standing view - which has been supported by developments in merchant service fees over the past two decades - is that the right of merchants to apply a payment surcharge plays an important role in promoting competition in the payments system and keeps downward pressure on payment costs for businesses.

One reason why a surcharge for BNPL transactions might make sense is the high cost.

Data collected by the Bank from 9 BNPL providers indicate that the average BNPL merchant fee was a little over 4 per cent in the June quarter 2021, which is significantly higher than average merchant fees on card transactions. Some stakeholders have also emphasised that BNPL merchant fees can be much higher for individual merchants, particularly smaller businesses, and that there is considerable variation across BNPL providers. While it is possible that competition from newer providers could result in downward pressure on BNPL merchant fees, it was also observed that competition may take some time to have a meaningful impact on BNPL merchant fees.

Weighed against this, the RBA states, is that payment systems are based on networks, which means there are substantial barriers to market access. However, the RBA eventually does come down on the side of removing the barriers to charging a surcharge on BNPL.

The Board has formed the view that the costs of BNPL no-surcharge rules - in terms of efficiency and competition in the payments system - outweigh any potential benefits in terms of supporting the entry of new players into the market. BNPL has continued to grow in popularity and is now used by a significant number of Australian consumers, particularly for online purchases. Accordingly, it is now likely to be difficult for many businesses to decline to accept BNPL services, even if they wanted to, and the high cost of these services is pushing up their payment costs.

What this means in practice is that:

Accordingly, consistent with the Bank's current approach to surcharging card payments, the Board's preferred approach is that merchants should, if they choose, be able to recover an amount up to the total cost of accepting payments, including those from BNPL providers. As noted, businesses may choose not to surcharge if they perceive that they benefit from accepting BNPL payments.

However, the RBA does face some challenges in regulating BNPL systems:

While BNPL arrangements facilitate payments between consumers and merchants (just as credit and debit cards do), there is some uncertainty as to whether they meet the legal definition of a 'payment system' or whether providers of these arrangements are 'participants' in payment systems under the PSRA [Payment Systems (Regulation) Act].

Analysis

It is likely that within three years the financial industry will look back on this recent review by the RBA with something of a sense of nostalgia. The reality is that current payment systems are simply not keeping up with the rate of technological change that is needed.

An analogy is the current telecom system. The technology of fraud - especially spoofing phone numbers - has outgrown the ability of telecoms to police this, resulting in an ever-expanding pool of fraudulent behaviour, which is gradually making voice communication more and more irrelevant.

One rapidly expanding possibility is the move to what has become known as "OpenBanking". This is where banks partner with third-party providers, who use a secure application programming interface (API) to render services to clients.

Of even more interest is the possibility built into cryptocurrencies such as Ethereum that enables what are termed "smart contracts". These are essentially a system of very low-cost escrow agreements, controlled by "contracts" made out of code.

A good example would be ordering goods online that need to be delivered to your home. Typically, when these goods are substantially delayed, or even not delivered, it can be difficult to get the merchant very involved in the problem - after all, they've already been paid their money.

Using smart contracts through Ethereum, the actual payment to the merchant would be triggered only when the recipient digitally accepts delivery. The delivery company would be incentivised to make that happen, because they would have a similar contract with the merchant. No delivery, and no one gets paid.

That has consequences for quality of service delivery, but it would also effect pre-order cash flow. Extended to its furtherest extent, goods could be offered for sale by a retailer, and the payment for their initial supply could be made immediately on their actual sale - a way to supercharge consignment selling.

The question that we end with, then, is whether what the RBA does today is establishing the future of payments processing, or really more administering a transitory phase before more technology upends the existing links to the banking system.

Agribusiness Elders has posted a higher full-year profit, assisted by the first full financial year of ownership of Australian Independent Rural Retailers (AIRR). Sales of rural products improved by 24% as a result of the AIRR purchase.

The company posted a 22% increase in full-year net profit to $149.77 million for the 12 months to September 30 as revenue lifted 22% to $2.548 billion.

The bumper profits were also driven by favourable market conditions, ranging from overseas pension funds pouring money into farm purchases to strong demand for cropping products.

The high demand for cropping products improved crop growing conditions that will continue to drive demand for its range of pesticides and chemicals, and a real estate boom is having a positive impact on the agribusiness giant. Chief executive Mark Allison told The Australian:

The diversified model for Elders allows us to continue to make increased profit even though there are droughts and floods or whatever, so the philosophy from day one has been we have to get the cost of capital for Elders at a position so that in bad conditions we make money, and then in good conditions we make lots of money...

Last year when we hit $120 million (profit) a bunch of commentators said this is as good as it gets, but hold on a minute, only 30% of our upside in profit this year has come from strong market conditions, and 70% has come from our bolt-on acquisitions and backwards integration and organic growth.

So acquisition and organic growth is 70% of Elders growth, it has nothing to do with seasons or cycles or cattle prices or rain or anything.

Like many other companies in Australia, Mr Allison said Elders was facing shipping and logistics problems caused by COVID-19 and the extra strain of supply chains, which had delayed shipments of key crop chemicals.

Around 70% of crop protection products come out of China. We have had examples of ships being sent back to China empty so they can send another shipment of inputs back here. Our supply chain has gone from eight weeks to 12 weeks, it has added an extra month for ordering.

This would still enable Elders to have enough stock on hand for next year's winter crops but the price of the products and as well as shipping and freight costs would need to be passed on to customers.

Elders' property arm was boosted by soaring demand for farmland and residential property. Gross margin improved by 33%. Prices in the property market were also expected to stay high, helped by low interest rates.

Looking ahead, Elders said favourable seasonal conditions and demand for agricultural commodities made for excellent trading conditions in the first-half of this financial year. The company also said there were good opportunities for more acquisitions.

Seed business

Elders is also looking to the expansion of its growing seed genetics business, EPG Seeds. EPG Seeds is investing in new distribution channels so its products will be available beyond the Elders branch network through AIRR and all national reseller networks.

Mr Allison said the company has been involved in plant breeding and introducing crop genetics to Australian farmers for decades.

These added investments will take these operations to a new level and expand the distribution of innovative grain and forage varieties to new customers, with the backing of Elders.

Related: Elders continues to grow its branch network through its AIRR ownership.

Related: Elders' AIRR acquisition delivers customer growth.

Pandemic lockdowns have boosted DIY sales at independent retailers since April 2020, especially in Melbourne and Sydney. With Australia-wide full vaccination rates likely to go past 90% next January, while domestic and international travel restrictions ease further, most retailers are preparing for reduced DIY sales in 2022.

Lockdown was certainly an activity incentive, but just as importantly, customers had few other opportunities to spend money to improve their circumstances. Some genuinely new demand was created, but there has also been a considerably bringing forward of future demand. Few homeowners will add a second deck, a second pool, or a third storey onto their houses.

That's not to say, however, that independent retailers intend to simply surrender the additional (more profitable) sales they've reaped from DIY over the past 20 months. The question is, though, what tactics should they adopt to hold onto more of those dollars?

Competition

The first part of the answer to that question is to acknowledge that what is being discussed here has less to do with changing consumer behaviour, and more to do with industry competition. While it is true that DIY spending in general rose considerably during the more difficult periods of the pandemic, independent retailers likely benefitted as much from the restrictions themselves as the increase in activity.

In both Sydney and Melbourne, during the strictest lockdowns, people were restricted in how far they could travel, and over which local government authority boundaries. While the increased volume of sales benefitted Bunnings, the proximity rules - as well as the volume of traffic through each Bunnings store - made the nearest hardware store often a more attractive option, and in many cases the only option.

With lockdowns essentially over, independent hardware stores need to revisit how they can compete with Bunnings for DIY sales in 2022. To do this effectively, they need to acknowledge that past competitive practices have simply not worked.

Back in 2019, the industry saw the first signs, in 20 years, of independent retailers coming to terms with what Bunnings really meant as a competitor. One catalyst for this was that the merger of Home Timber & Hardware (HTH) with Mitre 10 to form the Metcash-owned Independent Hardware Group (IHG) really did not deliver the kind of market competitiveness that then-CEO of IHG, Mark Laidlaw, seems to have at one time suggested.

Pre-pandemic, IHG did OK, but did not attract enough additional stores post-merger to noticeably change the structure of the hardware retail market. Competing with Bunnings seemed to work better as a recruitment and member retention strategy than it did as a functional, working competitive strategy.

Prior to that, the message most independent retailers agreed with was that the Bunnings business model was flawed, and that its ongoing aggressive expansion would not generate adequate returns. Independents, it was suggested, would eventually triumph due to the greater expertise of their floor staff, the ability to build relationships with customers, and their enduring role in regional communities.

Bunnings did not fail. It succeeded at doing better than any other major retailer in Australia. Today, Bunnings continues to expand, recently into both hard surfaces with the acquisition of Beaumonts, Tiles and into trade tools through its launch of Tool Kit Depot, while also continuing to grow its trade business through its existing warehouse stores.

Hardware retail has come to accept this. Very few (though there are some) would continue to voice the opinion that Bunnings is somehow strategically flawed. The reality is, most realise, that Bunnings is a major influence in certain key markets, and it is likely to continue to dominate those markets through to the end of the current decade.

New markets

That's not a message of despair - for one thing, the Australian Competition and Consumer Commission (ACCC) is more attentive to the monopolistic power of Bunnings than it has been at any time over the past 20 years.

Beyond that, however, Bunnings will also, within the next five years, begin to struggle with changes to its base markets. The baby boomers which boosted it to its current pre-eminence are ageing out of the DIY market, and generations that are replacing them - Millennials and the younger Gen Z - have different values, and a different approach to both home ownership and DIY.

There are, HNN would argue, already clear signs of this struggle in Bunnings. The best single example of this is in the two major DIY video series that Bunnings has brought out, 2019's "Make it Yours" (MIY), and 2021's "Make it Happen" (MIH). Exploring those series, and also looking at what overseas home improvement retailers such as Lowe's Companies are doing with video, can provide some sense of the new, emerging markets that Bunnings may be less equipped to capture.

Bunnings goes backwards?

It has been somewhat surprising to see Bunnings, which has a very good history of execution, produce a quite good DIY series in MIY, then go considerably backwards with its next production, MIH. There is the pandemic to account for, of course, but Wesfarmers/Bunnings is a very large, national company: it has the resources to overcome those difficulties.

The answer, in HNN's opinion, may lie in the different strategies behind each series. In MIY, the show was overtly aimed at younger DIYers, with at least some attention to the possibility they might be renters. It relied on taking a very modest - in fact somewhat drab - suburban house which Bunnings bought, and engaging with a series of designers/social media influencers to renovate it. Each of them took responsibility for redesigning and then rebuilding one aspect of the house, with relatively high production values in the shoot.

By contrast, MIH is perhaps the most Bunnings video series ever. The host of MIH, Lucy Glade-Wright who runs a successful blog/marketing company named Hunting for George with her partner, Jonno Rodd, presented the MIY series on Channel 7Two. The association with Bunnings has extended to the remodelling of her own house, presented in a series of videos, which, while somewhat variable in their quality, highlight her ability as both a designer and a presenter.

One of the standout examples of this is the video capturing the remodelling of the couple's kitchen, in a late 19th Century house somewhere in Melbourne:

This is one of the best DIY home renovation videos that HNN has seen. There is genuine passion, coupled with lots of hard work by both Ms Glade-Wright and her partner Jonno (who has a background in marketing). Part of what makes it so interesting is the constant planning interrupted by the necessity to change up those plans to match the reality of the renovation. It begins with a desire to preserve the exposed brick of the kitchen, which then needs to be painted white, and then cabinets do not fit in spaces and need to be replaced.

Yet in that constant juggling, a very particular and real aesthetic emerges, producing a room that is hyper-modern in some aspects, yet also conforms to the contours of a 150 year past. It's a kind of ongoing salvaging, but what is salvaged comes from both the past and, seemingly, the future.

What really distinguishes this particular video is that Ms Glade-Wright makes evident the actual meaning of this kind of renovation. The kitchen really matters to her in a way that interior design really does matter to many, if not most, Australians. It's an expression of self, of culture, and even of the community one builds over time with friends. Australians tend to "mock up" a sort of "happy go lucky" surface life, but underneath this is a deeply felt sense of place.

This video also contains perhaps the single most effective promotional piece ever made for Bunnings' DIY kitchen supplier, Kaboodle. It illustrates effectively how the inexpensive Kaboodle components can be used as the basis for a modern, functional and stylish kitchen, when they are taken out of the standard, prosaic patterns of the "kitchen in a box".

Indeed part of Ms Glade-Wright's charm is an ability to "spruik" for a particular sponsor - Kaboodle, or Electrolux appliances - in a way that seems to reflect her genuine appreciation for these products.

When it comes to her role on MIH, however, these abilities are, at best, tamped down somewhat, if not at times nearly excised. While the series has some pretensions to be about DIY, the fact is that, as the majority of work is performed by the Bunnings staff, it's more about how to renovate a room by hiring tradies.

There is some attempt at DIY activity, which means that every episode focusing on an interior room has the hapless homeowner forced to undergo the trifecta of modern room transformation: painting, tiling something like a backsplash, and laying laminate floorboards. You see the participants paint about a quarter of a square metre of wall, actually hold tiles but not do much with them, or hit a laminate board with a rubber hammer.

The really difficult parts, such as working out how much of a partial laminate board will be needed to span the surface of a room, and cutting those boards laterally - not on a right angle, of course - to fit the room's contours, are simply not even mentioned. If you know anything about actual renovation, it's a bit like joining a Zoom meeting where a good friend has accidentally turned up the "pretty", face-smoothing filter to the max: all the wrinkles are gone, but it doesn't improve anything, and the result is barely recognisable. It's essentially DIY renovation mime.

The other problem is that the results of all these efforts certainly demonstrate an improvement over how the rooms started out, but the end-design is far below what Ms Glade-Wright would be able to achieve given a free hand. That's not a mistake, really, by either Ms Glade-Wright or the producers, because the homeowners are very evidently somewhat conservative (to put it mildly).

Looking at the "before" and "after" of the kitchen, there is no doubt that some improvements have been made, but it is more about updating than anything else.

For example, it's difficult to reconcile the floor with the new design. It's not quite a clash, but you know instantly that it would look great with the kind of limed-white floorboards Ms Glade-Wright used in her own kitchen. That accounts for the somewhat heavy over-counter pendant lamps: it's a device to link those disparate elements together, a counter-balance between a light and heavy tonality.

Generational

Of course, what is really going on here is as much generational as anything else. The designs and approaches used in MIH very much belong to the baby-boomer/Gen X side of things, where in MIY it was slanted to the Millennial/Gen Z demographics. The clearest illustration of that shift is in Episode 2 of the MIH series. The task is to take a living-room which has been split to create a third bedroom for a Gen Z young adult Max. As his sister is now moving out of the originally two-bedroom home, he can now have her room, freeing up the space.

In some ways, it's almost emblematic of the shift between MIY and MIH. The Gen Z is moving out of the main space, and this is being reclaimed.

It's also worth noting that Ms Glade-Wright and her partner Mr Rodd belong to the late-Gen X/early Millennial demographic, which makes their business (formerly a retail operation) Hunting for George an ideal vehicle for presenting this aspect of Bunnings. Probably the most evident effect of that generational influence is the constant battle of the TV that takes place in the living-room designs they produce.

It's increasingly the case that TVs create a kind of design confusion as, in a screen-intensive world, there's a sense they need to be the secondary focus of a room, which, as TVs have become huge, is difficult to achieve. In late Millennial/Gen Z houses that's not an issue - because they don't have TVs (because there is an iPad/laptop/big smartphone), or the TV is allocated to a secondary space.

Alternatives

It's all very well to criticise this particular effort by Bunnings, but is there a better alternative available?

Indeed there is - in fact several. The most on-point is a series produced by Lowe's Home Improvement titled "The Weekender". This uses a very good, experienced DIYer and presenter, Monica Mangin of East Coast Creative, who transforms spaces in people's homes by breaking them down into a series of four or five projects.

In series 4, episode 8, Ms Mangin tackles a very small kitchen in a small house (less than 75 square metres) located in a lovely part of the city of Philadelphia, PA. The house is owned by Katelyn, a young Gen Z woman, who has saved up to buy a home she can barely afford, and really cannot pay for renovations.

So, already you can see the boxes that Lowe's is getting ticked off: small house, small space, first homeowner, Gen Z, limited funds, and a space that needs renovation, but has great potential.

The process is also very different from both MIY and MIH. While there is a tradie working to take care of essential tasks such as demolition, Ms Mangin does much of the work herself, including activities such as cutting out the hole for the sink in the wooden countertop. She walks Katelyn through every step of that process, including using a hole-saw to drill out the rounded corners, then cutting the lines with a jigsaw.

The outstanding part of the project is replacing the floor. After tearing up the old linoleum, a wood floor is revealed. Unfortunately, that wood floor would take too much work to restore, and the show has only the weekend to work with.

What is really interesting here, though, are the choices Ms Mangin makes to advance the project. She does not choose laminate flooring, but instead tongue and groove hardwood boards - which install almost as easily as laminate. Of course they are more expensive per square metre, but this is a very small space.

Then, instead of a simple treatment, she has Katelyn help her to stain these boards in a range of different colours. The goal is to make the boards look as though they are repurposed timber taken from warehouses and other sources. To add to the effect, she topnails the boards, emulating the way standard floorboards would be fastened.

This is what the final result for the kitchen looks like:

The real difference between the "Weekender" and both MIY and MIH is that there is really a very clear focus on actual, useful DIY tips. When Ms Mangin does the backsplash, for example, there is a virtual tutorial on tile selection, working with mosaic pattern tiles, how to cut the tiles, and how to fill in gaps in the pattern.

Seeing the difference between these two approaches, you really do wonder if the Australian series is not a little haunted by the remainder of the British class structures, where doing things by hand, as "trade", is still seen as a demeaning. In the US DIY is almost universally seen as "canny"; in Australia it's as though it is a barely OK alternative to using tradespeople. At least, that is, for the baby boomer generation.

The marketing opportunity

What we're really discussing above is that interesting area where design and DIY cross over. Is that all just about promotion, however, or does it really sketch out how people think about DIY today?

One answer to that question is that the market is a lot more complex than just a single division between those who can/will DIY, and those who can't/won't. It goes all the way from people who can (just) replace the washer in a tap, but panic when the toilet cistern starts to leak and needs its gasket renewed, to those of us who sigh at every DIY renovation TV show, because no one, anywhere, sands the walls of older houses before painting them (really, minimum of an hour per wall, easily).

One thing that is clear is that for people with some interest in DIY, and the minimum set of skills required, today represents something like a bonanza of possibilities. Power tools are so cheap, so powerful, so well-designed. Products like paint seem to get a little easier to use every year. There has been fantastic product development in everything from waterproofing (pre-made corner membranes - amazing!) to sealants to fasteners.

That is, to some extent, the "missing piece" when we talk about the boom in DIY sales during the pandemic. It wasn't just the demand, it was also people discovering how much DIY has changed over just the past decade, how much easier and safer it is now.

One of the slight distortions we all have in the hardware industry, and which we need to compensate for, is that we all believe that there is something in DIY that is just good for people. Amidst all the blathering we hear about conservation, climate change and so forth, we know that being able to repair stuff instead of replacing it is just a good thing. It's, well, it's respectful, in some way that is really difficult to define.

Yet those values are simply not the values (for the most part) of today's DIYer. One of the phrases that keeps recurring in the Lowe's Weekender video series is "it's Pinterestable". The fact is that much of interior design is really influenced by the community that is formed through social media. What is shareable has become what is valuable, to a growing, important sector of the market.

It is this that is really the differentiator between the early MIY and the later MIH video series by Bunnings. In MIY, the designers doing the design and DIY were all "influencers", dependent on social media for their personal and business reputations. For MIH, Bunnings chose another influencer in Ms Glade-Wright, but one that is very much something of a cross-over.

That's evident because she is acutely conscious throughout the MIH series of the level of discomfort she may be causing the homeowners with whom she interacts. Because they, coming from older generations, are evidently not always all that happy being exposed to this particular social media driven world.

What does this mean for hardware retailers? There are several steps that retailers can take to help boost their profile and increase sales.

Your own influencer

On a simple, direct level, if the younger generations are greatly inspired by the "influencer" economy, can they locate influencers who are local to their suburb, town or region? One way to do this is to search resources such as Instagram using the hashtag for your local area.

If they can locate influencers who are at the start of their design careers, it's possible to work out relatively inexpensive promotional deals. Any kind of commercial deal is helpful to beginning influencers, as those deals actually enhance their reputation in the community, acting as a form of validation.

Instagram rather than Facebook

While some see this as something of a joke, the reality is that for the younger portion of the market, Facebook has become to Instagram (and to some extent Pinterest as well) as email is to text messaging.

What this really means is that there is a big change to the narrative of sales. Facebook fosters (to sometimes negative consequences) the sense of a particular community involvement. Instagram instead measures something like the visual "beats" to a person's life. It's an association of less-judgemental "likes", a WhatsApp conversation rendered more universal and available through using the visual as the means of communication.

The task of the retailer in this situation is to render the individual items of DIY to having some kind of meaning in that narrative. Let's take, for example, the "forest of taps" displays at most Bunnings warehouse stores (which HNN would argue was originally a development of a similar display pioneered by Masters Home Improvement, during its brief presence). To older generations, this is useful, as it makes it possible to easily compare different taps on appearance, price and utility.

To younger generations, however, it is something more towards a mass of noise and interference. The decisions that are being about tap choice are associative, and apply to the narrative of the space that is being developed. A simpler display, with simple classifications might work better.

Yet the prime ingredient that might really work is a QR code that links smartphones to more product information, but not that provided by the manufacturer. Rather, this should provide links to social media and other sources where the product has been featured or discussed.

The important thing to realise is that this is not a matter of developing a "digital" virtual store. What it is really about is the communal, the shared, and it is only incidental that this is best realised through the digital.

Of course, what is important about this for smaller retailers, is that it means not that scale - such as that used by Bunnings - means nothing, but that it will mean much less than it has in the future. Smaller retailers cannot stock and feature 80 different taps. But they can stock 30, and provide the linkages these customers seek in a satisfying form.

Analysis

One of the potential big shifts we could see in the future for small independent hardware retailers is the development of industry-wide services for social marketing.

It's fairly evident that when we enter into this area that succeeding at this type of marketing will require not only considerable effort and time, but also a high degree of expertise. It's also a series of highly repeatable tasks that need to be done by each retailer.

The possibility would be that these promotional efforts will be consolidated, and see the formation of "marketing groups" somewhat along the lines of buying groups, such as the Hardware & Building Traders (HBT), or even the extension of groups such as HBT to cover marketing as well.

The other possibility is to see more product suppliers become engaged in influencer marketing, offering retailers "marketing packages". This could extend both to online media, and to in-store facilitation through store displays and QR code links to further content.

Farmers Warehouse is now in an expanded premises in McDougalls Hill, a suburb of Singleton (NSW). There is another Farmers Warehouse store in Dungog and both are owned by James Ramm.

According to the Singleton Argus, the Ramm family have been in agricultural supply services for many years with Mr Ramm starting out in the business running Farmers Warehouse as an online store.

He opened his first bricks-and-mortar location in Singleton on Ryan Avenue in 2009 before building a new facility across the road from his latest venture located next door to Bunnings. The need to have more supplies both undercover and in the yard meant they had outgrown their original site and further investment was required. He told the Singleton Argus:

Most of our biggest customers have probably never been in the shop. But they come to us because of excellent supply, delivery and pricing. The larger facility means we have more stock on hand to service our customers.

Three trucks ranging in size from 4 tonnes to 29 tonnes will enable more efficient deliveries for its customers.

With record prices now being received for many farm commodities, in particular beef cattle, farmers are keen to invest in farm infrastructure. With this in mind, Mr Ramm said he would love to see more local manufacturing of farm supplies.

We are at the mercy of overseas producers for so many farm inputs like herbicides, fertilisers and fencing equipment. It would be great to see these products made in Australia and therefore farmers would be less likely to be hit by sudden price rises and no supply.

Background

Farmers Warehouse began as a web-based store in 2008. While Mr Ramm, was working at his father's store in Rutherford (NSW), he saw the need for rural products to be available on the internet as a way of reaching a broader regional customer base. He started www.FarmersWarehouse.com.au from his home.

It is a member of AIRR (Australian Independent Rural Retailers) which allows better buying power and provides access to distribution warehouses in most states.

A new beta experience in Lowe's app combines emerging technologies to empower customers to plan, visualise and shop for flooring. The Measure Your SpaceBETA from the home improvement retailer uses LiDAR to take the guesswork out of home improvement.

The tool is made possible by a recent hardware upgrade to certain iPhone 12 and 13 models that make LiDAR-enabled applications possible for developers. Apps like Ikea Place and TikTok have already made use of the new capability to support more precise augmented reality effects.

Lowe's said its Measure Your Space BETA is an intuitive, end-to-end room scanning, measurement and estimate experience in the Lowe's iOS app.

Few home improvement projects can move forward without data about a home's space, which can be tough to gather. Seemantini Godbole, Lowe's executive vice president and chief information officer, said:

Home improvement can be complex, but at Lowe's, we're investing in emerging technologies like LiDAR, AI and mixed reality to make home improvement simple and intuitive. We see a future in which the devices customers already own can sense, understand and compile information about their home, putting it in their hands the moment they need it. We call this future spatial commerce, and we're excited to bring it to our customers.

iPhones and iPads with the LiDAR Scanner use purpose-built sensors and software to sense depth and map dimensions of a space and the objects in it. Lowe's will leverage this technology to get detailed room measurements.

Its customers will be able to access the feature simply by pressing the Measure Your Space BETA button on the product detail page of select flooring products in the Lowe's iOS app. The app will guide them to scan a room, automatically generating a floor plan, room measurements and a personalised estimate. They will be able to access this information in their app from anywhere, whether that's on their couch or in a store.

Measure Your Space BETA is developed by Lowe's Innovation Labs that is focused on building experiences that will shape the future of home improvement. It worked with Streem(r), an AR and AI company whose mission is to make the world's expertise more accessible.

This offering follows Lowe's for Pros JobSIGHT[tm] powered by Streem, an augmented video chat service launched in 2020 the midst of the pandemic to allow Pros to conduct virtual home visits with customers. Ryan Fink, Streem president and co-founder, said:

Lowe's and Streem together are applying the use of complex augmented reality tools to create a simple, user-friendly app experience with the unique ability to make DIYers' lives easier. This partnership is proving the value of spatial commerce today by using guided AR and AI experiences to empower consumers with the practical tools and data they need to dream, plan and accomplish home projects.

According to Ad Week, tools for virtually trying on products or placing furniture in homes have accelerated in popularity since the start of the pandemic, which made perusing items in brick-and-mortar stores more challenging. At the same time, better developer platforms and new smartphone capabilities like LiDAR have made mixed-reality and other virtual mock-up tech easier to create.

That trend has also coincided with a boom in the home improvement space and a greater willingness on the part of consumers to buy big-ticket items online.

Measure Your Space BETA will be available before the end of Q1 2022 in the form of a commercial beta launch available to iPhone 12 Pro/Pro Max, iPhone 13 Pro/Pro Max and iPad Pro users via the Lowe's iOS app.

To learn more about Lowe's Measure Your Space BETA, please visit:

The forecast for the post-pandemic recovery has taken a few forms since the dread days of February 2020 when the world realised it faced something more of a problem than at first foreseen. For the moment we can say that we have almost come the end of that particular problem, at least in Australia, and much of the rest of the world.

Outside the Northern Territory (NT), every Australian state and territory is predicted to reach a 70% fully vaccinated rate for people over 15 years old by mid-November 2021. By mid-December 2021, these regions will have reached the 80% fully vaccinated rate. (The NT will likely get to 80% in late December 2021.) New South Wales (NSW) and Victoria (VIC) are expected to cross over 90% by the start of 2022 at the latest.

While that is good news, it's likely the recovery will be, while not as tricky as the pandemic itself, at least tricky enough to create some considerable problems. That's especially the case for retail, which was, overall, one of the industry sectors most affected by the pandemic, along with tourism and - in a very different way - health care.

At the start of what will end up being pretty close to two years of pandemic time, there were a number of theories suggested as to what the recovery would look like - all of which were based on pure speculation. Perhaps the most persistent, at least in federal government circles, has been the "snap-back" - the notion that, somehow, once COVID-19 had been beaten back, everything would go back to the way it was in December 2019.

The Delta variant of COVID-19 somewhat intruded on that version of events, especially for countries with inadequate supplies of vaccine, such as Australia. We could say that what we could call the "final wave" of COVID-19 is all about what we do with that two years of experience now.

One of the most important things to realise in assessing this is that the recovery is not - obviously - synonymous with whatever shape the graph of gross domestic product (GDP) growth looks like. GDP does not really describe the entire economic condition of a nation, and it is of only passing importance in explaining a cultural change.

It's easy to reel off some of the headline challenges Australia faces now. There is the booming housing market, which takes place even as the wage price index and overall business investment remain at historical lows. There is the rise of online retail, with questions about whether that has permanently reshaped retail markets, and just what it would mean for retail overall.

There is also just the deep rift that has been revealed in Australian society, with mobs of mostly younger men shutting down parts of Melbourne and Sydney in anti-government riots. These were shocking not only in their level of violence, but in the unbalanced ideologies that supported them.

What we can also say is that Australians got through the pandemic relatively unscarred as compared to most other developed nations. And we did that not through some wise guidance by state and federal governments, but often despite the glaring, obvious mishandling of the pandemic by governments. We were patient, we adjusted, we put up with a lot of mistakes - and sometimes had to tolerate the pure arrogance of our leaders. ("Get out from under the doona", right before Delta hit, still remains worthy of at least a good eye-roll.)

The thing is, we cannot really expect the management of the recovery to go much better than the management of the pandemic. There are a lot of possible causes for that, but the summary is that, for whatever reason, government in the 2020s is simply nowhere as effective a resource as it was during, say, the 1990s.

So, what does that management of the recovery look like for retailers, and especially hardware retailers? What changes have occurred, what opportunities will emerge, and how can they cope with these uncertain times?

Hardware retailers

For retailers looking at the available market, we've entered a phase of confused and mixed messages. Will consumer spending on DIY fall back to 2019 levels, will increased shopping at smaller retailers continue, will online shopping continue at a high level, or go backwards? Which comes down to the key question, of how you manage retail when customer needs and expectations are changing on a monthly basis?

One of the best articles that HNN has read recently on this topic was written by Andrea Scown, who is the CEO of Mitre 10 New Zealand (not associated with the Metcash-owned Mitre 10 in Australia). Entitled "Clicks vs bricks: How retail is changing", the article asks many of the questions Australian retailers are facing.

Ms Scown is particular captured by the difficulties of running e-commerce from facilities made for direct-to-customer sales:

Where do you store all your stock while ensuring customers can get it with the same convenience of going in-store? The home improvement industry is heavily reliant on bricks-and-mortar retail; much of our range is difficult if not impossible to sell online.

What does the supply chain look like for retailers in the coming months? Retailers are having to factor in global disruption, shipping delays, significant freight cost increases and hold additional stock to ensure continuity - all of which puts more pressure on a retailer's footprint.

Her solution, for the particular situation in New Zealand, has been to take the company on a five-year process to digital integration, based on an SAP backend. As she describes it:

Here at Mitre 10, we are now immersed in a major five-year programme to ensure our customers get the best experience - because convenience is king. With everything so easily available at the click of a mouse, we know it'll be very difficult for a customer to bypass one of our competitors to get to us, when they are shopping for convenience. So where we are located, access, car park ease, hours of opening, and "click and collect" all make a difference.

But what about smaller retailers in Australia? It is likely most will find some way to muddle through a transition back to more in-person retail, while some aspects of click-and-collect will remain. However, over time, we could see the growth of online ordering lead to some regional consolidation of retailers.

One point that might drive that home as a necessity for growth is that the existing independent retail model has not been successful in competing against the main industry player, Bunnings. In particular, the drive by the Metcash-owned Independent Hardware Group (IHG) to consolidate its own Mitre 10 hardware group with the Home Timber & Hardware Group (HTH) in an effort to drive growth, did not prove as successful in the market as Metcash had hoped.

The primary reason for this was that its centralised, warehouse-based distribution model did not deliver a decisive competitive advantage. Other groups, such as Hardware Building Traders (HBT) were able to provide equivalent access to suppliers and bulk deals, with fewer trading restrictions. This, in turn, meant that IHG did not grow appreciably in size.

One possibility is that the "winning" model for Australia could turn out to be neither national nor strictly local retailers, but regional retail instead. We could see hardware retailers form at the very least strong associations on a regional basis, including their own regional warehouses. This would enable, for example, online e-commerce within a distinct region to be serviced directly from that warehouse.

One of the major obstacles to this will be access to capital. While the RBA has suggested that small businesses do have ready access to capital, this is true only where small business owners are willing to put forward personal assets, such as houses, to guarantee these loans. Access to true venture capital, based on the future value of a newly formed enterprise, remains readily available only to large companies.

Consumer changes

One of the most important elements for retailers to focus on is the actual hardware/home improvement consumer, and the changes these consumers might have undergone as a result of the pandemic period. If we look closely we might certainly see that there are some areas of aspiration and consumption fading out, but there are also new, viable markets emerging.

One good place to track those changes is in the area of attitudes to climate change. In late October 2021 we saw the Australian federal government release its long-awaited policy position on global warming, including long- and medium-term goals, and its methodology - based on as-yet unreleased modelling - for how those goals will be reached.

Those core policy settings have two parts. The first part is that Australia will not incur any significant costs at all to help curb global warming. The second part is that it will not allow global warming concerns to affect its energy industry and/or its general industry mix, even if doing so does incur costs through inefficiencies or the need for support and subsidisation.

Or, to put it more bluntly, the government won't pay to decrease global warming, but it will, seemingly, pay to boost industries that assure it will continue.

This is really nothing more than the continuation of the policies the current government has put forward over the past decade and more. The criticisms that have been raised against it are also familiar. Yet there has been a shift in the response to those policies, a greater sense of discontent. Perhaps that is partly due to an expectation that, as global warming exerts more of an influence, the policies should change as well. But HNN would suggest that a more significant cause is that the pandemic has fundamentally altered Australian society.

Two main beliefs were all but pummelled into Australians during the pandemic. The first was to trust the science, even if it made you uncomfortable. The second was to understand that everyone could make small, seemingly inconsequential contributions that would, when followed en masse, result in significant results - wear a mask, socially distance, and, finally, get two vaccinations.

In sharp contrast to that, the global warming policy has become a call to not contribute because, the government declares, Australia really won't make a difference. Also, there's no need to do anything, because technology - most of it developed elsewhere - will somehow make everything OK.

Viewed through the lens of the "education" offered by the pandemic, Australia's stated climate change policy is about as hokey as the worst of the claims made by anti-vaccination groups.

The new consumer

While all of this could seem to be quite disappointing, for hardware retailers, it does point clearly to some new emerging opportunities. One of those opportunities is what we might term the "active green" consumer.

Much of the "green", conservation movement has in the past been taken up by essentially "passive" actions. There's a commitment to recycling, to using "green" products for cleaning and in the garden, as examples. But what if consumers found themselves able to take a far more active role in doing something about global warming - the equivalent of masks, hand-sanitising and vaccinations?

The intelligent building

The portmanteau word "smarthome" has been co-opted to describe what is simply a normal home that has a bunch of independent gizmos attached to it, controlled by centralised system which links to smartphones and voice-activated and controlled digital assistants (Amazon's Echo, Google's Home and Apple's Siri).

What we might think of as the "intelligent building" (iBuild) relies instead on a series of integrated systems, and one of its main objectives is to limit the amount of energy used while maximising interior comfort.

It's possible to think of this as something of a two-stage system. The first - and more familiar - stage involves taking existing, established technologies, and combining them in a new way, through the use of sensors and other control systems, to create buildings that use every joule of energy consumed to the best possible effect.

Some of these iBuild systems can rely on quite exotic means of energy conservation. For example, there are climates which experience quite cold nights, followed by very hot days. In those areas, it makes sense to deploy what are basically large icemakers, which make ice at night, then use that ice to boost cooling during the day. Needless to say, that cooling boost is quite limited, and the machinery involved is fairly complex, so this is a niche use.

More commonly, iBuild relies on complex heat pumps. Heat pumps, of course, differ from other temperature control systems in that they do not expend any energy on actually creating heat. Instead they just move existing heat around. Compressing air, for example, is a way to extract the kinetic energy in the form of heat from it, while decompressing previous compressed air is a way of creating a heat sink.

iBuild heat pumps are capable of performing both these tasks at once, meaning different areas of a building can be selectively heated and cooled at the same time. You can add to that systems that transfer air from one area to another, averaging out the temperature, and limiting the amount of adjustment necessary. And then there is, of course, the use of heat exchangers for air entering the system for ventilation, using the exhaust air to either heat or cool the fresh air.

One company in the US that is actively engaged in installing these systems in New York City is Bloc Power.

One consequence of adopting this approach is eliminating the use of natural gas, and switching entirely to electric power. Thus these systems are naturally paired with the use of solar electric panels and storage batteries.

It is natural when developing such a system to add filtration as an element. That could include filtering out pollen, pollution - and even viruses, such as COVID-19. Taken one step further, there are currently systems being developed that can deliver some form of what is known as Direct Air Capture (DAC). DAC is a technology that can actively remove carbon from the air. Generally, this requires at the very least a moderate-sized plant of machinery that processes vast amounts of air.

There are a range of techniques used to take carbon dioxide out of the air, which is then followed by some mean of sequestering it. Sequestering can be done by reusing the CO2 in the production of other products, but more commonly it is pumped underground into long-term storage.

While there are currently no commercial mini-DAC systems available, there is an active community which has developed experimental, DIY systems. Some of the most successful ones have come from the Open Air Collective.

While these systems can be successful in terms of actually capturing CO2, the difficulty comes about what is then done with the captive gas. It will likely take more than another decade to come close to finding better solutions, but the idea of individual homes doing minor DAC, but collectively changing the atmosphere is very attractive - and hopeful.

Opportunities

What does this potentially mean for hardware retailers? While some of these future trends can seem somewhat remote, there is work being done currently in Australia that will contribute to these changes. For example, at UNSW Sydney, the Anita Lawrence Professor of High-Performance Architecture Mattheos Santamouris is working on developing materials and surface finishes that can help regions of cities remain cool at the height of summer. In particular, there is a focus on creating "cool roof" materials.

In the end, within the next five or six years, the hardware industry could see the start of a strong trend that would be a climate change equivalent to the push for better home insulation that started 15 years ago. It would mean extensive retrofitting of existing houses with more advanced technologies. While these would carry a high initial cost of investment, most would return that expense within a decade of use. As importantly, just as insulation today boosts the selling price of houses, going actively "green" in this way could become an important part of house investment.

The broader economy

That brings us to a discussion of the broader economy, which, for hardware retailers, is very far from having just a distant, abstract effect on their businesses. Economically, we're facing a housing market where a base interest rate of 0.1% has boosted prices dramatically in the eastern seaboard states, even as the baseline, organic demand from new household formation has decreased, due to declining immigration.

IBISWorld estimates household formation from 2016 to 2021 had an average of around 1.4% a year, but that this dropped to around 0.4% in FY2020/21 - so, around 29% of its long-term rate. The fear is that this may turn into a longer term trend, driven in part by those same high house prices.

Certainly, homeowners have been attracted to bigger and better houses, and there has been a net migration from the inner-city regional and ex-urban areas. But as travel and shared recreation opportunities return, and cities begin to exert their magnetic attraction once more, will these changes persist?

While the RBA basically guaranteed the current low interest rate settings would persist through until late 2023 at least, economists and the markets themselves are now pricing in an interest rate increase in May 2022, with the possibility this could be at 2% by the end of 2022.

The real concern is that, given the vulnerabilities introduced by the pandemic, the government of the day (which is uncertain, given a federal election is due by May 2022) will be forced to somehow shore up the housing industry. Economically, that would be a very poor outcome.

Analysis

In analysing the Australian economy and the hardware retail market, HNN does have what we think of as a "matrix of possibilities". What we see as being the primary underlying force in the economy is a transition what we might term analogue, mechanical industrialisation to digital, networked industrialisation.

The main difference between the two rests in finding efficiencies. The difficulty, and the resistance to this transition - which has been very evident since around 2005 - is that there is a lot of money being made by long established market players through those inefficiencies.

What the pandemic has done - somewhat paradoxically - is to enable some of these changes to take place through sheer necessity. For example, HNN has been writing about the potential of work-from-home (WFH) for at least the past four years. It is, fairly evidently, a massive "win" for society at large: less commuting means less automotive pollution, less road congestion, which means less infrastructure spending - not to mention, the potential to improve family life and reduce stress on individuals.

