HI News V2 No. 10: Bunnings Strategy Day
The must-read issue on home improvement
HI News Vol. 2 No. 10
FlexVolt from DeWalt
Mitre 10 results promising
Click to visit the HBT website for more information
This is a bumper issue of HI News, chock full of news and analysis about the world of home improvement.

If that's all you need to hear, just click on the following link to download this edition:
HI News V2 No. 10: Bunnings Strategy Day

Wesfarmers (the conglomerate that wholly owns Bunnings) held its annual Strategy Day on 22 June 2016. The CEO of Bunnings, John Gillam, spoke at length to financial analysts, explaining the company's intentions with its newly acquired chain of home improvement stores in Britain and Ireland, Homebase.

He also spoke about Bunnings' ongoing expansion in Australia as it moves in particular to take advantage of the "light commercial" end of the trade business, and to continue its expansion into the outdoor living category.

HNN provides you with an edited transcript of Mr Gillam's entertaining and informative address. Plus it ends with a series of fairly explosive questions poised by respected financial analyst David Errington of Bank of America Merrill Lynch.

In addition to the transcript, HNN publishes its own analysis of what is going on. Our conclusion? Homebase isn't about buying and refurbishing an averagely good home improvement chain. It's all about the market itself, and Homebase was just the best way in at the present time.
DeWalt FlexVolt

While Bunnings is set on revolutionising home improvement retail in Britain and Ireland, Stanley Black & Decker's high-end professional power tool brand DeWalt is revolutionising construction-grade tools.

After heartlessly teasing all of us for several months, DeWalt released the big news late on 21 June 2016, Australian time. What they have done is to develop a system of cordless tools that can switch voltages between 60-volt and 20-volt. The 60-volt tools are the kind of big machines they need on some construction jobs, including the world's first true cordless table saw.

In fact, that voltage can go all the way up to 120-volt, by combining two of the 60-volt batteries. And the tools come with a simple adapter, which enables them to run directly off of the mains current in the US (which is itself just 120-volt, of course).

HNN gives you the details on the main tools the company plans to release in the very near future, as well as its plans for outdoor power equipment as well.
Mitre 10 results

As is the way with Metcash, the owner of Mitre 10, we don't yet have all the details on its results for FY 2015/16, but we do have the core financials and "slides" from a presentation that likely hasn't been delivered yet. It's enough to paint a clear picture of the company. For Metcash as a whole, sales are lacklustre overall, and EBIT isn't doing that well either, held down by the fierce competition in the grocery sector, where Metcash continues to prop up discounts in its IGA affiliates.

Mitre 10, however, is a very different story. While its sales growth is nothing to be all that excited over, it did manage a close to 9% gain in EBIT, once again delivering up the profits so badly needed by Metcash. The managing director of Metcash must be very pleased with the management team at Mitre 10, led by CEO Mark Laidlaw.

The question remains, though, whether that team couldn't do some pretty amazing things if it didn't have such constraints on its capital expenditures. Mitre 10 has the right people to develop further, but it really needs an organisation behind it that believes in them, believes in the brand, and is willing to invest long-term in growth.

Well done, Mitre 10. HNN hopes things gets better for you in 2016.
CSR results

CSR has delivered some impressive results, and looks set to continue with that trend through 2016/17. The company has successfully pivoted its products over the past three years so that it can take advantage of the surge in multi-unit highrise building in Australia's capital cities.
Hitachi Koki results

With the acquisition of European brand Metabo, and a new distribution deal with Lowe's Home Improvement in the US, Japanese-based power tool company Hitachi Koki is beginning to really rev up its operations. In this year's financial report, it clearly spelt out the path it plans to take to significantly increase its market share.

You really need to read this issue. It's all about a kind of fundamental reset that is running through the home improvement industry this year.

Thanks as always for the great support from our readers.
HI News V2 No. 10: Bunnings Strategy Day
Bunnings 2016 Strategy Day transcript
Slide 8 from the 2016 Wesfarmers Strategy Day presentation
HNN Sources
Slide 55 from the Strategy Day presentation
Slide 59 from the Strategy Day presentation
Click to visit the HBT website for more information
This is a transcript of remarks made by John Gillam, the CEO of Bunnings, a division of Wesfarmers, at the 2016 Wesfarmers Strategy Day held on 22 June 2016.

The following transcript has been edited to improve clarity. Headings have also been added to improve navigation. Where appropriate, we have provided the slides used in the original presentation to illustrate the points being made.

In addition to these slides, we have also provided additional graphic and text information, based on details provided in the transcript, as an aid to exploring some of the references made by Mr Gillam.

We've got a really exciting story to convey to you today about what Bunnings is doing, both the opportunities we have before us in the Australian and New Zealand market, and, obviously, the very, very early days, just into our fourth month, of owning Homebase. We will go back into what was said in January [2016] and update you on our progress.

I wanted to start by talking about how we think about our business. I'm going to do that in the context of Australia and New Zealand, but as I'm doing this, the thoughts are very, very consistent at a macro level on how we are thinking about the UK and Ireland.

