IKEA Canada organized an in-person event last week to present its annual IKEA Canada Summary Report 2023. The report highlights the company’s ongoing growth and its commitment to making affordable, quality home furnishings that are accessible to Canadians.

The presentation was led by Selwyn Crittendon, IKEA Canada’s CEO and chief sustainability officer, who offered some highlights from the report that reflect how the company has grown over the past year. Crittendon told the audience in a downtown Toronto event space that IKEA Canada’s sales increased by 10.9 percent to $2.9 billion in the fiscal year ending Aug. 31, while national store visits increased by 6.3 percent to 28.6 million. During the year, 1.6 million deliveries were made to Canadian households.

“We are a purpose-driven, value-driven brand but we always put our heart and soul into the products and services we deliver.”

He went on to note some other achievements, including plans to invest over $400 million to support the company’s fulfilment networks in the Greater Vancouver and Toronto areas. In addition, IKEA opened a new distribution centre last year in Beauharnois, Que. Crittendon said it’s the first such facility in this country in over three decades.

But the core of his message that morning was about affordability. He noted the rising cost of living for Canadians and emphasized IKEA’s commitment to producing affordable—and sustainable—products to counter those rising costs. “These are the foundations of our company: function, form, quality, sustainability, low price. We will never compromise.”

Accessibility is another important aspect of IKEA’s strategy, Crittendon said. That includes physically, as the retailer plans to add to its growing list of small-format showrooms, called “plan-and-order points,” with more locations nationally to come, in addition to the ones most recently announced, in London, Ont., and Lachenaie, Que., which will open next spring.

But there’s another aspect of accessibility that IKEA has addressed as well, and that has to do with affordability. The retailer has partnered with RBC to offer a financing plan that will let customers pay for their purchases over 12 months with no interest.

Recession? Maybe, but it won’t be deep, RBC economist tells CHPTA members

Hardlines reported last week on the latest StatCan numbers indicating they predict flat GDP growth for the third quarter ending on Sept. 30. The second quarter was a contraction. Are we headed into a recession (two quarters with negative growth)? While some economists are being pessimistic, a report by Rishi Sondhi to a group of members of the Canadian Home Products Trade Association offered a more upbeat forecast.

Sondhi is an economist at TD Bank. In offering an outline of economic conditions in Canada, he started with China, the world’s second-largest economy. That country has been experiencing five percent growth. “That’s slower than previous years, but still is better than the world in general. But that growth rate is expected to keep falling.”

Moving closer to home, Sondhi said the U.S. is going through some diversifying, what he called “reshoring,” as manufacturers bring some production back home from Asia. That, he said, could cause higher production costs and add to inflation. He expects the U.S. economy to slow following strong five percent growth there. A drop in consumer spending that will continue into 2024 will contribute to that deceleration, he pointed out.

Sondhi next addressed the big question of which way interest rates will move. He suggested they have peaked. “We think the Bank of Canada is done hiking interest rates.” He forecasts that they’ll begin falling gradually by the middle of 2024 and expects them to reach 4.5 percent by October of next year.

He observed that economic growth here has already flattened. It may technically be a recession, he said, admitting it’s certainly flat. Add to that the reality of high interest rates, which continue to suppress consumer spending.

“We forecast weak, subdued growth for the Canadian economy, but we’re not expecting a deep recession.”

AD reports solid performance for Canadian members year-to-date

AD (Affiliated Distributors) reported owner-member sales of $57.6 billion through nine months of 2023, an increase of three percent and a record for the Wayne, Penn.-based contractor and industrial products wholesale buying group. Its Canadian members fared well also, including those within AD’s Building Supplies – Canada division.

Eighty companies have joined the group so far this year, half of them through acquisitions by existing members. Another 35 of AD’s existing 866 members were sold to outside entities. Owner-member same-store sales grew six percent through the first nine months of 2023.

The home improvement division, AD Building Supplies – Canada, was formed when the TORBSA buying group merged with AD Canada in June 2022. That division consists mainly of about 45 former TORBSA member locations, plus new members that have joined since the division was established. Hardlines did not get updated Canadian numbers as of press time. However, the building supplies business accounted for an estimated $786 million in sales in 2022, an increase of almost 10 percent over the previous year (Source: 2023 Hardlines Retail Report).

By country, same-store sales in the U.S. were up seven percent, while comps for Canada were up six percent. The AD division with the highest growth was Safety at 13 percent. Electrical, Industrial, and Bearings/Power Transmission all enjoyed growth of nine percent.

A recent webinar hosted by the Retail Council of Canada offered some important insights into the profiles of various consumer groups in Canada and how they spend on home improvement products.

The presentation was given by two individuals from Environics Canada. David Spira is the director of account management and Michael Scida is director of business development at Environics—in addition to being an alumnus of this industry, having served for almost seven years at Lowe’s Canada.

Scida identified roughly 19,000 retailers that cover the space, not including Walmart or Canadian Tire. About 57 percent of those stores are in Quebec and Ontario. The total aggregate spend, says Scida, is $118 billion.

Environics’ data broke the sales down, with furniture accounting for $33 billion, large appliances for $8 billion, and small appliances and home décor equalling $19 billion in sales. Environics estimates the home improvement category, which includes tools, lawn and garden, building materials, and labour, at $69 billion.