Yet, WFH seems to throw an entire sector of the society into a state of panic. Cities in particular will see the income of commercial districts crash. But the fact is that those cities long ago ceased to be even a little concerned about how viable they were for the workers that flocked there every weekday, as anyone who has had to buy a $6 cup of coffee can tell you. Hopefully, what WFH will see is cities reassess what they do and what they offer. Previously they were what amounted to a monopoly for business location. Now that they have competition, perhaps they can improve.

It's possible to go through a large number of categories, from electric cars to internet broadband provision, and find the same patterns. The problems we face during the recovery, over the next couple of years, will likely have less to do with "making good" the deprivations we have faced, and more to do with removing the restrictions that attempt to retard Australia's full economic development.

The difficulty with this kind of change for Australia is that it tends to follow a path of years of resistance, followed by a sharp change in direction in a single year or so. Hopefully this time, as we slowly walk our way out of the pandemic, we'll be able to start earlier, and take some more time to get things right.

Trade tool retailer, Sydney Tools is setting up a new store in Cairns (QLD) located off Mulgrave Road, one of the city's busiest traffic corridors.

Director Elvis Bey told the Cairns Post the business already has a large online customer base in the area and is preparing to take market share from local competitors, Bunnings, Trade Tools and Cairns Hardware. He said:

We've had a huge online customer base in Cairns and were frequently getting call-outs.

Our pricing is always very competitive, probably the cheapest in the country, and we always have the largest range. Our competitors might carry 10 bays of a brand like Milwaukee. We will probably carry 70-80 bays of Milwaukee.

The new Sydney Tools outlet will be part of the former Amart Furniture complex at the junction of Florence Street, Martyn Street and Mulgrave Road. It will be the centre's biggest tenant with 3100sqm of floor space. Mr Bey said a $4.5 million fitout had already begun.

In addition to Milwaukee, the store will stock other major brands including Makita, DeWalt, Hikoki, Festool, Paslode, Ramset, Husqvarna, Stanley, Fein, UniMig and Cigweld. It will also have a "shop within a shop" dedicated to Milwaukee products, and another for Dewalt.

Mr Bey said its saw itself as in direct competition with Bunnings. He said:

Absolutely, we're competitors. The one big thing is that we're able to apply better pricing and a much better range when it comes to plumbers, electricians, builders and carpenters.

The store is set to open in late November, with a grand opening celebration being planned.

Over the past two years, the tool retailer has opened about a dozen new locations and currently has 51 stores around the country. Its Cairns store could be a reflection of a "retail resurgence" driving economic activity across the city with a large amount of industrial property being leased. CBRE Cairns managing director Danny Betros told the Cairns Post:

We've leased nearly 20,000sqm in commercial space in the past three months, so there's a lot of work.

Related: A new Sydney Tools store will be built in Paget (QLD).

Total Tools

Wonthaggi's Mitre 10 will now have a Total Tools store alongside the offerings of the hardware store. It will cater to tradespeople and keen DIY enthusiasts in Bass Coast and South Gippsland. Wonthaggi is located 137km south-east of Melbourne.

Up until now, local tradies have had to travel to Pakenham, Traralgon, Fountain Gate or Dandenong to get a new piece of equipment or replacement power tool but not with the new Total Tools store in Wonthaggi.

The store is expected to be opened in the week leading up to Christmas.

Zakaria Yassa and his family has owned True Value Hardware in Blaxland (NSW) since 2011 but they have been in the hardware industry for almost 30 years. The store has been serving the local community since the 1960s. He recently told the Blue Mountains Gazette:

I guess you can say it is our passion. I have always loved to do home projects with my wife and three daughters - as well as maintenance around the house - so assisting the community with their projects is my dream.

Our shop caters to both professionals in the building industry and DIY lovers. We love to see the creativity of people as they are shopping, and helping them to bring what they are imagining alive.

The store owner said he and his team look forward to seeing locals on regular basis. He said:

We are a service oriented business, and this is very important to us. We value one on one interactions with our customers, so that they can get the best experience in-store.

We are definitely passionate about what we do, and love to make sure you leave with confidence in the products and advice you were given. We take the time to give valuable advice on products and techniques on how to use them in the best way.

We enjoy being a part of the community's projects. From large developments to small DIY projects we love to see regular people take on home renovations.

Brodie Hardware Cloncurry Mitre 10

Businesses in Cloncurry, North West Queensland experienced a boost in sales after this year's Australian Survivor was filmed in the town.

Materials needed for constructing sets were sought from local hardware stores including Brodie Hardware Cloncurry Mitre 10. Lisa Cunningham from Brodie Hardware told the ABC:

They were great. By the end of it, we'd exchanged Facebook details and all that and had built up a really good relationship with them. Anything you saw on the set was sourced through us or the other local hardware store. They were a massive client. We would have seen them every day.

Cloncurry Mayor Gregory Campbell said:

It was anticipated that the production coming to Queensland was going to be worth about 15 or 16 million and that the North West would be getting about a third of that,

Now local authorities are looking at how it can attract fans of the show and outback survival experiences through a new tourist attraction. Mayor Campbell said:

We're definitely planning on working out some sort of 'Survivor' product. Once people can travel more freely, there's a whole market there with fanatical Australian Survivor fans. So we want to get them to come to Cloncurry and have that experience.

We could recreate a challenge out of the dam. We're keeping the huts from 'tribal council'. So we're just working out where we can place them so people can go and take their photo with them or write somebody's name down on a piece of paper and put it in the jar...

Kenmore Village Shopping Centre in the Brisbane suburb of Kenmore (QLD) is about to get a major upgrade that includes the relocation of the existing Mitre 10 hardware store.

The proposal seeks the demolition of the two-storey north mall of the shopping centre. The building will be replaced with a revamped ground floor retail, shopping centre entrance and additional car parking spaces.

A new stand-alone building will be constructed to the south west of the site, accommodating the relocation of Lewis Bros. Mitre 10.

The Lewis Bros. store was established almost 60 years ago in 1963 when Harry Lewis opened the store as Kenmore Handyman and Paint Supplies. Brothers Wesley and Warwick eventually took over the business and purchased their second store in South Brisbane. However, the South Brisbane store was closed in September 2020 after losing much of the trade business in the area. At the time, management also said that the rents were "unrealistically high" so they decided not to renew the lease.

The Kenmore Village development will result in a net reduction in gross floor area of about 1500sqm to about 14,000sqm, and will likely cut overall car movements by up to 105 per day.

Shopping centre owner, Jen Retail Properties, said it is the biggest upgrade to the centre in years. A company spokesperson told Westside News:

The centre has now served proudly as a local landmark for over 50 years. The planned redevelopment will provide a vibrant new look and modern feel for the oldest section of the centre, the northern mall.

To revitalise this section, the northern mall and level 1 office will be replaced with a fresh ground-level build, new entry statements and a contemporary new centre profile when viewed from the western carpark.

After careful consideration, it is intended for the aesthetic elements of the new design to complement the look and feel of the remaining parts of the centre. We consider it important that the familiarity and character of the centre that our customers love and value is preserved.

Pink's Mitre 10

The long-standing hardware store in South Australia's Clarence Valley store is celebrating its 160-year anniversary.

It first opened in 1861 by Thomas Pink Senior and is now managed by husband and wife, Greg and Melanie Pink, reports The Adelaide Advertiser. Greg Pink told the newspaper:

This business is fortunate to have seen and survived it all, we've weathered many storms over the years. Our family-owned business has overcome fires, flooding, and now, a global pandemic.

Greg's father, Wayne Pink "officially" retired in 2005 but still frequents the store most weeks for "Family Friday", restocking shelves and helping where he can. Greg said:

While other South Australian businesses have surpassed 160 years of operations, very few have operated under the same family name. We think that's pretty special.

Back in early September 2021, things were looking pretty good for Metcash, the owner of the Independent Hardware Group (IHG), and its CEO Jeff Adams. He'd steered the company through the worst of the COVID-19 pandemic, and come out a winner. As he described the situation to senior Australian Financial Review journalist Sue Mitchell in an in-depth interview:

After the initial chaos of panic-hoarding and toilet paper shortages, it quickly emerged that the pandemic would deliver Metcash and its independent retailer customers their biggest leg-up in two decades.

And, according to Ms Mitchell, he saw the future as being almost as rosy, with Metcash set to retain these gains through to the end of 2022, at least.

Mr Adams was also full of plans for the future: the expansion of tradie-tool franchise Total Tools, as well as Metcash's private liquor brand Kollaros & Co. He mentioned to Ms Mitchell plans for possible expansion into the pharmacy and healthcare businesses.

With that in mind it was something of a shock to hear on 8 October 2021 that Mr Adams has resigned. According the Metcash board chairman, Rob Murray, the outgoing CEO wanted to spend more time with his family:

The demands on Jeff through COVID have been considerable and were a factor in his decision to retire as Group CEO. His endurance and resilience during this period, which included not being able to see his US-based family, have been amazing.

While Metcash can be expected to laud the achievements of Mr Adams, there do remain some question marks over decisions he made. The acquisition of Total Tools, for example, while seen as a brilliant low-ball bid for a potentially profitable venture, will find itself facing off against the Wesfarmers-owned, and Bunnings-managed Took Kit Depot in 2022. Some analysts also raised questions about the company seeking financing of $330 million at the start of the pandemic in 2020, then funding a circa $200 million share buyback in mid-2021.

While Mr Adams has been critical of what he considers the over-capitalisation of operations at Coles and Woolworths, there's a strong chance that companies which underinvest today will hit competitive difficulties in 2023.

The new CEO

All that is now, of course, less relevant than who the new CEO is, and what changes he may make.

Mr Adams' retirement makes way for Doug Jones, who is currently CEO and senior vice president of South African-based Massmart Wholesale which includes large format food, liquor and general merchandise stores, cash and carry stores, buying groups, and a number of ecommerce platforms. It services commercial, wholesale and independent retail customers.

A qualified chartered accountant, Mr Jones has previously held senior finance positions in Makro SA, Amalgamated Beverages Industries Limited and The South African Breweries as well as Coca-Cola Enterprises in Canada, and Deloitte in both Canada and South Africa.

Mr Jones will join Metcash on 1 February 2022 and the company said he will work closely with Adams on a smooth transition into the role. Mr Murray said:

Doug's extensive and distinguished international experience across wholesale, retail and e-commerce markets made him the standout candidate to succeed Jeff. He is passionate about the success of independent retailers, and we are looking forward to him joining us and taking the company forward...

About Massmart

Johannesburg Stock Exchange-listed Massmart Group is majority-owned by American multinational retail corporation Walmart. It has leading market positions in wholesale food, liquor, home improvement and general merchandise in South Africa.

Most recently, the company has reached an agreement to acquire a controlling 87.5% stake in South African grocery retail and delivery startup OneCart. Massmart announced its plan to acquire OneCart in August, stating that the deal supports its strategy to invest in and accelerate its e-commerce presence.

Related: Metcash results for FY2021 shows strong growth, but spark questions from analysts.

The new Yolla Co-Op in LaTrobe (TAS) is expected to open in December and its philosophy of "buying better" will continue for its customers and members. General manager, Ben Davis told The Advocate:

It means everything to our business. It is the drive and the reason we exist. We need to make sure as a business we do everything in our power to support our community.

For our Latrobe store opening, we are running a member giveaway [and] every member has a chance to win.

Yolla Co-Op is a farmer's co-operative that supplies an extensive range of rural merchandise to Tasmanian farmers. Formed in 1977 by a handful of farmers from Yolla in North West Tasmania, today the Co-Op serves around a thousand members throughout the state.

The business currently employs 24 staff, and it is recruiting for the new Latrobe store. Mr Davis said:

In the beginning, there were no salaries, it was just farmers working together to make sure that everyone got the best deal.

The decision to choose a Co-Op was critical to the philosophy that these farmers were trying to instil. To this day, the Co-Op still holds all those values and beliefs that every member is equally as important as one another.

But together, by using the purchasing power of the combined membership, we're able to provide our members with the best possible price...

The store features around 3,500 product lines for the upkeep of the farm, animal health and wellbeing, pet care, pasture and cropping, and home and hardware.

Feedback from members led the Co-Op to acquire the Latrobe site after another good year with record sales and strong profits. Mr Davis believes what makes the business special is that it is owned by Tasmanians, who are involved in the local community.

Related: A new Yolla Co-Op store was proposed for a site in Latrobe (TAS) earlier this year.

Chief executive of the lighting specialist retailer, Glen Robinson, spoke to The Australian after the company's annual general meeting (AGM) and said it had six new stores lined up for this financial year - one of which has already opened at Ellenbrook in Western Australia - and would relocate another four.

Beacon Lighting currently has 116 stores across Australia, and Mr Robinson said at the AGM the company had identified the potential for up to 184 in total. He told The Australian:

It will be a record year of investment for retail stores within Australia. When you see house price growth and people moving home, so churn rate, and people moving to regional areas, I think that's been quite a significant shift for Australia, and also people working from home has also been a big push.

NSW and Victoria in particular, as we start to come out of lockdowns, we will continue to see sales growing.

The trade market has been identified as a "Strategic Pillar of Growth" and improving service to its trade customers remains the number one growth priority for the company. Specifically:

Beacon is also aiming to grow its trade sales online by 90% and planning for faster delivery to boost the trade division. It is now delivering within three hours in metro areas for online sales, which the company would be marketing more heavily this year, Mr Robinson said.

Beacon's company store comparative sales for the first quarter of the 2022 financial year were down 4.7% on the same period of the year prior. However, that quarter was up 26.6% in a bumper year in which the company boosted its net profit by 69.4%. Mr Robinson said:

We were pretty happy with that. Those numbers would have been hard to cycle anyway and we've done it ... with Victoria in lockdown.

Mr Robinson said lighting remained a product well-suited to in-store sales, with customers commonly seeking advice for purchases which could be "pretty complex".

We got to $26 million last year from online sales, which was 10% of retail sales, so still 90% of customers still prefer to go into a store and talk to someone.

FY2021 results

In August, Beacon Lighting posted record annual sales and profits with a 15% jump in full-year sales to $289 million. Net profit rose 69.4% to $37.7 million in the 12 months to June 27. With many shoppers pivoting to online shopping, Beacon booked record online sales of $26 million, up 60%.

The company said it was able to bolster its margins through everyday pricing and improved procurement negotiations that have supported the profit margin, while the strengthening of the dollar has supported the product cost base. A pullback in discounting and promotions during the year helped to sell products at full price, further enhancing margins.

Not surprisingly, it was Beacon's showrooms in states where there were minimal lockdowns or no lockdowns that performed the strongest during the 2021 financial year with Western Australia, Queensland, South Australia and NSW the standouts. Beacon opened four new stores during the year.

It announced the launch of a new US website to facilitate direct-to-consumer sales and the expansion of Beacon International sales for Australian-designed products into the China market.

Related: Beacon Lighting delivered a 133% profit rise in the half year to December 31.

After 45 years, Brookes Hardware and Timber will have new owners who will take over from November. It has been sold by Robertson Real Estate to a buyer - who prefers to remain anonymous - for an undisclosed price, according to The Warrnambool Standard.

Ken and June Brookes, who have owned the business since March 1976, are happy the town will continue to have a hardware business. Mrs Brookes told The Standard:

The sale has proven to be a great result, not only for us but for the town. It'll stay as a hardware business which is wonderful for the town.

Over the years, our five children and other family members all worked in the business at various stages and we've given more than 130 local people employment which has been very rewarding.

The 45 years seems like a long journey but the years have gone quickly. Ken and I are aiming to have a good break and enjoy travelling in the future.

The Brookes' bought Stuart Brown's hardware store in Bank Street before relocating the business to its present site on Sackville Street in 1983. Ken's brother Owen and wife Ros were partners in the business from 1983 until 2000 when they moved to Queensland with their family. Mrs Brookes said:

We were the first shop to have automatic doors in Port Fairy and believe me the locals thought that was impressive! We've been very lucky to have received incredible support from the Port Fairy community and outlying areas over the years. We're extremely thankful for their support and friendship.

Plans to hold a community event to mark 45 years in business have been put on hold because of COVID-19. She said:

We were planning to say thanks to everyone but COVID has stopped that. We're looking at doing some front window displays which will highlight our 45 years in the town ... and we welcome anyone who has some old photos or memorabilia to get in contact with us through the store or via our Facebook page.

Metcash has released details of its trading for the first 16 weeks of the company's FY2021/22 year, from 1 May 2021 to 15 August 2021. The top news about trading conditions indicates that total sales for its Independent Hardware Group (IHG) segment, excluding sales for the recently acquired Total Tools Holdings (TTH) grew by 3.6% compared to the previous corresponding period (pcp), which was 1 May 2020 to 15 August 2021. (The periods are broadly comparable as they both include 16 full weekends.)

This represents a good result for IHG, as the Australian Bureau of Statistics (ABS) hardware retail stats for May through July 2021 indicate a fall in retail revenue for hardware of 8.9%. (August numbers are not yet available.) It also represents a turnaround from IHG's sales for its FY2020/21, which came in at 17.9%, while the ABS stats indicated growth for that period of 18.3%. (It would also seem likely that the IHG sales figures may include some non-organic growth in retail sales through acquisitions.) For the entire hardware segment, including TTH, sales increased by 24.7% over the pcp.

The company reported further growth in trade sales, which it stated acted to offset a decline in DIY sales. Metcash also stated that stock availability was being pushed, especially as regards timber. It noted that various COVID-19 pandemic restrictions had affected sales across Australia, except in the states of Tasmania and Western Australia.

Commenting on IHG's trade business, the company stated in its Annual Report for FY2021 that:

[Metcash] Hardware's "Whole of House" initiative is expected to help further build on its leading position in the Trade segment. The business has now established national coverage from nine Frame and Truss sites and has alliances in place which ensures it is able to supply the key stages of a house build including Foundations, Frame and Truss, Lock Up, Fix and Fit Out. IHG's share of the supply component of a house build increased from ~30% to ~35% in FY21 and there is potential to grow this further.

The report also mentioned IHG's showroom concept, Design10.

We are developing a new showroom concept (Design 10) that displays the many category options that IHG can supply including kitchens, appliances and laundry products to ensure builders and their customers are provided with a "Whole of House" offer.

Total Tools

On TTH, Metcash had this to say in its Annual Report:

Like IHG, Total Tools has a store upgrade program to further enhance customer experience, with 64 stores completed to date. Average store growth post refurbishment has been on average >15%, and it expects to refurbish a further 24 stores over the next three years.

Total Tools has significant growth opportunities through the expansion of its store network and the acquisition of an ownership interest in a select number of stores. The store growth program was well underway at the time of our acquisition, with plans to open eight to 10 new stores each year with a target network size of 130 stores by 2025.

The acquisition by Metcash provides Total Tools with funds to support the store expansion program, as well as the expertise in running joint venture and company-owned stores. Total Tools acquired a majority interest in 12 joint venture stores in December 2020 and there are plans in place to convert more franchisee stores to joint venture stores over the next three years.

Risks

Perhaps the most noticeable lacuna appeared in the "Risks" section of the annual report, where Metcash detailed its sense of competitive risks as follows:

Any increase in competitive activity from new or existing competitors (including in the form of a new market entrant with a wholesaler model, where suppliers sell directly to the Group's customers, where customers form their own buying groups to collectively negotiate and purchase directly from suppliers or where indirect competitors change their business models to compete directly with the Group) may have a detrimental effect on the Group's operations, particularly if Metcash fails to respond effectively to that competitive activity or its response is delayed (for example, as a result of the time required to engage with the Group's independent retail network in order to implement an initiative). Increased competition may also adversely impact Metcash's long-term performance and profitability.

This would seem to be a fairly general purpose statement. While Metcash is under no legal obligation to list it as a risk, it would seem prudent to directly or indirectly identify the new Bunnings trade tool chain, formerly Adelaide Tools and now renamed "Tool Kit Depot" (TKD) as a risk. There is also likely to be increased competition during the current financial year resulting from the completion of Bunnings' acquisition of Beaumont Tiles.

Another risk that could have been identified is that, as Metcash moves more into direct retail, both through acquisitions and joint ventures in its IHG banner stores, and by entering into store ownership and joint ventures in TTH, it becomes more at risk from downturns in the market. As a wholesaler, the company was somewhat insulated from ongoing fixed costs for sales floorspace as well as staffing.

Analysis

Looking through the Metcash results, it often seems as though the numbers that are provided are not always fully described. A good example of this is the "sales uplift" ascribed to stores that undergo the Sapphire upgrade process. This has been held to be above 15% by Metcash in the past, and they have now increased that number to over 20%. The question that remains is whether this number is a comparison of all sales prior to the upgrade to all sales after the upgrade, or only those sales made through products sourced directly from the IHG warehouses. Those are two very different numbers, especially as part of the Sapphire deal is that stores will order more product directly from Metcash.

Similar to that are the numbers that are provided for IHG's digital operations. While we've grown used to seeing digital sales increase by over 100% through the years, without a statement that identifies the percentage of total sales that are digital, it's difficult to find significance in those high numbers.

The real concern that stems from this kind of external accounting presentation is over how clear the internal accounting presentations are. The reality around TTH is that Metcash might have bought what seems like a "bargain" for the next two years or so, but that bargain could collapse as more TKD outlets come online.

HNN has speculated in the past that Bunnings might locate some TKD outlets near Bunnings Warehouse stores, and while we have no further confirmation on that point, we still think it likely. That could deliver a considerable competitive advantage.

While Metcash repeatedly declares that the TTH business is a good fit with IHG, that seems both true and untrue. Certainly, there are business synergies. But IHG could only reasonably place new TTH outlets near Mitre 10 stores if those are corporate stores. Otherwise the TTH store would divert revenue away from independently owned banner stores. Even without that direct adjacency, there must be some concern for Mitre 10 owners that a more effective chain of TTH stores could see a decline in power tool accessories from Mitre 10 stores.

The hardware store in the historic gold rush town of Gulgong, located in the Central Tablelands in NSW, remains in local hands after owners Pat and Gerald Rowles recently decided to sell the business and retire.

According to the Mudgee Guardian and Gulgong Advertiser, Gerald originally moved to Gulgong with his family when he was a baby and moved away when he got older to work in various jobs. He returned to Gulgong as a builder and an opportunity came up to buy into what was then Loneragan's General Store which had a timber yard. It became Gulgong Timber and Hardware after that.

Gerald had some business partners come and go through the years before buying out his existing partners three years ago. His youngest son had expressed interest in taking over before deciding to pursue another career, so he and Pat decided it was time to hang up their hats. He told the Mudgee Guardian and Gulgong Advertiser:

We put it on the market, and it's been a good time to put it on the market and it sold very quickly.

The business was purchased in a three-way agreement between locals Troy McKellar, David Woods and Tony Ruming. It is something both Gerald and Pat are very happy with, given they had hoped to sell it locally. Gerald said:

David has worked in Gulgong in retail for 38 years ... and Tony is a local builder. So the mix of talent is quite good with those blokes, and Troy has business expertise and contacts and that sort of thing...

Troy said a commitment to the town drove their decision to buy. He explains:

It's a local business, it's been there for a long time. And after speaking to Pat and Gerald, they wanted to ensure that a local bought the business to continue on that loyalty and commitment to the town.

Troy also said they are looking forward to bringing some new products to the store.

All of the feedback has been really positive. Everyone's really excited. Especially when we start saying that we're going to bring in a few lines of dog food and some rural supplies and that sort of stuff.

We'd just like to thank Pat and Gerald for building such a great business over the last three decades thank you to them for the opportunity.

Changes

For Pat and Gerald, the sale of Gulgong Timber and Hardware "pretty much" means retirement for the dual 65-year-olds, said Gerald. Although he will stick around the shop for a few months yet as the new owners learn the ropes.

Thirty-four years in business is longer than most, and much has changed for the business that has become a staple of the Gulgong CBD. None bigger than the steady march of new technology. Gerald said:

One of the big changes is technology, of course, in my time here we were pre faxes and now faxes don't exist anymore.

When we bought the place we had hand-written docket books and a wooden cash drawer that was just under the bench and you'd drag it out and that's what you do. When the actual time for the changeover happened, it happened in a solicitor's office in Sydney somewhere as they do, and then you'd get to two o'clock they rang and said 'righto, the changeover has happened'. So they took the money out, took their docket books away, and we put our change in and put our docket books in and away we went.

Now we've got our IT blokes crawling around the place running cables in changing computer systems. That's probably the biggest difference.

To some, Gulgong seems steeped firmly in the past, but Gerald believes the timber and hardware business has adapted quite a bit over the last four decades, driven mostly by the coal mines and more recently, people doing home improvements during lockdown. He said:

The coal mines ... were up and running pretty well by the time [we started]. So they started going in the late 70s I suppose when Ulan started hiring lots of people.

Gulgong has just gotten bigger. The number of people in the area, not so much in the town, with all these 24 acre and 40 acre blocks has been a big difference to us to as far as selling stuff. We sell a lot to the DIY handyman.

Gerald and Pat wanted to thank the community for all their support over the years and said the business wouldn't have stuck around if it weren't for its patronage. Gerald said:

One thing people have said to us over the years is that the last thing Gulgong needs is to lose its hardware shop. You can go to Dubbo or Mudgee to buy the big things but if you want to buy 500 grams of nails or screws you don't want to quickly drive to Mudgee.

Trading

Gulgong Timber and Hardware has been operating regular hours during COVID lockdown and Troy said the store is as busy as ever.

The figures since COVID has been exceptional, a lot of people are working from home now and have got that time to do a few little handyman jobs that they've been putting off. So business is very good at the minute.

About Gulgong

Gulgong has over 130 heritage buildings. It was established before surveyors could turn it into just another country town with a traditional street grid system. As a result, the main roads, originally tracks for horses and bullocks, wind and meander through a well-preserved settlement of single-storey weatherboard, iron, stone and brick buildings with old-fashioned iron-lace verandas, horse troughs and hitching rails.

After the successful launch of its mega store in Alexandria (NSW), National Tiles has launched a flagship showroom in Hobart (TAS).

The opportunity to enter the Tasmanian market came about when the National Tiles team discovered a 3,500sqm site with ample parking space located in Cambridge, a suburb of Hobart. A former K&D hardware store was re-purposed and updated to become the group's flagship showroom and trade store in Tasmania.

Prior to the store's opening, National Tiles had supported a number of local builders with tiles from Melbourne. CEO Campbell Stott said:

Convenience is so important to our customers. We believe that our onsite stock availability will significantly alleviate the traditionally long lead time Tasmanian shoppers have faced in getting tiles and flooring...

Our trade customers in particular love the convenience of being able to get all of their tiling materials and supplies from the one location, all from an [on-site] drive-through. Importantly, our customers are enjoying the stock availability on offer for all our ranges. Having a warehouse on site means that our customers can get their product the same day ... Traditionally Tasmanians have had to wait three or four months to get stock. Our ability to immediately assist our customers with their home renovations by having stock on hand has been critical and has worked incredibly well.

Since opening, over 1200 customers are visiting the store every week, exceeding the group's expectations. The store is part of the Cambridge Centre which is anchored by Harvey Norman and about 15 minutes from the Hobart CBD. It is sign posted from the main road, and situated on the highly trafficked Tasman Highway.

Within the store, the timber collection has been popular with local customers. Campbell said:

We have created an amazing timber space within the store, wall to floor, and customers are really enjoying being able to see, feel and walk on the timber. Around 20% of our retail orders are timber and hybrid timber hard flooring which is reflective of the Tasmanian market.

In addition to retail and trade specialists working at the store, there is a business development manager who is focused on partnerships with local builders, developers and interior designers. Campbell said:

There's a really terrific vibe. It's been a great start and we're really excited about the opportunities in Hobart, and for all Tasmanians who can order online and have stock delivered to them no matter their location.

To read more on this story, go to page 40 in the latest edition of Tile Today magazine here:

Related: National Tiles enters the Sydney market.

Reece

Bathroom and plumbing supplies company Reece reported a record annual profit in August where its net profit rose 25% to a record $286 million in the year ended June 30 and sales revenue rose 4% to $6.27 billion. Following its results announcement, chief executive Peter Wilson told the Weekend Australian exclusively:

COVID has created a short-term step-change in our markets. The million dollar question is, is it temporary or permanent? What is permanent is how people think about their home and how they live. The home now is more important than ever. It is where people eat, sleep, play and increasingly, work. That all plays into the Reece story.

Reece's core Australian business reported a 12% increase in sales in the second half of 2021, up from 7% growth in the first half. While lockdowns have proven volatile, the pipeline of work remains robust for builders despite the expectation of slower housing starts in the months ahead.

Reece bolstered its stock levels by about 20% in 2020 to prevent product shortages as a result of from supply chain delays caused by COVID-19 and closed Chinese ports. This saw a $170.6 million increase in inventory in the second half.

But Mr Wilson believes the increase was essential to keep stock on the shelves and looks forward in the year ahead to stepping up investment in the Australian business, especially in technology and digital offerings.

In February next year Reece will move into its new, hi-tech corporate head office in the inner-city suburb of Cremorne, known as Melbourne's latest tech hub. Mr Wilson said:

That will be a workplace for the future. We are going to be bold. It is all about innovation, tech and digital. We need to keep renewing ourselves in Australia. You can't be a digital leader by standing still. And we want to reinvest back into our stores to ensure we have the customer experience of the future.

US rollout

Reece currently operates 642 branches in Australia and New Zealand, and 189 in the United States. It entered the US market in 2018 with the $1.9 billion acquisition of MORSCO, which operates in 16 states.

HNN provided coverage of the acquisition here:

According to The Australian, the main issue for Reece is the inflated expectations about MORSCO and the ability of its management to quickly - under Australian ownership - dominate the US plumbing and bathroom products market.

MORSCO reported flat margins during the year and expansion of its US footprint was constrained by COVID-19. The business was hit by higher second-half costs as it established a profit share program with stores - as Reece has in Australia - and dealt with labour shortages, supply chain constraints and cost inflation.

Mr Wilson said MORSCO is poised to roll out the Reece brand for the first time. Reece will replace the three current MORSCO brands, Todd Pipe, Express Pipe and Expressions Home Gallery.

Its headquarters in Dallas, Texas has already been rebranded Reece. The store name change will begin in California. Mr Wilson said:

I have been holding it back. You have to earn the right to use the Reece brand. But the time has come. We are in some ways where we expected the US business to be, even slightly ahead. We acquired this as a long-term opportunity for growth. It was always a 10-20 year story...

We spent 12-18 months learning and getting a deeper understanding of the business and we took our time to work through what was going to be our strategy for the next three to five years.

Mr Wilson stresses Reece has yet to prove itself in America. But he is confident the company has not repeated the mistakes of other Australian companies whose US expansion plans turned to disaster. He said:

You have to do your due diligence. We knew what we were getting very well when we bought MORSCO. We held our nerve, were humble, listened and learned. We didn't make wholesale changes to staff and operations but then we got clear on how we wanted to run it going forward. Then you pivot, as we are doing now. But this is still a big mountain to climb.

Reece also flagged a significant increase in both operating and capital expenditure in America and Australia in the year ahead. This will equate to between 10 and 20 new store openings, existing store refurbishments and continued investment in technology, staffing, and training.

The owners of Goodwin and Storr Mitre 10 in Laidley (QLD) and Plainland's Mitre 10 have told The Queensland Times about how their stores have been directly affected by a recently opened Bunnings outlet.

The $18 million Bunnings store in Plainland opened in June and is located just over 10 minutes from Goodwin and Storr Mitre 10 which has been in owner John Storr's family for 110 years. He said:

We were down 60% to start off with [when Bunnings first opened]. Now it's at 40%. It's just terrible.

I'm just basically going through the books every three months and seeing if it's worth keeping going. If it gets to a point where I'm wasting time, I'll be closing up. I'm only just starting to make wages. You can't go for too long like that if you're not making wages.

Mr Storr said he expected the sale of big-ticket items like power tools to "grind to a halt" when Bunnings opened but it had been the opposite, with interest in smaller items like nuts and bolts drying up. He said:

I just find it frustrating when you know your prices are alright for certain things and they don't even get a look in. My paint sales have just stopped.

My big-ticket items have been ticking over but the margin is so small there's very little profit in it.

Even though Bunnings owns a large site in Gatton and received council approval to build a warehouse there in December 2015, it eventually built a store in Plainland, just off the Warrego Highway. The 7.8 hectare block in Gatton is now on the market.

Mr Storr said the threat of a Bunnings has been around for several years. He said the Laidley township was particularly quiet in recent months, which he put down to the impacts of COVID. He said:

I would have been happier if it was [built] over in Gatton. To be honest I think they've made a dumb move. They've boxed themselves in and there isn't any room for expansion.

It's lucky they didn't do a full Bunnings [offering] or they would have absolutely crushed us. There's not that free money going around [the town].

Plainland Mitre 10 owner Stephen Rule took over the 30-year-old business in 2003 and employs 19 staff. He said:

We got a kick from COVID but based on sales around the same time last year we're down 40 to 50%.

We always suspected that [Bunnings would] come. It's disappointing that they didn't go to Gatton when Gatton doesn't have a hardware store and they came and specifically targeted this area.

They have a habit of setting up new hardware stores next to existing hardware stores. Almost as they though intend to wipe it out...

We can still make it work with ... a Bunnings ... at this stage. The disappointing thing will be trying to maintain staff numbers. We don't want to lose staff.

Mr Rule said its rural range, including fencing, water tanks and stock feed, remained strong as Bunnings didn't stock these items.

It's keeping us going. Our margin has really copped a whack. We've lost it on the smaller items.

We should thank our customers that are supporting us. We've been through floods and fires.

Bunnings area manager Debby Stevens told the Queensland Times:

We compete with a huge range of retailers and believe that there is ample room for a wide variety of operators, speciality providers and online retailers.

Bunnings is a strong employer of local residents in the Lockyer Valley, with over 100 team member jobs recently created at Bunnings Plainland and approximately 700 team members employed in surrounding stores. The new Bunnings at Plainland represents an investment of over $18 million in the local community.

We are committed to engaging with the local communities where we operate and actively (contribute) to local causes and organisations through product donations, hands-on support as well as in-store fundraising.

Related: A Bunnings store proposal for the Lockyer Valley.

Related: The Goodwin & Storr Mitre 10 store has been acknowledged for its longevity.

Taminda development

Plans submitted by applicant Armidale New England Building Design will see the old Buttercup bakery in Taminda, an industrial suburb of Tamworth (NSW), be partially demolished and converted into a hardware store.

The manufacturing side of the iconic bakery was built in 1968 and closed in 2016. The site is still used for distribution of bread, with one section vacant. A new $875,000 plan calls for a major refurbishment and refit for the building.

If approved by Tamworth Regional Council, the plan would convert part of the building into a "hardware and building supplies warehouse and retail sales facility".

The new store would be subdivided from the rest of the building by a wall. A small section of office would also be demolished, and 55 new carparks would be constructed to service the new business.

The site has a total floor area of over 3,730sqm, with a total site area of 12,168sqm and 16 car parks. The building would actually shrink to 2,924sqm as a result of the plan, with the new hardware business to occupy 2,200sqm.

It is located around the corner from Bunnings in the area and a Total Tools outlet is nearby.

Hardware retail co-operative Ace Hardware has already opened 110 new stores in 2021, and said it is planning to open at least an additional 60 stores by the end of the year.

Globally, Ace has opened more than 900 stores in the past five years, while disbursing dividends of USD293 million in 2020 - a 46% return for Ace shareholders.

Ace's business model offers entrepreneurs the ability to become owners of their local store operation, and the opportunity to be one of a limited number of shareholders of Ace Hardware Corporation. John Venhuizen, president and CEO, said:

Our proposition for consumers is that Ace is the most helpful store on the planet; for prospective new store owners, our proposition is that Ace is the most financially and emotionally rewarding opportunity available.

An essential business, rooted in people, that exists to serve others; we are blessed with local owners who genuinely serve the communities in which they reside.

Q2 2021 results

Ace also reported record second quarter 2021 revenues of USD2.5 billion, an increase of USD187.8 million, or 8.2%, from the second quarter of 2020. Net income was USD116.0 million for the second quarter of 2021, a decrease of USD22.9 million from the second quarter of 2020. The decrease in net income was due to write-downs of excess personal protective equipment (PPE), higher warehouse labour costs and a non-recurring USD6.9 million income tax benefit recorded in 2020 due to changes in tax laws.

US retail same-store-sales reported by the approximately 3,400 Ace retailers who share daily retail sales data rose 1.2% during the second quarter of 2021. This was the result of a 7.1% increase in average ticket [transactions] partially offset by a 5.5% decrease in same-store transactions.

Ace added 55 new domestic stores in the second quarter of 2021 and cancelled six stores. The company's total domestic store count was 4,729 at the end of the second quarter of 2021 which was an increase of 165 stores from the second quarter of 2020. On a worldwide basis, Ace added 61 stores in the second quarter of 2021 and cancelled nine, bringing the worldwide store count to 5,550 at the end of the second quarter of 2021.

Ace Hardware earned other industry accolades this year, including being named one of the "Best of the Best Franchises" by Entrepreneur magazine, and ranking 5th among the top 200 largest franchise systems based in the US, according to Franchise Times.

The owners of family-owned Loganholme Mitre 10 located in the City of Logan (QLD) have announced the closure of their hardware store after 37 years, according to the Courier Mail. It has been serving its loyal customers since 1984 but could not survive after a Bunnings Warehouse opened across the road. Logan local, Ian Gill has owned it since 1998 and told the newspaper:

After 37 years of business it's devastating to announce we'll be closing in about eight weeks' time. We've tried everything to sell this past month, but no one wants to buy a hardware store with a Bunnings in its carpark.

In March 2017, when it was revealed Bunnings would be opening at the Hyperdome Home Centre later that year, Mr Gill predicted it would be the death of many small businesses. He said the Home Centre, owned by Queensland Investment Corporation, should support and protect longstanding tenants and small family-owned businesses.

The Queensland Government obviously doesn't support small businesses. We've done our best but we're exhausted and have had enough.

Mr Gill said in the past decade, 10 other small hardware stores had shut down within a 10km radius.

It's just so sad there's no protection available for small businesses. It's the small businesses that are paying the higher tax rate to the government. Closing will be a very sad day. I'm going to miss it so much after 37 years.

Mr Gill said he would never forget his time as a small-business owner in Logan.

For me it's about the friendships you make with your customers. We have locals who have been coming here for years who rely on us and support us.

Once Loganholme Mitre 10 officially closes in two months' time, Mr Gill and his wife plan to retire.

We're hoping to do some travelling around Australia. [It] will depend on COID-19 of course.

Related: Loganholme Mitre 10 prepares for battle.

Cobram Bolt Supply

In the town of Cobram (VIC), the Sneddon family have owned and operated Cobram Bolt Supply for almost three decades.

Ian and Angela Sneddon originally bought Cobram Hire Sales and Service in 1993. Now their children Brad and Glenn, along with their wives Michelle and Kylie, are greeting customers and working in the business.

After buying Cobram Bearings and Cobram Hydraulics in 2009, the business quickly doubled in size. Kylie Sneddon told the Cobram Courier:

We started off with three quarters of the showroom filled up and we've expanded our power tools and hydraulic equipment to support the agricultural industry.

Glenn Sneddon said providing support for farmers across the Moira Shire was the main goal.

We aim to fill anything that's missing in town for farmers so they don't have to travel for what they need. Because of our broad range of services, it's almost like a one-stop shop, we actually have people come from Melbourne because everything they need is in the one place.

As well as supporting farmers, the owners are passionate about giving back to local clubs and services. Kylie Sneddon said:

A lot of the clubs provide important services for everyone like the SES, and the sporting clubs are very important and gives families a place to belong.

There are three full-time employees at Cobram Bolt Supply, working alongside the family members. Glenn Sneddon said:

As a family business, you have to be fairly accepting and stop trivial things from upsetting you. You still have disagreements but if you didn't have them, your business probably wouldn't function anyway.

There's no use arguing about something, you may as well just fix the problem.

Running a business means a lot of pressure rests on Mr Sneddon's shoulders. He said:

You have control being your own boss but you have to also be very versatile. For us, it's nothing to get a call on a Sunday morning and have to come in and help a customer - that responsibility is always with you.

Navigating the everchanging coronavirus restrictions has been a challenge for the family which has remained optimistic throughout the pandemic. Kylie Sneddon said:

Last year was harder when we lost a couple of employees and we had to navigate home schooling at the same time. The lockdowns are the hardest because we can't get people in, and the border closures are hard on our customers on the NSW side.'