I'm going to talk about first, long-term value creation, and our thoughts on how we set about running our business day-in, day-out, and how we think about strategy five years, ten years and beyond. And then on top of that think about and talk about our market evolution, because there has been some huge change, and there continues to be a lot of change, and the change is driven by those who are really bringing the best offer to customers. And then I will from that context, talk about our strategic agenda, and then I'll get into Bunnings UK and Ireland.

[Please click on Full Text to read the entire transcript]
Seeking opportunities
A business manager is being sought for AEG Power Tools
HNN Sources
The brand manager for PPG Industries will oversee marketing activities
The national account manager will manage Yates' relationship with Bunnings
Visit the Mecca Website
A business manager is wanted to join AEG Power Tools based in Mount Waverley (VIC); PPG has an opportunity for a brand manager to be part of its architectural coatings team at Villawood (NSW); and a national account manager is needed at Yates.

For further information, simply click on the images provided.
Managing the AEG business

An opportunity exists for a business manager to join AEG Power Tools. Responsibilities will include driving the strategic direction in product development, value engineering and future planning. The ideal candidate will also have advanced Excel skills and experience with ERP Systems, preferably SAP.
Business manager required at AEG Power Tools
Brand performance at PPG

The brand manager for PPG Industries will be responsible for implementing effective ATL (above the line) and BTL (below the line) in-store marketing strategies. This individual will grow market share for PPG's brands in the retail/DIY and trade/professional sales channels in the specialty, texture and woodcare categories, for the Australian and New Zealand markets.
PPG Industries need a brand manager
Managing Bunnings for Yates

Reporting to the channel business manager, the national account manager will manage and develop the Yates relationship throughout the Bunnings network. The successful candidate is entrepreneurial in their approach, and will aim to identify new business opportunities as well as build on the strength of existing relationships. This will be achieved by providing innovative customer solutions and deep technical expertise.
The Yates national account manager will be responsible for Bunnings
TTI continues growth
Video interview of Joe Galli by Bloomberg Asia
TTI Group
TTI results for full year FY 2015
TTI regional sales distribution 2015
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Hong-Kong listed, US-based, Chinese manufactured power tool, hand tool, floor-care, and cordless technology company Techtronic Industries (TTI) has reported strong results for its FY 2015. It has described these results as "record-breaking".

The company's respected CEO, Joseph (Joe) Galli, highlighted the good performance of the company's team in Australia, in particular its successful advancement of TTI's AEG brand. Mr Galli also mentioned the good performance of Australian big-box home improvement retailer Bunnings.

Reporting in US dollars, the company shows sales for 2015 as USD5038 million, up 6.0% on its sales for the previous corresponding period (pcp), which was FY 2014. Removing the effects of the strengthening US dollar exchange rate during 2015, sales would have grown by 10.5%, the company reports.

Earnings before interest and taxation (EBIT) came in at USD400 million, up by 7.4% over the pcp, while net profit (after tax) was USD354 million, up 18.0% over the pcp. Earnings per share (EPS) were reported as USD0.1937, up 18%.

TTI divides its operations into two main segments: power equipment and floor care. For 2015, sales for power equipment increased by 11.8% over the pcp, reaching USD3972 million. Removing currency fluctuations, the increase would have been 16.8%, TTI states.

Sales of TTI's floor care products decreased for FY 2015. They fell by 11.2% over the pcp to reach USD1066 million. Removing currency fluctuations, the decline would have been less, at 8.1%. According to TTI's chairman, Horst Pudwill, the decline in floor care results is largely due to one-off, non-recurring items.
TTI results for full year FY 2015
Performance metrics

Performance indicators were largely positive for TTI during 2015. Gross margin increased by 0.5% over the pcp to reach 35.7%. Operating profit for its power equipment division increased by 29.7% over the pcp, though it fell considerably for floor care, down 64.6%.

In his remarks, Mr Galli pointed to the overall gross margin trend for the past seven years, which has seen it increase steadily. Mr Galli said:
So look at this chart. This is my favourite part of the presentation. It is again gross margin back to 2011. To go from 32.6 in a fiercely competitive industry, where our competitors have been in place for decades, and we are talking about large global companies like Makita in Japan, Bosch in Germany, Stanley Black & Decker in the US. And here we are taking all this market share and driving the gross margin up to unprecedented levels.

Mr Galli's point (as he further clarifies elsewhere) is that, as TTI is gaining market share while while still increasing its gross margin, it is not "buying" market expansion through discounts. Rather, the company is finding markets that are willing to pay a premium for the technological advances TTI is introducing.

Below is a chart of the increases in the gross margin from 2011 onwards:
TTI Gross margin, and percentage change in gross margin

As can be seen, the rate of increase for 2015 is less than for the preceding three years. This is likely due to the effects of currency exchange rates.
Operating profit

One of the more notable metrics to emerge is TTI's operating profit growth in its power equipment segment. This came in at 29.7% for FY 2015 as compared to the pcp. A similar measure of growth for FY 2014 was 16.7%, and for FY 2013 it was 14.2%.
Working capital/inventory

As he did a year ago, Mr Galli went to some lengths to explain why the company has chosen to expand its inventory:
So we added five days of inventory. Why? Because we already have a reputation at TTI, which Horst created, of being the best service level, best supplier to retail partners like Home Depot. Or Bunnings in Australia. And we have so much new product coming in the first half of this year, and we have so many commitments from our retail partners that we just couldn't take the chance, and we decided we would put the inventory in. So for me this is a very positive element of our announcement because it shows that we are not short-sighted.