(Note: these numbers differ from Hardlines’ own estimate of the size of the industry as defined in our annual Hardlines Retail Report, as we don’t include the specialty stores or labour, but only sales through traditional hardware and building materials channels, including Canadian Tire.)

“The average Canadian household spend is $7,827 per year on all household refresh categories,” said Scida. But that spend is not consistent across the board.

So, which groups are the biggest spenders? Scida explained that his company created a series of profiles for different demographics among Canadian consumers, based on store traffic. The group profiled various consumer groups and put them into four targeted consumer groups. Older families and empty nesters represent 1.1 million households and an average household spend of $13,188. Middle-aged families, representing 2.6 million households, spend $120,183. Large, diverse families represent $746,000 and spend an average of $12,000 per household. The younger mix is the fourth profile, which spends  an average of $9,247 per year on home improvement.

These target groups represent 29 percent of the population, said Scida, but account for fully 41 percent of the spend in the home improvement and home décor categories. For example, the older families and empty nesters, aged 65 and up, account for eight percent of the population but represent 13 percent of the spend.

But without a doubt, one group stood out. Environics has determined that the highest-spending group, and therefore the one making the biggest impact on spending in the home improvement and home décor categories, is the aging baby boomer demographic.
“The older families and empty nesters are really the key target group for household spending on home improvement.”

How do the different groups gather their information about which products to buy? Not surprisingly, the older demographic prefers to do it in person or on their computers. And they overwhelmingly prefer to complete the sale in person. The younger groups don’t see the need to conduct the transaction in person and are much more comfortable doing the deal completely online.

An executive at Home Hardware Stores Ltd. has been recognized as one of Canada’s Top 100 Most Powerful Women by the Women’s Executive Network (WNX). Vanda Boyd is senior director, in-store systems solutions for the St. Jacobs, Ont.-based retailer. Since 2003, the WNX has celebrated Canada’s Top 100 Most Powerful Women by recognizing community advocates, trailblazers, and thought leaders.

At Derby Building Products, Patrick McKernan has been named territory sales manager, home improvement retail, for the mid-Atlantic region. Based in Lafayette Hill, Penn., McKernan will work to expand Derby’s penetration into Home Depot’s U.S. stores with Novik Stone, Derby’s line of stone siding. His previous roles include working at East Coast Roofing Systems, an exterior residential remodeling company. Most recently, McKernan was at Colonial Electric Supply, a family-owned electrical distributor in the U.S.

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RETAILER NEWS

Federated Co-operatives Ltd. has announced that Swan Valley Co-op will purchase two home and building retail sites, in the Manitoba communities of Swan River and The Pas, from the Minsh Group of Companies. Each property includes over 9,000 square feet of retail space, a lumber yard, and storage facilities. The acquisition is expected to close in late November, with Co-op operations beginning on Dec. 1.

RONA inc. is holding the third edition of its PROvember event in most of its Lowe’s, RONA+, RONA, and Réno-Dépôt stores from Nov. 2 to 29. The event, linked to the VIPpro program, will feature in-store “lunch and learns,” special offers, surprises with purchase, and contests for building and home improvement professionals. In addition, participants can choose at checkout to support the RONA Foundation’s Building from the Heart campaign, which aims to renew living environments and make housing accessible for those who need it.

Castle growth continues in Ontario with its newest member location, Windeco Building Supply in London, Ont. The full-service lumber, building materials, and hardware retailer is getting set to open its doors with a full-service retail storefront in addition to its lumberyard. Owners Peng Yi Chen,Ri Kai He, Tong He, and Xian Yi Jiang will target home renovation contractors and DIYers in London and the surrounding area with their new store.

Wolseley Canada has launched its newest store in the Yorkdale area of Toronto. The 16,000-square-foot facility held a grand opening on Nov. 9.

IKEA Canada is expanding its network of plan-and-order points with additions in Ontario and Quebec. They will be located in London, Ont., and Lachenaie, Que., and are slated to open next spring. The spaces allow customers to consult with specialists to plan purchases for complex projects. The retailer has also opened a pick-up location in Thunder Bay, Ont.

Franchise Times has released its annual Top 400 list, which measures the largest franchise systems in the U.S. by global sales. Ace Hardware placed at number five, the same ranking it held in 2022, behind Burger King, KFC, McDonald’s, and 7-Eleven. Ace posted $23.1 billion in annual retail sales last year, a 3.4 percent increase from the prior year. It opened 168 new locations in the U.S. and 232 total new locations worldwide in 2022.

SUPPLIER NEWS

Canfor Corp. reported a third-quarter operating loss of $65 million, including a $49 million loss from its pulp business. The results include a net $20.8 million reversal of a previously recognized inventory write-down. In western Canada, earnings were squeezed by higher spruce-pine-fir prices.

ECONOMIC INDICATORS

The value of building permits issued decreased 6.5 percent in September to $11.2 billion. Most of the drop was attributed to a monthly decline in the institutional sector. The value of residential permits increased 4.3 percent to $7.2 billion, led by a 37.2 percent increase in construction intentions in British Columbia. Gains in the value of residential permits in Quebec, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador offset declines in the remaining five provinces. (StatCan)

NOTED

For its fiscal year ended Aug. 31, IKEA Canada enjoyed a healthy increase in sales of almost 11 percent. But food sales increased 27 percent as Canadian shoppers enjoying more than 15.6 million meatballs and three million hot dogs during the year.