Looking ahead 20 to 30 years, the outlook could be less certain for Cobram Bolt Supply as more farm owners decide to sell up. Glenn Sneddon said:

The environment is changing drastically in the farming area and there won't be a place for a shop like this in one or two generations time. A fair percentage of farms won't be here for the long term.

We don't know if the kids are interested in taking over the business or what will happen in the future.

Mr Sneddon said young people often leave the area for university and never returned. But for now, Brad and Glenn's children work at the store during school holidays and will probably cherish the memories of growing up with a family business.

In an interview with CMO (Chief Marketing Officer), Andy Bowen from Bowens discussed how the hardware and building supplies retail group is implementing its e-commerce strategy. For Bowens, offering a "digital service delivery" is about winning over a younger generation of tradies and builders. Mr Bowen told CMO:

We did not want to lose connection with the younger generation of trade. It's vital we maintain and engage with the younger generation and build a brand with that younger generation if we are going to survive long term. Then the question was, how do we do that?

And certainly from a digital perspective, we were lacking. But then the entire industry was.

Bowens focused on creating a digital experience for bulky items. The main challenge it faced was the complexity of moving large and often fragile products for the needs of builders on job sites.

It concentrated on repurposing its 16 stores across Victoria and delivery options by creating a digital front end and making promises around tight delivery times. Mr Bowen said:

We have stores that are set up in an industrial manner which works perfectly for distribution when it comes to an online offer.

The ecommerce site was launched in December 2020, and has generated a sevenfold increase in website traffic [to July], according to Mr Bowen. The group has also been working with building industry influencers to create awareness, including Matt Menichelli, the builder for Tess and Luke, The Block 2019 winners; and Stefanie Apostolidis, who runs the women's building industry worker support group, Melbourne Chippy Chick.

To execute on these digital-driven initiatives, Mr Bowen established a marketing and ecommerce team within the business, which now numbers 10 and is expected to grow further. He said:

Prior to the pandemic, I would have said only 5% of our budget was digital comms. Now it is more like 55% or 60% of our marketing budget. It's been effective for us, and we'll continue to push harder on that.

Working with Ms Apostolidis appears to have helped Bowens promote its offering to a new generation of building workers. He said that although only 5% of people that come into its bricks-and-mortar stores are women, they make up 22% of online traffic.

The initial ecommerce offering was targeted at retail customers but the company has also created a log-in for trade customers. Mr Bowen explains:

It is more about brand awareness than conversion ratios at this stage. That will start to change, but certainly in this first six months it has been all about awareness, and we will continue to push there, because trades aren't used to shopping online - the offer just hasn't been here in Australia.

To be the only ones really offering bulky supply to market to builders and trade and DIY and general public is a great thing - we're loving it.

Mr Bowen estimates there is around another year's worth of development work to be done on the website before Bowens completes its current scope of work. He likens the current work environment to that of startups he observed in his previous working life as an investment banker in New York. He said:

It is exactly like running a startup, but we are sitting in a 127-year-old business. It is a lot of fun, and we have great capital support. We are creating something new and that is the attractive thing for a lot of the team members. This is an industry that hasn't been able to do it effectively, and an opportunity for us to make a name for ourselves and create a legacy.

You've got this younger generation coming up that almost expects it, and if you're not there, you will lose market share. This is a long-term investment for us, we have done it to make sure there is a fifth and sixth generation for this business.

Related: Chief customer and digital officer at Kingfisher Jean-Jacques Van Oosten has worked fast to make ecommerce work better on a store fulfillment basis.

CMO Group

In the UK, building and DIY e-commerce retailer CMO Group (formerly Construction Materials Online) recently raised more than GBP27 million from a share offer and another GBP17.7 million for selling shareholders. At a placing price of 132p per share the market capitalisation of the firm is now about GBP95 million.

CMO saw sales soar in 2021 as it benefited from a lockdown boom in DIY. It operates seven specialist websites: Roofingsuperstore.co.uk, Drainagesuperstore.co.uk, Insulationsuperstore.co.uk, Doorsuperstore.co.uk, Tileandfloorsuperstore.co.uk, cmotrade.co.uk and Totaltiles.co.uk.

Its sites list more than 75,000 products, and it boasts its "unique digital hybrid service model", developed over more than 10 years, combines specialist advice and expertise tailored to category and customer needs online, bridging the gap between traditional bricks-and-mortar retailers and digital retailing.

At the time of its listing, Investors Chronicle wrote about CMO:

Based out of Plymouth, CMO has been built up over the past decade by buying up suppliers of key products - it acquired Total Tiles in late 2020 for GBP14.7 million - and acting as a third-party agent between suppliers and consumers for others.

Builders' merchants have made progress with online sales, but CMO claims that it has the largest product range available online and the market, overall, is about 10 years behind the rest of retail when it comes to online ordering.

Overall, about 10% of all building materials [in the UK] are sold online by all retailers, out of total sales of GBP27 billion at 2019 prices - and management argues that this gives CMO huge potential for sales growth. CMO isn't the only company to supply building materials on an online-only basis, but the defining feature of most of its online competition is a lack of scale and vertical integration.

The problem one can see with CMO is that while not having the warehouses and floor space that traditional builders' merchants must pay for ensures a higher return on capital employed, it still operates in an environment where margins are comparatively thin - only taking a sliver of profit between the supplier and the customer; CMO is essentially a sales agent with a front-end retail platform and a back office that organises the logistics.

Encouragingly, it addresses these issues with its push into acquiring vertically integrated supply businesses, as this allows it to capture more of the value in the supply chain. Arguably, until it has achieved some sort of greater scale, which a listing will make easier with better access to capital, it probably makes more sense to use CMO's service rather than participate directly in an IPO - at least until the price starts to settle down.

The company was admitted to the Alternative Investment Market (AIM) of the London Stock Exchange in July. On admission to AIM, private equity firm Key Capital Partners owns about 26.8% of the issued shares, CMO's founders own 10.4%, and senior management own about 6.4%.

The proceeds attributable to the company from the share offer, together with its existing cash resources, are now intended to provide CMO with a long-term funding model; execute on strategic opportunities, both organically and through M&A; reduce debt and restructure the group's balance sheet thereby providing further flexibility to fund future growth.

CMO also intends to attract, recruit and retain key employees with further incentivisation through equity ownership and long-term incentive schemes.

Related: Kingfisher makes large investments in technology in the wake of COVID 19 pandemic.

Mitre 10 New Zealand

New Zealand's Mitre 10 retail chain has provided a progress report on its digital transformation, according to a report in CIO (Chief Information Officer). (Mitre 10 New Zealand has no affiliation to Metcash-owned Mitre 10 in Australia.)

Asbjorn Aakjaer, programme director for the project at Mitre 10, said the business is two years into a business-wide transformation they've named Programme One. It includes a refresh of all the IT systems used to serve its 85 stores, owned by 64 people, and will result in an entirely new technology stack. He said:

We've set about to change everything, from the foundation all the way up, including the way we work and the systems that support our work, with a focus on our customers and team members.

The programme's six priorities are:

Mr Aakjaer highlights the last goal as especially significant given the group's owner-operator model.

The programme's design phase is almost complete, with Mr Aakjaer describing a process of first assembling a small group to scope the project, to reimagine what that business could look like, before embarking on an extensive consultation exercise that included surveying 3,500 customers. The working group looked at 80 functions to determine the multiple pain points that exist in the business, with a view to solving these as they planned for a "future business".

Among the complexities that need to be addressed are that there are 114 stock files across the business, so there isn't a single view of stock. As a result, the company's support centre is sometimes less informed about what's in the stores than their customers and suppliers are.

Mr Aakjaer points out that digital transformation isn't only about replacing the tools, it's also about changing the way people work so the organisation can become more customer-centric. So it is important to ensure Mitre 10's 6,000 staff understand and support Programme One.

Mr Aakjaer created a video created for that purpose that included a discussion of "quick wins" with regards to new technology solutions that provide immediate payback to staff. Examples are bringing in text notifications to customers when the products they've ordered arrive, and a product lookup app that enables staff to search for products on their devices when they are with customers on the shop floor.

The video also featured what Mr Aakjaer described as the organisation's take on a gender-reveal party, with staff gathered for an announcement on what technology partner had been chosen for the project. This was revealed by balloons that spelled out "SAP". Mr Aakjaer said that about 80 people throughout the business were involved in the vendor selection, so they wanted to reward them with a party for the announcement.

We wanted to make it fun and humorous.

Mr Aakjaer said it has ended up with a lot of SAP technology because it was the most suitable and "you can't nickel and dime a project".

Mitre 10 NZ CEO Andrea Scown said that a large part of the successful delivery of the project is if the entire organisation can "deliver it together" in a way that leverages Mitre 10's size and scale, without losing sight of the unique approach that each store owner brings to the business.

Related: Andrea Scown has been appointed the first female chief executive of Mitre 10 New Zealand.

Kathryn Pengilley from Goulburn Produce & Rural Supplies in regional New South Wales recently spoke to the Goulburn Post about the long-standing business. She said:

From humble beginnings as a small rural store in Craig St ... We have continued to grow throughout these 38 years to offer our customers everything they need for life on the land, from our early days of selling stockfeed - making us the longest standing stockfeed store in Goulburn - we quickly needed to move to larger premises in Sloane St, to then branch out into animal health, fencing, pumps then timber, hardware and power equipment.

This growth meant creating two more local businesses. Around eight years ago Goulpro Power was established after strong demand for its product lines when they were previously being sold from the Goulburn Produce site. Ms Pengilley said:

Things were getting a bit cramped in here (Goulburn Produce) so Dad had the idea to establish Goulpro Power as a standalone store for outdoor power equipment .

A suitable site was chosen, a purpose-designed building was constructed, and it now sells everything from lawncare machines for the backyard gardener through to the industrial size mowers for councils and showgrounds use, as well as tractors that farmers like to use. It is also the local authorised Polaris dealer, among other brands its supplies and services.

The family also owns and runs Goulburn Mitre 10 (including the site where it is situated), the only locally-owned hardware store in the area. It started out inside the walls of Goulburn Produce to have its own store in 2019.

Meanwhile Goulburn Produce itself has seen some other changes recently.

When animal feed store Fifes Stockfeeds made the decision it would close, the owners approached Ms Pengilley and her team about taking on as much of their stock as possible to minimise the disruption to the customers it had been servicing for almost 30 years. As a result, the range of feed has nearly tripled.

Goulburn Produce is a member of the CRT group to take advantage of its national buying power which helps to make its pricing competitive. Ms Pengilley states:

We have grown so much in the last 38 years with our local community's support, and with our commitment to our rural community we will continue to grow and provide the essential rural services that our customers need for many years to come.

Total Tools in Bathurst

In an earlier report, Total Tools has taken over an old Harvey Norman complex on Sydney Road in Bathurst (NSW).

The high-profile site beside the Great Western Highway has been vacant for about a year since Harvey Norman relocated to the former Masters building on Pat O'Leary Drive.

David Nicoll from Elders Nicoll and Ireland leased the site to Total Tools and said the business was making a long-term commitment to Bathurst. In June, he told the Western Advocate:

They've signed a long-term agreement to occupy the site. The Bathurst project is part of a national rollout, [and] Bathurst was specifically targeted as a place they want to be.

Related: MAP of NSW/Sydney building approvals by LGA.

A new Sydney Tools store will be built in Paget, a suburb in Mackay (QLD) after Mackay Regional Council approved an application submitted by Bayswater Holding.

A house and some sheds will be removed to make way for the 2775sqm development that will be located just metres away from Bunnings at 157 Archibald Street, according to The Daily Mercury. It includes left-in and left-out entry and exit points with 51 customer carparks.

The Sydney Tools store is expected to service the construction, mining, agriculture and automotive industries and stock brands such as Milwaukee, Makita, Dewalt, Hikoki, Festool, Paslode, Ramset, Husqvarna, Stanley, Fein, UniMig and Cigweld.

The company said it holds 70 million products with a range available both online and instore including petrol, diesel, silent and three-phase generators, welders and accessories, scaffolds, jumping jacks, trash pumps, 1in. wrenches, laser levels, commercial vacuum cleaners, electric, diesel and water pressure washers, air compressors and petrol commercial and electrical steamers.

Sydney Tools has eight other Queensland stores including seven in the southeast of the state and one in Townsville.

Related: Sydney Tools recently opened a store in Lismore (NSW).

Travis Perkins-owned Toolstation has opened the doors of its 500th store in New Malden, a suburb of south-west London, England. It said it is bringing essential products to local trade and DIY customers.

Toolstation opened 60 new stores last year and has opened 36 stores so far in 2021.

The 500th store opening comes after recent research from Toolstation revealed that its DIY customer base doubled since the pandemic, with 65% stating DIY helped to keep them busy.

Toolstation's multi-channel service means customers can safely purchase the essentials they need from stores directly or at toolstation.com through its click and collect service.

The Times reports that pent-up demand for home improvements has given Travis Perkins the confidence to lift its profit guidance for the year, despite warning about rising costs and availability issues.

Britain's biggest builder's merchant recorded a 44.1% increase in like-for-like sales, while total sales were 37.7% higher at GBP2.29 billion over the six months to the end of June.

Travis Perkins' builders merchant division, which cut 2,500 jobs last year during the national shutdown, is rebounding strongly while its Toolstation business continues its expansion. The company plans to open 60 new Toolstation branches this year after like-for-like sales within the division grew by 29.8% during the first half.

It said that the long-term outlook remained robust amid continuing demand for new housing and the need to address past underinvestment in the repair, maintenance and improvement of the existing British housing stock.

The construction industry in the UK recorded its fastest growth in two years in June, boosted by a jump in demand for new homes and by commercial property developers restarting delayed projects.

Travis Perkins said that it expected to record at least GBP310 million in annual adjusted operating profits this year, compared with the GBP300 million it had forecast two months ago.

It recently sold its plumbing and heating business to HIG, an American private equity firm, for GBP325 million and demerged Wickes, its retail DIY chain, in a separate stock market listing. This would allow it to focus on its core construction trade business.

The builders merchant business has experienced shortages in some areas, particularly timber, which is the subject of unprecedented demand from China, the United States and Russia because of construction booms and the closures of sawmills during the pandemic. Timber imports into America are at their highest level in 15 years, putting pressure on the rest of the supply chain.

The company is also making progress with its plans to overhaul its store portfolio and expects to make GBP30 million in profit from transferring properties.

Screwfix

Screwfix currently operates 18 stores in the Republic of Ireland and with plans to add 11 more later this year.

New outlets have opened recently in Carlow, Athlone, Portlaoise, Dublin and Letterkenny. Screwfix is part of the Kingfisher Group of home improvement chains that includes B&Q. John Mewett, Screwfix CEO said:

The growing demand for convenience has led to the opening of more stores to help our busy customers get their jobs done. We know that time is money for our customers and our new stores in Ireland will not only enable us to provide our customers with added convenience and certainty, but also allows us to provide even more job opportunities for local communities.

Parent company, Kingfisher Group, raised its interim profit guidance because of the high levels of demand from new and existing customers.

In a recent trading update, Kingfisher raised its adjusted pre-tax profit guidance for the six months to the end of July to between GBP645 million and GBP660 million, up from the previous guidance of GBP580 million to GBP600 million. It posted a half-year interim adjusted pre-tax profit of GBP415 million for the same period last year.

The FTSE 100 retailer also raised its half-year like-for-like sales guidance to about 22%, from the previous guidance of "mid-to-high teens" growth.

Since the onset of the pandemic, online sales have risen particularly quickly as Kingfisher used stores to distribute digital deliveries and to provide click-and-collect services. Screwfix was launched in France in April as an online-only business.

Related: Screwfix announced more stores earlier this year.

Stawell-based business, Rural Vision is merging with Hewitt and Whitty in Ballarat (VIC), in a move it believes will give customers a better range of products at a better price. Both are part of rural retail group, CRT (Combined Rural Traders).

Stawell branch manager Tim McEwen said the new entity, Hewitt and Whitty Rural Supplies Stawell, would be able to serve their customers' needs better. He told the Ararat Advertiser and Stawell Times:

It just gives us access to a larger range of products with a better buying position, which we can pass onto our customers. We will be looking for more staff and we will have more product lines.

For example they have good access to the 'Grain Line' range of augers and a lot of other products as well.

He said the store would see an expansion of Castrol products as well as an increased supply of power equipment such as mowers, ATVs and chainsaws.

Mr McEwen said the idea for a merger stemmed from conversations over a period of time, with some changes still being implemented, while others can be seen already.

We have started trading under the Hewitt Whitty banner since July 1, but it is just going to be a gradual build up...

Having been part of CRT, I have known the Hewitt and Whitty team for years and it has just come from a conversation which has gone further and further and got us to where we are now.

Rural Vision has been part of CRT since 2007 while Hewitt and Whitty have been servicing farmers in the Ballarat and surrounding districts since it opened in 1938. Greg Hewitt, grandson of co-founder Bill Hewitt, is still active in the business. He said:

We are very excited and proud to be represented in the Stawell area and with staff such as Tim and Leesa looking after the business, we know it will be good for customers, which is the most important thing.

Mitre 10 in Narooma (NSW) continues to trade after a fire destroyed two adjacent businesses in September 2020. The Mitre 10 building was damaged, and the store has temporarily relocated to a different location close by.

Now after almost a year, the burned mess of a building in the middle of Narooma is finally getting cleaned up.

Mitre 10 owner Phil Constable initially thought they could clean up themselves but the damage was more than they thought. Asbestos was discovered in the building next door where the fire started, and he had to wait until it was cleared up to gain access.

After juggling between locations, Mr Constable is looking forward to moving back into his original building. He told Narooma News:

It has been frustrating, we couldn't do anything until the demolition. I have an understanding of the problems, but it has been particularly frustrating to have the place next door demolished before they (insurance company) can establish the actual extent of damage to our building and assess the scope of works for reconstruction and rehabilitation.

Business was booming for the Mitre 10 store before the fire. Mr Constable said it was tough taking a step backwards.

We have suffered a significant loss of trade during this [with] not having the floor space in order to give the level of offer we have had.

We were trading very well coming out of the bushfires, and during COVID, there was a lot of DIY activity associated with the lockdown. The hardware industry and garden centres were beneficiaries of people looking at work to be done to their homes.

Mr Constable thanked customers for their ongoing support.

We have been grateful of customer loyalty and people have been patient when ordering. Delays have been most onerous.

At the time of the fire, Narooma Fire and Rescue Captain Scott Dawson said it was the first fire of its kind in about 20 years in Narooma.

The owner of the destroyed building, Heather Blessington, said it took a long time to get quotes for the job, due to companies' backlog of bushfire rebuilds.

Homebase CEO Damian McGloughlin recently told Retail Gazette the COVID-19 pandemic meant that the team had to learn and adapt quickly. He said:

With more customers shopping online, the weighting of sales towards digital changed overnight. Over the last year, we've invested even more in this area through our 10-year partnership with The Hut Group.

Mr McGloughlin also found that visits and dwell time on Homebase's online "how to" pages shot up significantly over the last year since customers were finding it hard to get a tradesperson.

Almost as if in response, Homebase launched a refreshed website earlier this year after undergoing an overhaul to improve the customer experience online. New features include "before and after" makeovers to provide inspiration and "shop the look" content so customers can buy everything they need to recreate the latest trends in their homes. Mr McGloughlin said:

Digital has significantly grown and is an important part of retail. Customers are generally inspired by what they see online first and will continue to do more research online about the kind of product they are looking for.

The decision then comes down to whether they want to buy the product in-store or online.

Some customers want to touch and feel a product before they buy it or speak to someone face to face about their project, so will come into store. On the other hand, some customers know exactly what they want and will just complete the transaction online.

Because many people get their initial ideas for home and garden updates or transformation projects from social media, we've adapted the shopping experience in-store.

The home and garden retailer also partnered with Checkout.com, a payments service provider so that it can accept all the usual payment tools as well as PayPal, Apple Pay and Google Pay.

Homebase has also been using different methods to "understand customers better". Mr McGloughlin said:

A lot of the work early in our turnaround focused on simplifying how we operated so we could get closer to our customers. We now understand them better, which has meant we've been able to deliver more of what our customers want when they want it.

Homebase runs live customer listening groups where it receives "in the moment" feedback on new ranges or store layouts. Mr McGloughlin explains:

We have an amazing tool called 'Feels Good To Be Heard' that allows us to constantly collect customer feedback on a store-by-store basis. It helps us continuously improve, and we often take things customers love and share them with other stores to introduce.

We also use social media to inspire customers with the latest trends and must-have new products. It's an important tool for us to get their feedback - and even to inform what products we sell.

However, feedback isn't useful unless you are doing something with it, so we also have systems to ensure that the right customer insight is getting to the right teams, from our commercial and buying teams to our marketing and store operations teams.

Mr McGloughlin also told Retail Gazette that he was one of the longest-serving board directors at B&Q. He served as the retail director at B&Q before he stepped into the role of chief executive at Homebase three years ago. He described Homebase as "a very different business" since making the change from a publicly listed company to one that is private.

While there were problems to fix in the beginning, the passion of the teams across Homebase is clear to everyone who works here...The role at Homebase is much broader with wider responsibilities and requires me to wrap my arms around the entire business. The thing I love most is that I have the total accountability to make a quantum difference. There is much more demanded of me as a leader.

When you run a business such as Homebase, you have so much more ownership of the entire business, from strategy to operations and from the small day-to-day details to longer-term vision and plans...One of the main things I've learnt is the importance of agility, both as a leader and for the business.

I'm a true believer in laying out a long-term plan, but you have to have the courage and agility to move away from it, adapt to the market and your customers when you need to.

Since he started at Homebase, Mr McGloughlin said he was most proud of "keeping the brand alive". This means needing to make some bold decisions - from changing ranges to changing the layout of stores.

Homebase is a family business, and throughout my time here, I have prioritised the team.

While we do bring in new talent where we need it, we focus on growing and developing the team we have. If people have the right attitude but don't have the skills yet, we'll do what we can to train them to where they need to be. We always look at stretching our internal teams, making sure we're giving people opportunities.

I've established myself as a chief executive and taken Homebase through a complete lifecycle, from selling the business, delivering a successful turnaround business, and now to the exciting next chapter of growth.

The main thing I've learnt is that you've got to lead by paradox. One minute you're in the detail - and at the other, you're in the helicopter, thinking five, 10 years ahead. Because I've always been in the detail, I find it easy to zoom in and out.

Mr McGloughlin said that moving forward, Homebase would continue to "cement" itself as home and garden experts.

We've put a clear full stop to our turnaround and have now entered our next chapter of growth. We are very clear on who we are and therefore, what we offer our customers. Our plan now is to continue to accelerate that plan and deliver it through working closely with our suppliers and teams and offering the best products and service to our customers.

Expansion across digital and fulfilment will continue to be a focus, as well as opening new stores in more communities, making it even easier to shop, whether it's online or in our stores. We'll continue to focus on newness and innovation, offering customers the right ranges and projects in partnership with brands and our suppliers.

Related: Homebase and Bathstore showrooms offer a digital experience.

A development application for a Sydney Tools store was recently approved for a Kensington location in Bundaberg (QLD). The outlet will be situated at 20 Johanna Boulevard, filling the vacant lot between Bunnings Warehouse and the Boulevard Lodge. It will be open from 7.30 am to 5 pm seven days a week and 51 car spaces have been included in the design.

Bundaberg Regional Council approved a material change of use application for a hardware and trade supplies business on Johanna Boulevard. The applicant, Bayswater Holding, intends to develop part of the site for a "building to facilitate the expansion of Sydney Tools", according to submitted documents.

This approval comes after Total Tools was approved for the former Chipmunks Playland and Cafe Bundaberg site in the same area.

Sydney Tools also recently opened its Morayfield (QLD), pictured.

Related: A development application was lodged for a Sydney Tools store on Johanna Boulevard in Kensington, a suburb in Bundaberg (QLD).

Terang Co-op

In its most recent annual report, Terang Co-op chief executive officer Kevin Ford said the turnover of $31.3 million it achieved was $6 million or 28% higher than the previous financial year.

The before tax $1.05 million profit for the financial year ending on February 28 more than doubles the previous record of $440,101 set in 2013.

Mr Ford said the result was boosted by COVID-19 lockdowns in 2020 and reinforced by changes in business practices. He said the Co-op struggled to keep some essential stocks on the shelves as panic buying set in during the initial lockdowns, while online deliveries hit new highs. There was a huge 38% jump in hardware and timber revenue, a 49% increase in the rural division, and 16% in the supermarket, which remains the biggest part of the business.

Mr Ford said the COVID-19 lockdowns had "taught us the size of the potential market". He told The Warrnambool Standard:

It meant people were forced to shop locally which particularly drove the March to June quarter results, but from then the changes and improvements we made gave customers reasons to continue shopping with us.

Mr Ford said the Co-op was placing more emphasis of encouraging locals to shop locally and stop the substantial retail leakage out of Terang. He said:

The Co-op's commitment to a quality customer service ethos, competitive pricing, and an increased range of quality products will deliver to our members' needs, encouraging more in our community to shop in our town.

It is extremely important for a small town, such as Terang, to have a great supermarket, a great trade and retail home improvement store and community Co-op.

The Co-op also reinvested more than $1.2 million worth of capital back into the business and will look to continue growth into the future. Its investments over the year included $850,000 redevelopment of the IGA supermarket, upgrades and rebranding of Mitre 10 and The Rural Store, new capital equipment in 360 Dairy Solutions and replacing the Co-op's fleet of vehicles.

It employs more than 120 staff and has more than 3000 members.

Related: Terang and District Co-operative ended its 2019-20 financial year with an increased surplus after a solid year of trading.

Australian retail conglomerate Metcash announced its results for its FY2021, ending 30 April 2021, on 28 June 2021. While the results were, overall, very positive, the results presentation was somewhat more contentious than usual.

In top-line terms, statutory revenue came in at $14.3 billion, up by 9.9% on the previous corresponding period (pcp), which was FY2020, ending on 30 April 2020. According to Metcash, if "charge through" sales are included, revenue grew by 10.1% on the pcp. Overall earnings before interest and taxation (EBIT) came in at $401.4 billion, an increase of 19.9%. Net profit after taxation (NPAT) was $239.0 million; NPAT for FY2020 recorded a loss of $56.8 million, occasioned by a write-down of $237.4 million to compensate for the loss of a contract with 7-Eleven by Metcash's food business.

Metcash's hardware business also reported strong numbers. Sales including charge throughs came in at $2.6 billion, an increase of 24.7% over the pcp. EBIT for hardware came in at $136.0 million up by 61.5% (though this includes earnings from acquisitions, which we delve more into below). Like-for-like (comp) sales rose by 11.4% in what Metcash defines as the "the retail banner group", while in the pcp this number fell by -0.7%.

In its other segments, Metcash's food business saw sales grow by 3.1% to $9.4 billion. In its liquor segment, sales came in at $4.4 billion, an increase of 19.2%.

In the face of what would seem to be good news, it was, perhaps, a little surprising to find the analysts virtually attending the results presentation had some pressing questions for management about its internal investment plans, and exactly what the results meant. The initial presentation of the result numbers took around 30 minutes, and the Q&A session took over 40 minutes.

At the heart of this contention was what many analysts saw as a surprising move by Metcash: a share buyback scheme. In announcing this buyback, Metcash stated:

On 28 June 2021, Metcash announced that it is undertaking an Off-Market Buy-Back of up to approximately $175m. This follows the Board's assessment of Metcash's ability to distribute excess capital to shareholders having regard to: an improvement in the level of economic certainty; its near-term capital expenditure and working capital requirements; opportunities to grow and create shareholder value; while also maintaining a strong balance sheet with low gearing. When combined with $179m of ordinary dividends in respect of FY21, Metcash will have returned over $354m to shareholders since payment of the FY20 final dividend.

The Board considered various alternatives for returning excess capital and determined that the Off-Market Buy-Back is the most tax effective and value enhancing strategy for distributing the excess capital. All shareholders who continue to hold shares following the Buy-Back, irrespective of whether they participate or not in the Buy-Back will benefit through earnings per share and return on equity accretive outcomes.

The buyback would account for something over 5% of the shares currently issued by the company.

HNN can make a good guess at what was actually disturbing to the analysts about this move (though it was never overtly mentioned). However, it is best to delay that until our end analysis.

We need first to take the questions of the analysts at their (very valid) face value. For the most part, these related to the wisdom (or lack thereof) in returning capital to shareholders via a buyback, when those funds might have been better reinvested in Metcash.

There were some really excellent questions asked of Metcash, in particular by Grant Saligari of Credit Suisse, Michael Simotas of Jefferies, Andrew McLennan of Goldman Sachs, and Craig Woolford of MST - as well as a seemingly simple, but very revealing question by Morana McGarrigle of Macquarie.

However, as has often been the case, it was David Errington of Bank of America Merrill Lynch who really got to the heart of the matter with Metcash CEO Jeffrey Adams. What makes Mr Errington's questions so distinctive, is that, while they deal overtly with numbers, forecasts and decisions, they somehow also penetrate down to the character of the executives - and of the business itself - involved in making choices.

Mr Errington's question begins by pointing out an interesting fact not at first clearly evident in the numbers supplied by Metcash:

In the second half, your key [food] business in EBIT was down second half [FY2021] on second half [FY2020]. Now, I know that you've lost Drakes and that, but at the end of the day, that's what it is, it is what it is, you lost a couple of major customers here and you have to cycle it. [Also] you're not going to have tobacco excise benefits this year.

So you're down from $94.3 [million] to $89 [million]. And you're going to give up another ten [million dollars] in not having excise from tobacco in food. So my question is in the main food area, is my concern in the industry is that there seems to be a step up in capital intensity going on at the moment, where we have got Woolworths, and we've got Coles both stepping up sizeably their investments.

Is it wise to, you know, because your maintenance capex, I think you're basically highlighting that your capex is not much above maintenance. So I think capex is about $80 [million], and maintenance depreciation is about $60 [million]. So you're a little over that. Now, I know you're doing MFuture and all the rest of it. But giving money back to shareholders at this point, I know there's been a desire to give it back because he did raise $330 million last year, so [you've] got to give some back. I get that. But giving it back like this, when the others are stepping up sizeably their capital intensity... You know, Woolworths has announced last week, $400 million in another automated DC. Coles are stepping up, they're investing in projects. Do you think that you might need to step up to remain competitive? Because I know that you're saying that you've got to look at sales, excluding Drakes and all the rest of it. But at the end of the day, they are major customers that you lost. Are you at the position now that you can actually grow sales, once we do go through the normalisation period, given what's happening in the industry right now?

Mr Adams responded:

Yeah, well, look, Dave [sic], I wouldn't want to try to predict any further than what we've, what we've reported here on the first eight weeks. But again ... we're quite confident that, you know, we are still seeing again, if you go back to that, FY20 being a more normalised sales period, the growth that we're seeing against that is encouraging.

As far as our plans, and you know, do we have the capital that we need for those plans? We're absolutely sure that everything that we spoke about at the investor day, I don't want to comment on what other people are doing, because I'm not, you know, familiar enough with their strategy, and why they're spending that kind of money. But we feel quite comfortable that we're spending the right level that we need to spend to deliver the plans that we've outlined.

Mr Errington took up those points:

Is it fair, Jeff, to compare it to FY20? Do you reckon right now, we're in a normal period, that you're comparing a normal period to a normal period? Because I don't know about you, but living in Melbourne in the last two months hasn't been normal. I've had to wear face masks in supermarkets. I wasn't allowed to go more than five kilometres for about two or three weeks. So do you really think it's fair comparing the numbers today? Do you think we've normalised today, do you? Do you think we've normalised that you can safely say and talk to us as, as the investment community, "compare yourself to FY20, because right now, it's normal versus normal"? Do you think that's right? Do you think we're in normal conditions right now, so that your trading is normalised?

Mr Adams confirmed that this was, indeed, his basic approach:

Compared to FY21 at that time, I think we probably are closer to normal. Maybe this is the new, new normal. The only reason we provided both of those, Dave, was so you can make that comparison to see, versus FY21, which was very volatile, we know, particularly at the start of the year. And then as we got more toward the end of the year, it was sort of what people are calling the new norm.

Mr Errington asked for a final clarification:

But do you think it's the new norm now? Does it seem like we're still in that new normal period now?

Mr Adams agreed that this was his approach:

Yes, I do! And until things change, as far as borders opening up, and people getting further into the vaccination, I think we probably will be living the way we are now for some time to come.

One reason why this exchange matters so much is that it touches on one of the key strategic matters for the hardware industry, as well. In terms of capital intensity (to borrow Mr Errington's phrase), we're seeing something similar in hardware, with Bunnings not only investing in ramping up Adelaide Tools to a nationwide chain of tool retailers, but also buying Beaumont Tiles as well. And behind that, there is the ongoing, very large investment in data analytics that Wesfarmers managing director Rob Scott has instigated. While TTH (Total Tools Holdings) certainly is an investment in hardware, it's also a new business, rather than an ongoing investment in, for example, IHG.

This is happening against an economic background that many would agree is highly uncertain - as Mr Errington points out. Mr Adams, in contrast, seems to suggest there is a predictable pattern to it, a pattern which will, it would appear, continue to benefit the businesses that make up Metcash.

More concerning, however, is that there is a sense in all of this that Metcash may be, at least in part, willing to return funds to shareholders based not only on present performance, but also on future performance. Yet if we look at a venture such as TTH, much of the predicted growth has an element of risk to it. That's part of the point that Mr Saligari was trying to make when he asked some pressing questions about TTH:

Just on the total financial commitment into Total Tools, at the moment, and maybe we just stick with the balance sheet amounts at the close, before talking about the additional 15%. So when you acquired this 70%, it was $57 million for Total Tools Holdings, and you recorded a liability of $122 million, and then there was $42 million dollars, I think, for the JV stores and a liability of $69 million for put options that the JV owners have back to Total Tools. And there was debt $40 million at acquisition. Is that ... sorry, can you maybe just confirm whether they're the right numbers?

Metcash's chief financial officer, Alistair Bell, did respond to that question, but it was not quite on-topic, so Mr Saligari pursued clarification:

All right, to just to, say, double confirm whichever way we cut it, whether we halve the liability or not, we're looking at about $180 million, approximately Total Tools Holdings, about $120 million for the JV stores, including the put options, so we're up to $300 million there plus the debt. So it is sort of $340 [million] or $360 [million], whichever way you look at it, should we then get in? So we should compare that amount with the $24 million? Is that approximately right?

Mr Bell responded:

I'm trying to follow your maths, Grant. So I'll have to, it may be easier to take it off and come back to you afterwards.

Finally, as the last question to the event, Ms McGarrigle asked:

Maybe just one other quick one on hardware, just given your positioning in the trade market and given the fact that the market is very fragmented. Should we be seeing more consolidation? Or should we expect to see more consolidation in the industry in the near term?

Mr Adams replied:

So, you know, we've said before, and we said again at the investor day in March that it does tend to still be quite a fragmented market, in hardware. Obviously, we've had a great opportunity to pick up Total Tools, and in the past picked up HTH. There's still lots of people out there, you know, it would depend now on what valuations they would be looking for, because a lot of people have benefited significantly during the COVID times. So unless people are willing to talk about normalised earnings, we wouldn't be interested. But it is still one of the markets for us and in businesses where it's still very, very fragmented and lots of opportunity.

That's a revealing answer, in that it indicates the drive to acquire more corporate stores is likely to be muted for some time. It's also interesting that when it comes to investing in new stores, the prediction for future growth would seem to be less than completely optimistic.

Assessing hardware at Metcash

At this point, having spent considerable time looking through the financials presented by Metcash for its FY2021, HNN has to confess that we have, quite frankly, been defeated. We cannot, based on the numbers provided, derive an analysis from the perspective of the industry itself.

That isn't to necessarily criticise Metcash. Corporations produce accounting numbers for three purposes: to substantiate their tax payments; to inform investors about past performance and future prospects; and to help with the management of a company by monitoring its performance. The first two are public and the third is private. HNN's purpose is frequently to somehow derive a sense of the third from the numbers contained in the other two.

This year, however genuine performance figures seemed a little hard to come by.

Revenues including charge throughs

To give some idea of the difficulties involved this year, take, for example, the numbers provided by Metcash for revenues that include what the company describes as "charge throughs". On the Metcash website these are defined as follows:

Charge through is a process that allows suppliers to deliver their non warehoused goods directly to our customers, with all accounts for those deliveries payable by Metcash. Metcash, in turn, on charges the receiving customer of those deliveries.

In the most recent, full-year FY2021 results, this is the description of revenues for the hardware segment at Metcash:

Hardware sales (including charge-through) increased 24.7% to $2.6bn (FY20: $2.1bn) with significant growth in DIY sales and a return to growth in Trade.

In the statements for the first half of FY2021, this is the statement for the same category of revenues:

Hardware sales (including charge-through) increased 20.6% to $1.3bn (1H20: $1.0bn) with significant growth in higher margin DIY sales. Excluding acquisitions, hardware sales (including charge-through) increased 16.2%.

So, interestingly, the retail sales including charge through were split exactly evenly (at least when rounded to the nearest $100,000,000) between the two halves.

For the previous year, FY2020, this is how the same category of sales is described in the results announcement:

Hardware sales (including charge through sales) decreased 1.3% to $2.08bn (FY19: $2.10bn) reflecting the impact of the slowdown in construction activity on Trade sales and the loss of a large HTH customer in 1H19.

Going back to the first half of FY2020, this is the description for that category of sales:

Hardware sales (including charge-through sales) declined 4.2% to $1.04bn (1H19: $1.09bn) mainly reflecting the impact of the slowdown in construction activity on Trade sales.

Once again, the amount of sales in the first and second halves were exactly the same, rounded to the nearest $10,000,000.

For FY2019, there was some variance between the two halves.

HNN has no further comment to offer on this.

Organic versus inorganic growth

In providing an overview of Metcash's Independent Hardware Group (IHG) from an industry perspective, it's crucial to be able to separate organic growth, which relates to growth in assets owned for more than a year, from inorganic growth, which relates to recently acquired assets.

The reason that is so crucial is because we're more interested how individual retail premises operate, and less interested in who specifically owns them or benefits from their wholesale business. From an investor perspective, both are interesting, but who benefits from the revenues is somewhat more important.

Crucially, when the market expands, as it has recently, we want to know which sectors are capturing more marketshare. Is it IHG, other independent groups, or is Bunnings the main beneficiary?

In the current results, as provided, there is simply no way to work out, or even back into those numbers. We do get one hint, in the FY2021 first half results, which state:

Excluding acquisitions, Hardware sales (including charge-through) increased 16.2%.

Though, in the same document, when it comes to EBIT, we're back to no differentiation:

Hardware EBIT increased $25.6m (+ 65.8%) to $64.5m, reflecting a significant increase in sales volumes, the increased weighting of higher margin DIY in the sales mix, an increase in the contribution from joint ventures / company-owned stores, and the earnings from acquisitions which included $4.8m from two months of trading in Total Tools Holdings.

The same holds true for the full year FY2021 results. Regarding sales, these state:

Total IHG sales (excluding Total Tools) increased 17.9% (FY20: -1.3%).

When it comes to EBIT there is even less clarity:

Hardware EBIT increased $51.8m (+ 61.5%) to $136.0m, reflecting a significant increase in sales volumes, an increase in the contribution from company-owned / joint venture stores, and the earnings from acquisitions which included $24.0m from the Total Tools Group.

The difficulty in both cases is that the list of acquisitions is quite extensive. It's also not clear that notations such as "excluding Total Tools" means that everything related to Total Tools is excluded, including Metcash's 36% to 42% share in Total Tools franchise stores, or just the main companies that make up TTH.

The only other recourse that we have to measuring organic growth are the "like-for-like" sales mentioned in the FY2021 results:

Retail LfL sales in the IHG banner group increased 11.4% (FY20: -0.7%), with DIY sales up 25.1% and Trade sales 4.9% higher.

However, LfL (comp) sales tend to understate growth, so using these as a proxy for overall organic sales growth would not be fair to IHG.

About the only statement we have to offer is that the 17.9% growth figure - which does include acquisitions - is close to the overall figure from Australian Bureau of Statistics (ABS) for growth through that period of 18.3%.

Other comparisons

A curious addition to the results for FY2021 was an extended comparison to not only the previous year, but also two years in the past:

This includes a 19.4% increase for the ten months ended February 2021 and a 12.3% increase in March/April 2021 sales. Compared with FY19, March/April sales increased 25.4%.