Mr Galli also explained why the increase in inventory will have no net effect on the company's outcomes:
[T]he implication of that inventory build on our balance sheet is zero . . . because the suppliers we are now paying our bills in 84 days. Ten years ago we paid our bills in 20 days. So we now have such an aggressive purchasing organisation that we have been able to extract very favourable terms from our suppliers. And don't think this is TTI being a bully, and being rough and tough with our suppliers. We are pretty good negotiators. But this is, when you show numbers where we are growing double-digit, the suppliers say, "well of course we will accommodate your request, improve your terms."

TTI offers a rough measure of productivity by comparing its increase in sales to its increase in headcount. According to the company, even as sales increased by 10.5% (exclusive of exchange fluctuations) the headcount rose by only 2.2%.
Regional performance

North American sales (US and Canada) grew by 11.2% over the pcp to reach USD3772 million. Sales for Europe, the Middle East and Africa (EMEA) declined by 11.1% over the pcp, to come in at USD861 million. The company reports that, accounting for currency fluctuations, sales would have grown by 5.1% over the pcp.
TTI regional sales distribution 2015

Sales for Rest of World (ROW), which includes Australia, grew by 3.5% over the pcp, and would have grown by 18.9%, TTI states, were it not for currency fluctuations. Mr Galli was careful to point out in his remarks on the results that the ROW results were "led by Australia, but not only Australia", possibly indicating that some areas of Asia were also positive contributors.

Mr Galli was particularly enthusiastic about the potential for further growth in Western Europe:
Europe up 5% [in sales outside currency fluctuations] and that was after the floor-care situation. Europe was up strong double-digit in power equipment. And we see Western Europe as a massive growth opportunity for the company. We love developed markets where there is a focus on safety on the jobsite, and where the consumer that we sell to has the right level of disposable income to buy our high end products.

He added to this comment later in his remarks, highlighting the fact that TTI continues to thrive in Europe despite gloomy economic predictions:
However in Europe where we are -- where Milwaukee was an afterthought brand five years ago, Europe was up 24% [for Milwaukee sales]. This is a market where every headline says, Europe is slowing down, the economy is bad, there is one issue after another in the European Union, and we are up 24%. We don't let our managers read these headlines anymore, we cancelled all newspaper subscriptions, we just want people focused on new product, right Horst, so we ... sometimes it is best not to look at some of these gloom and doom headlines, because we have so much new product and it is so exciting that we are leading a stampede and a revolution away from corded tools to cordless.

Mr Galli also reminded analysts that the company had decided some years ago to pull out of Brazil, and to proceed cautiously in both Russia and China, strategies that he believes have been very effective.
Power tool brands

Mr Galli called out the performance of the company's high-end power tool brand Milwaukee as being particularly good. Exclusive of exchange fluctuations, sales of Milwaukee products grew by 23.7% for FY 2015 as compared to the pcp. Commenting on this result, Mr Galli said:
A key highlight was our Milwaukee growth, where we yet again exceeded 20%: 23.7% growth in Milwaukee power tools worldwide. This is in a mature industry where these kind of growth levels have never, never been seen. How are we doing it? Well we are doing it with new product. We have so much new product coming into Milwaukee, largely cordless, largely high technology cordless, that is well ahead of our competitors' capabilities. With all those cordless products we are launching, we have been able to generate growth that, again, that you have never seen in the industry.

To read more, please tap/click on the Full Text button.
Kitchen Wars
Real Living editorial on IKEA
HNN Sources
Australian House & Garden Kaboodle editorial
Kitchen as a living-room from the Freedom Kitchens catalogue
Give to Amnesty International
From now through to the end of FY 2016/17 the kitchen renovation sector is going to be busy cooking up some major changes.

At the lower to middle part of the market, the next 15 months will be shaped in part by a battle between the Bunnings-exclusive flat-pack kitchen manufacturer Kaboodle, and the Swedish-based "King" of flat-pack, IKEA.

A little higher up the price incline, there is a better than 50% chance that the German-listed, South African based homewares retailer Steinhoff will acquire privately-held Australian retailer The Good Guys. Steinhoff already owns Freedom Furniture, and therefore the Freedom kitchen business. A combined company could exert a significant force in the $25,000+ part of the market.

Just to add even more spice, there is the exit of Masters from hardware retail, along with its Principal kitchen service. This will release a certain amount of revenue into the market -- but only after an initial period of discounting on many kitchen-related products, which could temporarily depress prices on goods such as benchtops.

The final sprinkle of chilli flakes comes from two main companies in the independent market, the Home Timber and Hardware Group (HTHG) and Mitre 10. HTHG is definitely on the market, as part of the exit by Woolworths from hardware. Mitre 10 could well be spun off by its owner, Metcash, as well.

There is also speculation that Mitre 10 and HTHG might be combined as a new company to be listed on the ASX. Whatever happens, it is likely that these hardware operations might seek to enhance their retail consumer offer, and kitchens could be a part of that.
The exit of Masters

Part of the "headline news" that will affect this segment of the home improvement industry is Masters' exit from home improvement retail. As with all aspects of the company's exit strategy, this is likely to have a two-stage effect: an initial dip in demand/price, as Masters discounts its existing stock, followed by an increased share of the market for some other participants.