HNN's chart for sales over this period illustrates why such comparisons might be tempting:

After a strong peak in activity from April to June in 2020, stats since February 2021 show signs of decline in hardware retail revenues. Nonetheless, as these stats show a 21.5% increase from April and May 2019 to April and May 2021, the IHG sales figures show a stronger result - though they are described as being ex-Total Tools, but inclusive of other acquisition revenue, and thus do not describe purely organic growth.

This multiple year comparison is carried over into the Outlook section of the results dealing with hardware:

In Hardware, sales for the first eight weeks of FY22 increased 29.1% compared with the same period in FY20, and 15.5% compared with the same period in FY21. Total IHG sales for the first eight weeks of FY22 are up 15.1% compared with the same period in FY20, and 3.1% compared with the same period in FY21.

Again, the sales numbers are footnoted as excluding TTH sales, but not other acquisitions.

Analysis

An announcement that Metcash made in February 2021 to the Australian Stock Exchange regarding the employment of its CEO, Mr Adams, states in part:

Metcash Limited (ASX:MTS) today announces that the employment agreement of its Group CEO, Jeff Adams has been extended subject to the renewal of his visa, which is due to expire in August this year.

The existing terms of his employment agreement are unchanged and include a maximum period equivalent to his visa (four years), and a notice period of 12 months for both Mr Adams and Metcash.

Mr Adams has held the position of Group CEO since December 2017.

As Mr Adams has been a very effective CEO, it will be interesting to see how his ongoing engagement with Metcash develops.

The Remuneration section of the results for FY2021 provides this useful graph which describes the various performance reward schemes provided to key management personnel (KMP).

The long term incentive (LTI) scheme relies on two main performance measures, returns on funds employed (ROFE), and total shareholder returns (TSR). Payments are, according to the document:

Delivered in Performance Rights. Each Performance Right is a right to acquire Metcash shares at no cost, subject to the satisfaction of performance and service conditions.

As expected, the announcement of the share buyback by Metcash has helped to boost its price.

Conclusions

What resonates most with HNN in looking at these results are the comments made by Mr Errington. There is a link, really, between what happens in some sports, and what happens in the relationship with share markets as mediated by corporate executives and investment analysts. The written rules of the game are important, but it's knowledge of the unwritten rules that leads most players to a better understanding of themselves and their team members, and helps some to achieve some small moments of actual greatness.

If it was Metcash's intent to avoid a certain kind of scrutiny, a clear benchmarking of performance against industry statistics (though we can't know if that is the case), then congratulations are due, as from HNN's perspective at least that is what has happened. But constrained results are unlikely to serve Metcash's better purpose in the years ahead. Which is, in the end, the message the investment analysts at the results presentation might have wished to convey - in HNN's opinion.

Related: Metcash held its Investor Day earlier this year.

Sunshine Mitre 10 general manager Neil Hutchins said the defibrillators are an investment in emergency health care not just for their staff, but also for the communities in which they operate. He told The Chronicle:

We have over 400 staff across our locations, and we take our duty of care very seriously so we have first aid officers at each location, and now we also have defibrillators which can help save lives for anyone experiencing a sudden cardiac arrest.

But it's not only that, many of our stores are in regional and remote locations so by having a defibrillator on site, it also makes these lifesaving devices more accessible to the local communities.

And while it's a very big investment, if we can save just one life, it will be money very well spent.

The defibrillators were sourced from iHeart80, a company founded by former Australian ironman surf lifesaving champion Guy Leech after he experienced personal tragedy when he lost his close friend "Chucky" to a fatal heart attack. Quick access to a defibrillator could have been the difference between life and death for Mr Leech's mate. He explains:

More than 500 people a week have heart attacks or strokes. Unless a defibrillator is put on you within about three minutes, you've got a 10% chance of survival. The average time for an ambulance to arrive is 12 or 13 minutes.

Mr Leech said the defibrillators were easy to use, with the machine giving instructions during use.

The defibrillators are with first aid equipment in all Sunshine Mitre 10 sites including Darling Downs and southwest Queensland stores in St George, Roma and Roma Steelyard, Dalby, and Kingaroy.

Trade-focused retailer, Screwfix is set to launch a trial which will see it deliver products to customers in as little as 30 minutes. To provide this service, Screwfix is partnering with Gophr, a delivery courier business.

While the trial is limited to the area, parent company Kingfisher has been looking to boost its last-mile delivery options, according to The Times.

Sister company B&Q has been leveraging its store estate, operating dark stores out of its "digital hubs" to offer next-day delivery. B&Q also offers click-and-collect within an hour, while Screwfix offers the same service within one minute.

Thierry Garnier, Kingfisher's chief executive, is an advocate of rapid deliveries because of his stint in China as boss of Carrefour's Asian divisions where shoppers expected goods to be delivered within 15 minutes. There he oversaw an operation where hundreds of motorbikes would deliver groceries from supermarkets at three-minute intervals every day.

During the pandemic, Kingfisher grew online sales by 158% as the business switched to picking internet orders from shop shelves to speed up delivery times. As a result of Mr Garnier prioritising digital growth during the crisis, online sales account for almost a fifth of revenues.

However, it is understood that Mr Garnier is keen to offer faster deliveries particularly to tradespeople who are working in homes.

Mr Garnier is using Kingfisher's existing store network as a profitable route to growing its ecommerce business.

In the UK, Gophr is a last-mile service that recently raised GBP4 million to accelerate its expansion and counts meal kit company HelloFresh, pharmacy retailer Boots, luxury fashion e-tailer Net-a-Porter and British consumer co-operative, Co-op as clients. Department store Marks and Spencer had previously chosen Gophr for its trial of online food deliveries, before striking a joint venture deal with retail software company Ocado.

Amazon had originally disrupted the UK market with its offer of same-day deliveries but more frequently offers next day deliveries as its Prime Now service migrates to its main website.

Related: During the pandemic, Kingfisher focused on speeding up its delivery times.

Homebase is creating a new hybrid model, which integrates both a physical and virtual showroom following the roll-out of its new generation kitchen and bathroom showrooms launched earlier this year.

Customers will be able to browse the Homebase and Bathstore ranges independently or be guided by a design consultant with free design consultations available both in-store and virtually.

Homebase currently has 152 stores and 15 stand-alone Bathstore outlets. Ian Penney, business unit director for room solutions at Homebase, said:

So many people start their projects by looking for inspiration online, and our new 360-degree virtual tours of two of our kitchen and bathroom showrooms make it even easier for customers to see how they can turn their ideas into a reality. Our free design consultations are available in-store or virtually, so customers really can browse and plan everything from the comfort of their own home.

As the KBB (kitchens, bedrooms and bathrooms) sector in the UK begins to recover post-lockdown, retailers that are able to provide an online experience in support of a bricks-and-mortar space is an effective way to build consumer confidence, especially among those who are shielding or feeling anxious about shopping in-store. Scott Currie, managing director at Virtual 360-degree Tours Glos adds:

Safety still remains a huge concern for many consumers, so offering an online tour package can help attract and retain business opportunities without risk. We are very pleased that we can facilitate Homebase's many customers so that they can see even more of their fantastic ranges - whether that's from their own home or visiting a local showroom.

Peter Jones, managing director at Jones Digital is pleased that UK retail brands like Homebase and Bathstore, are now able to reap the benefits of working with its multimedia solution that simulates an existing retail space. He said:

We all need to move with the times and raise engagement with our potential customer base, especially at a time when clients are often building relationships online first, rather than by popping into to visit a showroom to get a feel for it...

"Every showroom tour can be seamlessly embedded into the architecture of your website with tags, links and videos containing further product information, as required. This in combination with chat bots and online enquiry forms, which all help customers to interact with your business in real-time with messages instantly delivered to members of your team," explains Mr Currie.

In Mackay (QLD), Porters Mitre 10 joint general manager Greg Porter remains confident the business can keep up with the current demand for timber and other building supplies despite the construction boom around the world.

Amid restrictions on movement to stop the spread of COVID-19, people around the world are looking for bigger homes or embarking on renovation projects, sapping supply and driving up market prices for the most important component, timber.

In Australia, the HomeBuilder grant was tipped to attract 27,000 applications, but so far has received more than 121,000 across the country. A combination of low interest rates, government stimulus payments during the COVID-19 shutdowns and border closures, saw Aussies turn to bricks and mortar either through renovations or new builds.

Master Builders Queensland Townsville regional manager Emma Peters said the issues facing builders and trade contractors are "substantial". She told the Townsville Bulletin:

The resulting demand has created the first-world problem of builders being extremely busy with the work they won while the grant was running - as well as dealing with the growing problem of trade and materials shortages, and price hikes.

At Porters, the business is using all available supply lines to meet the "unprecedented" level of building approvals. Mr Porter told the Daily Mercury:

I'm supplying more product than I've ever had to supply in a very long time.

He said the pressure on building materials was amplified by an "excessive amount" of construction activity around the country.

In the past, we've never had these challenges. We've never seen every state in Australia in a very strong position construction-activity wise. There's always been one or two states that aren't in a growth period.

Queensland-based timber and hardware business, Bretts said it has been fielding desperate pleas for material from local builders and other states. Bretts managing director Bill Nutting said the firm would normally produce frames and trusses for 1000 homes a year. But in a recent week alone, they turned away requests for 600. He said suppliers were doing what they could, but labour shortages were impacting too. He had heard several stories of builders receiving calls from roofing contractors due to start work the next day demanding an increase of $5000 to do the job or they wouldn't turn up. He told The Courier-Mail:

The market is so hot they could walk next door and get the money. This is going to go for 12 or 18 months. The prices are going to keep going north and there's going to be delays. It's inevitable.

It's very unhealthy. We'd much rather see this play out over two years, not over 12 months.

Building products group Williams Group Australia relies on softwood produced at Tumut (NSW) to help supply its needs. Sales manager Mark Pickett said the current climate was proving "very challenging" in light of the fact Australia can't produce enough timber to meet demand. He told The Land newspaper:

This is across the board in NSW, Queensland, Victoria - demand for timber in all the states is very strong.

Yes the [2019] fires had an impact and they have lost a shift at Tumut - the mill used to run two shifts - which means that we are dragging logs from further away and that raises the cost. The impact has been severe. In the US, the lumber price index is off the Richter scale and sawmills can't catch up, so they have gone to Europe for logs. In Australia we pay northern hemisphere prices for lumber and that equates to a significantly dearer price.

Mr Pickett said prices were forecast to remain strong through 2024.

Timber production is an investment, not just something that you can grow in a few years. It will be 25-27 years before we get a harvest from new plantings.

Mitre 10 Goulburn operations manager Matthew Lawler put the timber shortage down to Covid-19, international tariffs and the ongoing impact of the 2019/20 bushfires. He told the Goulburn Post:

The bushfires totally stripped supplies.

Mr Lawler explained that burnt material meant suppliers went through blades faster which made manufacturing difficult. He said that while Mitre 10 had a good relationship with current suppliers and was "one of the priorities", they were searching for alternative solutions.

He said alternatives included a laminated veneer lumber product (LVL) that could be used for frames and trusses. However, this product is also in short supply and manufactured in Europe and Russia.

Steel was another option, but Mr Lawler said supply was "drained" due to current demand. He said builders were also finding it difficult to get hold of metal reinforcing mesh for concrete.

In Orange (NSW), the timber shortage will cause delays in housebuilding for years to come. Brendan Kent from Kents H Hardware explains that pine framing is used for 90% of new houses. He told the Central Western Daily:

What I've been told by suppliers is that it's going to be an issue that will take years to improve, it won't be fixed overnight. I've been told by a few of our customers that they're being delayed by two to three months. I hope I'm wrong but as far as I can gather this will be the new norm. There's no light at the end of the tunnel.

Normally Mr Kent would import the timber from New Zealand or South America. But the global demand for the wood has seen prices skyrocket. He said:

Now the US and Europe are buying it off them for 30-40% more than what we pay. Unfortunately most places are now limiting how much people can buy, so full packs of timber we unfortunately can't sell to anyone.

The way we see it, instead of selling it all to one customer we're better off sharing it around so everyone can stay in work.

Philip MacGregor, executive chairman at Sydney's Hardware & General, said the worsening shortage of timber, steel and other supplies hitting the industry is simply "overwhelming". Over the past 35 years, Mr MacGregor has experienced the "bust and boom" cycle of the construction industry. He told AFR (Australian Financial Review) Weekend:

This is bigger than all of those because it's widespread.

The huge increase in demand for new homes and renovations is colliding with a severely stressed global supply chain for basic materials. Shipping and transport bottlenecks caused by the ongoing pandemic have left consumers and businesses struggling to get their hands on everything from cars to mattresses and pianos, according to AFR Weekend.

Hardware & General's biggest customers are builders that typically construct between two and five houses a year. Mr MacGregor said:

Everything is going full steam ahead to the point where supply can't keep up, whether it be labour or raw materials.

The result is a steep leap in prices and wait times. Canny builders are stockpiling more than they immediately need. Others, Mr MacGregor said, are turning customers away or absorbing hits to profitability.

Bruce Parker, group manager at Hardware & General said locally produced timber costs have gone up by 20% to 25% this year alone, with more increases to come. Imported timber has increased by as much as 90% and more. Part of the reason is that Australian timber buyers are now competing for supply from Asian mills with American builders, who are in the grip of their own construction boom. He told AFR Weekend:

All the costs in the supply chain have just gone crazy. This isn't going to ease off until global demand eases off.

Pricing pressure

Everything from steel reinforcing for concrete slabs to timber for framing and cladding, flooring, roofing, doors and fittings have soared in price, according to the Housing Industry Association (HIA), and are sometimes taking months longer to arrive.

Stephen Havas, housing chairman at Master Builders Queensland old The Courier-Mail:

[The costs] are not currently priced into building contracts or they are being gradually fed into building contracts. Builders have little or no margin left at the end of projects to pay wages or fix building costs.

Builders have to increase their prices to match both what they are paying now and what they might have to pay in the future. The cost of construction from a consumer perspective is going to rise.

Bunnings has also experienced "unprecedented demand" for timber products and expects elevated timber prices to squeeze its margins for up to another year. Managing director Michael Schneider said at its recent Strategy Day presentation:

We think about timber (and) we've probably got another six to 12 months of some challenge.

"Feedstock is in a reasonably good space, but getting it through the mills and, clearly, the strong demand is putting pressure on," added Mr Schneider, using the term for raw timber that is processed into usable wood products.

Mr Schneider said Bunnings was reluctant to put up shelf prices and hoped to tackle the margin pressure by cutting costs.

We do a lot of work with our suppliers to look at ways that we can offset costs through improved efficiencies in supply chain or volume purchases.

HIA chief economist, Tim Reardon, believes the shortage was likely to last for another six months. He told the Herald Sun it was expected the housing construction surge would continue until the middle of next year, and then return to a "more normal market level".

Mr Reardon said timber supply would also improve as domestic manufacturers to ramp up their output, which would come as they trained new staff, and open or commission new mills.

Related: Hardware retailers have been experiencing supply challenges in building supplies for some time.

A development application (DA) has been lodged for a Sydney Tools store on Johanna Boulevard in Kensington, a suburb in Bundaberg (QLD). Rival Total Tools was granted development approval on the same street, according to Bundaberg Now.

The Sydney Tools "Material Change of Use" application for hardware and trade supplies located at 20 Johanna Boulevard, Kensington was lodged by Baywater Holding Pty Ltd.

If approved, the development would have a gross floor area of 2424sqm and fill the vacant lot between Bunnings Warehouse and the Boulevard Lodge. The application said:

The proposed development is a natural consequence of the established character of the precinct, the zoning of the land and is a logical development of the site...

The business provides a facility that would be similar in appearance and scale to others in the locality and the commercial built form is typical of the type of development along Johanna Boulevard. In that regard the development is commensurate with the local role and function of the centre...the development also incorporates a standard of urban design and landscaping that would positively contribute to the streetscape...

Among the listed features proposed for this development are 51 car parks including two designated disabled parking bays, a proposed unroofed impervious area of 1,359sqm, 6-12 staff on-site and operating hours of 7.30am to 5pm Sunday to Monday.

The development application for Sydney Tools is currently with Bundaberg Regional Council's development group for assessment.

Related: Total Tools lodges DA in Bundaberg (QLD).

A report in Merimbula News Weekly has confirmed that Pambula Mitre 10 will take up space which was previously occupied by Woolworths on Main Street, Merimbula (NSW). The supermarket has move across the street into a new purpose-built building.

Chris Flint, general manager of Mitre 10 Pambula said a tenancy agreement was nearly complete. He told Merimbula News Weekly:

On top of convenient hardware, paint and garden items, the new outlet will feature kitchen, bathroom and laundry displays and appliances, outdoor furniture and barbecues, greatly assisting the residential and accommodation markets.

The Pambula store went through a large redevelopment in 2019 and Mr Flint said the move into Merimbula offered a "natural growth opportunity". He said:

The new combined operation will provide full time employment opportunities for up to 10 people, plus the chance to develop and promote the existing team at Sapphire Hardware. An additional 15 part time and casual jobs will also be created to support the new businesses.

Separate to the Mitre 10 business, but taking the rest of the tenancy, is a Total Tools franchise of approximately 1200sqm or just over half the building.

When Jindabyne developer Bruce Marshall bought the site in 2018, the area measured 3846sqm with a building of 2355sqm and 94 car parking spaces.

Inspiration Paint and Colour

After 21 years running the Albury-based paint supplies shop, local identity and businessman Errol Gibb has decided to retire, passing the store into new hands.

Mr Gibb, formerly of Inspiration Paint and Colour on Kiewa Street, Albury (NSW) has a reputation for sponsoring various sporting teams, charities and men's sheds around the region. He told The Border Mail:

I hope I'm thought of as being generous with donations and what not. It helps the community. I think it's something people should look at more.

Mr Gibb plans to spend his retirement fixing up his house and travelling with his wife, but he said he'll still pop into the store occasionally to check in.

New owner Geoff Gray has relocated from Melbourne with his family and said Mr Gibb was "an institution" in Albury. He said:

I don't think we'll ever be able to get rid of him...The thing is, you struggle to go anywhere without running into anyone who knows him.

I don't think I've had a customer that's come in that hasn't mentioned him. We went for a walk down the street the other day and I think he said 'hi' to every second person, because they just know him.

Mr Gray has more than 15 years of experience in the paint industry and said although there had been a big uptick in business during the pandemic with people spending more time at home and wanting to do their own renovations, taking on the business was still a daunting task. He said:

It's a big step.

Warrnambool-based George Taylor's Store has been purchased by a long-time employee; recent acquisitions and good seasonal conditions have helped Elders to a 31% rise increase in profits for the six months to March 31; and construction is expected to start in October for Sunshine Mitre 10's new store.

George Taylor's Store

Chris Snell and wife Simone Watts have taken ownership of the George Taylor's Store business in regional Victoria. They officially took over the operation of the three George Taylor's Stores on April 1.

This follows former owners Greg and Jacqui Malseed who have retired after 15 years of running the stores. Mr Snell has been working at George Taylor's Store since 1989. He told The Warrnambool Standard:

This was basically my first job when I left school. I started on the floor and slowly moved up.

Greg and Jacqui have now retired, but I was Greg's right-hand man for many years and prior to Greg owning the business, he was George Taylor's right-hand man for many years. The baton's been passed on to me.

Mr Snell spends most of his weeks travelling through the stores at Grassmere, Warrnambool and Camperdown, and Ms Watts has begun learning the ropes. Ms Watts explains:

I'm an accountant at Sinclair Wilson. But I work at the Warrnambool store on the weekend. It's something to break up the week and it's fun to play shops.

COVID-19 didn't slow down George Taylor's Stores and Mr Snell had no hesitation in taking over ownership. He said:

Last year was actually quite good. We traded quite well, and I think people started to purposefully look for Australian and locally made products. We sold a lot of camping gear and we're going to be building on that.

Since taking over the business, Mr Snell said he'd had a warm reception from regular customers and staff.

I've been doing most things for quite a while but of course there's always some challenges that pop up. It's always been a good place to work, I never found the need to look for work elsewhere. I think it's all worked out well that we've taken it over.

Elders

The 182-year-old farm supplies company said it has picked up about 900 new customers directly from its main rival, Nutrien. in the six-month period to March 31.

Half-year net profit after tax of $68.2 million is well above the $52 million recorded by the company for the same period last year. Revenue for the six months was $1.1 billion, 22% higher than the $900 million for the previous corresponding period. Underlying earnings before interest and tax were up 40% on a year ago to $73.8 million.

A sizable contributor to margin growth was the recently integrated Australian Independent Rural Retailers (AIRR) business which was delivering "above pre-acquisition expectations", generating $29.3 million in gross margin earnings, or almost double its results in 2019-20.

Managing director Mark Allison told the North Queensland Register that with the dust still settling on the Ruralco-Landmark merger 18 months ago, Elders expected to gain more agency and farm products supply businesses and customers, quitting Nutrien. In the first half of 2020-21 almost twice as many Nutrien customers had moved to Elders than were recruited throughout all 2019-20.

Former Ruralco farm services business YP Ag in South Australia, and five other new real estate and horticultural and general farm supplies ventures in NSW, Queensland, SA and Western Australia generated 21% of its growth results in the first half of 2020-21. Elders also established six new greenfield sites in the past half.

The company is currently weighing up another 17 potential bolt-on acquisitions which Mr Allison said would possibly add five or six new business to the group before the end of the trading year.

In the longer term, the company has its eye on significant growth and marketshare target areas in most states, with rural product sales opportunities considered most notable in Queensland, WA, Victoria and NSW.

Sunshine Mitre 10

Annecy Properties will be developing Sunshine Mitre 10's new $7.25 million store in the trade and construction precinct at Stockland's Aura Business Park in Caloundra.

Sunshine Mitre 10 has a 10-year precommitment of the site, according to The Courier-Mail. Annecy Properties director Neville Jensen said he expected doors at the new store to open in June 2022. He said he was in negotiations for some time with Sunshine Mitre 10 before the deal was struck. He told The Courier-Mail:

Sunshine Mitre 10 is already a tenant of mine in Caloundra and I have been talking to them for the last couple of years about doing this deal. They targeted Aura as a strategic hold for their future, but it still took a while to get over the line.

The 3309sqm building is on a 6051sqm site. Annecy paid $1.95 million for the land in a deal struck by Colliers International's Nick Dowling.

It is understood that Sunshine Mitre 10 will pay about $400,000 rent a year. Mr Jensen said he expected to hold onto the property for at least the next two to three years.

Related: Sunshine Mitre 10 is set to open another store on the Sunshine Coast.

Sales for US home-improvement giant climbed to USD37.5 billion in the three months ended May 2, up 32.7% from a year earlier. Profit rose to USD4.15 billion or USD3.86 a share, from USD2.25 billion or USD2.08 a share, a year earlier.

Its latest results have been fuelled by a pandemic surge in renovations and homebuilding in the US. There has been an unprecedented burst of home improvement projects, most recently with the distribution of vaccines and the rebound of the economy.

Global same-store sales surged 31% for the quarter compared to 6.4%, a year ago. Paint was the only category to see same-store sales growth of less than 20%. Online sales grew by 27%. More than half of digital orders were fulfilled through stores.

Big-ticket sales - transactions above USD1,000 - also indicated a strong willingness by shoppers to spend on home improvement, rising by about 50% on a comparable basis year over year. The average ticket rose to USD82.37 or 10.3%, from USD74.70 in last year's first quarter. Home Depot's tally of customer transactions rose to 447.2 million or up 19.3% in the quarter, from 374.8 million a year earlier.

Some of that increase in consumer spending could be tied to higher prices. For example, the price for a sheet of oriented strand board timber has quadrupled over the last year, according to executives, but demand has kept pace.

Although timber has been cited in recent months by investors and businesses as a contributor to inflation concerns, it has continued to fly off shelves amid rising prices.

Home Depot CEO Craig Menear said that the supply chain bottleneck is in sawmills, where cutting capacity hasn't caught up with demand. He said:

We don't see a lot of capacity coming online, so we're probably not going to see a lot of finished lumber product in distribution, so as soon as that product hits our stores, it sells.

This is the first quarter that the retailer is facing year-over-year comparisons to its business during lockdowns.

Even as much in-person retail evaporated in 2020 Home Depot worked to keep its stores open, arguing that it should be considered an essential retailer. In the year since, it also has benefited from the strong housing market and government policies such as enhanced unemployment benefits and stimulus checks that have supported consumer spending.

Ace Hardware

Ace Hardware Corporation has announced record first quarter 2021 revenues of USD2.0 billion, an increase of 42%, from the first quarter of 2020. Net income was USD105.4 million for the first quarter of 2021, an increase of USD69.2 million from the first quarter of 2020. John Venhuizen, president & CEO, said:

Same-store sales growth of 29.9%, 51 new stores, a 220% increase in our digital business, and increased retail inventory depth drove the best first quarter in Ace's history. Elevated demand, limited supply, and a ridiculously disrupted global supply chain continue to create a difficult environment operationally...

The 29.9% increase in US retail same-store-sales during the first quarter of 2021 reported by the approximately 3,400 Ace retailers who share daily retail sales data was the result of a 12.3% increase in same-store transactions and a 15.7% increase in average ticket sales.

Ace added 48 new domestic stores in the first quarter of 2021 and cancelled 15 stores. The retailer's total domestic store count was 4,680 at the end of the first quarter of 2021 which was an increase of 114 stores from the first quarter of 2020. On a worldwide basis, Ace added 51 stores in the first quarter of 2021 and cancelled 16, bringing the worldwide store count to 5,498 at the end of the first quarter of 2021.

Well-known UK retail information publisher Retail Week held an excellent online conference recently, called "Retail Connected". In an entertaining and enjoyable format, they hosted a global range of retail talent for brief, informative and entertaining talks on a range of topics. It's free to access the recordings of this event, and HNN urges you to go take a look at this link:

One of the people interviewed at the event was Jean-Jacques Van Oosten (aka "JJ") who is chief customer and digital officer at Kingfisher, which owns the UK home improvement retailer B&Q and Screwfix, as well as a range of retailers in France, Poland and elsewhere in the EU.

Like so many other home improvement retailers, Kingfisher found the COVID-19 pandemic to be something of a mixed experience in many regards. The first thing that JJ had to deal with was rapidly closing a number of stores, as the first wave of the pandemic hit the UK and the EU. As he puts it, the company was facing negative 80% like-for-like sales in the stores, and at the same time, positive 300% for ecommerce.

In the end, Kingfisher emerged in very good shape from the pandemic - at least so far - with strong gains in profitability and customer share. One element that JJ emphasises is that the company adopted the need for speed as one of the essential services it had to supply its customers, and that in many cases the way the company scaled up and delivered that speed was by making better use of its existing retail network of stores.

In fact, one area where they were lucky was that by chance, in the weeks before the pandemic hit, they had changed strategy in a very positive way. As JJ tells it:

The irony of all of this is that three weeks before COVID, we actually decided as a strategic move to put stores at the centre of our ecommerce proposition. That means making the entire range available online. So we decided to do that three weeks before the lockdown, though we had no idea the lockdown was coming up.

Our strategy was very much one of making that range completely available, as fast as possible, accessible to customers through either click and collect or for home delivery. Because we believed that speed is really the essence.

You know the "youngsters", they buy things on their mobile - even people of my age, if I may say! And that's even just for shampoo or something to eat. They don't go into a big shop, they just order it mobile, and it comes back minutes later. You can only do this if you've got local presence. So our stores, in our view, were real assets, and not liabilities.

Amazon, despite all of the fantastic, you know, out of this world type of logistics, they can't do same day, or within a few hours. We will be able to do that. In those extraordinary circumstances [of the pandemic], we put everything in place to make that happen very, very fast indeed.

All that came from a lot of work, and being willing to really invest in the process.

We invested very fast into digital equipment for colleagues to get all of the orders coming from the customers and located to the right stores. In the end, they could actually do all of this automatically, using a handset to go and pick [the orders] at Screwfix in one minute, and at other stores in under a few minutes. So it is quite fast.

As JJ describes it, this was far from just a surface change. The company had to rethink how it did retail almost from scratch, change the way the network worked, and adapt to delivering unusual items.

All that puts a lot of stress on your in-store routines in terms of availability, in terms of replenishment routines. You have to think about, if you want to do a home delivery from stores, you know, not all stores have got the depth of inventory to be able to do these. How do you optimize the network?

So we had to build - I mean it's obvious now - but we had to create the concept of hub stores for digital, which are slightly larger stores in the UK then in France. We had to really work extremely hard on availability, because we had actually such a high level of demand not just for the normal building materials, but also for things like live plants.

Beyond just the practical business of shipping what you had in whatever way would suit the customers, Kingfisher also focused on many of the intangibles it needed to help drive trade, such as delivering more choice.

We also had to go and think about providing choice to our customers. How do we provide choice? Because they were asking for that. For example, they did not have much choice for services.

For example, they were asking, "Do I go and set up a service with a tradesman? Or do I go instead to a marketplace for services?" So we actually went and bought a marketplace, which we are now rolling out to the UK and in Poland and in the other countries as well.

In doing that, we chose deliberately to use an open architecture. So we would welcome what would be considered by traditional retailers to be competitors, but we don't look at it like that. That way, you can monetise some of your web traffic.

While many retailers still look at recent events as bringing in a temporary state of affairs, JJ is quite clear that many of the changes caused by the pandemic will live on for decades.

We talk about mutational events, the pandemic is a mutational event. The direction, what I can say is, people say they will continue to work from home to achieve a better balance for their own life, for their private life. But they will also go and collaborate in the office because they value this.

So we'll have to have flexible working facilities at home, but they also want to see their homes as a place where they can relax. So that is important as well. They want to work in the gardens, on the balcony. They've also discovered the importance of local communities.

We've gained 10 million new customers, we look at the 18 to 34 age range, many of them are new customers and never did DIY before. So they've learned about it, and they enjoyed it. They want to do more. And I think across all of the sector, the importance of contactless and mobile is going to increase as well.

More importantly, though, JJ sees a profound structural change in the way retailers need to operate. Where in the past, retailers could dictate product availability to the customer, that will be much less the case in the future.

I think you need to be very smart as a retailer now. Once upon a time, retailers were telling customers what to buy, your buying team was deciding what would be bought by the customers. That is probably a little bit old-fashioned now. Today, customers are telling you what they want to buy, and you need to personalise your offer.

The level of automation is important as well. If you look in Walmart, they have invested heavily now in a lot of technology, they are looking at automating stores themselves with very advanced robotics.

Historically, we have for 120 years, since the time of Piggly Wiggly, consistently provided cost advantages to our customers. The customers are doing our job for us, they come to our stores, and they pick stuff for us. In exchange, they get a lower price.

Now, what customers are expecting is that we go to them, and we help them to do all these things. That increases our cost base. And that requires us to be far smarter to do that effectively and completely change our unidimensional economic model to add new lines of incomes. That might be marketplaces, it might be monetisation of traffic, or it might be a partnership.

Asked what he felt he himself had learned through the experience of the pandemic, JJ pointed to the need to provide colleagues and team members with real representation.

What I've learned is that, from a leadership perspective, is the importance of creating a safe environment, not just safe physically, because of the COVID situation, also mentally, where people can express themselves, and they can speak out. And I will always look for everyone around the table, the virtual table to be able to make a contribution.

Low interest rates, rising property prices, the government's HomeBuilder scheme and strong demand for extensions and renovations after COVID-19 lockdowns have resulted in record volumes of renovation applications and approvals, based on data from the Australian Bureau of Statistics and reported by the Australian Financial Review (AFR).

Timber and lumber prices are proving an acute problem for the hardware retail and construction industry as limited supply combined with a massive lift in demand - as people renovate their homes during COVID-19 and new homes are built - generates big increases in costs. A shortage of skilled tradies is also adding to rising costs.

A number of retailers said timber costs have already risen by up to 15% and say there will be more rises before year-end due to "serious constraints" on imports because of global competition.

Mike Barry, chairman of Natbuild, told The Australian prices in Australia haven't increased to the same extent as 400% plus rises in the US but that since November pricing pressure in the Australian market has been evident. He said:

The significant demand from new buildings and renovations has just skyrocketed and that is a global phenomenon, and the consequence is that we have not had the same supply of imported material. Towards the end of last year is where we started to feel the price effects.

Our intelligence is everybody is feeling the same supply pressure here, and same supply disruptions, and our intelligence also says that the price increases are flowing through fairly consistently across the market.

Ashley Waller, a Home Hardware director, has described "extreme and unprecedented demand" for timber and other building products, product shortages and "soaring" transport costs.

Mr Waller said timber costs had risen between 6% and 15%, with additional price rises expected before the end of the year. He told The AFR:

These circumstances have resulted in us not being able to source and supply many products that you would ordinarily expect us to have in stock or receive in-store within 48 hours.

Horsham Mitre 10 owner, Chris Jones, said he had never seen a shortage like the current scarcity of timber. Wimmera timber yards in regional Victoria are reporting shortages as construction projects across the region continue to be delayed by up to several years. He told The Wimmera Mail-Times:

There was a fair bit of disbelief in the industry, initially, due to the supply shortage because shortages are generally to bring the price up. That's not the case this time.

Mr Jones said Horsham Mitre 10 had received calls from places as far afield as Geelong and Melbourne looking for timber.

Pontings Mitre 10 timber manager Nick Slorach in Warrnambool (VIC) said while building projects weren't being help up, the shortage of supplies was starting to be felt. He recently told The Warrnambool Standard:

We're sort of at the stage where some suppliers aren't taking orders. Generally through winter they will build stocks. They just didn't get a chance to do that last year.

However, Mr Slorach said Pontings had been able to fulfill its orders and keep up a supply of stock.

Timber is getting hard to get. We've been able to get through. We are getting drip fed what we normally would, so we are getting by. Hopefully it gets better sooner rather than later.

Mr Slorach said pine framing, cypress, engineered products were the products that were very hard to get.

The framing shortage means they can't build the trusses, so truss companies across the state have cut off as well. There's a three-month lead time for jobs that are in the books, for jobs that aren't in the books, who knows. So that will hold things up at some point.

Mr Slorach said imports and shipping was part of the issue with other countries such as America paying more for timber - sometimes up to $500 more per cubic metre more.

So your imports are less because we don't have as much timber coming into the country, but we're not producing as much either.

Bunnings

Duncan Bryce, Bunnings' head of builders' solutions, said the building industry was "facing a number of significant challenges" and that boom conditions were causing "serious constraints""on timber imports because of overseas competition and shipping issues. He told the AFR:

The availability of product on a day-to-day basis is uncertain as our suppliers are working on a just-in-time basis, with limited inventory, making forecasting very challenging.

Industry sources told The Australian that since November local lumber costs are up at least 20% and imported lumber up 60%. According to a report in The Australian, Wesfarmers CEO Rob Scott told the Macquarie Australia Conference:

Lumber prices have gone up and there has been constraints there around supply, we have seen pricing pressure, similarly containing shipping is another area where there has been strong increases in pricing and there's also been some increases in other raw material prices, cotton and other categories, and I think what is important to note across all these areas the whole market is facing these cost pressures.

But Mr Scott said that Wesfarmers would do whatever it takes to maintain Bunnings as well as its other retailer brands credentials of offering low prices to shoppers.

The way we think about this is not just simply supply costs are going up, how much do we need to increase our price to offset that. That is not the way we think about it, we think about it far more holistically.

And that is certainly what Bunnings is trying to do with lumber, they are trying to resist the pressure to just keep on increasing prices because in times like this we want to deliver even better value credentials with our customers.

When cost prices go up the Wesfarmers business will do everything they can to keep our prices down because that's what our customers depend on us for.

Bunnings general manager for merchandise, Toby Watson, told The Australian the retailer had seen "unprecedented demand for timber products" for a number of months now due to Australians spending more time at home and the incentives for new home builds and renovations. He said:

This is creating a challenge for the entire industry with demand particularly strong for structural timber.

We're working with our suppliers and trade customers to forecast demand and plan earlier in the build process so we have additional time to manage orders as best as possible.

A Total Tools store could soon be located on Johanna Boulevard in Bundaberg (QLD).

A material change of use for a hardware and trade supplies development application has been lodged with the Bundaberg Regional Council for a site that previously had a Chipmunks Playland and cafe. STMC Enterprises is listed as the owner and applicant.

The proposed development would occur within the existing development footprint, not requiring any extensions to the building. The building footprint is just over 909sqm and covers about 35% of the site.

The tools and hardware business would expect up to six stock deliveries per day, mainly in the mornings.

Located within the Kensington industrial area, the application proposes that the new use would complement the location's zoning. According to Bundaberg Now, the application said:

Whilst the development does not directly support industry activities, the proposal would be compatible with the existing industrial and commercial uses within the precinct.

It also said that the long-term use of the land for industrial purposes would not be compromised because the existing building could be returned to an industry use.

The proposed development is a natural consequence of the established character of the precinct, the zoning of the land and is a logical development of the site.

The planning scheme sets an expectation that a mix of commercial and industrial activities are supported within the locality...

... the business would provide some secondary support to industrial uses through the selling of tools.

The Total Tools application also states the new business would provide a boost to the region.

The proposal provides a direct public benefit to the regional catchment with respect to economic development and employment.

The Total Tools Material Change of Use application is currently with Bundaberg Regional Council's Development Group for assessment.

Sunshine Mitre 10

Sunshine Mitre 10 Group has taken up three commercial blocks in the new Trade and Construction precinct in the Aura Business Park to build its latest store. It is located alongside the Bells Creek Arterial Road, which was due to be connected to the Bruce Highway.

Sunshine Mitre 10 general manager Neil Hutchins said the new store would be part of a steadily expanding network across Queensland. He told the Sunshine Coast Daily:

With Aura being a thriving hub of construction with thousands of homes being built over the next 20 years, we know there will be a huge appetite from tradespeople, owner builders and homeowners alike.

And with Aura to be home to 50,000 residents it fits with our focus on community, supporting community and sporting organisations in the towns in which we operate.

Stockland's senior economic development manager Matthew Byrne said Aura was positioned "in the heart of the largest investment zone in the region".

Once finished, the estate due to home 50,000 residents was planned to include two business parks, 10 sporting grounds, 25 community facilities, 20 educational facilities and 700ha of conservation and parkland areas.

Mirco Bros stores sold to Nutrien

Earlier this year, Nutrien Ag Solutions bolstered its local presence with the purchase of WA-based business Mirco Bros. The acquisition includes stores at Manjimup, Henderson and Neerabup, all located in WA. They will be rebranded Nutrien.

Mirco Bros was established by brothers Vince and Peter Mirco and their wives June and Jean in 1968 and has been owned and operated by the family ever since.

It stocks a wide range of fertilisers, chemicals, garden supplies and agricultural equipment to cater for commercial, market and backyard gardeners. The business also supplies tractors and associated implements to WA's vegetable, horticultural and vigneron industries.

Nutrien Ag Solutions region manager Andrew Duperouzel said Nutrien was proud to build on the knowledge and relationships Mirco Bros had built up during the past five decades of serving WA growers. He told Countryman:

We are very pleased that Martin Mirco (son of the late Peter Mirco) and the existing branch managers will remain within the branches to continue to provide the same great service, particularly to the horticulture industry in the South West.

The horticulture industry is an important and growing part of the agriculture industry in WA, and we are keen to support growers to be as productive and profitable as possible through great products and advice."

As a company, we have great confidence in the WA industry and are willing to invest to see it grow.

Related: In late 2019, North American-based Nutrien Ag acquired the former Landmark and Ruralco businesses.

Design 10, located at Fagg's Mitre 10 Belmont Timber, is the first of its kind for the Mitre 10 group. The idea to convert the space - previously home to Tait Flooring and Hardings - into one big showroom came after a flooding incident in 2019. However it provided an opportunity to start again. General manager Andrew Pitman explains that a mains pressure pipe on the street burst, causing water to flow through the showroom and destroyed everything. He told the Geelong Advertiser:

The idea came to life after that happened and change over took 12 months from idea to execution. This is the first Design 10 in Australia.

He said the vision is for customers to visit the showroom for inspiration.

The Geelong-based team created Design 10 as its own initiative and after seeing the results, Mitre 10 decided to buy in and roll it out across the country. Showroom manager Jules McDowall said it was discussed with Mitre 10 head office in the early days but was never picked up.

Andrew drove it at ground level here and we just built and built. It got to the point when Mitre 10 visited and went 'wow'...

We have flat pack kitchens but we have made them bespoke. We show people how you can take a flat pack and turn it into your own - for example, we have timber flooring on the sides of an island bench. Anything is possible.

Prior to having this facility we weren't geared to help them achieve that in a retail environment. Now [people] can come here and achieve just about anything they see on The Block or Pinterest.

Technology is also playing its part with a large in-built benchtop screen, allowing customers to explore different ranges virtually.