In normal circumstances, it would be reasonable to expect that the Home Timber & Hardware Group (HTHG) would be able to pick up a considerable amount of the ex-Masters business. However, given the current circumstances, with Woolworths selling HTHG, that seems unlikely to happen. Making it happen would require a decent investment into the business, and it's likely management will not see that delivering an immediate return in terms of the end sale price.

The kitchens sold by Masters did come supplied with DIY instructions, but they are regarded as requiring skills at the higher end of DIY capabilities. It's likely that over 70% of these kitchens were assembled by contractors rather than home owners. That means that much of the business that gets released by Masters exit is likely to go to companies such as Freedom Kitchens and The Good Guys, as well as smaller, regional kitchen companies.

Mitre 10 might also be in a good position to collect some of the ex-Masters business, but with its ongoing focus on trade rather than consumer, this opportunity is likely to slip past.

The Bunnings-linked Kaboodle will probably pick up more than 10% of this business, but it is likely to suffer somewhat from Masters' discounting during calendar 2016. This particularly applies to areas such as benchtops and some cabinet fittings. Bunnings itself will likely also be hit by Masters' discounts on plumbing fixtures such as taps and sinks.

One of the surprise beneficiaries of the Masters' exit from kitchens is likely to be IKEA. One of the real benefits of the Masters' kitchens was their use of Hafaele fittings, which enabled customers to select some very sophisticated and useful configurations. That is an area where IKEA excels, particularly with its new range of Metod kitchens. IKEA has also worked hard to better integrate assembly services -- using HI Pages -- into its offering. It is quite likely the Swedish company could pick up 20% to 25% of the former Masters business.
Kaboodle and IKEA

These two companies have become engaged in a classic "scissors" competitive action in their retail sector.

Kaboodle -- along with Bunnings -- has put a lot of work into moving the classic "value" kitchen maker into the next category up in the market. Kaboodle has developed a series of well-planned, attractive kitchen designs at positive price points. Bunnings has given Kaboodle displays extra floor space, and used this to create interesting vignettes of kitchens.

In some stores, such as the Epping (VIC) Bunnings Warehouse, it has devoted a great deal of space to displaying the Kaboodle options. At others, such as the Mentone (VIC) Bunnings, it has provided a display of the basic components as a guide to construction.
Bunnings Epping display of Kaboodle surfaces

These ongoing developments have been backed up by a magazine advertising campaign, with occasional TV commercials at key moments of series such as Channel 9's "The Block". The magazine campaign has grown steadily in terms of design and execution over the past two years, and become one of the more effective campaigns by a home improvement brand today.

Meanwhile, IKEA has been moving in the opposite direction to Kaboodle, penetrating into the "value" end of the spectrum. That has become increasingly evident in its magazine advertising, backed up by the occasional web video campaign as well.

IKEA also has the considerable backup of its huge warehouse display stores, which offer far more space than the average Bunnings for kitchen display.
IKEA display kitchen

It also has the advantage of selling a respected home brand of appliances custom made for its kitchens. This is backed up by a website which, as it is designed specifically for homewares, does a better job of displaying the kitchen merchandise than the Bunnings website.
The market shape

What has brought about these changes in the market?

The graph below gives some indication of the changes that have occurred:
Number and cost of kitchens in new homes - HIA

The graph shows the cost of kitchens in new homes, as this is the data the Housing Industry Association (HIA) has made publicly available, but this usually tracks within 10% of the average cost of kitchen renovations. What it indicates is that there has been something of a "reset" when it comes to the costs of the average kitchen over the past three to four years. It's worth remember that around 2003/04 the average cost of a kitchen renovation, in today's dollars, was around $30,000.

Many commentators continue to persist with this older view of how the kitchen market works. Commenting on kitchen costs, they regard anything costing under $25,000 as a "minor" renovation, or one that is "basic" or even "bargain", and regard $35,000 as somehow representing the average cost.

Not so. Not at all. The average cost is really around $20,000, and will likely stay at that level for some years to come.

As purchase prices tend to be distributed around a normal curve, this means the "hot" price category with the highest density by customer numbers is now where kitchens cost between $15,000 and $25,000. In the past, Kaboodle had established itself as a leader in the $10,000 to $20,000 area, and IKEA had established itself as a leader in the $20,000 to $30,000 area. With the shift downward in the average price, Kaboodle is now reaching out to the $20,000 to $25,000 market, and IKEA is reaching for the $15,000 to $20,000 market. This is what is sometimes called a competitive "scissors" action.

Over the last three years, through a lot of hard work, Kaboodle has built itself an expanded role in the flat-pack kitchen market. It has moved from being the "budget" alternative, to something of a reference point for many people renovating their kitchens.

For renovators who plan to spend less than $20,000 on their kitchen renovation, at least looking to see what Kaboodle has to offer has become very common. It is growing in popularity for those planning on spending between $20,000 and $30,000 as well.
The Kaboodle strategy

One of the discoveries that Kaboodle seems to have made early in its quest to expand its market upwards is that it had two strong advantages it could use: a sense of fun, and a strong sense of style.