The team has the ability to design complete kitchens. While Design 10 supplies all the products and materials, it has an affiliation with WeDo, which project manages and installs it.

Solar energy at Mitre 10 Horsham

Chris Jones from Jones Mitre 10 in Horsham (VIC) has used the advice from local solar specialists at Wade's on how to maximise copious amounts of sunlight, extensive roof space and a scheme to make it work for his retail operation. He also worked in partnership with landlord Plazzer Builders to access the Sustainable Australia Fund (SAF) through Horsham Rural City Council.

After three months, he believes he is already seeing financial benefits. Mr Jones told The Weekly Advertiser:

We're not only saving thousands of dollars but through the program we're also guaranteed a pay back from the fund provider. We're basically locking in our savings. It's not only taken the sting out of the power bill, but also putting us financially in front with power use.

From my perspective the big part of the program is that I don't have to own the solar system - the landlord does - and the next tenant takes it on. It's a win-win situation for everyone.

The SAF's Upgrade Fund is a fixed-rate, long-term loan, with terms of up to 20 years, for environmental-upgrade projects for existing non-residential buildings. Adrian Wade from Wade's Horsham said there was never a better time for commercial enterprises to invest in solar power.

The Horsham council signing up with the Sustainable Australia Fund opens a large door of opportunity. It allows businesses to be able to finance environmental upgrades such as solar-power systems and to then pay them off a long period time through council rates.

This has enormous benefits for owner-occupiers and in the case of Jones Mitre 10, long-term tenants.

Mr Wade also said the fund removed some of the financial barriers that concerned many businesses contemplating a move to solar-power systems.

It has provided a way to make the most of every dollar while reaping the benefits of solar power.

A warehouse to sell rural and agricultural supplies employing up to 10 staff members has been proposed for Gracemere in Northern Queensland.

The development application (DA) was lodged on behalf of Australian Independent Rural Retailers (AIRR) which has more than 250 retailers in its network. It positions itself as the one-stop shop for farmers, growers, producers and pet owners, and sells a range of animal health, crop and pasture protection, livestock, fencing, farm management, water, pet, equine and poultry products.

The proposal is for a warehouse facility with three separate buildings and associated ancillary offices and amenities, to be developed over two stages. The first stage will include two warehouse buildings, which will both be six metres high, and the associated ancillary office and amenities area, sealed driveways, parking and landscaping.

Stage two will be for a third warehouse, which will have a 2170sqm ground floor area. The warehouses will connect to a covered loading area for deliveries. There will be no storage or handling of dangerous goods.

The proposed site in Gracemere is located on a corner block with a total area of 13570sqm and currently contains a few demountable buildings.

The DA was submitted by Gideon Town Planning to Rockhampton Regional Council and is now awaiting approval.

Gloucester Hardware

Gloucester Hardware owners, Jigna Vekaria and her husband are at a loss for how to thank all those who rolled up their sleeves before and after their hardware store flooded in March. Ms Vekaria told The Gloucester Advocate:

We closed the doors on [the] Friday after the SES told us about the flood warning but people just keep banging on the door to come in and help get our stock up higher.

Being relatively new to the Gloucester (NSW) region, the couple didn't know the full history of how the area has flooded over the years. And even as they learned more about it, they still didn't think it would be as bad as it was.

In fact, no one did. As the threat of more flooding was predicted to continue Ms Vekaria opted to keep their doors closed. Little did they know that a message was posted on Facebook calling for people to help them start cleaning up. Ms Vekaria was shocked when the group showed up. She said:

I couldn't imagine, with all the mud and dust, how to start. When the group came in - there are no words for that. It was amazing to see how many people came.

The clean up took place over two days and the shop was able to reopen after a week of being shut. According to Ms Vekaria, without the helping hands, the shop would have been closed for a month.

I cannot image where I'd be without the community. I really want to thank all the volunteers and builders - because of them we had a quick reopening.

The site of a former Caltex service station site located close to Pontings Mitre 10 in Warrnambool (VIC) will allow the store to expand on-site and use the additional space for storage.

Pontings Mitre 10 director John Ponting told The Warrnambool Standard he had been considering options for off-site storage because of the the region's building boom. He said:

We've been finding it hard to store a lot of the orders we get. When the former service station went on the market, we jumped at the chance.

The service station closed in July 2019, and expressions of interest were sought for the parcel of land where it was located (Raglan Parade) in late 2020.

Mr Ponting said the building on the site would be demolished and it would be used as a loading and unloading bay.

It will help us get trucks out of the main yard and will be good for storage. I had been looking at off-site options for storage so we were lucky it came on the market.

Mr Ponting said the business' last expansion was about 10 years ago.

It's an expensive acquisition but we think in the long-term it will be beneficial for the whole business.

Total Tools Shepparton

Total Tools in Shepparton (VIC) moved to a larger store in March, the fourth time in five years that owners Ray and Haxhije Cox have upsized. Mr Cox said told Shepparton News:

We started in a small store and it's grown over the years. It took us five years to get to where we are today and this is our fourth move, we're classed as a mega-store now.

He said while there were plenty of tradies coming through the door, the number of people doing their own handiwork or renovations had increased.

It's open to anyone, we've got plenty of ladies coming here and shopping as well so it's not just the traditional tradie types, it's a broad range of people.

When everything first happened with coronavirus, we had guys who'd never welded before coming in wanting to learn how to weld, so they were buying welders. The biggest thing now is it's a bigger store but it's busier trying to keep up with the amount of stock going out the door.

The new store is at 46-52 Benalla Road, Shepparton (VIC).

Mitre 10 NZ CEO

Andrea Scown has been appointed the first female chief executive of Mitre 10 New Zealand.

She has taken over the reins from Australian-based Chris Wilesmith as the trans-Tasman commute to and from Coffs Harbour (NSW) under COVID-19 restrictions became unsustainable.

Ms Scown told the Wanganui Chronicle her appointment represents stability within the business. She is focused on steering the company through the second year of its multi-year transformation program.

Anything I'm doing is a build-on rather than a change out. We've got a very clearly defined strategic path, we've got support from the board and membership around that, so [I will be] managing all of those things and taking care of the team. There could be some reprioritising of things [ahead] but no wholesale change.

The transformation is centred around enabling the business to operate more as a "bureau service" and is expected to be completed by 2025, said Ms Scown.

It is part of a major overhaul of the way the Mitre 10 operates internally and its model as a co-operative. The company is also looking at how it can use new retail technologies from store sales through to back-end fulfilment. Ms Scown explains:

We're a very inefficient business, again it's not unusual for retail, retailers don't tend to spend a huge amount of money in that real tech space. For us that inefficiency means we take a lot of people to do things and we'd love to have more people focused on customer service and value-added things.

About half of Mitre 10's 84 stores are Mitre 10 Mega outlets. The hardware chain is also New Zealand's largest garden centre. It is expanding the larger box store format with new stores planned for construction in Silverdale (a village approximately 30km north of Auckland in the North Island) and Papamoa (a suburb of Tauranga in the Bay of Plenty region). Ms Scown said:

We're at an age now with the store network that there is probably more ... refurbishments happening [than new openings]. We're also working on evolving [the concept] of what is our store of the future.

Mitre 10 is realistic that once the borders open to international travel the level of demand for its goods will likely peter out after very strong trading in the last 14 months. Ms Scown said:

The reality is if you're not travelling to Australia, you're going to build a new deck. Australians travelling here with their NZD5 billion spend [however] aren't going to buy decks or buy paint while they are here.

As a sector we should accept that it will pull back a bit, certainly in the retail space. Trade though for us continues to grow really strongly year-on-year pre-COVID and I would not see anything happening that will pull that back. We've still got a housing shortage, we've still got unprecedented levels of consents [approvals] that we haven't seen since the 70s. There's no proof point for me or other senior leaders in the business or our members to say that will ease off anytime soon - subject of course to being able to get materials to do that building.

Ms Scown comes into the CEO role as building materials company Carter Holt Harvey cut its supply to some of regular customers in New Zealand including Bunnings, Mitre 10 and ITM - as a result of accelerated house construction.

The timber shortage has had varying "pockets of impact" across Mitre 10's network up until now, according to Ms Scown. While she does not believe it will have a massive impact on Mitre 10 as the co-operative stores are able to share assets, for the industry it will "probably shake down and will end up in a new normal".

Ms Scown said there is no easy fix for the shortage as there are layers of complexity, and it is a situation she believes will stick around until at least the year's end.

Ms Scown joined the hardware store chain in 2017 after working at multi-channel retailer EziBuy and has a background in fashion and apparel retailing, as well as private equity.

At Mitre 10 (NZ), Ms Scown started as general manager of retail operations before later moving into the role of chief customer experience officer and then chief operating officer. She first applied for the role of chief executive at the same time Mr Wilesmith did in 2019 when former Pumpkin Patch boss Neil Cowie announced he would step down.

Ms Scown hopes her appointment inspires the next generation of women, and was surprised by younger women across the organisation reaching out to her following the announcement of her appointment. She said:

You forget how important those role model pieces are for younger women. [When] you do get reached out to from younger women in the organisation you realise actually they are looking [for representation], particularly in this type of industry, thinking it's hardware, building products, there's a lot of men about, is it a place for women - and I think it definitely is.

Ms Scown said some of her biggest supporters have been male colleagues.

Mitre 10's employee gender split ratio is slightly skewed towards a higher female representation versus male - just like its customer base. There are three women in Mitre 10's executive team and one - Tricia Indo - on its board.

With a big family - Ms Scown is a mother of seven and now five grandchildren -she has plenty to do outside of work and said she does not believe in 13 to 14-hour work days. She said:

There's always times when you have to put in the hours but I think as a routine it's about sending that good cultural message.

Ms Scown also said she loves being in the stores and spends two or three days a month outside of Mitre 10's Albany office in Auckland's North Shore, where she is typically based.

Related: In 2019. Australian executive Chris Wilesmith became CEO of Mitre 10 New Zealand.

Independent store AG-PARTS located in Echuca (VIC) has recently been taken over by Kyabram-based Stuart Joyce, who already owns and operates Kyabram Bearings & Industrial Supplies and K2 Industrial Supplies in Echuca.

The store has agricultural supplies such as farming implements, seeders and tillage equipment, as well as industrial tools and accessories. It is a member of Industrial & Tool Traders (ITT) which is part of Hardware & Building Traders (HBT). Manager Darryl Clark said AG-PARTS is one of the only places in town to sell Milwaukee Power Tools. He told The Riverine Herald:

Milwaukee are a high-end, tradie's power tool and we stock a large range.

After a difficult year in 2020 dealing with COVID-19, Mr Clark said the business is very grateful to the community and its customers. He said:

We'd like to thank all our customers who supported us last year and stayed loyal by shopping locally.

AG-PARTS is also a Castrol Australia stockist which is running a promotion with the chance to "Win a dream holiday with Castrol".

Its local and knowledgeable staff are on hand to point customers in the right direction based on their budget and the task at hand.

The store is located at 39 Mundarra Road, Echuca (VIC).

Home improvement retailer Homebase will introduce the Powerbase range of outdoor power equipment products in time for its spring season.

Designed to make gardening easier, Powerbase is user friendly, catering to different levels of gardeners whether they are novices or more experienced. With 31 products, from lawn mowers and chainsaws to hedge trimmers and pressure washers, this range will provide customers with more choices when taking on garden projects.

The range includes lightweight cordless options, and using the latest in rechargeable lithium technology. Using Powerbase means that one battery platform can power up to 12 different garden power tools. This can save customers time and money as well as being more environmentally friendly. Stephen Pitcher, director of trading for garden & seasonal at Homebase, said:

We know that our customers have had to readjust to a new way of living over the past year and outdoor spaces have become one of the few places we can see friends and family.

Tackling garden projects can be intimidating, especially for the less experienced gardener. As the garden experts, we're committed to providing our customers with the tools they need to bring their projects to life and the new Powerbase range does just that.

All Powerbase products are covered by a two-year warranty.

Wickes

DIY retailer Wickes has taken another step towards becoming a standalone, listed business. Parent company, Travis Perkins, submitted its prospectus for a demerger of Wickes to the Financial Conduct Authority recently. Chief executive of Wickes, David Wood, called it a "milestone" for the business, according to The Times.

FTSE 250 building materials group, Travis Perkins has been wanting to offload Wickes since 2018 when it believed that a younger British generation had fallen out of love with DIY, and it wanted to focus on its trade customers. Its spin-off plans were put on hold during the pandemic as companies across the UK hunkered down to ride through the crisis.

However, Wickes has enjoyed a revival from a DIY spending boom as people have used their extra time at home to carry out renovations. Wickes has 233 shops and employs about 8,000 people.

Investors will be given one share in Wickes for every share held in Travis Perkins and it is expected that there will be some volatility in the first few months of trading as shareholders have mixed views on UK retail stocks. (Travis Perkins has been valued at GBP4.03 billion).

Nick Roberts, chief executive of Travis Perkins, said the separation "will allow both businesses to allocate capital to drive growth and further enhance their market leading positions".

Wickes boosted like-for-like sales by 5% last year and increased total sales by 20% to GBP1.34 billion. While the group was boosted by a surge in first-time DIYers, it suffered a 27.8% drop in sales from tradesmen as COVID restrictions limited their work. The company increased click and collect orders by 450% while home deliveries rose by 120%.

Mr Wood said there was a "large cohort of millennial first-time DIYers who have found the process enjoyable and have learnt a new skill over the past year. There is new blood in the market, which will be helpful to the business and the market".

He added that there remained pent up demand in the professional trade sector because of projects that had been put on hold during COVID restrictions, while an uptick in housing transactions would lead to more renovation work on kitchens and bathrooms.

The group said that it expects its retail growth to "moderate against tougher comparatives" but that hiring help will return and has had a high level of enquiries from trade clients. Wickes said that sales in this division were 50% lower than last year.

Related: In early 2020, Travis Perkins put plans to spinoff its Wickes DIY retail arm on hold as the coronavirus outbreak continued.

While the Independent Hardware Group (IHG) strategies announced at Metcash's Investor day in March 2021 were, for the most part, not entirely new, they did amount to a new pattern for the hardware wholesaler/retailer to take. To summarise the overall strategies quickly:

A new IHG?

How do these strategies relate to each other, and what sort of IHG can we expect in the future?

Perhaps the simplest way to see what is happening is that much of this is everything that HNN and a range of other analysts predicted would take place once HTH was merged with Mitre 10. A good deal of future growth for the company looks like it will come from operational alterations, rather than from expanding sales revenue.

A clear example of that is the move to eliminate the True Value and Thrifty-Link brands, and to shift the emphasis on store branding towards Mitre 10 and away from HTH. While, as IHG points out, the two minor brands do account for only 3% of total revenue, these are, of course, real stores and with real owners, not just numbers on a spreadsheet. As the CEO of IHG, Annette Welsh pointed out in response to an analyst's questions about whether moving the smaller brands into the bigger brands might dilute the latter's market position:

It's certainly the conversation that we have at the national advisory council in terms of how do we ensure that the brand isn't diluted. So there's standards that each store will hit in terms of their movement, depending on which brand they go to. But we see the majority of those stores probably moving into the [HTH] brand rather than into the Mitre 10 brand. It's the right one for them to go. It's the smaller model. It's probably more closely to aligned to DIY. And so that's probably how we see that tracking out.

Very logical.

What the analysts might have missed, however, was how these moves will directly improve the revenue for IHG. Many retailers have persisted particularly with True Value because the fees are much lower. Forcing some of them into HTH or Mitre 10 will likely increase the fees they pay to IHG.

The same holds true, of course, for the move from HTH to Mitre 10. According to IHG predictions, the proportion of sales through HTH will move form 46% in 2017 to just 22% in 2021, and further down to 20% in 2024, while Mitre 10 sales will move up to 80% of sales by 2024. With Mitre 10 store contracts in general more expensive than HTH contracts, that should boost profits for the group.

How popular that will be with smaller stores remains to be seen.

Corporate/Joint Venture stores

According to IHG, the amount of revenue that is derived from non-independent stores grew from 40% in 2018 to 45% in 2021. A number of statements were made which said that IHG planned only to acquire stores when either there was a sale due to members deciding to cash out for retirement and similar purposes, or when an "aggressive" offer was made for a store by a competitor. (Part of the contracts with IHG, it is HNN's understanding, include a provision which enables IHG to make a matching offer to buy a store offered for sale.)

While that might seem like a slowing down of acquisitions, it seems highly likely that by the time 2024 comes around IHG will be deriving over 50% of its revenue from Corporate/JV stores. According to Ms Welsh:

One of our great strengths is the strength of our independent members who are very supportive of the company store and joint network portfolio that we have, because they see it as us walking in their shoes, us experiencing what they experience every day, but also the opportunity for us to test and trial all of these initiatives and ensure that they are commercially proven before we roll them out.

What that delivers for them is confidence that when we come to them to say, this is the right initiative for your business in your local community at this time, we can demonstrate to them that we have absolutely put it through the wringer and it is right for them to take advantage and deliver top and bottom line sales.

This is a familiar suggestion from IHG, but, anecdotally, HNN seldom encounters hardware retailers in the group that are entirely comfortable with the increasing numbers of corporate stores. In order to "walk in retailers' shoes" you would surely only need about 25% at most of the revenue flowing through the corporates. It is HNN's estimation that this situation could become much more acute if Metcash continues with its roll-out of Total Tool stores, which will bring increasing competitive pressure to the established IHG retail network. For IHG itself, between Total Tools and its corporate stores, those retail dollars are completely fungible, but they could represent a substantial loss in sales from hand tools and power tool accessories for some Mitre 10 store owners.

Sapphire

As Ms Welsh mentioned, Sapphire upgrades have been one of the main ways the group has moved HTH members into Mitre 10 - which would indicate a reversal of its past policy which extended Sapphire upgrades to HTH as well.

The story about Sapphire is itself interesting. With 130 conversions expected to be completed by the end of Metcash's FY2021, to meet its target of 200 a year later, they would obviously have to do 70 conversions. The new target is 300 stores by 2025, which means instead of doing 70 conversions in year, they need to only manage 170 over four years, or 42.5 per year - about 40% fewer.

No doubt the COVID-19 pandemic slowed down the rollout of Sapphire, but this does cast doubt on whether IHG will be able to meet even this greatly reduced target. It represents a clear failure to deliver on past projections.

Digital integrations

This is how Ms Welsh describes one of the recent big digital leaps forward at IHG.

Just this month, hot off the press. We have improved our offer to our customers and made our inventory click and collect in a store live. Not something that we had before. So remember a customer previously would go on to click and collect, they'd place an order, and then we would find them to tell them whether we had it in store. They would need to wait for a few days before we can get it. They now can see that for themselves. And it's a much more convenient offer than we've had before.

OK, really? So, up until March 2021, ordering something for click and collect took from three to five days? That's honestly difficult to believe.

Of course that really reflects the whole difficulty that IHG has had in implementing digital sales over a network which is widely distributed. One area where they at least seem to have done better, is with providing some data insights directly to store owners. According to Ms Welsh:

In addition to our digital solutions for our consumers, we've got some fabulous solutions for our members themselves. This is part of that continuing strategy for us to add value back to the members. The members have been generous in trusting us with their scan data. What we now do is build that scan data and return it to them. What they have is an iPad on which they can then search their own insights related to their business that we've provided back to them. They can see benchmarking across the whole group. We indicate to them where they've got aged inventory, where their price is not competitive and where there are opportunities for them to create even better value.

Probably the greatest advantage in that list of features is the capability to see benchmarking across the group. Other than that, most point-of-sale systems can provide this kind of information. To provide real data analysis would require more points of information, such as geographically linked demographics, perhaps an indication of what people from their geographic area are browsing online and so forth. Maybe some of that will be forthcoming, now that they've sorted out click-and-collect.

Whole of house

While the "whole of house" approach is something that Ms Welsh pioneered at IHG, it seems a very difficult area to quantify in terms of expected growth. The point that Ms Welsh makes is that currently the average involvement by a builder results in IHG supplying around 35% of their needs. However, there are builders that rely on IHG for 70% of their needs. While this is an identified growth area, it remains unclear exactly how IHG is going to achieve this growth.

Though it is not especially clear, it seems that one way IHG might do this is through what it calls its Design 10 centres. As Ms Welsh explains it:

A big portion of build trade is that fix and fit-out perspective. That piece at the end, that finishing touch that's really important. And for those familiar with our business, we've got some real strengths in here. We have our Harding's business, appliance and front of wall business. We have our Tate's flooring business. We have timber connected home kitchens, right the way through the whole gamut. So the pictures on the slide that I show you here are a brand new Mitre 10 design centre. We're calling it Design 10. Hopefully you see that cheeky connotation and that link between Mitre 10 and Design 10.

...

The purpose of this is that ability for the builder to bring their consumer in and really finish off the home side-by-side with the expertise that we have. It's to bring the renovator in, to give them that real vision of what could be in their home. And that serious DIYer also has the opportunity to learn and connect with our teams to build their new kitchen or a new bathroom.

This isn't just a bricks and mortar solution. We plan on probably having about 10 of these in central locations or major regional centres, but it is also an online solution that we should be building and ensuring that we compete with the best in the market here.

This loops around, to some extent, to our sense of the difficulties that Metcash has as a whole when looking at the potential of digital enterprises. To HNN's knowledge, by far the most used resources for designing houses, renovations, kitchens, bathrooms and so forth are found online. Houzz, for example, or Pinterest, and videos on YouTube. Does it really make sense to invest in physical locations to which a limited number of people can travel? And while those showrooms do provide more than just an image downloaded online, or a video watched on a mobile phone, they are also very limited in terms of the products and designs they can offer.

The forecasts

The other area of great interest in IHG's Investor Day presentation was its forecasting. There seemed to be a real earnest wish expressed throughout most of the Metcash presentations that some of the exceptional circumstances brought about by the COVID-19 would stick around another two or three years. The food segment, in particular, seemed to express a strong hope that somehow Australians have been permanently converted from dining out, and there was similar sense of hope on the part of the liquor segment.

While it does seem likely that these hopes will prove futile post 2021, there is some potential that areas such as DIY expenditure will show longer lasting increases. After you've painted a couple of rooms, or refinished a chair, there is a high potential that you will consider that work in the future as well.

However, as Ms Welsh repeatedly makes clear, the DIY market is something of a side benefit and the real focus is on builders and trades. IHG makes use of the figures produced by the Housing Industry Association (HIA) in her forecast of future growth.

While HNN has the greatest respect for the HIA, it's pretty clear to us that these forecasts are more likely to be incorrect. We're already seeing strong signs that the housing market is overheating in Australia, and without the potential to raise interest rates so as to slow the growth, there is a clear possibility of a crash.

Outside of that, however, the HIA shows sharply reduced rates for growth in multi-unit dwellings. While the COVID-19 pandemic has certainly reduced the attraction of living in an apartment, it seems inconceivable to us that this will continue much past the end of FY2022. The simple fact is that with house prices continuing to increase, many younger families will need to choose between renting or purchasing some kind of multi-unit dwellings.

That potential insight flows through to another of the charts offered by IHG, which shows their vision of the market they service:

What that graph clearly shows is that if we do see a radical increase in multi-unit dwellings, at the expense of detached dwellings, IHG could be exposed to a declining market. Ms Welsh states that:

We have, and have had for some time, a diversity of our consumer, which we think puts us in a very strong position. A little bit in that multi dwellings, which is going to become challenging in terms of its growth for the next few years, as there's an overpopulation of apartments, but the split between detached and renovation.

It seems unclear where the notion of an oversupply of apartments comes from. Certainly there has been a reduction in demand, and current building approvals show a slow down in construction, but, post the COVID-19 pandemic, it would seem this form of habitation will retain its previous popularity.

Analysis

Ten months is not a long time to be in charge of a complex business like IHG, no matter how long you have worked as IC2. It will likely be another 18 months or so before we really start to see the kind of imprint that Ms Welsh intends to make on the hardware retail industry.

One of the difficulties of the role is the shift that needs to be made between the needs of the members, and the needs of the sharemarket, as represented by the investment analysts. Members want to know that you care about their needs, that you value their human contribution, and that in seeking to profit yourself, you will also provide a path to income stability for them as well.

Investment analysts are very different. Their primary need in a business such as hardware is that they need to see a clear path between CapEx and future growth. They want to see that a company is anticipating future change, and positioning itself so that it will benefit from those changes, and provide self-funding for future growth as well. The main requirement they have in communication is not promises, high aspirations or reassurances, but rather to be given the tools they need to make risk assessments.

To achieve that, the major requirement is true coherence. They must be able to look at any single element of a strategy - for example, Design 10 - and be able to trace the logic of that investment through to how that reduces costs, grows markets, adds certainty, or anticipates future trends. Supplying instead what might best be described as a list of stuff that we did that was great, and more stuff that we are going to do that is also great, simply will not pass the test.

For the hardware industry itself, as mentioned in the introduction, what we're seeing is IHG move to the position most of us predicted it would. In terms of the balance between letting independents to what they want, and exerting corporate control over them, the latter is going to come to dominate more at IHG. The countervailing force is that IHG is willing to offer more services, more help, to drive more sales to them, and to make the system more efficient. How the current members will feel about all that two or three years from now is not something HNN can predict.

However, what we do feel really needs to be addressed is a word that both Ms Welsh and Mr Adams brought up in what we might term a disapproving way: fragmentation. There is a drive at IHG - and has been for some time - to seek to remove fragmentation from the hardware retail industry.

The contrary viewpoint to that, as expressed by Hardware & Building Traders (HBT) and others, is to accept fragmentation, but make it work much better than it has in the past. Fragmentation is not disarray, it is the adoption of a different kind of order, and a different set of relationships. Pre-digital technology, it might have been true that there was an established trend to move from the fragmented to the less-fragmented. But today, with digital technology, that has changed. Efficiency has moved from the highly centralised to the decentralised.

The real flaw in the hardware retail industry today is not that it is fragmented, but that it is lacking in innovation. A prime driver of that is the dominating presence of Bunnings in the market, which, aside from a high level of competition, makes obtaining capital difficult, not only for retailers, but also for companies that might service hardware retailers. In terms of where those innovations - despite the obstacles - will eventually come from, HNN is quite sure it will be from the "fragmented" portion of the industry.

The Tasmanian-based hardware retail properties that are home to three Nubco stores - located in Kingston, Mornington and Wivenhoe in Burnie - are set to be sold at Burgess Rawson's next Investment Portfolio Auction scheduled for the end of March, according to The Mercury.

All three properties are leased to ASX-listed hardware and industrial supplier Coventry Group Ltd on "identical, landlord-friendly, seven-year net leases to 2026, with options to 2036 at prominent and carefully selected locations".

The Kingston property at No.176 Channel Highway features a prominent 4138sqm site with a 1632sqm warehouse and showroom. It is surrounded by major retailers in one of the state's fastest-growing regions. It returns a net rent of $216,678 per annum, plus GST.

At Mornington, the Nubco at No.14 McIntyre Street is within 5km of the Hobart CBD and has a 3151sqm site within the leading industrial precinct on the city's Eastern Shore. It currently returns $108,594 per annum, plus GST.

Entry-level investors are expected to be among the potential purchasers of the Wivenhoe property. Burgess Rawson agent Beau Coulter told The Mercury:

Set just minutes east of Burnie and with its $71,823 annual rent, we will likely see it change hands between $900,000 and $1.1 million.

Ray White's Trevor Fox said all three properties had the added appeal of clearspan, some hard stand and easy accessibility for vehicles. He said they also benefited from their proximity to Bunnings outlets, which compete for a different section of the hardware market. Mr Fox said:

Everywhere the Nubco sites are, Bunnings has opened up within 500m, which is a ringing endorsement for the quality of the locations.

Property owner Paul Krawczyk said the auction was a good launching pad to showcase some A-grade properties nationally. He said Tasmanian property assets were increasingly becoming "highly prized" and noted there had been a shift in mindset among interstate investors. He said:

Some people wouldn't have dreamt of owning commercial property here six years ago. But now, anyone with a quite decent portfolio ... you would think they would own Tasmanian property.

Mr Krawczyk is shifting his focus to apartment development and said the Nubco properties would be put towards these projects.

The sale funds will be used to help resolve some of the inner-city living shortage that we have in Hobart.

Related: In 2019, Coventry Group acquired Nubco.

Myrtleford-based rural supply co-operative TAFCO in regional Victoria has opened its membership to different types of members, after previously only allowing farmers and agricultural workers to join.

TAFCO secretary Kerry Murphy, said the decision came as a result of the impact the coronavirus pandemic had on the local economy. She told the Myrtleford Times:

Since COVID, the importance of buying locally has really come through. It made us think we should really let everyone be a part of this wonderful business.

It's been at the front of our minds with the COVID situation and I suppose a little bit of a change of attitude from people, looking closer to home for things, and thinking about their buying choices. We're encouraging people to put money back into the community.

Ms Murphy stressed the difference between a cooperative business model and a traditional one. She explains:

The core of our business isn't about maximising profit, it isn't about people investing to get a good return on it. We aren't the stock exchange; it's about investing in the local community and a local business and having a fair return.

We exist for good pricing and quality goods and services to meet members' needs. Anyone can now buy shares in the TAFCO co-operative for a minimum of $250, but there are some requirements to be met.

In any co-operative you must be active, there's an active membership provision in all co-operatives' rules, and in TAFCO's case that means you must trade. The $250 is the shares, your ownership, you're a member-shareholder of the co-operative. Then you have to trade, you have to buy things from us at least once a year, there's no minimum amount you have to spend with us, you just have to transact.

We're the same as a normal business structure in that we have to make money, we have to pay tax and we've got to do all the things that a business does, but it's the philosophy behind the structure that's quite different.

Multi-channel trade retailer Screwfix plans to open 50 more stores in the UK and Ireland, as a direct result of the surge in demand for home improvements during lockdowns.

Owned by Kingfisher Group, forty of the new branches will open their doors in locations across the UK and a further ten in the Republic of Ireland. The move marks a milestone in Screwfix's efforts to bolster its store network in the British Isles from 723, which employ 11,643 people, to 900 in the long term.

The company typically targets trade customers but also serves a growing number of DIY shoppers, many of whom have kept themselves busy with projects at home during the pandemic. It has been one of the few businesses allowed to remain open as an essential retailer in the UK, and has boosted its e-commerce sales using click and collect deliveries.

It credits a focus on e-commerce, using its stores as centres for click and collect deliveries, for its "rapid growth". The launch of its new app was also a factor. John Mewett, chief executive of Screwfix, said in a statement:

We're delighted to be opening 50 new stores this year, creating 600 jobs. The growing demand for convenience means we now see scope for over 900 stores in the UK and Ireland, which will help our customers get their jobs done. We know that time is money for our customers and these new stores will enable us to provide them with added convenience and certainty, as well as providing job opportunities for local communities when they need them most.

B&Q in Saudi Arabia

The move for UK home improvement retailer B&Q into Saudi Arabia follows a franchise deal between parent company Kingfisher and the Dubai-based Al-Futtaim Group.

B&Q is expected to launch two 50,000-square-foot stores by September 2021 to introduce the DIY brand to Saudi customers, the company said in a statement. Kingfisher CEO, Thierry Garnier. said:

This franchise agreement is a great opportunity to expand our business in the attractive Middle Eastern home improvement market with B&Q, one of our most established retail banners.

The expansion into Saudi Arabia represents a significant move for B&Q and comes amid the development of a local mortgage market in the Kingdom.

The first B&Q stores in Saudi Arabia will stock a full range of home improvement products from the Kingfisher portfolio including Erbauer, Magnusson and GoodHome, alongside other locally and internationally sourced products. They will also have an online offering. The DIY chain is looking to expand in new territories via partnerships.

The Al-Futtaim Group operates more than 200 brands across the Middle East, Asia and Africa. It has operated the retail franchises in the Middle East for Marks & Spencer since 1998 and for IKEA since 1991.

Related: In early 2020, Screwfix announced more stores opening in Ireland.

Helensburgh H Hardware store owners Mike and Gail Tribe have decided to call it a day and told The Illawarra Mercury they are "sad and disappointed" to close the doors to the business, after 21 years.

It wasn't always this way. When the business was up for sale in 90s, Mr Tribe saw an opportunity after losing his job as a contract driver and despite having no prior experience in retail.

But being in the trades runs in the family with his father who is a carpenter, and his son as a builder. He has been able to learn some tricks of being a tradie.

He said there was a "big increase" in sales over the first 10 years, but that was where it peaked. The couple decided in late 2020 that closing would financially be the best option after a decline in sales. Mr Tribe told The Mercury:

Our trade has decreased dramatically year by year for the last three years. There's no way I can continue.

They were planning to sell the business in the future, but the pandemic had other ideas for them. COVID-19 exacerbated the decrease in sales which meant that staff numbers also needed to be cut. He said:

The only reason we're surviving is because of JobKeeper. We were very grateful that came along to keep us surviving.

Despite JobKeeper, Mr Tribe said there was a slight surge in sales at the beginning of the pandemic with people doing more DIY at home, but it was not enough to survive. He also said that there had been less "shopping local" not just for the hardware store, but other smaller businesses in Helensburgh.

..It's our weekend trade more than anything that has suffered, which means that people are driving past your doorstep to go out of town to shop, which is really, really disappointing.

People need to support the local businesses otherwise there won't be any. There's no customer loyalty anymore.

Not surprisingly, the couple are both sad to leave their community, and their regular customers. Mrs Tribe said:

The community is very friendly. I'll miss the people and I'll probably still come down because I've made so many friends. It's a part of history for Helensburgh.

Mr Tribe believes there will be more inconvenience once the store closes. He said:

I know a lot of regulars that we've got left will certainly miss this because it's a long way to go to a hardware store from Helensburgh.

We help them through any problems, we usually are able to help them out, having done a lot of years of experience in the building trade. There isn't a lot of problems we can't solve for our customers.

However, it is not goodbye for good. Mr Tribe explains:

We will be maintaining the other side of our business, which is the gas deliveries. And see where we go from there.

F.J.'s Discount Tools

Longstanding retail outpost F.J.'s Discount Tools in the Victorian suburbs of Bayswater and Rosebud are shutting down after owners Frank and Sarah Greco decided to close the business after 30 years. Mrs Greco told the Herald Sun:

We've just had enough; we've done it for a very long time and it's time to do something different. We've been here a really long time, and it's hard work, seven days a week.

The couple's Rosebud store has been operating for almost 30 years, while the Bayswater shop opened in 1998. Mrs Greco said their customers had been sad to hear they were closing.

They have said we will be missed, and (the stores) are a destination; we've been here so long, people are like 'We used to come here when we were kids with our dad' and people really love the shops.

Mrs Greco said COVID lockdowns also had an impact on the couple's decision to close.

The lockdown was stressful; we understand it was the right thing to do but it makes it really hard to run your business ... it's tough.

Both the Rosebud and Bayswater stores are well-known for their lifelike mannequins, nicknamed Bob, who models the workwear the business sells and stands out the front.

Mrs Greco said it had been a challenge taking on the bigger hardware chains.

Although Rosebud is such a small community, the Bunnings at Rosebud constantly sends customers to us for stuff they don't have and we constantly send people to Bunnings so there has been a good relationship over the years.

You just try and help people - if you don't have something you should send them to someone who does.

She said her husband knew a lot about tools and could recommend products to customers.

Frank is very handy and the things we get here, he chooses because he uses them and he knows that it's a good thing.

Mrs Greco said the stores would close in the next couple of months, after they had sold the remaining stock from their warehouses. The Bayswater site is now up for sale.

Total Tools chairman and Geelong-based franchisee Warren Jones told the Geelong Advertiser that while the group caters primarily to professional tool users, he also expects the new location on Victoria's Surf Coast Highway to attract aspirational amateurs. He said:

Even though the bulk of our customers are tradesmen, because we sell to the tradesman it attracts a lot of serious DIYers.

Mr Jones has added the 2000sqm Grovedale store to his own network of Total Tools franchises in North Geelong, Brooklyn, Melton and South Melbourne. The North Geelong store, which opened in 2010, and the Grovedale location will support each other. Mr Jones said:

We would describe them as sister stores. They work well together. Tradies can buy from either store and we will share resources and stock between the two.

The Grovedale store opened to customers shortly before Christmas but will have its official "grand opening" in March with a number of offers, specials and giveaways.

The move to open a store servicing Geelong's growing southern fringe was on the radar for about five years, Mr Jones said. In addition to the Armstrong Creek growth corridor, he expects the store to service trades in the Surf Coast. He said:

Torquay is very heavy with tradesmen. Most people won't pass one tool store to get to another; we needed to establish a presence in the south.

Online sales helped to boost half year results for Reece; rural retail business MG Trading is changing its name to AG Warehouse; and DW Rural will celebrate its first birthday in Warragul (VIC).

Reece

Plumbing and bathroom group, Reece experienced a net profit increase of 17.3% to $123 million in the six months ended December 31, from $104.9 million in the same period 12 months ago.

Online sales rose 70% compared with a year ago, and the group has been accelerating a push to enable customers to have a "digital experience" when choosing products and designing bathrooms, as well as traditional face-to-face shopping in its showrooms.

Sales from the group's 640 outlets in Australia and New Zealand were stable despite an extended lockdown in its home state of Victoria. The company said stores were impacted by COVID-19 but it developed an efficient process of testing of staff, deep cleaning of stores and social distancing amid the different states' restrictions.

In Australasia, sales rose 7% to $1.47 billion, while in the US, where COVID-19 outbreaks were much worse, sales managed to increase just 1% to $1.51 billion.

The company said it did not receive any JobKeeper payments from the federal government in July-December at its Australian operations.

Chief executive Peter Wilson told The Weekend Australian in an exclusive interview the group has reaped the rewards of a population surge in regional areas during the COVID-19 pandemic. However, he remains wary of the medium-term impact of inflation flowing from booming commodity prices.

Mr Wilson said the end of lockdowns across most of the country in the second half of last year saw an acceleration of demand for bathroom products.

Post COVID-19, there is definitely a change happening. The home is now increasingly where the heart is. People are renovating homes because they are going to be spending more time at home now.

The other big shift you can see is the move of people to regional areas. There is a real momentum to regional lifestyles.

We have always had a big regional play - we are in all the regional centres. Those businesses for us will become bigger businesses.

The short-term economic indicators look pretty good. You still have the stimulus, interest rates are pretty much zero, and we have got on top of COVID-19 compared to the rest of the world.

There is quite a lot of cash out there that people want to spend on their homes. As the vaccine gets rolled out, consumer confidence will continue to grow.

But Mr Wilson said Reece was starting to see the impact of booming commodity prices on input costs, which could spawn inflation.

Medium term, however, we are still cautious. There are many twists and turns to come. We are also watching raw material and shipping price increases. We are definitely wary of inflationary pressures emerging in the medium term, which could impact on housing affordability,

The Wilson family maintains a 67% stake in the company.

Related: Executive chairman of Reece Group. Alan Wilson believes growth prospects for his business will be in the US.

MG Trading

MG Trading said it is changing to AG Warehouse as a way of strengthening its support to its dairy customers while increasing its focus on cropping, beef, sheep and lifestyle customers.

AG Warehouse is a retail farm supplies business that provides merchandise, fertiliser, fuel and feed to customers through a network of more than 30 outlets across regional Victoria, southern NSW and Tasmania. (MG Trading) general manager Michael Loxton told the Wangaratta Chronicle:

We've got a great business and as we continue to grow, it was time for a change of name. We have seen significant changes in recent times in the agricultural markets serviced by our footprint in southern Australia.

"While dairy remains core to our business, we have also been diversifying and building our offering to cropping, sheep, beef and lifestyle customers....

With AG Warehouse, our aim is to continue supporting our traditional dairy base, while also welcoming new customers from other farming backgrounds.

AG Warehouse head of buying and marketing, Steve Andrews, said it was clear the business needed a new name to reflect its growth and one that would be recognised by all parts of agriculture, not just dairy. He said:

AG Warehouse aims to be the 'one stop shop' for all farmers' agricultural needs.

DW Rural

As part of the festivities to celebrate its first birthday in Warragul, DW Rural announced a storewide sale throughout March for the Australian family-owned business.

With more than 40 years' experience in rural merchandise. DW Rural's merchandise manager, Dennis Rankin, said the first year instore has been "tremendous" on so many levels.

Joining the AIRR group (Australian Independent Rural Retailers) and including a free on-farm delivery service has introduced quantifiable advantages for its customers. Mr Ranking told the Warragul & Drouin Gazette:

AIRR is the biggest group of independent rural retailers in the country, which has given us tremendous buying power.

We'll remain a specialist in dairy supplies and calf rearing, but we now have the added bonus of a full range of all farm supplies for our customers, combined with the convenience of that free delivery service.