More expensive kitchens have a tendency to be austere, functional, and refined. What Kaboodle brought to its less-expensive kitchens was a bit of a sense of play and fun. While the underpinnings of the kitchens, the basic, machine-made forms that make up the cabinets and shelf supports, remained the same -- simple but useful -- Kaboodle rapidly evolved the facade, introducing fanciful and bold approaches to kitchen appearance. These include:
  • Rustic
  • Modern
  • Cottage/Farmhouse
  • Industrial/Warehouse
  • Cafe/Bistro
  • Heritage/Traditional
  • Hamptons
  • Colour based

  • These kitchen styles are now used by some renovators as the basis for their design of much of their dwellings. They might have an attraction to something like "industrial" design elements, but be unsure how to execute such a design. The "industrial" style Kaboodle kitchen provides them with a set of visual guidelines they can follow throughout their dwelling.
    Kaboodle ad design

    A challenge that Kaboodle faced in expanding its appeal is one that many Bunnings product lines face: how do you extend over more of the market, while clearly retaining links to the "base" market?

    Kaboodle has handled this by splitting its marketing into two different types of advertising. One form of that advertising, which is usually a double-page spread, sets out the practical steps involved in choosing and designing a Kaboodle kitchen. This is usually illustrated by a "before and after" set of photographs:
    Kaboodle explanation

    The other style of ad Kaboodle uses is more of a style/glamour ad which emphasises the design choices available:
    High-design Kaboodle ad
    Kaboodle media buy
  • Better Homes & Gardens/March 2016

  • Kaboodle's major advertising presence in Better Homes & Gardens (BHG) is a double-page spread right before the editorial section on kitchens, using the practical ad. BHG has done, in general, a good job with these editorial pages. The magazine manages to combine overview photographs to give a sense of a kitchen, with numerous details about how the kitchen was put together, and additional elements that might work with the kitchen style.

    As is usual in these editorial specials, kitchens by both Kaboodle and IKEA are used, though they are not always identified as such. In the previous kitchen special, which appeared in the September 2015 issue, while Kaboodle kitchens were used in the editorial, the company was not mentioned al all. (IKEA was mentioned, but not specifically in relation to a product.)

    In this issue both Kaboodle and IKEA are mentioned specifically in relation to products. The spread where Kaboodle is named uses an image that is taken from one of the Kaboodle glamour ads.
    Kaboodle editorial in Better Homes & Gardens

    In fact, Bunnings is all through this issue of BHG. There are two other ads for Bunnings homewares. Kaboodle is also used as part of a "granny flat" feature at the back of the magazine.
  • Australian Home Beautiful/March 2016

  • BHG is published by Pacific Magazines, and the other home design publication from Pacific is Australian Home Beautiful (AHG). It's not always easy to clearly identify kitchens, but as Kaboodle is not identified as a supplier by the magazine, it would seem no Kaboodle kitchens are featured in the editorial.

    Nonetheless, Kaboodle has made a considerable advertising buy in this edition. There is a double-page spread glamour ad, a one-page glamour ad, and a third-page ad promoting Kaboodle's kitchen designer software.
    Kaboodle glamour ad, Home Beautiful

    This expenditure does make sense, as AHG really defines the upward market that Kaboodle is aiming at, with kitchens that start at around $25,000. AHG does also offer the most comprehensive coverage of any of the magazines from this autumn season, with over 40 pages of coverage in its "2016 Kitchen Lookbook" feature. Of the 10 kitchens featured, four cost $60,000, there is a $26,500, a $40,000, a $50,000, and three from $66,000 to $80,000.

    For Bunnings, there is also a one-page Brilliant ad for lighting, and a one-page ad for Heatstrip outdoor heating.
  • Australian House & Garden/March 2016

  • Bauer Media's Australian House & Garden (AHG) offered a surprising good kitchen section in this edition. It profiled four kitchens, providing three pages of coverage for the first two, and a double-page spread from the last two. The first two are, as you might expect, deluxe kitchens, the first being a classic Sydney kitchen that has been featured frequently -- with good reason.

    The last two are budget kitchens, including one which uses recycled elements, including a shop counter as a kitchen counter. The final of the series is a Kaboodle kitchen (clearly identified as such), using a "semi-industrial" look.
    Australian House & Garden Kaboodle editorial

    Kaboodle has one glamour ad in a double-page spread,
  • Real Living/April 2016

  • This is also a Bauer Media title. The magazine surprised HNN by offering one of the better kitchen features for the Kaboodle/IKEA sector. In part that is because the magazine approached the feature as one that was all about flat-pack kitchens, rather than relegating them to a small section of a larger kitchen feature.

    Beyond that, however, the editorial team has obviously really invested time and energy in sourcing some more unusual and interesting photographs of flat-pack kitchens (no recycled ads here). To add interest, each of the five kitchens features a unique table and chairs combination, not sourced from the flat-pack provider, as well as an interesting range of appliances and accessories. The colours used and overall design approach is very engaging. Below is one of the two Kaboodle kitchens featured:
    Kaboodle kitchen in Real Living magazine

    Kaboodle has two double-page spread glamour ads in this edition. Bunnings also has a single-page ad for its designer lighting, and another single-page for a bathroom-related product.