DW Rural said it now stocks a full rural merchandise range, in addition to its specialist focus on dairy and calf rearing.

The existing digital infrastructure at DIY retailer and garden centre, Wickes and trade focused Toolstation meant that some of their branches could be repurposed as fulfilment centres during the first COVID-19 lockdown in early 2020. They could quickly transition to offer home delivery and click and collect.

The number of online orders collected from Wickes' stores grew by more than 450% during its last financial year, while home deliveries more than doubled. The retailer is now working to make its distribution operations more efficient as it expects that an increasing share of online sales in the future.

A strong domestic repairs, maintenance and improvement (RMI) market, buoyed by booming housing transactions, pushed LFL (like-for-like) revenue at Wickes up almost 6%. Sales of its core DIY range were up by 19.3% LFL, as customers made online purchase across a broad range of categories. But LFL sales in its DIFM (for-it-for-me) kitchens and bathroom business were 27.8% down as it was more affected by COVID-19 restrictions.

By the end of 2020, Wickes had 233 stores, following two closures.

Toolstation rebuilt its website within days at the start of the COVID-19 lockdown, and over the course of the following weeks, its IT infrastructure was re-platformed to make it scalable and more resilient.

It added 60 new UK branches during the year, to take it to a UK total of 460, while its European business added 17 new branches, to a total of 83. These include trials of new small format stores and click and collect-led stores.

Toolstation full-year sales of GBP 633 million were 42.1% higher than the previous year, growing by 22.2% LFL. Sales in the UK alone were 20.9% up on 12 months ago, despite lockdowns in late March and April. Adjusted operating profit came in at GBP24 million, down by 17.2% on last time, as the costs of adapting the store network to operate in a socially distanced way, the higher proportion of delivered sales, and the investment in digital offset its sales growth.

Group results

Parent company Travis Perkins reported sales of GBP6.2 billion in the year to December 31. That's 11.5% down on the same time last year. LFL sales - which strip out the effect of store openings and closures - were 7.1% down from the previous year.

It reported a pre-tax loss of GBP7.7 million down from a pre-tax profit of GBP180.8 million a year earlier. But when GBP140 million of one-off costs - primarily from a business restructuring program that will see about 190 Travis Perkins builder's merchant and plumbing and heating branches close - are taken into account, the group reported a statutory operating profit of GBP77 million, down from GBP232 million a year earlier.

Travis Perkins is also restarting plans to demerge Wickes that were put on hold at the onset of COVID-19 and expects the complete the process in April. The group has been able to repay all the GBP46 million government support given to Toolstation and Wickes at the onset of the pandemic as a result of their strong performance.

Chief executive Nick Roberts said that despite the "unprecedented challenges" of 2020 the group has shown "great agility and versatility in adapting our working practices, further digitalising our engagement with customers and reshaping our business to suit the changing demands of our markets". He added:

I am pleased to be able to confirm that the process to demerge Wickes has recommenced. The Wickes digitally-led model has proved highly effective during the pandemic and the business is in great shape to embark on its journey as a standalone entity.

The retailer will have a market capitalisation of about GBP130 million when it is demerged from Travis Perkins.

A Mitre 10 store in Warrnambool (VIC) wins top award; NSW-based Flower Power is reportedly looking for a partner to grow the business; and Beacon Lighting delivered a 133% profit rise in the half year to December 31.

Mitre 10

Pontings Mitre 10 recently won the prize as Independent Hardware Group's number one medium sized store in Australia. Director John Ponting said staff received the "totally unexpected" award during a live-streamed ceremony. He told The Warrnambool Standard;

It was a great honour to get the state award and then to go to the next level and get the national award, it says a lot for the staff behind us and the support we have from the community.

It would be one of the standout achievements that we have accomplished as a family.

Director Pam Madner (nee Ponting) said the prize was the first national award the family had won in its 98-year ownership of the store.

We grew up as kids and this was always part of who we were. Probably a lot of it is the climate at the moment, lots of people are doing building, [and] interest rates are low.

But it's also the relationship we have with our customers. That is what differentiates ourselves from non-family businesses.

The hardware retail business, started by Walter Ponting and brother Len, is now owned and operated by the third generation.

"I think they would be proud", Ms Madner said of her parents and grandparents. "One that it still exists, and two that we're recognised Australia-wide."

Related: Pontings Mitre 10 won IHG's 2020 award for the best medium-format store in Victoria and Tasmania.

Flower Power

Flower Power chief financial officer Michael Spiteri confirmed to the Street Talk column in The Australian Financial Review (AFR) that the company is searching for a new investor. He told the AFR:

We're looking for a partner as long as it's the right business partner that can help us to grow.

It is understood the family-owned Flower Power would like to sell a stake in the business, rather than sell out entirely.

Sources said Flower Power was generating $15 million to $20 million earnings before interest, tax, depreciation and amortisation before the pandemic struck. However, it is understood the business had performed well through COVID-19 because of the home improvement/DIY boom that resulted from people staying home during lockdowns.

Flower Power has 10 stores across NSW mainly around Sydney's outskirts, with a presence in western Sydney suburbs such as Penrith and Prospect, as well as north of the city in Warriewood, Terrey Hills and Glenhaven. Its stores include cafes and playgrounds for kids.

Mr Spiteri is Flower Power's only shareholder not related to company founder Nick Sammut, according to documents lodged with the corporate regulator.

Mr Sammut founded the business in 1968 and it is now run by his son, chief executive John Sammut with support from his brothers Mark and Collin. The brothers are all shareholders in the business, as well as two other Sammut family members.

Beacon Lighting

Bumper sales from the lighting retailer's bricks-and-mortar stores along with building and renovation activity throughout the pandemic lockdowns contributed to its 132.8% rise in first-half net profit of $22.2 million.

Sales across the business increased 23.5% to $151.3 million. Its online sales grew 111.1% to $14.4 million.

Profit margins climbed to 14.6%, from 7.8% a year earlier. A large part of that stemmed from the retail group not needing to have promotional sales and specials because the demand was so heavy from customers.

The retailer also shifted to early opening hours - 7.30am - in an attempt to gain a bigger slice of the tradie market, and this helped trade club customer sales jump 50% in the first half. Beacon's trade club now has at least 39,800 customers, up almost 7000 from December 2019.

The retailer never took JobKeeper payments. "Sales never reduced to a point where JobKeeper was necessary", said chief executive Glen Robinson in the AFR.

The cooling and lighting retailer admitted that many customers' unfamiliarity with pricing on lights would continue to improve its gross margins, according to CFO David Spiers in The Australian. He said:

Most people don't know the price of lighting products because they shop infrequently.

Beacon Lighting opened new stores at Virginia in Queensland, Camperdown in Sydney, Tweed Heads in NSW, and at Belmont in Perth.

The lighting company still sees its future in bricks and mortar despite the major boost to its online sales. It has acquired sites in Molendinar, on the Gold Coast in Queensland, and Traralgon, in regional Victoria. It is looking at 69 new store opportunities over the coming years.

Beacon remains 55% owned by the Robinson family after going public in 2014.

A five-storey Bunnings Warehouse is planned for Sydney's northern beach suburbs and a petition has called for a stop to the Bunnings development in Dubbo (NSW).

Frenchs Forest

Bunnings has gained approval from NSW planning authorities for a store to be built at the corner of Warringah Road and Allambie Road in Frenchs Forest.

The $48million store will offer customers three levels of shopping and include a large outdoor garden centre, kid's playground and hardware and building supplies. The 20,000sqm development will also have two levels of parking to accommodate 400 vehicles.

An Australia Post distribution centre and a two-storey office block will be knocked down to build the store.

Bunnings regional operations manager, Alan Harvey told The Daily Telegraph the company was pleased to receive approval for the new multi-level Bunnings Warehouse.

While it is too early to confirm an opening date, we look forward to providing a wide range of home and lifestyle products to the Frenchs Forest community.

Northern Beaches Council was initially worried about safe vehicle access to the store because of its close proximity to the busy Warringah and Allabie Road intersection. Its concerns related to "potential road safety issues with merging vehicles and conflicts with pedestrians". The main driveway will be moved to Rodborough Road once traffic lights are installed at the Allambie Road intersection to combat safety concerns.

The exterior of the warehouse will also change as a result of council complaints regarding the size of the Bunning's logo and colour scheme. Bunnings will limit the amount of green paint used on facades, have fewer hammer logos visible and reduce the size of the logo by 33% on Rodborough Road.

Dubbo

A petition to stop the construction of the proposed Bunnings store in Dubbo has been launched by locals. According to the Daily Liberal and Macquarie Advocate, it cited an increase in cars to the area, as well as trucks, and states:

...[T]he proposed development will create safety issues for residents, businesses (including child care) and schools in the immediate vicinity.

This huge increase in traffic threatens the safety of pedestrians, including children, and other local road users. The associated noise will destroy the amenity of the area for local residents.

However, Bunnings regional operations manager Robyn Hudson said access to and from the site has been designed by the developer's expert consultants and was "carefully considered to ensure a safe and accessible store".

Concerns have also been raised about the Bunnings Warehouse building being "totally out of character" for the area because it will be "on the front doorstep of many residents". The petition states:

The project delivers no benefit to the community as Bunnings is currently appropriately located on Sheraton Road in an industrial/commercial area, with room to expand if they need to.

Ms Hudson said:

Bunnings has been part of the local Dubbo community since 2008 and we're looking to move to a larger location that's expected to create over 40 new jobs for locals, in addition to our existing Dubbo team.

If approved, the new store would represent a significant direct investment in the local community and would provide residents with an even wider range of home and lifestyle products...

We value to views of the local community and we'll work with the developer and council to listen to and address community feedback as the application progresses.

The development application for the $30 million store is currently before Dubbo Regional Council.

Related: Building plans lodged for a larger Bunnings store in Dubbo (NSW).

A hardware store located in Bellingen (NSW) is set to close; a Toowoomba (QLD) based Mitre 10 building is for sale; and a Mitre 10 store is expected to open in a shopping strip in inner-city Melbourne.

Bellingen

Shaun Green, owner of Bellingen General Hardware has decided to shut the doors of his store for the final time. The closure will leave the small town with no hardware outlet.

For the last couple of years, Mr Green had been running the store on his own with some unpaid help from family under increasingly difficult conditions. He told The Bellingen Shire Courier-Sun:

I can't afford to pay wages. The last 12 to 18 months I haven't even paid myself very much.

He believes Bunnings is only part of the number of challenges that led to closure of his hardware retail business. He said:

It's a combination of things. There's the Bunnings advertising power. They've been doing it for 20 years and they've indoctrinated a generation. It's not just Bunnings, it's Big W, it's Kmart, it's the Reject Shop. All the big players.

On a local level, he believes the main street beautification process as the first of a series of disruptions that have caused permanent changes to shopping behaviours in the town. He said:

It wasn't just the loss of the parking, when they were doing the pavers you couldn't even walk down the footpath.

That's when it started going bad. Because people get into habits, they started going into Toormina and Coffs Harbour. And since then, you've had the drought. Bush fires. Before COVID started we had the water restrictions, which meant people weren't doing gardening.

Then COVID, which made a lot of things difficult to get. There was a limited supply of stock coming into the country. Things were harder to get, [and] more expensive. A lot of people started shopping online. Habits are formed, and they just keep doing it.

Mr Green bought the store from Jim and Kathryn Hunt at the end of 2015, after working with them for six months. Prior to this, he worked at Norco Rural in Bellingen for seven years. But he does not regret the purchase at all. He said:

I've learned heaps. I've made a lot of good friends and industry contacts. This has been part of my journey, everything happens for a reason.

He expects the final day for the shop will be February 23, and he will take a well-earned break following its closure.

Toowoomba

The Pittsworth Mitre 10 freehold property on Yandilla Street has been listed for sale through an expressions of interest campaign by real estate group Ray White.

In the online listing, lead agent Kathy Hohms said the hardware store held the lease on the property until the end of the year, with options until 2026. The listing said:

The property has free street parking available at the front entrance and also off street parking bays at the nursery entrance off Short Street.

The building, built circa-1950, comprises a large showroom and retail area with frontage display windows on both sides of the central entrance. The nursery [is] accessible from the showroom and it also has customer rear access.

The expressions of interest period will end on March 31.

South Yarra

The Chapel Street shopping strip precinct in Melbourne's inner suburb of South Yarra may soon have a Mitre 10 store after real estate agency Gray Johnson negotiated a lease with the new tenant.

According to a report in The Age, the retail space measures 201sqm and the retail business scored a five-year lease paying $60,000 (+GST) a year.

The hardware shop is leasing No. 356, close to the corner of Chapel Street and Malvern Road.

In a pilot project for home improvement retailer Lowe's, fintech company Bumped found that customers who were rewarded for their purchases with shares of the retailer's stock increased monthly spending by USD47.82 and visited the store on average 0.84 times more per month.

The data also showed that customers who were rewarded in fractional shares of Lowe's stock became more loyal and shopped less at Lowe's competitors, according to the press release. David Nelsen, founder and CEO of Bumped, said:

In industries dominated by duopolies, like the home improvement category is, it's critical that brands look to build long-term, lasting relationships.

Bumped gives customers fractional shares of stock when they spend with their favourite brands, and has been piloting its software app over the past two years.

Ace Hardware

For the fiscal year, Ace Hardware posted net income of USD317.6 million versus USD140.4 million in the year before.

A 14.7% increase in average ticket and a 9.8% increase in comparable transactions versus the prior year drove Ace's 25.9% gain in comparable sales for the full year from the approximately 3,300 Ace retailers that share daily retail sales data with the parent company.

Full-year revenues were USD7.76 billion with retail revenues of USD751.5 million and wholesale revenues of USD7.01 billion compared to total revenues of USD6.07 billion with retail revenues of USD506.7 million and wholesale revenues of USD5.56 billion in the fiscal year previous. Operating income was USD333.1 million versus USD133.8 million in the year earlier.

Ace Hardware added 167 new US-based stores in fiscal 2020 and cancelled 76 stores. This brought the retailer's total US store count to 4,647 at the end of fiscal 2020, an increase of 91 stores from the end of fiscal 2019. On a worldwide basis, Ace added 201 stores in fiscal 2020 and cancelled 104, bringing the worldwide store count to 5,463 at the end of fiscal 2020.

As the proprietor of Seymour Timber and Hardware, Alan Bower had mixed feelings when he sold the store. Although he's looking forward to retirement, Mr Bower is sad to see the end of the business he has owned for the past 15 years. He told the Seymour Telegraph:

On one hand I'm really looking forward to retirement, but on the other I really enjoyed my time with the staff and customers.

Mr Bower moved to Mitchell Shire 30 years ago to raise a family and was keen to work for himself after a career in the public service. He wanted to do something local in an industry he enjoyed and took the opportunity to purchase Broadford Timber and Hardware in 1996. Ten years later he purchased two hardware stores in Seymour and combined them into the current store on Anzac Avenue.

Mr Bower is also looking to part with the Broadford store and hopes to sell it as a going concern. He said:

It will be up for sale if a good price is offered. The stores are my superannuation, so I'm looking for the right offer.

I want to thank the community for their loyal support through the years. We haven't got a closing date yet, but the Seymour store will likely be trading until May or June. I also want to thank the staff I've had through the years. They have supported me and always looked after our customers...I will miss the two stores, but I've been thinking about retirement for a while and I think now is the right time.

A clearing sale will be held at Seymour Timber and Hardware before the store closes.

Speedy brings tool hire into more B&Q stores; omni-channel trade-focused retailer Screwfix said it continues to focus on its team and customers; and web-based DIY marketplace ManoMano said it has 50 million unique visitors per month, an increase of 70%.

B&Q

UK home improvement retailer B&Q and tool hire chain Speedy have extended their trial of Speedy hire outlets in B&Q stores. The trial began in July 2020 with Speedy concessions now at nine B&Q stores throughout Britain. A further five outlets opened in January.

The concessions, typically about 90sqm in size, give B&Q retail and trade customers the option to hire equipment from Speedy as part of their B&Q shopping trip. The offer includes Speedy's four-hour national delivery promise on certain products.

Customers can order and collect Speedy products from the select B&Q stores, complementing Speedy's own network of 200 depots. They can hire a range of mobile access platforms, tower scaffolds, mini diggers and dumpers, plate compactors, floor sanders, mixers and heaters. Speedy chief executive Russell Down said:

We are delighted to be trialling Speedy concessions in B&Q stores. These will make the option of hiring tools and equipment much more accessible to DIY customers and enable trade customers to hire equipment seven days a week...

B&Q business development director Chris Bargate said:

We're committed to testing new initiatives and are delighted to be trialling this tool and equipment hire service in our stores with Speedy. Our customers are continuing to adapt and change to new ways of living and shopping, and these new concessions with Speedy are just one way in which we're making it easier for people to improve their homes.

We're excited by the potential re-use of our space to offer new services in store and are keen to understand how customers respond.

Screwfix

Screwfix recently confirmed that it had passed GBP2 billion in sales in its latest financial year. During the year it opened 30 shops, created more than 500 new jobs and benefited from high levels of demand both online and in-store during COVID-19 lockdowns. It now has 725 outlets across the UK and Ireland.

In the past five years, Screwfix has created 4,000 new jobs in total, opened a new store once a week - on average - and doubled sales from GBP1 billion to GBP2 billion. The retailer said that many new recruits include the under-24 age group.

The growth came as people now working from home or furloughed during lockdowns held over the last year looked to improve their surroundings, buying from retailers such as Screwfix and sister company B&Q either directly or through the tradespeople who are Screwfix's core customer base. During the first lockdown, Screwfix's branches operated as click and collect fulfilment points and saw sales grow across all in-store and digital channels.

ManoMano

ManoMano is an online marketplace for DIY, home improvement and gardening products, headquartered in France.

After achieving EUR1.2 billion in sales turnover in 2020, the company said it is building its presence in Northern Europe, and increasing support for its merchant partners.

By doubling its sales volume in 2020, ManoMano said it has demonstrated the scalability of its model. Philippe de Chanville and Christian Raisson, co-founders and co-CEOs of ManoMano, said in a statement:

The year 2020 has been marked by a considerable increase in European consumers' digital expectations for DIY, garden and home products.

ManoMano said it has 50 million unique visitors per month and 7 million active users. With 10 million products, ManoMano offers a significant online catalogue.

The UK is most important market for ManoMano's growth. The company saw a major boost in demand during 2020, with sales turnover in the UK increasing by 240% to EUR105 million.

ManoMano said it carefully selects its partners to ensure a qualitative offer for customers. On its UK platform, 75% of sellers are based in the UK. To support its growth plans ManoMano will make further investments in its UK-based marketing including TV advertising.

In mid-2020, ManoMano partnered with order management specialist OneStock to optimise fulfilment logistics in the UK and across Europe. It appointed OneStock to manage all UK warehouse and merchant stock, enabling guaranteed delivery dates for shoppers and freeing merchants from logistical constraints.

ManoMano has already rolled out its fulfilment service in France and Spain which promises delivery in either 24 or 48 hours. It is working with OneStock to extend this feature to customers in the UK, Italy and Germany.

A new flagship store for Sunshine Mitre 10 in Nambour (QLD) and C&L Tool Centre is operating under different ownership.

Nambour

Queensland-based Sunshine Mitre 10's plans to build its optimal store in Nambour is in the same town where the business began 110 years ago.

Sunshine Mitre 10 general manager Neil Hutchins recently announced the new site at 980 Nambour Connection Road (formerly occupied by Allclass Kubota Tractors), and said it already has council approval and will open later this year. He said:

The transformation of the 13,000sqm site is well underway, and the local community has already shown excitement and support for this endeavour.

The new location in Nambour is important because it not only meets the increasing demand from our retail and trade customer base, but it also supports the town of Nambour and pays respect to the heritage where the company was started by Walter Lanham in 1910.

We have been steadily expanding the Sunshine Mitre 10 group across Queensland with more recent store openings in Bundaberg, St George, and Brisbane, and we have a focus on supporting the communities of the towns in which we operate.

Nambour is at the top of that list in terms of regions we want to support. This new store is the next step in our expansion, and this flagship location will be the best possible representation of our brand and heritage. We're excited to see it unfold and transition into another 110 years of locals supporting locals.

Sunshine Mitre 10 already employs more than 400 staff across our network of stores in Queensland, including the seven sites we operate throughout the Sunshine Coast. We are pleased to have committed to this multimillion-dollar investment on the back of a 25-year lease at this location.

The site has 4,000sqm under roof and will be one of the largest in the Sunshine Mitre 10 network. It is expected that dozens of jobs to be created, in addition to the development and construction of the site being managed and built by local builders and tradies. Mr Hutchins said:

This new flagship store will include all the latest brands and products and showcase the best hardware product available. The site will have everything you need to get in, get out, and get on with it. The entire project has been meticulously designed to provide the customer with the ultimate hardware shopping experience.

The new store will feature dedicated departments around building and hardware, along with homewares, electrical, hand and power tools, kitchens, painting and decorating, gardening and outdoor, appliances and plumbing as well as the dedicated trade products and services Sunshine Mitre 10 is known for.

Mr Hutchins said when the store opens, Sunshine Mitre 10 would continue to operate the existing Court Road store for the convenience of the local community and work to transition its loyal customers of 75 years to the new location.

We look forward to inviting everyone to the grand opening mid-2021.

Related: Sunshine Mitre 10 has 18 locations throughout Queensland. HNN took a tour of its operations in 2019.

Perth

Distribution group Stealth Global Holdings, headquartered in Perth, has purchased construction trade-focused retailer C&L Tool Centre.

Established in 1969, C&L is a reseller of industrial and tooling supplies, safety and personal protective equipment, and hardware, building, construction and workplace consumables primarily to professional (80%) and retail (20%) customers. They include multinational corporations, small-to-medium enterprises, schools and universities, and government agencies.

C&L operates three divisions and offers well-known brands within a "mega-store" setup comprising a showroom and distribution centre across 2700sqm.

Almost 25% of the company's sales orders are received and processed online through various digital channels.

For the 2020 financial year, C&L delivered revenue of $14.3 million and earnings before interest taxation depreciation and amortisation of $1.26 million. Sales for the first four months of the 2021 year are believed to be tracking 25% higher than the previous corresponding period.

The directors and management of C&L continue to work with the business under the change of ownership.

The C&L acquisition is believed to be complementary to Stealth's existing business, with the companies sharing a similar customer and supplier base and offering similar services. Stealth said it would spend $3.83 million acquiring C&L.

Stealth managing director Mike Arnold said the synergies would deliver on the company's aim of providing long-term value to shareholders and customers.

[We believe] the depth of C&L's products and tailored services will give [our] merged businesses greater scale as we continue to build a national distribution network to deliver more value, better experiences, more stores in our network, a deeper assortment of merchandise and brand range, and a more complementary team of experienced [personnel]...

Stealth is a supplier and distributor of safety, industrial, healthcare and workplace consumable products. Its services include distribution and logistics services, contract supply and on-site inventory management solutions. It operates through four segments: industrial, safety, healthcare and workplace supplies.

The company's industrial segment provides maintenance, repair and operations (MRO) supplies, hoses and fittings, adhesives, sealants and fillers, tools and equipment and electrical products. The safety division provides clothing, footwear, hand protection and lifting and handling, height safety, and safety glasses products. Healthcare has first aid products including medical supplies, consumables, disinfectant and wipes and disposable towels products. Workplace supplies provides packaging and tapes, cleaning and janitorial, crib and kitchen, storage and hardware products. Its portfolio of brands includes BSA Brands (a joint venture between Stealth and Bisley Workwear) and Heatleys Safety & Industrial.

Related: US big box retailer Home Depot acquired HD Supply, one of the largest distributors of maintenance, repair and operations (MRO) products in the multifamily and hospitality markets throughout the US and Canada.

The #MyWickesMyWay TikTok campaign launched by UK DIY retailer Wickes in late 2020 involved seven content creators each producing a video on the social media platform.

Working with influencer marketing agency Takumi, the TikTok creators were tasked with adapting existing trends, including DIY tips and transformation hacks, to drive awareness of Wickes' product range and reach new audiences. The sponsored posts encourage viewers to engage with the brand and its campaign hashtag, #MyWickesMyWay driving user-generated content by participating in hands-on home improvement challenges.

Wickes' first influencer campaign on TikTok aims to engage younger consumers who use the app to follow their favourite DIY creators and share videos. By running its #MyWickesMyWay campaign with branded hashtag challenges, Wickes could demonstrate how to use its products for home improvement projects and urge people to visit its stores. As an essential business, its locations have remained open during recent lockdowns and offers delivery and "click and collect" service.

Following its launch, the campaign delivered over 612,600 views and 120,000 likes as well as a reach of 442,000 and engagement rate of 17.9%, according to Takumi. Wickes head of marketing Shelley Allison said in statement:

TikTok is the ideal space for creating fun home improvement content at a time when consumers of all backgrounds are either discovering or re-engaging with this area.

We want to help the nation feel houseproud, and as we're all spending more time inside our four walls, we want to encourage new audiences to engage with our brand and home trends. The #MyWickesMyWay campaign helps to deliver important awareness for Wickes as the go-to destination for all things DIY, inspiring consumers to go out and get creative with new tips and tricks.

Recent research from Wickes also revealed that over half (53%) of those working from home throughout the pandemic admit to deliberately sprucing up areas of their homes so they look better on a video call.

About TikTok

On average, TikTok users spent 52 minutes per day on the app in 2019. This is just shy of the 53 minutes per day Instagram users spent on the platform despite having been around almost a decade longer. And 90% of TikTok users return to the app multiple times a day, according to Marketing Dive.

These high levels of engagement are driven by the entertaining short-form video content that populates users' feeds and makes it difficult to put down. It also offers marketers the chance to encourage user-generated content, spark trends and create viral content quickly.

Although TikTok is a particularly effective way for brands to reach younger audiences, it's misguided to think there aren't opportunities beyond this core user base. In the US alone, TikTok's adult audience is growing by 357% annually.

You can view some of the videos on Wickes' TikTok page at this link:

Pontings Mitre 10, located in Warrnambool (VIC), has won Independent Hardware Group's 2020 award for the top medium-format store in Victoria and Tasmania. It recognises the store's retail excellence, engagement with community and innovation.

The store opened in 1923 and traded under Home Timber and Hardware from 1993 before taking on the Mitre 10 banner in 2019.

Co-owner John Ponting said he was "surprised" and "humbled" and could not recall winning another award in 15 years. He told The Warrnambool Standard:

I think we have raised the standard of the business. It is all about customer service and building the customer's trust, and we have a good diversity of staff, young to old and male to female and customers really have some sort of connection with the store.

Operations manager Kat Ross said the award was a "fantastic achievement" for the 55 staff.

We would also like to thank our loyal customers for their continued support, especially throughout such unprecedented times of 2020.

Sydney Tools

In late 2020, Sydney Tools opened a showroom and warehouse on Bayswater Road, Garbutt, which is expected to be a retail hub for North Queensland.

At the time, Sydney Tools manager Ryan Luke said like many retailers, there had been delays getting stock into the country because of COVID-19 but the store was fully stocked within a couple of weeks.

Prior to launching its Garbutt location, Sydney Tools said it has executed on its expansion plan that involved opening 10 stores during 2020 including five in Queensland and one each in NSW and Victoria. It has also opened stores for the first time in the Northern Territory, South Australia and Western Australia.

Ten more stores are expected to open in 2021 and in four years the company said it expects to have a network of 70 stores across the country.

Online retailer VidaXL has committed to a land and build package of 113,620sqm in Tarneit (VIC), after signing a deal with Frasers Property Industrial through its Australian subsidiary HB Commerce, according to a report in the Australian Financial Review.

The e-tailer which sells home, outdoor furniture and garden products will occupy the space which includes a warehouse and two offices. Frasers Property Industrial general manager - southern region Anthony Maugeri said that the site will help VidaXL accelerate its e-commerce operations in Australia.

The new national distribution centre is designed to help VidaXL accommodate its rapid online business growth and customer demand which is in-line with the rise of e-commerce and a structural shift towards online retailing.

Completion of VidaXL's facility is anticipated in April 2022.

The move by the Dutch home and garden products online retailer comes as a growing number of e-commerce businesses acquire new warehouse facilities amid the online shopping boom generated by COVID-19. Amazon will build an even bigger 200,000sqm warehouse in Sydney. CBRE director of advisory and transaction services industrial and logistics, Todd Grima, said:

CBRE forecasts an additional 350,000sqm of additional new space will be required each year to accommodate growth in e-commerce. The VidaXL transaction reflects the growing e-commerce trend in Victoria and its new facility will be fully racked and hold over 100,000 pallets.

VidaXL launched in Australia in 2014 and is currently growing at over 100% per annum.

Founded in 2006, VidaXL has grown from selling products via other e-commerce platforms such as Amazon, Ebay and Kogan, to also sell from its own web-based store. Within 14 years, the Dutch company has grown its market reach across Europe and is active in 29 countries.

But the continuing increase in online shopping and large pure-play online businesses such as VidaXL is unlikely to dominate retail spending. Retail expert at Queensland University of Technology's Business School, Gary Mortimer, told SmartCompany:

There are still consumers that want to go out into a nursery centre, touch and feel and engage with products and also get face-to-face advice on technical products and electronics.

According to Mr Mortimer, while Australians spent an estimated $45 billion online in 2020 - a 40% increase from the previous year - only 12.5% of retail sales are made online. He said:

It still suggests that about 88 cents in every dollar is still being spent inside a physical store.

Margaret River Mitre 10 has won the retail group's state award for excellence in Western Australia. The store won the annual award on a criterion based on sales, customer service, store standards, stock availability and community involvement.

The store changed to the Mitre 10 banner in October 2019, from the Home Timber and Hardware brand.

A new layout helped staff and customers deal with the restrictions brought on by the COVID-19 pandemic. Store manager Paul Brown told the Margaret River Mail they could practice social distancing with a lot more ease than with the old layout.

Mr Brown said it was extra special to receive the award after only being part of the Mitre 10 group for 12 months. He said:

We're all thrilled to have taken out this prestigious award. It's a real feather in the cap for us. Since transitioning, the store has become the flagship Mitre 10 outlet in the South West [of WA] and continues to offer the best possible service and range to their loyal trade and retail customers.

Our fantastic team provide our customers with professional and dedicated customer service, always striving towards 100% satisfaction.

This award was only possible due to the fantastic support we have received from the local community, in what has been very trying times.

The state awards were announced in late November 2020.

Brighton Hardware

The owners of a hardware store located in Brighton (TAS), around 29kms from Hobart, have decided to retire and placed the store for sale.

For the past 15 years, Paul Diaz and Leanne Taylor-Diaz have focused on providing quality products and exceptional service.

The store is a previous Tasmanian Telstra Micro Business Awards winner after turning the business around from a reputation of being poorly stocked and over-priced to successful regional store.

At the time, Paul and Leanne told Brighton Community News that when they took over the store the stock was depleted, there were few customers, and they had only about $20,000 to stock the shop. Leanne admitted she hardly knew the difference between a nail and a bolt.

While Paul said he had a strong background knowledge of what was required in terms of making sure the shop flourished, both of them also relied on finding out what customers wanted and then let their friendly personalities deliver it. Their loyal customers did the rest.

In three years, Brighton Hardware became a $450,000-a-year business. Paul said:

It's a local shop and once they saw that they could come in here and get what they wanted, they came and bought more and more.

The store is currently operating six days a week and is set just off the main road with customer parking available.

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UK DIY retailer Wickes is selling a range of fitted kitchens with built in desks and bookcases to help its customers to work from home more efficiently. This collection of multifunctional kitchens is a clever response to a demand for more home office space.

The new Fitted Kitchen Home Office range aims to provide a more professional set-up so that everyone can repurpose their space to better suit their needs.

Available in Wickes stores around the UK, homeowners can mix and match a selection of 33 modern colours, cupboards, shelves, drawers and practical workstations to suit different design preferences. It gives those without a study the chance to easily create a dedicated space for the working week, while still keeping the kitchen functional for other family members.

There are six styles to choose from including the shaker-style Chester range, Milton, Tiverton, minimalist Sofia, Melrose, and modern Camden.

The idea rides on the back of recent consumer research that found only 49% of Britons have a proper desk or workstation, with 39% using the dining table, 28% working on a kitchen table, and 20% sitting on the sofa with a laptop tray. Whilst these are manageable for short periods of time, they aren't the best long-term solution. Paul Bangs, category director of Kitchens and Bathrooms at Wickes, said:

We understand there can be challenges associated with working from home which is why we've introduced a new working solution that fits seamlessly into everyday life.

We are always working to deliver innovative and helpful products and services that fit into our customers ever changing needs and believe the new option of a kitchen home office will provide them with more choice when considering at-home workspaces as we all continue to adapt to new ways of working.

Kitchens at Homebase

Home improvement and garden retailer Homebase has a partnership with Miele that allows it to sell the appliance maker's ovens, hobs, extraction, refrigeration, dishwashers and laundry products online and in showrooms. The Miele range of appliances have been on display in 15 stores including in the new "Kitchens by Homebase" showroom in Guildford, Surrey. Michael Hardwick, key account manager for Miele GB, said:

Homebase is a new partner for Miele, enabling us to create greater brand awareness and communicate with a much broader audience.

In August 2020, Homebase announced the launch of Bosch and NEFF appliances as part of its kitchen offering. At the time, Ian Penney, business director for Homebase Room Solutions, said:

The kitchen is the hub of the home and we know our customers are looking for inspiration for how they can make their busy lives easier.

Embarking on a kitchen renovation can be daunting, but we're here to take the pain out of the journey ... A kitchen isn't just units and worktops, the appliances, paint, flooring and tiling, accessories are just as important - and we have something for every taste. We're really pleased to be partnering with Bosch and NEFF, to help bring our customers even more innovative and quality products.

In similar move, selected Bunnings stores began selling Samsung home appliances in late 2020. This rollout is expected to expand this year, according to Appliance Retailer.

Bunnings director of merchandising and marketing, Phil Bishop said the partnership supports its focus on extending its product range in the kitchen category.

We are thrilled to be working with Samsung to expand their home appliance range in the Australian market and to provide our customers with even more choice at the best price. Samsung is world renowned for their cutting-edge technology and we look forward to continuing to grow our partnership to offer our customers the latest innovations in home appliances.

The partnership is a first for Samsung and aims to meet growing demand for smart products.

Grafton Group

Building materials distributor Grafton Group and owner of the Woodies DIY chain has agreed to acquire Dublin-based Proline Architectural Hardware.

Proline specialises in the supply of traditional and contemporary architectural ironmongery products including door locks, hinges and handles. It works closely with architects on the specification and scheduling of ironmongery products for commercial, public sector and residential projects. The company reported revenue of EUR10.8 million in 2019.

Grafton said Proline's product range and expertise allowed joinery manufacturers, contractors and trade customers to source ironmongery products from a single source. Grafton chief executive Gavin Slark said:

Proline will bring specialist expertise to Grafton in the architectural ironmongery distribution segment in Ireland. It will also enable us to offer a broader range of products and services and to extend our customer base in this segment of the market. The acquisition of Proline is in line with our strategy of acquiring specialist, high-quality businesses that trade in complementary markets.

Grafton said the deal is still subject to approval by the Competition and Consumer Protection Commission.

Prior to its Proline acquisition, Grafton announced its purchase of AVC Ltd, a UK-based manufacturer and distributor of bespoke wooden staircases that trades as StairBox.

Founded in 1994, StairBox has focuses on "the use of technology, operational expertise and a culture dedicated to cost effectively manufacture an extensive range of high-quality customised staircases".

It has developed a software application that enables customers to accurately design, visualise and price staircases on the StairBox website. The resulting products are manufactured at what it said was a state-of-the-art production facility in Stoke-on-Trent.

The company primarily serves trade customers operating in the repair, maintenance and improvement market.

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Metcash, the owner of the Independent Hardware Group (IHG), has reported its results for the first half of its FY2020/21, covering the period between 1 May 2020 to 31 October 2020. Results for the overall company showed sales of $7.06 billion, up from $6.29 billion in the previous corresponding period (pcp), which was the first half of FY2019/20. This represents an increase of 12.24%.

Earnings before interest and taxation (EBIT) came in at $203.0 million, up from $155.7 million in the pcp, an increase of 30.38%. Net profit after tax is stated as $125.1 million for the half. As Metcash wrote down $249.3 million during the pcp, leaving a loss of $151.6 million, percentage comparisons are not meaningful.

Hardware division

The Hardware division, which includes IHG and the newly acquired Total Tools, earned $759.3 million for the half, up from $599.9 million in the pcp, an increase of 26.57%. Division EBIT came in at $64.5 million as compared to $38.9 million in the pcp, an increase of 65.80%.

That's the simple version.

First of all, these are the results that are derived from applying the Australian Accounting Standards Board (AASB) 15 standards, which exclude "charge-through" earnings. We can include those, in which case the Hardware division earned a total of $1259 million in the reported half, and $1044 million in the pcp, an increase of 20.6%.

While that is useful in terms of comparing past first half-years, AASB 15 is here to stay, so it is best to get used to the new numbers, excluding charge-through sales.

Acquisitions

In a note on its presentation slides for the Hardware division (#14), Metcash states that:

Excluding acquisitions, total sales increased 16.2%

This is footnoted, and the footnote reads:

Acquisitions include Total Tools Holdings and in FY20 G. Gay & Co, Keith Timber and Wormersley's.

We would have to assume that "total sales" refers to sales under AASB 15, which means that acquisitions were responsible for $62.3 million in sales. Of that, Total Tool Holdings (TTH) is responsible for $18.6 million, which means the other acquisitions brought in $43.7 million.

One additional part to this, however, is that, as Metcash's chief financial officer Brad Soller informed the analysts during the earnings presentation, while Metcash owns only 70% of TTH, it is required to report 100% of that company's revenues. The other 30% is then taken out in liabilities.

So, effectively, $5.6 million should be deducted from the overall sales, bringing them down to $753.7 million. TTH is responsible for $13 million of that, the other acquisitions for $43.7 million, and IHG (for comparison purposes to the pcp) $697.0 million. (That's a derived estimate, so we cannot vouch for its complete accuracy.)

In terms of EBIT, the Metcash presentation notes that acquisitions contributed $8.5 million to earnings, and lists TTH's contribution as $4.8 million. (In this case, as we're dealing with EBIT, we would assume the 30% liability has been already applied to TTH's EBIT numbers.)

So that would mean that EBIT can be broken down into $56 million largely from IHG, $4.8 million from TTH, and $3.7 million from the other acquisitions. Which means that a rough estimate of EBIT growth directly attributable to IHG would be around 44.0%.

The media release which accompanied the results indicated the growth in EBIT was the result of higher sales volumes, an increase in sales of DIY/consumer products which carry a higher margin, a shift to more direct revenues from joint venture and fully owned company stores. Hardware also delivered a great deal of cost containment, especially as regards necessary expenditure on COVID-19 containment measures.

In response to an analyst question about the source of growth, IHG CEO Annette Welsh responded:

Customers were unable to go further than five kilometres. And to that extent, it would have driven some of those customers to their closest hardware store, and we benefited from that.

Other performance metrics

According to the media release accompanying the results, like-for-like (comp) sales increased by 13.2%, with DIY/consumer up 35% and trade sales up by 4%. This helped to shift the balance for IHG between DIY and trade from its previous 36/64 to 40/60, in percentage terms.

While IHG had good performance, the store network also saw a net loss of six stores during the reported half. The Metcash presentation reports a loss of 10 stores from the banner group, and a gain of 90 stores - though 86 of those are from TTH, so in terms of IHG, it was a gain of just four stores.

The number of Mitre 10 stores increased by nine to a total of 330, while the number of Home Timber and Hardware stores declined from 168 to 153. True Value Hardware and Thrifty-Link store numbers remained constant on 161.

Total Tools Holdings

A number of interesting issues were raised by the analysts at the results presentation as regards TTH. However, this turns out to be a complex topic, and HNN will be covering it in more depth in our next edition of HI News.

Outlook

Metcash is very optimistic - with a few caveats - about the future of its Hardware division. According to the company's media release:

In Hardware, sales in the first five weeks of 2H21 are up 25.3% (+19.3% ex-Total Tools) with sustained strong demand in DIY and Trade sales continuing to track positively. The business will continue to focus on its MFuture growth initiatives across Trade, DIY and digital, and retaining customers gained through the COVID-19 period. The second half will include a full six months of trading by Total Tools, including the four stores acquired and anticipated acquisition of a majority interest in a further eight independent stores.

The caveat, however, is this:

There continues to be a high level of uncertainty as to the potential impact on all our Pillars of any changes to COVID-19 related restrictions and resulting changes in consumer behaviour.

The optimism the company has around TTH, and what that indicates both about Metcash and the market, is something that Andrew McLennan, an analyst with Goldman Sachs, picked up on as well in his questions:

With respect to tools, with the successful Total Tools acquisition on your belt, you've got a very strong position now in trade. I'm just wondering how we should think about this business going forward from a consolidation perspective? Could you say that the growth - you are a mile ahead of anyone else in the trade part of the market. I'm just wondering how we should think about MFuture consolidation opportunities.

...

Just given the scale and the positioning in the trade part of the market, just how much more consolidation could be?

Metcash CEO Jeff Adams responded encouragingly, but with a degree of wariness as well:

Look, I think it's still very fragmented. There's still lots of opportunities out there for us to, similar to Total Tools, really step change and if we're able to find the right strategic fit and the value work for that, then certainly, we'd be interested. But there's still lots of opportunity because it's still a very fragmented market in Hardware.

IHG CEO Annette Welsh also responded to these suggestions:

Yes. I think the one thing to say is that there's real confidence in the model that we have and in the heritage in trade in that format... So we'll look to continue to drive that.

Analysis

It is a somewhat well-worn saying, but a rising tide does lift all boats. Looked at strictly comparatively, the 16.2% increase in IHG revenue does not actually track the market. Overall hardware retail sales for Australia for the pcp were $9769.7 million. For the reporting half, sales were $12,214.6 million. That's an increase of 25.03%, leaving IHG a full 9% off the pace. And more likely, given that IHG has a larger presence in Victoria, New South Wales and Queensland, which gained the most sales during the recent half, closer to 10%.

Of course that is offset by the large gain in EBIT that the Hardware division did manage to accrue, which is in part a tribute to extensive cost-cutting measures, as well as the surge of DIY spending.

The real question that continues to linger over IHG is whether it is continuing to pursue an early 2000s strategy as we enter into the third decade of the 21st Century. Take for example, this statement by Mr Adams:

Our retail banner groups are ideally positioned to continue benefiting from the change in consumer behaviour to more 'local' shopping, and their improved competitiveness supported by our MFuture initiatives is assisting them to retain new and returning customers to their stores.

HNN would dispute that there can be any real evidence of that pattern change in consumer behaviour at this time. It is simply a myth to believe - in our opinion - that in the long term consumers will "wake up" to the benefits of shopping locally.

There are some consumers that certainly like to shop locally, and there are consumers who find it easier - and more enjoyable - to shop at "big box" retailers. Rather than hoping that consumers have somehow been "retrained" to prefer local shopping, it might be better to research ways to better appeal to a broader market.

This is actually a very deep subject - and one we will explore in more depth in the next issue of HI News. Perhaps as a pointer towards that, it is best to close with this: all the acquisitions that Metcash - and therefore the Hardware division - have pursued have been about acquiring businesses with established path-to-market which could be enhanced through a centralised, moderately scaled approach to business processes.

Contrast that with, for example, Wesfarmers' acquisition of Catch - which was all about technology, innovation and personnel. The COVID-19 pandemic should have been a "wake-up call" (in the American parlance) to these possibilities not a further temptation to continue with what are really the market daydreams of the 1990s.

The 4560sqm building that houses the Dahlsens Mitre 10 store in Myrtleford (VIC) has sold for $3.35 million and Acheson's Mitre 10 recently held an event to celebrate its new look grand opening.

Myrtleford

The freestanding Dahlsens Mitre 10 property located at 39-49 Myrtle Street attracted 63 inquiries and sold on a yield of 8.5%, according to a report in The Age.

The property, which was listed for sale for the first time in 30 years, hit the market early in the COVID-19 shutdowns.

Just prior to the building's auction, Dahlsens reassured locals that while the landlords may change, there will be no change to the hardware store's services.

At the time, Wangaratta-based director Mike Noble from Garry Nash & Co said the property and its location were very appealing for prospective buyers. He told The Myrtleford Times:

When we have a really good regional asset come on the market we often get regional people enquiring because, without generalising, regional people understand regional assets.

Generally you get a much better return on a regional asset than a city investment so we also tend to get the city people looking at regional investments based on the return. It has been quite competitive - this is not a cheap asset.

With interest rates being the lowest they've ever been, it is a very good condition for people to be looking at commercial investments...

The hardware store employs around 30 people and pays just over $284,000 a year in rent and is 10 years through a 15-year lease.

Forbes

The Acheson family owned hardware store has served the local community for several decades and first opened in 1970.

Jacinda Acheson said the grand opening was a great day out for everyone and was a success. She told the Forbes Advocate:

It was fantastic to see people bring their family out and support their local business.

Ms Acheson said Acheson's Mitre 10 would like to thank the Forbes Magpies Junior Rugby League Club for running the BBQ, as well as Lars Coffee for providing hot drinks, Brianna Bell from Showbiz Foods, Dippin Dots, and 2PK/ROK FM.

Along with thanking the everyone who attended the launch of the store's new look, Ms Acheson said they would like to thank and acknowledge the team at Acheson's Mitre 10 for all their effort and support.

Related: Acheson's Mitre 10 was formerly a Home Timber and Hardware store.

Listed agribusiness Elders has grown its branch and wholesale rural supplies member network as the sector continues to undergo a shakeup following the amalgamation of Landmark and Ruralco by major rival Nutrien Ag Solutions last year.

The Australian Independent Rural Retailers (AIRR) network, which includes eight warehouses, supplies wholesale products to about 370 AIRR member stores. It has grown from about 340 back when the rural merchandising group agreed to the $187 million Elders takeover in mid-2019.

Among recent additions to AIRR has been South Australia-based YP Ag - a former CRT (Combined Rural Traders) member. Elders chief executive officer and managing director, Mark Allison describes it as the sort of "blue chip" rural merchandising business that is likely to trigger another wave of recruits moving away from Nutrien. He told Stock Journal:

We've had about 12 new members coming across from CRT to sign up to the wholesale group this year and we can see good growth potential in VIC, NSW and QLD.

We haven't lost any AIRR members since the business became part of Elders. AIRR has already exceeded our performance expectations with earnings before interest and tax of $21.9 million and is highly likely to exceed year earnings we originally planned over a full year.

Former rival operators are now trading as part of the Elders network after it spent a further $18 million on business acquisitions in the financial year. The NSW North Coast was proving fertile ground for new Elders/AIRR members who were previously aligned with Landmark and Ruralco.

AIRR also has plans for a warehouse in Tasmania, which could see more retailers joining Elders.

Mr Allison said other potential AIRR members may actually find a better fit as part of the Elders' agency and store network, or within its horticulture business, Ace Ohlsson.

According to Mr Allison, part of the company's latest eight-point plant is to continue pursuing some "massive opportunities" to win more market share in new geographies and across all product and services areas.

Although he said the company is taking a methodical and "low pulse rate" approach to growth, it is understood there are about six potential acquisitions under consideration. Mr Allison said:

We have a pipeline of acquisition opportunities, but it comes down to talking about the right numbers, locations and being sure they are the right cultural fit for us.

The company also launched a branch incentive program enabling store managers to share bonus reward payments with staff as specific sales benchmarks are achieved. Mr Allison said:

We looked at our competition in the market, which is invariably private operators and we thought this platform would drive the right private reward mentality in our teams.

Profit performance

Elders has posted an 80% profit increase to almost $123 million in the year ended September 30. It has been bolstered by a rain-revived turnaround in cropping activity and restocking demand, and strong flow-on benefits from its 2019 takeover of AIRR. Mr Allison said:

Coronavirus has had no material impact on us so far.

Although some specific business categories experienced market price shocks, notably the wool market, Elders had not needed to tap any government JobKeeper funding, or cut staff or working hours across its 220 branches, or draw on a $50 million working capital facility it established to provide emergency trading headroom when the pandemic hit.

Mr Allison said rural property vendors were experiencing high demand for their farmland, which was expected to continue well into 2021.

Revenue rose 29% to $2.09 billion and underlying earnings before interest and tax jumped 60% to $119.4 million. Gross margin growth was recorded across all state geographies and products. Mr Allison said:

Our solid business foundations and strict financial discipline, and a commitment to ensuring the safety and prosperity of clients, communities and staff, allowed us to succeed despite challenging operating conditions in FY20.

We now have a business that can make good money in a bad year and great money in a good year.

Mr Allison said the results included 10 months of contribution from the AIRR business. AIRR added $44 million in wholesale gross margin - well in excess of projections. Its portfolio of house brand crop protection and veterinary products, combined with growth in Elders' Titan chemical product sales, were expected to make even more impact as the farm supplies division attracted more retailer members.

Elders has about 18% of the total farm services market across Australia, behind Nutrien with more than 40%.

UK-based Homebase could have a new owner - its fourth in five years - as its current owner, Hilco looks to capitalise on the pandemic boost for home improvement retailers by putting the DIY chain up for sale. It is seeking to secure a deal from potential buyers after just over two years of getting the company back on track.

Damian McGloughlin, Homebase chief executive, told the Financial Times that a transfer of ownership within two to three years had "always been part of the plan" and that with Homebase's profitability restored "now was the right time".

A stock market listing is also an option, added Homebase chief financial officer Andrew Coleman. He told the Financial Times:

It is something we have looked at. We'll have to see how things play out but all options are on the table.

The group is thought to be hoping to secure new ownership by next Easter.

Hilco acquired Homebase for GBP1 (and its substantial lease liabilities) in 2018 from Wesfarmers which had paid GBP340 million for the group just 18 months earlier. Wesfarmers had wanted to convert Homebase stores to its Bunnings format, but customers proved unreceptive to the focus on building and DIY in warehouse-style stores at a retailer traditionally known for home decor and gardening.

Under the deal in which it sold Homebase, it should be noted that Wesfarmers is entitled to 20% of the sale proceeds if the Hilco sale happens.

Under Mr McGloughlin, Homebase has moved back towards its homewares areas and introduced partners such as Tapi for carpets and Bathstore, which it acquired out of administration, for bathrooms. He said:

We operate across a broader range of categories than B&Q or Wickes. People come to us to finish a room, not to build one.

Mr McGloughlin also helped to steer Homebase to a return to profit in 2019 with underlying profits of GBP3.2 million against losses of GBP114 million in 2018.

Hardware and home improvement stores have been among the relative winners from the COVID-19 pandemic as consumers adapted their properties to incorporate home offices and diverted spending from holidays and leisure to DIY projects.

Mr McGloughlin said that spending more time away from the office had "helped people fall back in love with their homes" during the pandemic and that the warm summer weather in the UK had helped its garden centres.

However, he added that sales of big-ticket items such as kitchens had suffered, and the company's ecommerce operation had at times struggled to cope with the increased demand. He said:

We did more orders in three weeks than we would ordinarily do in 52 weeks.

Homebase has since signed a 10-year partnership with Hut Group to overhaul its ecommerce offering, and said it would be opening more stores and experimenting with new formats as it emerged from its rehabilitation.

Hilco ownership

In just over two years of ownership, Hilco has carried out a widespread overhaul, closing underperforming stores, securing rent-reductions and cutting jobs to shore up the firm's finances. It has also shut two of Homebase's six distribution centres and secured a GBP95 million lending facility from Wells Fargo, a major American multinational financial services company. In a statement, Homebase said:

Having built an excellent foundation, Homebase is moving out of its turnaround phase and entering into an exciting new chapter of growth. Now is the right time for us to be starting conversations with potential new owners to accelerate our plan.

Homebase said it hopes to build on the more than 10,000 product lines added in the last two years, introducing new and expanded ranges by working with brand partners.

It also has plans to open around 15 new stores over the next two years in cities and regions where it does not already have a Homebase store.

The DIY chain now has 155 shops and 15 Bathstore outlets with more than 6,600 employees. At its peak it had 250 stores and 12,000 staff.

Related: HNN covered the Wesfarmers sale of Homebase extensively.

The latest campaign from Mitre 10 seeks to celebrate the "real stories and people behind its stores".

Independent Hardware Group general manager of marketing Karen Fahey said the video series aims to invite consumers to understand what the Mitre 10 brand stands for. In a statement, she said:

We are so proud to tell the stories of the local and incredibly generous families in our network. The people within our stores are the real brand champions and this is one way we can give them a voice.

Built by Families aims to demonstrate how family-owned businesses engage and support their communities. It invites Australian consumers into the lives of these families, stirring emotions and building relatability. There's nothing superficial or contrived about the stories. Just genuine tales told by authentic people in communities across Australia.

The videos begin with three businesses, the Hitchins family based in Moe (VIC), the Hastings and Benton family in Diamond Creek (VIC) and coming soon, the Johnson family in Mona Vale (NSW). Brand ambassador, Scott Cam, provides an introduction for the series. Ms Fahey said:

Consumer trust and belief in our brand stems from generations of families delivering on a service and work ethic and fostering strong relationships with their customers - the very trademark of locally-owned, family-run business.

The generational knowledge and expertise contained within these families is priceless and cannot be replicated. These three stories are saying it's not just product on the shelf in our stores...it's the people who work there, their values and the small things they do that make their communities better.

The spirit of Mitre 10 lingers on in towns long after the lights go out and the store is shut. We encourage consumers to think differently about the people behind their local hardware store and listen to their stories. When you shop with locals you'll not only have a more enriching experience, you'll invest in the health of that community.

The campaign will be implemented through multiple channels including a dedicated "Built by Families" website, TV advertising spots during The Block and social media.

Related: HNN featured the Mitre 10 Diamond Valley store extensively in a previous edition:

In South Australia, demand for plants has increased so much since the pandemic that many nurseries and garden centres are struggling to find workers, according to a report in The Adelaide Advertiser. Nursery & Garden Industry of SA president David Eaton said members are looking for more staff in most areas, from production through to retail.

Initially when COVID-19 hit, there was huge demand for vegetables then anything edible, then fruit trees that would take three years to bear fruit, then indoor plants.

With more people spending time at home, perennial outdoor colour is showing strong growth and we think high demand will continue. This has sparked something that will be a trend for many years to come."

Communications consultant Neville Sloss said surveys of garden centres revealed much of the rise in demand has come from new customers and many of them keep coming back. He told The Advertiser:

Our garden centres reported that apart from extra business from existing customers, many more people new to gardening were shopping with them.

What they are now reporting is that these people have kept coming back, and we estimate that there are now up to 30% new gardeners in our SA community - and that is the feeling nationally as well.

At Newman's Nursery in Tea Tree Gully (SA), co-director Dianne Hall is experiencing a "major skills shortage" and has been unable to fill two full-time positions for trained staff. She said:

People need expert guidance and so they ask lots of questions like 'Does that fruit tree need a pollinator?', 'How big will it grow?', 'What's the root system like?', 'Will it affect the footings of my house?' or 'Does it like sun or shade?'

You need to be a trained horticulturalist. In the past, you'd advertise and there'd be 200 or 300 apply and half of those people would have horticultural qualifications. Now they haven't got any qualifications. They might be a keen gardener and mow someone's lawn but haven't got the knowledge to answer customers' questions.

Members of the Horticultural Media Association Australia have been lobbying the South Australian state government to address the issue by creating more pathways for training the skilled workers that the industry needs.

In Nagambie (VIC) Bruce and Gladys Parris have decided to slow down and make the most of their golden years after working in the family hardware store since 1968. Their store, F.W. Parris and Sons is shutting down.

According to the Southern Riverina News, John Sanderson Machinery will take on part of the building where the store is located, and Rebecca Baker Pharmacy has purchased the showroom.

Mr Parris said his dad and uncle borrowed a stationary hay bailer from their father to start the business. He told the Southern Riverina News:

They worked with the old-school hay bailers where you brought the hay to the machine and it took a team of men to make it all happen. My dad was quite inventive and he and my uncle slowly improved their process until they were working with more modern, automatic hay bailers.

They purchased the showroom in Nagambie in the '50s and began selling and servicing hay bailers, tractors and other machinery.

I'm not entirely sure how they made the switch from hay bailers to hardware but over several years they decided it was more viable than trying to keep with the advancing hay bailing technology.

Mr and Mrs Parris joined the business in 1968 after Mr Parris completed an apprenticeship in Melbourne. The couple was looking for an escape from the city and had always wanted to return to Nagambie. Mr Parris said:

When my uncle died unexpectedly and my dad had semi-retired, I took over and have been doing it ever since...

I was joking with Damian Sanderson (from John Sanderson Machinery) for a number of years about him buying the business and me retiring and one day it actually happened.

Selling the business is not an option because small hardware stores aren't viable due to big businesses coming to town. Having the building in the hands of another local business is the next best thing.

Mr Parris also told the Shepparton News in a separate interview:

It's a bit sad the shop is closing, but on the other side it's a little bit of a relief, too. All this is going to continue on - it's not as if developers are going to come in and build on the land.

He thanked his loyal customers who have kept his family in business for so long.

Without them, there would be nothing here.

The couple wants to stay busy in retirement and remain connected with the community. Mr Parris said:

I'm going to continue carting wool and machinery. That will keep me going but will allow me to back the pace off. We will always remain in the Nagambie community. A big part of what we loved about the business was seeing local faces and finding out what they're up to.

Serving farming customers

It's a different story for Daniel Muller who purchased Marulan Rural Supplies (NSW) in November 2015. He recently told the Goulburn Post.

Being part of a small community has been the most amazing experience. We came from Sydney, where we did not have the same sense of belonging. We have our kids' school teachers, netball coaches, soccer coaches, local shopkeepers, grandparents, aunties, cousins and siblings, employees from the mines, the police, they all come into the store.

They all come in for a bag of scratch mix, and leave after a yarn and a laugh. Some bump into a neighbour here, others meet new friends. Our humble shop is the most social place.

Being an active member of the community also means the store sponsors its local soccer and cricket teams and provides its schools with raffle prizes and donations. Mr Muller said:

We engage with our community by being members of our Chamber of Commerce ... We always strive to support local business, groups and the community in everything we do.

He described what Marulan Rural Supplies offers its farming customers.

Our customer service, pricing and reliability is something we pride ourselves on. We carry all stock out to our customers' cars, engage with customers and find out their stories, research and source items that we do not currently stock and help our customers with all their needs.

Our deliveries are always reliable. From our fencing contractors who come in at the crack of dawn to our 'I'm running late, can you just drop a bale of hay off on your way home' customers.

The store is an authorised Supagas dealer and recently became a registered firearms dealer selling guns, ammunition and accessories. After responding to customers' requests, Mr Muller employed a resident gun expert and underwent a rigorous eight-month process before being granted a firearms dealer's licence. Mr Muller said:

This side of the business has gone from strength to strength. Our customers are amazed at our low prices and range.

We stock a large range of brands including Gamo, Howa, Savage, Lithgow, Adler, Ruger, Miroku, Akkar and many others in all different calibres from air rifles up to 6.5 Creedmoor.

In addition to an extensive range of rural supplies, it also stocks treated pine from Penrose Pine and are able to cater for customer special orders. The store also sells a high-quality fencing range including treated pine or galvanised strainers and stays, hinge joint, netting and barb. Its stock feed covers animals from alpacas to peacocks, from cattle to bison - the store has a customer with bison - and from racing greyhounds to pedigree cats.

Marulan Rural Supplies has a small and hardworking team with five full time staff and five casual weekend staff. Mr Muller said:

Everyone brings their own strengths to the business which is such an asset in helping our customers with their needs.

Industrials retailer, NZ Safety Blackwoods - part of Wesfarmers - is embarking on an expansion plan for the New Zealand market over the coming year.

National manager of trade centres, Chris Mason, said it is already two-thirds of its way through its nationwide store refresh program to upgrade stores and relocate a number of them to bigger sites. He told The New Zealand Herald:

There will be more stores [opening], particularly in the Auckland market. What we'll be looking to do around the rest of the country is to either expand existing locations or refurbish and transform the retail experience.

[Store growth] will be single-digits over the next year, but we've certainly got larger plans.

NZ Safety Blackwoods currently has six stores in Auckland and 24 spread throughout the country, selling safety equipment, engineering supplies, uniforms and packaging.

It has been operating in New Zealand in various forms for over 30 years. NZ Safety and Blackwoods were trading separately until about four years ago when Wesfarmers merged both brands.

In Australia, Blackwoods is the largest provider of industrial and safety supplies with 60 branches and distribution centres.

Growth factors

The trend towards fashionable workwear among tradies along with a boom in infrastructure projects and advances in technology are helping to fuel its expansion, said Mr Mason.

The drive for growth comes down to a changing trend from our customer base. A younger more image-conscious tradie who cares about brand and their image when on site. We're being driven by a desire for fashionable workwear - not just in clothing, even with tools.

The industrial sector is also being disrupted by technology and things are changing at a rapid pace in terms of safety and innovation. You see it in tools, for example, with wireless connections to control speed and who can use them now, earmuffs with Bluetooth and different types of connectivity to allow people to communicate easily on site. We're not immune to that disruption from technology that you are seeing in other industries.

Durable workwear labels designed for the "fashion conscious" tradie are now sold alongside tools, engineering supplies, safety and personal protective equipment (PPE) in a retail environment which for the first time has mirrors and changing rooms - features that would have been unheard of in this industry even just a few years ago.

Mr Mason said the trade industries are shedding their traditional persona as a new generation of more image-conscious tradies emerge along with increasing numbers of women entering trade industries. Its stores are evolving to meet this changing demand.

The old school self-image of the typical New Zealand tradie has changed over recent years and this has manifested in a growing design trend for more stylish workwear which was traditionally seen as purely functional.

More commonly now, they are looking for workwear that they can come off the site, take off their work boots and head down to the pub.

The designer label on their work clothing is just as important to them as their casual clothes are and a range of recognisable fashion brands like King Gee, Levis and FXD have developed an offering to meet this need...

As a retailer, our offering has evolved to provide the service levels to match the positioning of this style of attire which now includes a more customised fitting service.

Tools, clothing and apparel have been the fast-growing products for NZ Safety Blackwoods. Its plans were to increase the size of existing stores to accommodate larger ranges in these categories. Mr Mason said:

The line between workwear and casual wear is certainly being blurred, and that's right across the industry ... With the infrastructure projects going on there is a need for a larger workforce and so younger tradies are entering that workforce. There's been a drive on recruitment into the trades and apprenticeships, and we're certainly seeing that drive some of the growth.

In the short to medium-term there's still a large opportunity for expansion. The government through Covid has committed to big spending in infrastructure and construction to keep the economy moving forward so we see there is a big market.

Mr Mason said Wesfarmers recognised "there was a opportunity here" and "would continue to invest where it makes sense to do so". NZ Safety Blackwoods turns over about NZD240 million each year.

Flagship store

It recently opened a new 1000sqm flagship store in Penrose, an industrial suburb in Auckland. The Penrose store footprint is twice as large as the group's next largest store and is its 30th store in New Zealand.

Mr Mason said its investment in a local omnichannel expansion program will cover bricks and mortar stores as well as its e-commerce platforms.

We are seeing more tradespeople working in smaller teams now and there is a move towards a centralised purchasing model where being able to get everything they need to get the job done in one place means greater efficiency and less time away from the site.

Offering an integrated retail solution provides access to a wider range of products with the minimum time needed to make the purchase," he says.

Mr Mason also said the number of customers using click and collect has doubled in recent months and the new store will include a touch screen terminal that allows customers to order from more than 100,000 products - with the option of delivery to their worksite or collection from one of its 30 trade centres across New Zealand.

Workhorse range

Blackwoods recently revamped its own brand of workwear called Workhorse, according to Manufacturers' Monthly. Originally launched in 2014, Workhorse now has clothing or both night and day wear.

Apparel program manager at Blackwoods, Cahal Callanan, said the company wanted to provide a "real value proposition" to large industrial businesses who needed workwear to protect employees. She told Manufacturers' Monthly:

One of the main factors in the new range was to add in more stretch fabric, so it fits to workers bodies and allows more movement for people on site doing these active jobs. They are working eight to ten hours each day of really solid work, so if their uniform can fit and move with them it makes them more comfortable and efficient.

Workhorse launched a range with high visibility as a focus. Instead of using day-time high-visibility colours, such as yellow or orange, the range is made from white fabrics. The Blackwoods team believe white is the most naturally luminescent colour and contrasts well in dark environments.

National category and sourcing manager of apparel and footwear, Leigh Eam, said the safety aspects of the designs across the Workhorse range is what makes it unique. She told Manufacturers' Monthly:

White really does stand out in a dark environment and in addition with our biometric tape applied to the garments a person is really visible.

Biomotion retro-reflective tape is another element of design for the nightwear range that is crucial to improving safety. She said:

Usually you may only get one band of tape around the leg and arm for visibility. But to increase this, with our new range we added two bands on either side of the joint on the leg and arm and this makes it easier to identify which direction the person is moving in.

She said there is also an "X" configuration across the back of the uniform so machine operators can easily identify which way a person is facing.

With two bands featured on the arms and legs of the clothing, each band moves when a person is walking and people can clearly see the motion of that person. I think this range that Cahal has created really focuses on the fit-for-purpose needs for night works.

Blackwoods developed the Workhorse range by listening to its customer support staff to identify the unique needs of Australian industries. One important aspect that came out of this direct feedback is the use of 100% cotton fabric. Mr Eam said:

Australians love wearing 100% cotton and we know that the Australian high-visibility standard has been modified to allow workwear ranges to use the natural cotton that Australians want.

There are also a range of other factors like clothing vents to combat heat and collars that can be pulled up around the neck to protect from the sun. We created clothing with these elements, and they are intrinsic to our workwear range.

General manager, Andrew Pitman from Geelong based Belmont Timber and Fagg's Mitre 10 said the business believes the federal budget will help revitalise the wider economy and provide a confidence boost for the local community. He said he is pleased the government will borrow to fund personal tax relief and new incentive programs for business, infrastructure and job creation. He told The Geelong Advertiser:

A trillion-dollar national debt is breathtaking in scale but it's what the country, and regional Australia, needs to support future investment and growth.

In particular, Mr Pitman welcomed the extension of the first home loan deposit scheme, the ability to write off new assets, job creation incentives and the tax cuts. He said:

The payment of up to $200 per week to hire young Australians is very appealing and will help reverse some of the high youth unemployment we have in Geelong. This aligns with our participation in the GROW G21 program that helps disadvantaged youth secure new work opportunities.

Mr Pitman said the hardware retailer would also take advantage of the ability to write off assets through the purchase of vehicles and equipment with that investment to be shared among Geelong suppliers.

He believes personal income tax cuts will also ultimately see more money flow back into the economy and build consumer confidence. He said:

In the lead-up to Christmas, the additional money will be spent in the retail space and help resuscitate retailers that have suffocated under the weight of COVID-19...

Small business, tourism and the hospitality industry have been haemorrhaging under lockdown and the additional federal government stimulus will help bring back the customers as Australians seek to holiday domestically.

We also believe that 2021 will see a strengthening trend of Melburnians migrating to regional Victoria and in particular Geelong.

COVID-19 has been an enabler for the development of the home office workplace. The new work from home ethos will see Geelong's population continue to grow as Melburnians seek the appeal of an affordable regional lifestyle.

Total Tools in Warrnambool

Total Tools Warrnambool franchise director Kyall Wragge has been placing the final touches on a 1534sqm store in East Warrnambool's Harvey Norman Complex. It is expected to open in mid-November.

The business owner went ahead with plans to open despite this year's disruptions, using a vacant shopfront and a site occupied previously by floorcare and cleaning retailer Goodfreys. Mr Wragge told The Warrnambool Standard:

We weren't going to let the challenge of COVID hold us back.

A former Melbourne resident, Mr Wragge moved to Warrnambool to start the store because of the city's growing trade-based industries. He explains:

Data shows there's a lot of qualified tradies around the area. It's a growing area, you can see it through the roads and the housing ... It was voted the most liveable city in Australia; it's a beautiful place and it's growing.

Mr Wragge said he is gearing the new store at both DIY and trades markets to "complement" existing hardware stores in the region.

Narromine Hardware

Narromine Hardware located about 40 kilometres west of Dubbo (NSW) is benefitting from an air of optimism with local shopkeepers enjoying increased foot traffic and farmers excited by the prospect of a long-awaited, decent harvest.

After experiencing the devastating impacts of a prolonged, unprecedented dry spell, closely followed by the global pandemic blow, the general vibe among locals is finally looking up, according to Dubbo Photo News.

The hardware store will soon celebrate its second year under new ownership in November. In its first year, the team made much-needed changes to the space which was home to previous hardware shop fronts for over 65 years. In an earlier interview, manager Tracy Brennan said:

We've remodelled the layout to serve our customers better, expanded the range of stock and refurbished both the interior and exterior of the shop and trade desk. We also cemented our back shed and turned it into a trade centre.

It also modified the range in store to better suit the current water restrictions, and ordered grey water hoses and a range of gardening products so residents can reuse their water elsewhere.

More recently, it brought the newsagency into the hardware store, making it a one-stop-shop for locals.

Capitalising on the buoyant atmosphere, retailers have teamed up with the Narromine Shire Council for a major Shop Local campaign which will run from November 1 to December 18.

The marketing strategy aims to promote the Narromine region as a leading shopping destination in the lead up to Christmas and continue to encourage people to shop locally. Narromine Shire Council communications manager, Kelly McCutcheon, told Dubbo Photo News:

Come December, our shops will turn into overall weekend trading so they will be open on Saturday and Sunday. A lot of our cafes are going to complement that and open for that time as well.

A late-night shopping event in Narromine is also planned for December 10, where most retailers will keep their doors open for a few extra hours.

A trading update for the first quarter of 2021 showed Beacon Lighting's like-for-like store sales was up by 26.6% driven by an increase in home renovations and home offices during COVID-19 lockdowns. Consumers have been sprucing up their homes with new lighting products, as well as desk lamps or ceiling fans for home offices.

The online channel proved successful for Beacon Lighting, as it has for many retailers during home isolation. Its online sales rose by 156% in the period.

Retail trading conditions have been supportive of the lighting and fan product categories, with strong growth being exhibited across all Australian markets except for the Melbourne region.

Due to lockdowns, the company's Melbourne stores have been closed to retail customers since 6 August 2020. However, it has made use of these stores to process online orders, click & collect contact-free pickups, and service trade customers.

Beacon Lighting chief executive Glen Robinson said during the difficult times around the coronavirus pandemic the retailer had been able to provide its customers with a safe and rewarding shopping experience in stores and online.

We are seeing many customers investing in their home as they spend more time at home working and studying. Thanks to the support of our customers and the commitment of our team members, the group has been able to achieve these strong results.

FY results

Beacon Lighting has been benefitting from the trend to work from home driven by the COVID-19 restrictions, as stuck-at-home Aussies spruce up their fixtures and fittings with the spare cash they have that would have otherwise been spent on a holiday, travel or hospitality. In August, it unveiled a bumper full-year profit, up 38.5% to $22.2 million after sales grew to $252.2 million for the 12 months through June.

On an underlying basis, which strips out the impact of Beacon's exit from its solar business as well as the sale of a distribution centre, net profit after tax lifted 16.8% to $19.1 million.

Beacon Lighting's online sales surged 78% in the June half, lifting online sales for the year by 50.6%.

In an earlier trading update back in June, Mr Robinson told The Australian:

Much of it (rising sales) is coming from the fact people are not spending in cafes and restaurants, they are not going on overseas holidays, so they are investing in their house.

Some of it might be coming out of superannuation money, and they see it as a good opportunity to improve the value of their home and change their spending habits from where they would usually go...

[Sales increase] is across the board so there has been an uplift. Probably the strongest growth categories were light globes, desk lamps that sort of stuff ... even things like ceiling fans, garden lighting was very popular.

More recently, the lighting retailer took out a seven-year lease on prominent retail space located on 1860 Sandgate Road, Virginia (QLD). A Bunnings store is being built next door. CBRE's Adam Brimson told The Courier Mail that an estimated 63,000 vehicles passed the location each day.

In Melbourne, Beacon Lighting's purpose-built distribution facility at the Gilbertson Industrial Estate in Derrimut (VIC), encompasses a 11,469sqm warehouse and office on a two-hectare site.

A fit-out for a new Sydney Tools store in Orange (NSW) has been underway and director Jason Bey told the Central Western Daily that the industrial power tool and accessory retailer is looking to hire upwards of 15 staff.

As a significant regional centre, Orange has the industries where its customers rely on hand and power tools for their job. Mr Bey said this will be the 44th store for the business but the first in the Central West.

Orange has been an area of interest for a very long time. Since the inception of Sydney Tools in 2001 we would always have people who would travel to our Sydney store.

Northern Territory

The Winnellie (NT) store is the first one outside Sydney Tools' eastern seaboard locations. Mr Bey said the 2500sqm store located on the Stuart Highway was recognition of its belief in Darwin as a growth market. He told The Northern Territory News:

We see Darwin as offering enormous growth potential for the specialist tools market. Around 11,158 people were employed in the construction industry in the Northern Territory in 2018-19, making it the fourth-largest employing industry in the region.

While this represented a decline in employment of 23.1% in year-on-year terms, in line with a decrease in building and engineering activity, we believe a number of significant upcoming infrastructure projects are set to underpin the sector.

The upshot will be the provision of much-needed employment for specialists in a range of key trades, and a fuelling of demand for capital equipment, accessories and hand tools.

Projects include the Federal Government's $1.6 billion works program at Darwin's RAAF Base Tindal that is expected to create 300 jobs during the construction phase and the $260 million Ship Lift and Marine Industries Project. The marine industries project is designed to expand shipbuilding and repairs capability and expected to create 100 jobs during construction and 400 positions permanently. Mr Bey said:

Our move into the Northern Territory is a no-brainer. It's a market with enormous potential and growth over future years.

US home improvement retailer Lowe's recently announced plans to install Buy Online Pickup in Store (BOPIS) self-service lockers across all its US stores, aiming to improve contactless delivery for online shoppers amid a worsening COVID-19 spread.

Lowe's frictionless shopping experience through its pickup lockers is ideal for time-pressed customers especially during the upcoming Christmas holiday period. It provides consumers with a fast fulfillment solution, while also potentially serving as a more cost-efficient option for Lowe's over delivery.

The addition of lockers leverages innovative technology to provide a safe and easier way for customers to collect same-day online orders at their convenience.

Electronic technology embedded in the lockers generates a scannable barcode as soon as an order is ready for pickup. Once store staff stages an online order, the customer receives an automated email notification that contains a one-time user barcode.

The customer then completes the pickup by scanning the barcode at the locker using their smartphone without having to wait in line, receive assistance from a store associate or contact a touchscreen or keypad. It eliminates checkout time and allows fast movement in and out of the store.

Executives at Lowe's say more than 60% of orders customers place online are being retrieved at its big-box stores. Joe McFarland, Lowe's executive vice president of stores, said in a statement:

With more than 60% of online orders picked up in our stores, this gives our customers one more option and the added flexibility to control how and when they get that order.

According to a study conducted by McKinsey & Company, as many as 60% of US consumers stated that they are currently using BOPIS services and will continue using it when the pandemic subsides. So the popularity and widespread usage of contactless retail services are likely to continue in the future.

Lowe's expects to install the lockers in most metropolitan cities by Thanksgiving in late November. For providing the retail locker solution, it is working with Parcel Pending by Quadient, a major package solutions provider in the US.

Lowe's investment in pickup lockers builds on improvements the company has made to its Lowes.com website, in-store technology and its delivery network over the past 18 months.

As the coronavirus took hold, many consumers began turning to e-commerce more than ever before. And though Lowe's was deemed an essential business during mass lockdowns, the retailer still saw online sales skyrocket in recent months.

As shopping preferences shifted during the pandemic, Lowe's moved up the migration of Lowes.com to the cloud and rolled out curbside pickup to support sustained online growth.

Moreover, the company is focusing on accelerating front-end work and drive customer-facing capabilities. These capabilities include online-delivery scheduling and order tracking, a customised homepage, simplified search and navigation as well as enhanced online product offering to boost customer experience.

Related: Competitor, Home Depot already offers such lockers at a number of its stores.

A Home Hardware store has opened in Berry Springs, a mostly rural locality in the Northern Territory and Terang Co-op in regional Victoria delivers strong financial year results.

Berry Springs

The newly opened Home Hardware store is part of the Berry Springs shopping precinct, replacing Berry Springs Hardware.

Owners Russell and Lindy Willing plan to have the business's drive-through ready by November so customers can stock up on bulky items such as feed and cement. Mr Willing said the store would also offer services including pool testing and key cutting, as well as barbecues, paint and power tools. He told the Northern Territory News:

We've invested in a good range of garden and power tools we believe will be appreciated by locals. We are really confident the store's range will meet the needs of our rural folk. And if we don't have exactly what they need, we encourage feedback so we can genuinely meet people's needs wherever possible.

The store is located on 10 Doris Road, Berry Springs (NT).

Warrnambool

In his annual report presentation, Brendan Kenna, chairman of Terang and District Co-operative, said trading had been steady and the co-op had achieved a before-tax profit of $76,255. The net operating profit after tax was $44,709, up from $17,079 the previous year, which was also an improvement on 2018.

The $24.4 million turnover was the second highest on record. The co-op's financial year finished on 29 February, but the AGM was pushed back due to the coronavirus pandemic.

Over the past 12 months, the co-op has continued its positive progression, introducing significant improvements such as a $900,000 redevelopment of the

Supa-IGA supermarket, becoming part of Mitre 10, joining the National Rural Independent (NRI) group and introducing clothing lines for the first time in the 25-year history of the rural store.

Mr Kenna told The Standard that changes implemented over previous years were starting to take effect, describing the past year as one of consolidation and implementation of the co-op's strategic plan.

He said the financial year had been impacted by the St Patrick's Day fires as people and businesses dealt with the aftermath of that disaster. But he said there was a more promising outlook with better profits in the latter half of the financial year bolstered by improved confidence and prices in the dairy industry.

During the 2019-20 financial year 129 new members were welcomed, bringing the total to 2844 and the figure has since grown to 2954.

UK-based home improvement retailer, Homebase has just launched a "green shopping aisle" in five stores located in London, Edinburgh, Bridgend, Birmingham and Leeds with more stores to follow.

Designed for the environmentally conscious, the store aisle is a picturesque grass walkway and canopy infused with foliage and butterflies. It is also decorated with evergreen climbers and vegetation, to help customers find the section of the hardware store that will make their home more sustainable. Chris O'Boyle, trading director at Homebase, told the Daily Star:

We know that more and more of our customers are looking to make environmentally friendly decisions as they embark on home and garden improvement projects.

'The Green Aisle' not only puts some of our most sustainable and eco-friendly products all in one place for those who know what they're looking for, but will also provide advice and inspiration, supported by our expert teams, for people who need a hand turning their green ambitions into reality.

Whether it's something as simple as a draught excluder to sit at the bottom of a door, getting a smart meter installed or a bigger project such as installing new insulation, there are hundreds of ways - both big and small - that can help people make a positive difference to their home.

Homebase's Green Aisle has launched at the same time as the British government's "Green Homes Grant" scheme, with a number of items selected based on their energy efficiency credentials. Items range from white goods and electricals through to insulation and smart appliances.

The Green Aisle is also available online at the following link:

The concept was developed in partnership with Smart Energy GB, an organisation that is tasked to help people in Great Britain to understand smart meters during the national rollout and how to use their new meters to be cleaner and greener with their energy use.

It was also created after research found 74% of Britons want to make their homes greener, but half have no idea where to start. The poll of 4,000 Brits, commissioned by Smart Energy GB, also found 71% hope going green will save them money.

Meanwhile, seven in 10 said they want to help the environment. Four in 10 of those polled via OnePoll are keen to use environmentally friendly paint when redecorating. Others are looking to install energy efficient home appliances 38%, smart home tech 34%, a water-saving showerhead 31% or a smart meter 29%.

The Bondi Junction Timber & Hardware Store (Bondi Junction Hardware) has been operating in one form or another at its Oxford Street location for well over 60 years. Its modern, most recent incarnation really dates back to 2009, when one of its employees, Neil Houlton, decided he would take over the store, as something he could do through his "retirement" years. As part of that deal, he took on his daughter, Kerry Renshaw, as a silent partner.

Most unfortunately, Mr Houlton passed away in April 2015. That left Kerry as the sole director of the business - which was a little difficult, as she was living in the US at that time with her young family. For the next two years, the business continued with some of the established managers, such as Ken Dunlop, at the store helping to make it work. Kerry eventually found her way back to Sydney, and started being more hands-on in managing the store as well.

In mid-2017, with the current managers looking to move on, Bondi Hardware found itself looking for a new manager. And that is where Adrian Blythe entered the picture. As Adrian tells it:

I knew one of the guys that was retiring. I knew both [managers] from my wholesaling days as well, so I've had a relationship with both of them for a while. And it just came up in a general conversation. Because when I left the last retail store, I went back into wholesaling for a while.