    As Kaboodle develops its advertising further, it might look to this kind of treatment as a possible way forward, especially for the more upmarket magazines.

    Where Kaboodle has been nimble in adjusting its approach to capture a larger and developing market, IKEA has lagged somewhat in adjusting to the new realities of the kitchen renovation market.

    Prior to 2012, IKEA's main market was for renovators who started off budgeting for kitchen ideas that would end up costing $45,000 (and could easily run to $60,000), then cut back to a budget of $30,000. With a few compromises and the odd "luxe" touch, they could make IKEA kitchens "do", until the next renovation in 12 years, when they would finally get "the kitchen of their dreams".

    That market has been in steady decline over the past three to four years. It's been replaced by renovators who begin with a budget of $30,000, and are quite happy to end up spending under $25,000.

    In addition to this, the market that IKEA is to some extent missing consists of those renovators who are seeking to upscale from kitchens they might have installed when first purchasing a property 10 or 12 years ago. They're ready to spend $20,000 to $25,000 on a kitchen, but they really want to have an exciting addition to show for it. They are less interesting in something timeless, elegant and highly functional, and more interested in a kitchen that feels dynamic and fun.

    With this market, the company has not been especially effective with its approach. IKEA is a big, well-established, multi-national company, which can bring resources to areas such as marketing and media materials -- something its competitors struggle to match. Where it gets into trouble, however, is when it fails to get its localisation strategies right.

    IKEA kitchen advertising universally applies muted tones, with a lot of white, off-white and grey, delivering a distinctive modern European look, with a hint of legacy to it. This stands in stark contrast to many of its current store displays of kitchens, which will typically make use of the vibrant colours and interesting, dynamic designs.

    It seems likely that the in-store design has been successfully localised by store managers based on experience in what sells, but this localisation has yet to feed back to the advertising design, which is likely determined on a more global scale.
    IKEA strategy

    While these are considerable challenges, IKEA also has considerable resources at its disposal. Perhaps the strongest point of difference that IKEA does have over Kaboodle and other kit kitchens on the market is the sheer variety of fittings it offers. This extends to the arrangements of shelf and drawers, and the inserts that are available for these. These modules simply plug into the overall IKEA layout, and so enable the renovator to come very close to custom kitchen design. While they do cost, not only are renovators free to select what they can afford, but it is also a fairly simple matter to "upgrade" to better fittings a year or two after the kitchen has been installed.

    Another great resource IKEA has, which cannot (as yet) be matched by competitors such as Kaboodle, is the form factor of its kitchens. As HNN has mentioned previously, in expanding into the lower budget end of the kitchen renovation market, IKEA has employed a strategy that comes directly from its European roots: highlighting "stand alone" kitchen components. These are units that are not built into corners, but instead are freestanding against walls. As anyone who has put a complete kitchen together knows, this saves the effort spent getting the kitchen to fit into corners which are simply never really square at 90 degrees. The only interface between the kitchen bench and the room is its backing onto the wall, where out-of-square angles can usually be easily resolved. Easier DIY translates directly into cost savings.

    In its most recent promotional material, IKEA has gone one better on this design, and introduced the freestanding kitchen "pod". The pod is made up of back-to-back kitchen units that can house most of the kitchen necessities -- sink, stove, appliances -- without the need to rest against any wall.
    The IKEA kitchen "pod"

    While this might seem a slightly exotic solution in Australia, it is a common one in Europe. In part this is because one form of dwelling rental (common in France and Italy, and not uncommon in the UK) has the renter supply the fittings for the kitchen when they move in. One solution for this situation is kitchen "pods", with suppliers in Europe providing some very well-designed solutions. The pods can fit into any space, and can thus be moved by the renter if and when they move elsewhere.
    Dune kitchen pod - not IKEA
    IKEA advertising

    There is a marked shift in IKEA's advertising for autumn 2016 as compared to its spring 2015 advertising. That comes down to one element: price. Where in September/October 2015, all of the kitchens featured in its advertising had a starting price of over $10,000, in March/April 2016, the most common ad is for a kitchen costing $5200.
  • Better Homes & Gardens/March 2016

  • IKEA managed to scoop Kaboodle to get the inside front cover double-page spread for this issue, and it uses that space to run its most common ad for this season:
    IKEA ad in BHG

    Like Kaboodle, IKEA also picks up some editorial usage and mentions. In fact, it is the "pod" concept that gets the editorial mention:
    BHG IKEA editorial

    Interestingly enough, while Kaboodle is listed as a supplier for this editorial feature, IKEA is not.
  • Australian Home Beautiful/March 2016

  • IKEA's presence in this magazine is much less than that of Kaboodle. There is only one ad, the same double-page spread that appears in BHG. It is the third of six double-page spreads that start off the magazine, in order: Smeg, Temple & Webster, IKEA, Miele, Freedom Furniture, and Bed Bath & Table.
  • Australian House & Garden/March 2016

  • IKEA again runs the same ad, this time at around page 136-7 of the 194-page magazine. The only editorial mention seems to be for an IKEA kitchen stool.
  • Inside Out/March 2016

  • Not a magazine that Kaboodle chose to advertise in. IKEA has the second double-page spread at the start of the magazine, after Temple & Webster and before The Home. IKEA runs one of its lowest priced ads, which features the mid-wall unit.
    IKEA Inside Out ad for mid-wall unit
  • Real Living/April 2016

  • With Real Living, IKEA went for a splashy spend, using the inside front cover position to create a trifold opening, giving them four pages of ad content. The ad features both the configurability of the IKEA kitchens, and one sleek, modern design.
    Start of IKEA tri-fold
    Inside of IKEA tri-fold

    Like Kaboodle, IKEA also picks up editorial coverage in the flat-pack kitchen feature, with three of its kitchen designs featured to Kaboodle's two.
    Real Living editorial on IKEA
    Semi-custom kitchens

    Outside of the two major flat-pack contenders, the semi-custom kitchen market could be set for something of a disruption as well. Since November 2015 there have been rumours that appliance/kitchen retailer The Good Guys might be arranging to be taken over by South African-based and German-listed retail conglomerate Steinhoff International. This is significant as Steinhoff owns Freedom Furniture in Australia, and therefore also controls Freedom Kitchens.

    The Good Guys (TGG) is currently Australia s third largest consumer electronics and appliance retailer, after Harvey Norman and JB Hi-Fi. It is also among the top ten privately-owned companies in Australia.

    Steinhoff International NV listed on the Frankfurt stock exchange in early December 2015 (it has a secondary listing on the Johannesburg, South Africa stock exchange). It is now the second-largest retailer of household goods in Europe.

    [To continue reading, please click/press the Full Text link]
    Coomera residential development
    Stockland has agreed to acquire a 116ha property north of the Gold Coast
    Courier Mail
    It will be a residential development called Waterway Downs in Coomera (QLD)
    Stockland's nearby Highland Reserve at Upper Coomera is nearing completion
    Give to Amnesty International
    Property developer Stockland has agreed to acquire 116ha, incorporating a 98.2ha residential development site, at Coomera (QLD) for $40 million.

    Known as Waterway Downs, the property fronts the Coomera River and has approval from Gold Coast City Council for the construction of up to 747 residential dwellings. It will be a mixture of traditional detached homes and town houses.

    In a statement, Stockland said Waterway Downs will be a masterplanned, riverside community surrounded by a 50ha conservation area. The acquisition also includes two adjacent islands within the Coomera River and the suburb of Hope Island -- the 10.1ha Foxwell Island and 8.1ha Thomson Island.

    The primary development site will enable Stockland to increase its presence in the high growth Gold Coast north corridor. It expects to achieve the first settlements from Waterway Downs in 2017-18. Stockland chief executive residential Andrew Whitson said:
    This is an excellent acquisition, which reaffirms our strategic commitment to southeast Queensland and will enable Stockland to maintain its strong presence in the Gold Coast residential property market.
    Waterway Downs will provide us with a very good opportunity to generate positive sales momentum from the current upswing in the southeast Queensland residential market, and we expect to achieve incremental internal rates of return and an operating profit margin above our hurdle rates.

    Coomera area councillor Cameron Caldwell said the new project would be a positive addition to the Coomera community.
    This acquisition for Stockland is a great thing for the Coomera, it will continue the growth story of the area and will bring more housing stock and jobs to the northern Gold Coast.

    Future residents will benefit from the convenience of its location, less than 2km from Coomera train station and less than 4km from the M1 Motorway.
    Smart lock for apartment owners
    Latch smart door lock is made for apartment dwellers
    Digital Trends
    The lock is operated by passcode and smartphone integrations
    No keys are required for Latch smart door lock
    Click to visit the HBT website for more information
    Start up company Latch is making its first smart door lock available to real estate developers, so that apartments will come fully equipped with the high-tech entry system. Because Latch is a smart lock, there are no keys required so the lock is operated by passcode and smartphone integrations.

    For most city-dwellers and apartment-renters, installing their own high-tech smart lock is out of the question, because the landlord needs to be able to access the apartment too. That's why Latch is targeting luxury apartment buildings in order to give tenants access to the lock through their standard rental agreement. (The company is also trying to do deals with some offices and other commercial spaces like gyms.)

    Latch is even going so far as to discourage renters from passing out keys, unless a tenant insists. That way keys can't be lost and buildings don't have to change the locks when someone moves out.

    Latch can open with a traditional key, but its creators stress the passcode as the primary operation for locking and locking the door. Tenants will be able to issue temporary passcodes to visitors and family members. And as with other smart locks, Latch features setting options that will unlock the door as soon as the tenant's smart phone is within range.

    Some of the obvious concerns with Latch-equipped apartments have to do with privacy and security. Theoretically, building owners and managers would be able to access Latch's detailed logs of door activity, including each time a specific Latch device is opened or closed.

    Owners of large apartment buildings have the benefit of a sort of attendance log in case incidents or emergencies take place, but renters, who have access to their own information as well, have little choice about the tracking of their presence within Latch apartments.

    Latch door locks also have hidden cameras that snap pictures of guests at the door. Luke Schoenfelder, co-founder and CEO of Latch, told Digital Trends in an email:
    Latch deeply values consumer privacy and intentionally limits the data they collect to increase the security and safety of the building.