So I was coming into the store to sell product and that. And then I got talking and Ken was saying, "Oh I'm retiring." And then the next time I came in he said, "I know now I'm going to retire soon." So I'm saying, "What are they doing, who are they going to replace you with?" He says, "I don't know." And then the last time I came in he says, "I'm now retiring in a month."

I said, "Well, I might be interested, maybe." I was like, you know what? It's a nice small shop, I've got a bit of an intimate knowledge, after being a wholesaler for six years servicing this store. Dealing with them for six years as another of my retailers, so always kept in touch.

And it just sort of went from there.

While Adrian is responsible for much of what goes on inside the hardware store side of the business, Alan Grinham handles the very active timber yard. He's been in hardware since the late 1990s, and has worked at Mitre 10 and what he terms "the other one" (Bunnings). Alan claims that working at "the other one" was just an accident, during a transition.

As Adrian describes their comfortable working arrangement:

Alan focuses on the outside, the lengths of timber, the sheet material, the cement that I'm cutting, that sort of stuff. And then we help each other out when it comes to special orders, customer orders, various things like that.

One change for both of them was working at a store that was part of the Hardware & Building Traders (HBT) buying group. Bondi Junction Hardware has been a member for well over 10 years. For a small, very active store, what HBT has to offer has proved ideal. As Adrian explains it:

This is the first HBT store that I've worked for, but I have noticed that they do put a big emphasis on not trying to tell you how to run your store. With HBT they mainly help you out with rebates. So you get to a certain spend you get rebates, or just whether there's certain deals going and stuff like that.

But they will let you run your business how you want to run your business. As opposed to [Independent Hardware Group (IHG)], who want more of a say. You have to have the products, you have to be in catalogues, and so forth.

We use predominately HBT suppliers. Because they look after us, so we tend to help out by sticking to those ones.

Store strategy

What's really interesting about Bondi Junction Hardware is that Adrian has built the small store to work as a well-stocked, orderly and effective retail experience.

Since I've come on board, I've re-laid the whole shop. And not just in terms of moving stuff around. Before the idea was that "our tradies don't care, they just want stock".

In some ways, that's part of a generational shift. But it's a particular generational shift, and Adrian outlines the root causes.

You need to have a layout. You need to have a proper format. Maybe once upon a time, let's say pre-Bunnings, they were probably like that, it didn't really matter to tradies much. But Bunnings has forced a lot of the smaller shops like this I suppose, to run a proper, actual format. If you can make it easier for the guys to find what they want, that increases overall sales.

That statement is important because it remains difficult for many hardware retailers to admit just how much influence Bunnings has had on the market. That influence really grew during the time the big-box retailer was competing with Woolworths' failed Masters Home Improvement. And there is also the background influence of IHG's Sapphire store program.

While it is possible to go to extremes that are really not all that useful to the tradie market, expectations have shifted. In particular tradies are very time-conscious. As Adrian says, it is simply vital to have a store that presents as clean, well-organised and consistent.

A good example of the kinds of changes that Adrian made were with drill bits, which saw him move to stock more from Sutton Tools.

One of the first areas was all our drill bits. We had all these really old, beaten up racks that were all different sizes, and they were all bent, and stock was just anywhere. It cost us nothing, it cost nothing from the suppliers, they'll supply the racks. So I got the company to come in, put some new racks in. We looked at the range, they were able to expand on the range of what we sold.

A lot of the times you've just got to use your suppliers. So people like Sutton, they came out and brought out the new racks. And the rep spent a day here pulling all the stock down, re-laying it.

Packaging

Adrian also benefitted from some suppliers finding alternative ways to handle packaging changes, especially when it comes to changing packaging over.

One particular paintbrush we had never sold. There was almost no sales history on it whatsoever. Then the company rep came in one day and said, "Oh look, we're actually rebranding, doing new labels." So he offered to send out all the new labelling. So we had to pull off all the old cards and repackage. And the new packaging was much better, a nice green. Just like that, all of a sudden, those brushes started selling. Purely due to the packaging change.

There is a lot to that brief story. First of all the recognition that the problem wasn't the product, but the packaging. Secondly, getting a really good package redesign. Then, in a way that preserved costs for the supplier, was very environmentally friendly, and resulted in rapid change, simply shipping out the new display cards for the retailer. The retailer, of course, is highly motivated to sell the stock, and this process is actually easier than, say, destocking then restocking the product.

Expansion points

Adrian is also alert to some of the high-margin incidentals that can help make a store both more amenable to customers, and polish up its numbers a bit. One change Bondi Junction Hardware made was to go from a vending machine selling soft drinks, to an in-store fridge.

We bought a fridge, and you get those really hot days, a couple days we've been cleaned out of Gatorades or Powerades. Because they've got all the guys onsite and it's a 40-plus degree day.

That replaced a drinks machine, but no one really thought it was ours. It was costing lots in terms of electricity. When we moved to having the in-store fridge, we started selling lots more.

Timber

While Adrian has been hard at work making the store itself into a well-functioning retail system, Alan has also been working hard on the timber yard of the store - which is a big driver of revenue and profit. Of course, many of the problems that Adrian faces inside the store, Alan faces outside the store, only magnified a couple of times across a more narrow range. The store's space, given its location, has to be compact, and timber, of course, is anything but compact.

There is a really defined market for timber from Bondi Junction Hardware. First of all, given the high level of traffic congestion in Sydney from 7am to 7pm, being able to get timber without leaving the city is a big advantage. As Alan describes the situation:

So I suppose you could say in the heart of eastern suburbs where we are, we're the only timber supplier. The nearest one to here, you'd have to go over the East Gardens [a 20 to 40 minute drive]. So if someone asks for something we haven't got, and we say "Look, I haven't got any, but they'll probably have it over there near East Gardens, "they'll almost always say "I'm not going that far."

Results

One very good metric to judge the success of a smaller store in an active environment is ticket size. With limited, niche trade traffic, how much is spent on each transaction is a vital measure of success.

According to Adrian, the average transaction size is a healthy $100-plus. That compares favourably to the smaller average transaction size of $30 to $40 many stores have. Of course, equally, given its position and the predominance of trade customers, there are fewer transaction. Around 500 a day may be a comparable average for stores elsewhere, while Bondi Junction Hardware typically does fewer than 200. That said, for a smaller store, the combination of high ticket sales and fewer transactions is much better than mid-range tickets and mid-range transactions numbers.

That is in a store where the total area is 750 square metres, and of that only 105 square metres are for the store area itself (the rest is the timber yard).

Working for an owner who is an accountant, it is also important to make sure that the gross profit numbers are heading in the right direction. As Adrian tells us, he and Alan have managed to make that happen. Like most good retailers, this has not been as simple as just bumping up the prices.

The owner keeps a close eye on the figures. Since I've come on board I've been able to reduce the spending, I've been able to increase the sales. Which has meant we're making about 10 points more, on the gross profit.

It's not through raising prices. A lot of it was through decreasing some of the prices. But when you decrease, you start to sell more, unit price drops. So you might directly seem to lose a bit of gross profit, but then with the volume you sell, it tends to make up for it. It was a matter of looking at stuff like that.

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Sars-CoV-2 and the disease it causes, COVID-19, has had a very direct and immediate effect on retail, causing stores to close and customers to stay away. But could it also have a longer-lasting and more fundamental effect, as science and new technical capabilities assume a prominent place in social and economic life?

The whole catastrophe

It's worth considering, for a moment, exactly what a catastrophe, such as the pandemic, really is. "Catastrophe" has two main meanings: the result of a disaster, and - curiously - the denouement, the final, climatic development of a classical tragedy (such as Macduff killing Macbeth in Shakespeare's play). The latter was its original meaning, and it began to be used for the former in the mid-18th Century.

So there is a commingled sense that catastrophes are at once surprising and yet often seem to have been predictable after the event: the volcano that erupts, the earthquake along a known faultline - or, indeed, a pandemic taking a shape foreshadowed by both scientists and science fiction writers for decades.

Given those warnings, it's not really possible to put these events down to "bad luck". What they really are, typically, is what Americans would term "a wake-up call". What catastrophes really do is to point out the significant gap that has developed between the accepted and expected view of things, and the actual, underlying reality.

The problem, of course, arises in determining where that gap really exists. After the sinking of the Titanic, for example, it might have been tempting to undertake an extensive study of icebergs. The reality, though, was that the shipwreck revealed Edwardian England did not know as much as it thought it did about both metallurgy and ship design.

It is just so with the pandemic, as well. For example, there has been a persistent desire to see its lesson as being, in one way or another, that "China is bad" (because it was the origin point of the Sars-CoV-2 virus). China, in this case, is just the iceberg. Of course it has all the attractions of the "blame the iceberg" approach: no one is really to blame (except China), and the world can be said to have been behaving perfectly (except China).

But blaming China is not, self-evidently, going to stop the next pandemic - nor will it help nations of the world recover from this one. Which raises the question: what will help stop another pandemic, and possibly hasten recovery from this one?

One clue might be to look at the practices of those nations that have been successful in stemming the effects of the pandemic, often securing better economic outcomes as well. The approach to the pandemic in nations such as Australia, the US, and the UK, as well as much of the EU (except Germany) has been to see it as a matter of people interacting with a virus. This has resulted in an emphasis on moving people with some probability of having contracted the virus into some form of medical detention. (HNN notes that the word"quarantine" is frequently used incorrectly. You cannot, technically, quarantine someone who is known to have a target disease. It's purely a preventative measure - and originally lasted 40 days, which is the origin of the word.)

Other countries such as South Korea, Taiwan and Germany, have taken an information approach instead. Their emphasis has been on contact tracing combined with extensive, early testing. One reason why all three have adopted that approach is due to the legacy of their prior experience with other diseases in recent times. Mistakes they made then taught them the benefits of contact tracing. South Korea fought off Middle Eastern respiratory syndrome (MERS) in 2015, and Taiwan was hard-hit by severe acute respiratory syndrome (SARS) in 2003. Germany suffered a major outbreak of e. coli in 2011 - 3,950 people were affected, 53 died, and 800 suffered hemolytic uremic syndrome, which can lead to kidney failure.

It is also the case that many of these early, successful approaches have run into trouble at a later stage. The record for countries being able to control the pandemic when restrictions are lifted, no matter how good their contact tracing may be, is poor. Most have attempted to balance economic activity against pandemic spread, and most have, unfortunately, not found that balance.

Post-manufacturing

Restated, the problem of Sars-CoV-2 virus and the pandemic it has caused really has to do with the way in which linked global societies have managed only a partial transition to an information-driven environment. Manufacturing, finance and product development have been globalised, but not disease detection, prevention, and treatment.

It's helpful to look at this situation in terms of a historical change that is underway. The best label we can come up with for this change is "post-manufacturing".

Post-manufacturing does not, of course, refer to an an economy which has stopped making objects, such as cars. What it does refer to is an economy where the growth in value has shifted from the manufacturing processes themselves, to the ability of the products produced to successfully interact with software.

Of course, this is not the first time that the economy has taken this kind of turn. From around 1890 to 1930, the same thing could have been said about electricity, where engagement with this technology became central to economic growth. Electricity was joined by the internal combustion engine from 1910 to 1940, plastics from 1920 to 1970, and, post-war, from the mid-1950s to the early 1980s, transistors.

That said, software is emphatically different from all these other economy-boosters. It is not produced by industrial means, but rather results from the practical application and distillation of knowledge itself. It responds to issues of scale, economically, but does not require scale to be produced, opening up the potential for different methods of development, production and distribution, such as open source.

Those characteristics means its capacity to add value is both astonishing, and yet uncertain. A prime example is provided by Tesla, the most successful global maker of electric cars. Founded in 2003, the company completed its initial funding round in 2006, and launched its first vehicle in 2008. The Roadster was a Lotus sportscar powered by electric batteries. When Tesla launched its Model S four years later, the automobile as software was finally achieved.

The Model S isn't just about electric motors, it's also about near-autonomous driving, which has the capacity, when developed into fully-autonomous driving, to help change national economies. What we're talking about, basically, is a single-purpose robot as car.

Despite the evident success of early post-manufacturing businesses, it's easy to understand why making the necessary shift is so hard. Manufacturing, in its more modern sense, has been with us now for over 200 years, dating back to the late 18th Century. Mass production took off, firstly in the US, in the 1850s, and was, indirectly, a contributing cause to the American Civil War. In the early 20th Century, it came to reshape the US and other economies, helped by electrification of factories and better techniques in steel production.

During World War II manufacturing developed further techniques of scale, and this helped to fuel the post-war boom of the 1950s and 1960s. It hit historic highs as the chemical industry developed new materials, in particular polymer-based plastics.

Beside boosting economies, manufacturing also influenced the way things were done everywhere in society, along with a responsiveness to the organisational principles of the military, to which most working people had been exposed during the war years. Schools, hospitals, restaurants, police and even governments all shaped themselves around manufacturing principles. It has become, especially for the past 75 years, simply the way things get done.

Yet while many decry the shift of manufacturing to China and other low labour cost countries as an economic problem, a more accurate view is that what has been transferred are those activities that have the lowest future growth potential. The problem comes down to localities which have lived through three successive generations where most families were supported by a vibrant manufacturing base, and who now find themselves struggling to adapt to change.

So it is not an economic problem. It's a social problem. One indicator of this is that, while countries such as the US, the UK and Australia worry about the shift of manufacturing jobs to China, countries in Latin America are also confronting what they overtly refer to as post-manufacturing. Their problem isn't China, however, it's the increasing automation in developed countries, which means those countries are now shifting less manufacturing to places such as Mexico and Brazil.

Post-manufacturing retail

What does this mean for retail, and specifically home improvement retail?

Most of the debate about how retail might change concentrates on how much revenue comes in through online sources, and how much originates from physical stores. That narrative cites some changing numbers for online purchases during the pandemic which could prove "sticky" into the future.

It is no surprise, of course, for retailers to discover that online retail has jumped significantly. In the UK, this has seen online sales climb from a 20% share to a 30% share, while in the USA online has lifted from 17% of overall retail sales to 22%. (These figures are net of car and car part sales, as well as restaurant and bar/pub sales.) In Australia, the growth in online sales has surged by 49%, to reach close to 12% of overall retail.

Some individual stores did well out of online. The department store Myer, for example, sold $422.5 million online for its FY2019/20. This amounted to 17% of overall sales, and represented a 61.1% increase on the previous financial year.

But if we are thinking in terms of post-manufacturing, it is debatable whether the split between physical and online sales/distribution matters as much as the industry currently believes. If the metric of post-manufacturing is all about how much engagement with software it enables, online offers itself as a ready place for that. Yet most customers today, and for some substantial time, are unlikely to shift from physical stores. Evidently, then, the real move for retail over the next five years is to increase software engagement in physical stores, while boosting engagement online as well.

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Founder of Queensland-based retailer TradeTools, Greg Ford is not afraid to share the wealth. He has over 50 shareholders and most of them are his employees.

Mr Ford started TradeTools in 1987 to create jobs for himself and his father. In 2020, there is a workforce of 240 people across 18 stores located across the state from Tweed Heads to Cairns. There is also an outlet in Vanuatu and another Queensland store in Browns Plains due to open later this year.

The global pandemic has accelerated growth for the retailer and has employed almost 30 new staff to cater for the unprecedented increase. About 10-12% of sales came from online. Mr Ford told the The Courier Mail:

We're a little bit reluctant to admit it but we have had a massive increase in turnover ... We had one quiet week when COVID hit and then it went whoosh and it has never stopped. It's nuts.

Every store has gone up and our figures are currently 60% above what they were this time last year ... I think we just drained all the money out of tourism ... because no one is going anywhere.

If we manage to average our current turnover through the rest of the year, we are going to be looking at $160 million, $170 million turnover.

Mr Ford said sales could have been even higher if there was more stock to sell. The company was expecting 76 containers to be delivered at its head office in Stapylton on the Gold Coast in July.

Profit sharing

Having enough trained workers and keeping stock on the shelves have been the two biggest challenges the company has faced in recent months.

It will take a couple of years to fully train new workers but Mr Ford does not anticipate any problem retaining them. TradeTools paid a weekly commission based on turnover and provides the opportunity for staff to become shareholders after 10 years of service.

Mr Ford credits this profit-sharing initiative with helping the business to thrive before and during the coronavirus crisis. With an average staff retention rate of eight years, TradeTools staff are experts in their craft - a point of difference that he believes any competitor would be hard-pressed to replicate.

While the remuneration of workers across the country has come under pressure amid the COVID-19 pandemic, many of Mr Ford's staff are benefitting from the surge in demand. He told SmartCompany in a separate interview:

I don't pay myself a multimillion-dollar salary, I don't need it. The big corporates have never been able to get into the specialised end of the tool industry [due to a] lack of expertise.

(HNN readers are already aware that Bunnings and Metcash have acquired once-independent brands Adelaide Tools and Total Tools.)

The business owner said anyone asking to buy his company gets the same answer: "Not on your life."

Mr Ford is British born, grew up in Europe and has lived in the United States. He has seen what happens when independent companies fold in the face of large businesses en masse and believes it's not pretty. He said:

I've seen what happens when you basically let corporations run the country. That's what we see in the States and Europe.

Companies like TradeTools can be privately owned and have a strong, engaged workforce. I want to see that philosophy continue to expand.

I don't want Bunnings to be the only hardware company in Australia ... it's the whole point of TradeTools.

But beyond this, Mr Ford wants more independent business owners to adopt profit-sharing initiatives with their workers, saying there is a range of benefits to sharing, whether that's aligning incentives to promote success or just being able to sleep soundly at night. He said:

We spread the wealth around and everyone benefits. I cannot understand why others, especially in the higher echelons of business in Australia, just can't see that.

It allows you to sleep at night knowing your employees aren't continually looking for a new job, and it allows you to be more trusting of the people who work for you because they're taking part in the profitability of the business.

Mr Ford also sees a need to expand local manufacturing. TradeTools stocks its own range of locally made private-label tools called Renegade Industrial. He said:

I've always thought we should produce more of our own products here. When I came to Australia 47 years ago many things were made in Australia, I've been sorry to see that so many things are now made overseas.

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Latitude Financial has confirmed it has added ASX-listed plumbing and bathroom supplier Reece to its interest-free "buy now, pay later" (BNPL) platform, LatitudePay, for people who are completing home renovations in a COVID-19 economy.

Reece has benefited from the increased spending in the home, which is set to be bolstered further as the federal government starts paying its $25,000 homebuilder grants.

LatitidePay is also used by retailers such as Harvey Norman and Forty Winks as well as tech giants Apple and Samsung. The company said LatitudePay was close to signing up 350,000 customers across Australia and New Zealand since its launch in September 2019.

Latitude CEO Ahmed Fahour said the company was focusing on the home improvement space to capitalise on people spending more money on their homes during lockdowns as a result of the coronavirus. He told The Australian:

Reece is an example of a business doing incredibly well with the growth of the home economy. Everything is geared towards the home economy for our business.

The plumbing and bathroom group recently announced that its net profit increased 13.3% to $229 million The result was driven by a 10% increase in sales to $6 billion during in its 100th year of operations. In Australia and New Zealand, sales revenue grew by 0.8% to $2.88 billion.

Reece managing director, Peter Wilson said the company's ventures arm, Superseed, has also launched an online job management platform for its customers in Australia and America. He said there were other innovations to come in new fields. He told The Australian:

Our vision is to be a digital leader for the trades. We know we are a really important part of the way the trades operate. Increasingly as we pivot to a much more digital world, we want to be connected into their digital ecosystems.

Reece followed its $1.9 billion acquisition of US-based MORSCO in 2018 with a $221 million purchase for Californian plumbing wholesaler Todd Pipe in 2019.

More recently, the company has taken out a 10-year lease on a new warehouse it will move into next year, located at Melbourne Airport. Reece will consolidate a number of brands in the one site and service suppliers and customers from the purpose-built 11,670sqm facility in August next year. This follows Amazon's commitment to take space in the same industrial business park for its gig-economy Amazon Flex drivers to service its the city's northern and western suburbs. (See "Amazon's first robotic warehouse in Australia" story in this issue.)

Capital raising

In April, Reece raised $647 million to boost its balance sheet so it could capitalise on greater investment on plumbing and sanitation by customers arising from the pandemic.

The company also said the funds would be used to support the business during the period of global economic uncertainty, increase liquidity, reduce net debt and potentially position it for acquisitions.

Related:

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A new inner-city hardware store located in Hobart (TAS) is expected to open in 2021.

The Mercury reports that Clennett's Mitre 10 has earmarked a site for a development which will cater for both retail and trade customers. Managing director William Clennett said he signed a heads-of-agreement with the landlord and hoped to have lease negotiations finalised by the end of July.

The new site is 3900sqm with 1000sqm of retail space, a 2000sqm trade centre and off-street parking for 40 cars. The initial investment will be $2 million, with a further $4 million expected to be spent in the next 10 years.

The development still needs to gain council approval, but he is hopeful the store will open on April 1 next year. The new store would operate in addition to Mr Clennett's stores in Kingston, Huonville, Glenorchy and Mornington.

Bunnings has stores at Kingston, Glenorchy and Mornington. Mr Clennett told The Mercury:

The Clennett's business is set up to really dominate within the building products market, but we have also targeted retail categories where we believe we can offer a more specialised service such as power tools, paint, garden and bathroom goods.

We've also deliberately tried to partner with big brands such as Wattyl paints, Milwaukee, Stihl and Webber, all brands which Bunnings don't supply. We are really focused on supplying quality products, and I think customers are trending back that way.

I think the market is changing, and people are becoming more socially and environmentally conscious, and I think buying local is a natural extension of that.

He also believes the CBD store would add a new level of convenience for shoppers living and working in Hobart, while a free home delivery service can also give Mitre 10 a point of difference.

Meanwhile, Mr Clennett's Kingston business is undergoing an $800,000 expansion, with a new sand and soil yard being developed on the former Kingston Landscape Centre site in Mertonvale Circuit. It is approximately 500 metres from the existing hardware store in Huntingfield Drive.

Mr Clennett has taken ownership of the landscape centre and signed a 20-year lease on the site, which is closed for four to eight weeks while existing buildings and amenities are demolished. The expansion aims to ease traffic congestion and provide more space for shoppers.

Mr Clennett also hopes to redevelop a corner of the existing Mitre 10 site in the next couple of years to incorporate bulky goods tenants, which could include automotive, lighting or other specialist offerings to complement services already provided by the retail business.

Sourced from The Mercury

The new owners of Brennan's Mitre 10 have relaunched the store as Petrie's Mitre 10 in its Dubbo (NSW) location with a member of the Petrie family at the helm. The Petrie Group has taken ownership of the store after an initial delay as a result of the COVID-19 pandemic from the original March 30 timeframe.

Brad Petrie, son of managing director Phillip Petrie, is excited to be the manager of the store after three years' experience at the group's Port Macquarie store. He told the Daily Liberal:

[I was] service replenishment manager at Port Macquarie, and looked after a team of 12 to 14 people. So this is still a step up.

He said Port Macquarie was a "trade-predominant store" whereas Dubbo was "predominantly retail".

Since the sale was announced in March, the Petrie Group has consistently said its approach would be "business as usual", including retaining the Brennan's staff of about 40 people.

Not surprisingly, the final days of ownership of the Brennan's managing director Michael Brennan and his family were emotional. However he told the Daily Liberal it was the "right time for Brennan's to pass it on to Petries".

The two families have known each other for decades, and Mr Brennan said they both had the ideology of "service and being local and regional and a major part of the group we're in". He said:

So I feel very proud to hand it over to them, I really do.

The Petrie Group now has nine stores in its network with the inclusion of the Brennan's store in Dubbo. Mudgee-based Petrie Group managing director Phillip Petrie said the family business was looking forward to being part of Dubbo. He told the Daily Liberal:

The challenge is to follow in the footsteps and maintain the standards that the Brennan family have kept here for a long time, and they're held in high regard.

We want to make sure we continue to be held in the same regard, and to run the business to the standards, and look for ways that we can even improve the offer over time. But yes, I suppose continuation and consistency is the most important thing for us.

Mr Petrie also said a major challenge is combatting the quantity of scale from big box retailers by ensuring customers get personal and informed service.

For starters you need a lot of energy and you need great people and our business has built itself on building long term relationships with our staff, our customers and our suppliers. When we build those relationships, it makes it a really strong business and people come back to us again and again...

He praised the Brennan's model which placed a priority on staff who are friendly, who want to help and who know what they're talking about. He said:

Long term staff, they know their product, they know their customers and they genuinely want to help people solve their problems, it's not just a number coming through the door, they'll know your name, they'll find a solution for you - they'll be part of your solution for the problems you're trying to solve.

Petrie's Mitre 10 was established in 1986 as a result of the sale of Lonergan's - a well-known local business - to Malcolm and Carmel Petrie. Current directors, Phillip and Annette Petrie and Mike and Annette Fergus took the reins in 2009.

Michael Brennan looks back

Mr Brennan spoke extensively to Dubbo Photo News about managing the retail business and his family history in Dubbo. Here are some of his most interesting quotes and responses to its questions.

He regards his father Frank as one of the pioneers of "big box" retailing and believes he has "learnt and inherited much of his tenacity and thinking". When discussing the emphasis he placed on friendly and informed service, he said:

There is one thing about small, local business being that you work beside your team each and every day, you share each other's dreams, desires and lives in the same community. 'Big business' cannot do this. We have always had long-serving, caring, involved staff. The reason would be that certain people click with our style and share what we believe in. We live each other's lives each and every day, we want to treat people as we would want to be treated.

When referring to some of his biggest challenges, Mr Brennan said:

Honestly, the single stand out item would be the regulation that come from governments. A business of this size and smaller has an inordinate amount of pressure put on it, it becomes cost restrictive and they're so time wasting. An example would be the single touch payroll and superannuation reporting that each employer has to undertake now.

The second that comes to mind would be the reduction in prices of products due to Chinese manufacturing. So much more effort has to be undertaken to sell a product that 20 years ago in some instances, was double the price. Yes, we sell more, but the cost to serve is greater.

I recall selling cheap electric drills, such as the Skill brand back in the eighties for $99, nowadays a cheap drill can be around the $20 to $30 mark.

The third challenge has been seven-day a week trading. I'll speak my personal mind here. The world expects retailing to be open 24/7 but at the same time do not want to pay for it, it expects retail staff to give up their lives to provide a service to Monday to Friday workers yet they do not want to pay any more for the increased costs of staff working those weekend hours.

I feel for the employees and do believe they are entitled to increased rates on weekends, I understand why consumers want seven-day trading, but I know from being a retailer that it is incredibly unfair to them due to the cost to serve. An offshoot of that is buying on the internet which forces retail to maintain seven-days a week trading.

When asked about why the family decided it was time to sell the store, he said:

There is no single answer to this question, it is merely the right time. I have a list of probably 20 key points that lead to the decision. Time of life both me, my parents and five sisters, no family succession due to having no children myself and sisters all out of Dubbo. A business this size is difficult to sell, and the timing was right for the purchases by the Petries. Profitability for this style of business is tough, desire to have freedom from a lifelong career in order to try something different, government and statutory regulation is becoming overbearing, and the list goes on.

Mr Brennan remains very optimistic about the future. He said:

We continue to own the buildings of Mitre 10 in Dubbo plus the building of an about to be announced new retail business. We won't be front-line, but we are still a major part of the main street of the city.

Bev and Frank will continue their retirement with much time spent on the golf course and involved with different groups. My wife and I will increase our effort in our couple of properties and at some point I'll probably look for some supplementary income but what that looks like is too early to speculate.

Related: The sale of Brennan's Mitre 10 was initially postponed amid the coronavirus outbreak.

Sourced from the Daily Liberal and Macquarie Advocate and Dubbo Photo News

Queensland-based Gunna-Do Hardware located in Allenstown, a suburb of Rockhampton, will have new owners after Pat and Judy Murphy and their daughters, Natasha Murphy and Nikki McCaul put the business up for sale. The family have owned it for almost four decades.

The business under its ownership will come to an end as Pat and Judy look to retire permanently and Natasha and Nikki move in different directions. As the family representative, Natasha said they would like to see another family take on the store. She told The Morning Bulletin:

I know times are tough but it has been an amazing journey for our family and we are hoping another family might be interested.

After 37 years, Natasha said it would be sad to finish up and say goodbye to customers, many of whom they have gotten to closely know over the years. Reflecting on how the store has developed over the years, Natasha said technology had come a long way. She said:

The transition of going from pen and paper to add up stock and going to computerised. The accounting system's gone from doing little paper things at the end of the month, now it's just emailed out.

She also believes the perception of females in the hardware industry has also changed. Natasha and Nikki would often find that customers would see them but ask to speak to their Dad. Most of the time, Pat would still get his daughters to serve the them anyway because they knew what the customer was after. He said:

The attitude of males has evolved. Women themselves are doing a lot more these days, they are not hesitant to swing a hammer, they are in there earning themselves.

Part of the store's survival can also be attributed to the loyal and competent staff they have had over the years. Natasha paid particular mention to current staff members Pete, Joe and Lachlan. She said:

They are the backbone of our success for being here so long. We have had many staff that have gone on to bigger and better things, apprenticeships, navy men, army men, architects, teachers, and they all started as weekend juniors.

Sourced from The Morning Bulletin

Metcash released its results for FY2019/20 on 22 June 2020. Overall, the company has reported an increase of 2.9% in sales to $13.0 billion. However, earnings before interest and taxation (EBIT) were $324.2 million, a fall of 1.8% on the previous corresponding period (pcp), which was FY2018/19. The company's food division lost a major customer in South Australia, and the finalisation of supply to the 7-Eleven convenience store chain will see future reductions.

For the company's hardware division, which consists primarily of the Independent Hardware Group (IHG), the year represented a mixture of declining sales, and a fourth quarter sales boost due to an increase in both consumer/DIY sales and trade sales.

Pre-pandemic sales, during the 10 months to February 2020, fell by 2.8% as compared to the same period during FY2019/19. However, the uplift in sales during March and April, as consumers bought more supplies from hardware stores, raised hardware's second half performance by 1.8% over the second half of FY2018/19.

The company also completed two acquisitions, of G. Gay & Co. in Victoria, and Keith Timber in South Australia, which helped to boost sales.

Total sales for the year came in at $2.08 billion, a decline of 1.3% on the pcp. Retail like-for-like (comp) sales increased 1.6% in the second half, after falling by 3.2% in the first half. The result for the full year was a decline of 0.7% in these comp sales.

For wholesale sales in IHG to the banner group, these held flat in the second half, after a decline of 2.6% in the first half, delivering a decline of 1.1% for the full financial year.

Metcash also reports that in terms of comp "scan sales" (relating only to a subset of stores, those which report scan sale data to Metcash) there was an increase of 11.6% for March and April 2020, as compared to the same period in 2019.

Online sales are reported to have grown by 40%, with the company now featuring 14,000 stock-keeping units (SKUs) up from 3000 in FY2018/19 listed on its website. Metcash also notes that the average ticket size online is around $200, which is four times higher than the average in-store purchase ticket.

EBIT for hardware for the year was $81.2 million, equal to that for the pcp. EBIT was propped up by an increase in the proportion of DIY sales from 35% to 37%, Metcash claims, with DIY delivering broader margins.

(For this financial year, HNN is relying on pre-AASB16 accounting figures for comparative purposes.)

Commenting on the performance of hardware during the early stages of the pandemic, Metcash CEO Jeff Adams said:

[T]here [were] changes in consumer behavior, with the most significant being the uplifts in DIY sales. As I mentioned, along with our hardware retailers seeing many new first-time customers in their stores. Some of those customers commenting, they have passed up our competitors because the car parks were too busy or they had queues outside of their stores, and were visiting the local Mitre 10 or Home Timber & Hardware store for the first time. The hardware team and the retailers are now focused on how to retain those new customers after the crisis who have now had a good shopping experience in their local store.

Mr Adams also welcomed the new CEO of hardware, Annette Welsh, as:

[O]ur new CEO of Hardware, Annette Welsh, who has taken over for Mark Laidlaw when he retired at the end of February.

As the original ASX announcement indicated she would assume that position on 1 May 2020, evidently the process was speeded up.

Store network

Metcash has continued its expansion of corporate-owned stores in the bannered Mitre 10 network. Hardware acquired a further six operations with a total of 17 sites during the reported year. Asked by Bryan Raymond of Citigroup to clarify the earnings contribution of the additional stores, Mr Adams responded:

So those would have been phased in at different times throughout the year, Bryan. And in fact, the one lease one came in right at the very end of the financial year, but I think it was around $3 million or something in the year.

The company states that the corporate stores now account for 15% of all stores, and contribute 40% of the sales attributable to IHG. There is also a reference on one slide to "Cost resets in company-owned retail network most exposed to slowdown in construction activity", which could indicate a fall in investment for the coming financial year.

This is also the first report since the acquisition of Home Timber & Hardware (Danks) where there has been no mention of ongoing integration.

The company has continued with its Sapphire upgrade program, claiming this now stands at 90 stores, up from 60 at the close of the previous financial year. The number of trade-only stores has also increased, reaching 19 for the year, up from 11 a year ago. Metcash confirmed the target of reaching 40 of these stores by 2022 still stands.

Future

Looking to the future of the company, Mr Adams provided this overview:

In the Hardware pillar, sales for the first seven weeks of FY2020/21 have increased 9.4%, underpinned by continued strong demand in DIY categories. Weak indicators of future residential construction suggest further weakness in the trade sector is likely from the second half of FY '21. However, the government recently announced a stimulus package to boost residential construction and renovation activity is expected to help mitigate this weakness.

Total Tools acquisition

The surprise announcement of the results is that Metcash has decided to go ahead with the acquisition of Australian power tool and hand tool retail franchise Total Tools. The franchiser has 80 franchise stores, and one corporate store, with each franchise owning a portion of the company. Total Tools generated revenue of over $550 million for calendar 2019. Its EBIT is estimated to be around $25 million a year.

While negotiations are underway, and clearance from the Australian Competition & Consumer Commission is required, the end cost is expected to be around $57 million for a 70% share of the company.

As part of that deal Metcash is also providing a debt facility of $35 million, which – as financial analysts have pointed out – really forms part of the purchase price. That would mean that Total Tools in its entirety is being valued at around $140 million.

At the end of 2019, when Total Tools was first said to be on the market, the estimate was that it would sell for 10 times earnings, or around $250 million. If that is true, then this move by Metcash could see it acquire the business at a significant discount of less than six times earnings.

In his remarks at the presentation, Metcash's chief financial officer Brad Soller presented the rationale behind the acquisition:

The acquisition is in line with our hardware strategy, which is to focus on trade customers. Total Tools has a differentiated offering, which is focused on tradies, who require high-quality tools for commercial use. Total Tools has been operating for 30 years and offers a broad range of products, which, as I said, are focused on tradesmen themselves. This is different to Mitre 10, which tends to be more focused on the actual builders.

Total Tools not only supplies the leading tool brands but also has a highly valued and growing own-brand offering, and its stores pride themselves on offering a broad range and high-quality customer service.

There's a strong strategic rationale for the acquisition. The acquisition aligns with Metcash strategy to be the leading supplier to independents in each of its three pillars. It enhances Metcash's position in the Australian hardware market, which will benefit the independent retailers in both Total Tools and the independent hardware group. It increases the Hardware pillar's exposure to trade customers. It strengthens both Metcash and Total Tools existing independent networks and will provide Metcash with a more balanced mix of earnings across its operating pillars and will deliver significant value creation opportunities and synergies.

Responding to a question from David Errington of Bank of America Merrill Lynch, Mr Soller also clarified the strategy Metcash will take with Total Tools:

The other component in terms of the loan facility we intend to provide them is, we do want to acquire some of their franchisee stores and take our ownership interest. It's a very similar strategy to what we've successfully done in the hardware pillar at the moment through a combination of independent and company-owned stores. So we will look to actually acquire those stores going forward in that [debt] facility specifically for that purpose.

In response to a question from Bryan Raymond of Citigroup, Mr Adams clarified how Total Tools would fit with Metcash's hardware division:

We don't have a very strong presence in the tools category, so we won't get huge merchandising synergies. And it is intended that we actually run the front part of those operations [Total Tools] as an independent business. So Paul Dumbrell, he currently is the CEO of that business, will continue to actually drive the sales and drive the relationship with the franchisees.

Analysis

Mark Laidlaw will no doubt be missed as one of the people who has left a strong imprint on the Australian hardware retail industry. It's difficult to remember exactly how tough things were when Mr Laidlaw first took over Mitre 10 in 2010, with the CEO who preceded him working directly for the then-opposition, HTH. The kind of size and influence he gave the hardware division at Metcash was something Mitre 10 members could only have dreamed about those 10 years ago.

His departure will mark a new phase in the development of what is today IHG. The really big question the hardware division of Metcash faces is whether it intends to pursue its branding and strategy as the only retailer able to "take it to " Bunnings in the marketplace, or if it will instead move to a somewhat more balanced approach, which focuses on consolidation rather than competition.

One reason IHG might consider changing direction is that, as the results for this financial year indicate, its current strategy is not exactly a runaway success. It's facing off against a company that is massive, and looks like turning in 11% sales growth during a period when IHG itself saw sales fall. It's even arguable that IHG is lagging behind not only Bunnings, but also the market at large, with its sales figures not even tracking the general increase in the overall hardware retail market.

In fact, at the moment, it is just difficult to track where aspects of its strategy are leading. The company continues to acquire new properties, many of these stores that would otherwise have shut down, or been sold by the original Mitre 10 owners. Metcash's claim is that by acquiring more corporate stores, which make up more of its overall revenues, it is helping to strengthen existing independents in its network. Given the sales figures, however, it is really difficult to see how and where that is working out.

The Total Tools acquisition only further makes strategy difficult to determine. Again, Metcash is claiming that this will help to strengthen the independents in its network. It's hard to see, on the face of it, how investing in a dedicated tool supplier, and helping it to grow and expand, and therefore compete more for the tool market, will help independents.

Though there are some scenarios where that could happen. For example, Total Tools could move to a store-within-store model with retailers in the IHG network. In that case, instead of having to manage their own line of power tools, which typically return low margins, they could effectively rent space to Total Tools. Which could work, until you get into the business of power tool accessories, where independent retailers do make good margins.

The other aspect of the Total Tools acquisition is that Metcash might not have paid as much as was asked during the first round of the sale, but that discount has come because of increased risks. Just exactly how bad the economic fallout will be in Australia, no one really knows. One reason for that uncertainty is that it is at least partially reliant on overseas markets. Will trade matters settle down between the US and China? Will Australia's insistence that China has to lose face internationally over the COVID-19 pandemic continue to damage Sino-Australian relations?

In short, Ms Welsh, as the new CEO of IHG, has a lot of challenges to face up to over the next two years. There is little doubt that IHG could prosper, and that it could contribute to independent hardware in Australia. But there is also little doubt that the way forward is going to start by recognising the underlying problems and contradictions in the business, and the need to not simply repeat past strategies.

An Inspirations Paint store located in High Street, Berserker (QLD) has submitted plans to extend its shopfront. The development application (DA) submitted to Rockhampton Regional Council is for a material change of use for extensions to existing paint shop.

Specifically, the application relates to 63, 65, 67 and 69 High Street and 64 and 66 Seigle Street for Lesdel Pty Ltd, the owners of the site.

The company owns another paint store on the southside and is looking to reduce its overheads by operating from the one main paint store. The southside store is mostly used for storage and before they can close it, they need to extend the northside store to accommodate for the extra required space.

It is noted the shop extension is a 296.6sqm gross floor area and includes the use of the existing buildings on the premises. The DA also notes the site is located near a state-controlled road and intersection.

The concept plans drawn by Rufus Design Group indicated further works to be submitted for approval at a later date. The current proposed plans include a new paint store extension of 144.5sqm, along with other storerooms and a covered trade entry, measuring 8x15m.

The existing retail paint shop will remain in its current location and is to be expanded to the rear.

The existing dangerous goods paint store will be converted to a regular paint store, with a new dangerous goods paint store extension at the rear.

An extension of the existing trade drive-through will allow space for a small internal workshop hire room. Behind that will be a new sandblasting grit store.

To the east of the existing shop, a new covered drive-through entry is to be provided which will have space for four painters' vehicles for temporary set down and loading. Recently, the two existing rental houses owned by the company were demolished to make way for an extended concrete driveway area to accommodate 17 additional car parks, a dedicated delivery truck bay, and relocation of the existing shipping containers that are rented out to local painting contractors.

A retail shop extension has been planned for a future stage but is not part of this application. This area will be seven temporary carparks until the company is in a financial position to proceed with the construction of the additional shop.

Sourced from The Morning Bulletin