    So far, Latch has raised a total of US$16 million in funding to bring its first smart lock to market. Much of that funding came from real estate partners who have invested in Latch in order to secure early or exclusive access rights to the system. Two buildings in New York are already slated to implement Latch in the 435 units shared between them.

    In the future, Latch is considering marketing its product to individual consumers, although that's not a part of its early business model.
    Homebase acquired by Wesfarmers
    Bunnings about to takeover Homebase
    UK Renovation Forecast percentage growth
    UK Major Home Improvement Retailers
    Click to visit the HBT website for more information
    Wesfarmers has offered GBP340 million (around $705 million) for the Homebase home improvement retail operations of the UK-based Home Retail Group. The offer is highly likely to be accepted by Home Retail Group's shareholders, with the transfer taking place in early April 2016. Homebase will be managed by the Bunnings team at Wesfarmers. After an initial period of operating Homebase as Homebase, there will be a rollout of a Bunnings-branded retailer in the UK, using the retail real estate currently operated by Homebase. As part of these changes, Michael Schneider has been promoted to be in charge of the operations of Bunnings in Australia, as managing director. Peter ("PJ") Davis has been promoted to be in charge of Bunnings operations in the UK and Ireland, also as managing director. John Gillam will oversee all of Bunnings' operations, and his title is now Bunnings chief executive officer (CEO). Wesfarmers has indicated it hopes to retain many of the current Homebase retail staff. The current managing director of Homebase, Echo Lu, who was appointed in April 2015, has agreed to remain with the company in the interim.

    [Click Full Text to continue reading]
    2016 Wesfarmers Strategy Day
    Matt Tyson, previously of Masters, is set to advise Bunnings
    Strategy flyer for Bunnings staff
    Slide 54 from Wesfarmers Strategy Day 2016
    Give to Amnesty International
    It was never going to be easy.

    In January 2016 Wesfarmers managing director Richard Goyder and the then managing director of Bunnings, John Gillam, made a surprise announcement. Wesfarmers was about to acquire Homebase. Based in the UK, Homebase was a slowly failing home improvement retailer owned by the UK's Home Retail Group, along with home goods retailer Argos.

    The two Wesfarmers stalwarts introduced not only the acquisition of Homebase, but also a reorganisation of Bunnings. Mr Gillam would become chief executive officer of Bunnings overall. Peter Davis, who had been the effective "number two" at Bunnings, would take charge of Bunnings UK and Ireland. Michael Schneider, long responsible for directly managing the Bunnings stores, would move up to manage Bunnings in Australia and New Zealand (Bunnings ANZ).

    The acquisition was not the result of a sudden opportunity that had to be seized in an instant. Bunnings had started working on the possibility of buying into the British market more than a year previously. By the end of 2015, the project was far enough advanced that in November a Bunnings "shadow" team consisting of the executives who would take over the management of Bunnings ANZ was already meeting, ready to move.

    It was evident from the initial outline presented in January 2016 that the plan was daring indeed. The initial acquisition would cost around AUD705 million. After working to fix up the basic Homebase brand so that it stopped losing money, Bunnings would then set about entirely rebranding every store.

    They would be transformed from Homebase to Bunnings UK. With the rebranding, the chain's entire strategy would also be transformed. From a brand constantly seeking out mid-margin opportunities, it would become an everyday low price (EDLP), segmentless retailer. In other words it would duplicate - with strategic adjustments - the business model of Bunnings ANZ. The depth of capital expenditure required to get all this underway would be GBP500 million.
    Beta to version 1.0

    Over four months later, at the 2016 Wesfarmers Strategy Day on 22 June 2016, Mr Gillam and his team set out to explain the company's thinking not only about the Bunnings UK/Homebase development, but also about how Bunnings ANZ would function as well.

    Some aspects of the plan originally announced have been tweaked a little. A more generous timeframe has been allocated for the transformation to Bunnings UK, up from three to four years to three to five years. The capital allocation called out has increased by a couple percentage points as well, from the previously announced GBP500 million (AUD984 million), to AUD1 billion.
    Selling the vision

    During his introduction (HNN is publishing the full transcript of his presentation in this issue, along with some analyst questions of interest), Mr Gillam made repeated references to the history of Bunnings. He pointed out that it had begun as quite a small enterprise, that then grew through the acquisition first of McEwan's (largely in Victoria) in the early 1990s, and then of BBC Hardware, when Wesfarmers acquired the assets of Howard Smith in the early 2000s. He drew some parallels between the acquisition of McEwan's and the acquisition of Homebase in particular, pointing out that the former had actually been in administration when Wesfarmers bought it.
    2016 will challenge independents - HNN

    Mr Gillam also went to some lengths to describe the matrix of capabilities and market fits that Bunnings has created. He pointed out that Bunnings operates in the DIY, DIFM (do it for me), light commercial and heavy commercial areas. He drew particular attention to light commercial:
    The light commercial engagement in our business is really, really pleasing. It actually synergises our stores, they shop us at different times, really, than consumers, but they are shopping mostly and nearly totally the same products, so it gives us more working capital benefits as well, and it validates the offer to have that quality of person shopping you, as well as people who are trying to do things around their home. There are more and more segments that just work on the home, and that's one of the exciting areas of light commercial.

    Customers are serviced through not only the "standard" Bunnings Warehouse outlets, but also through smaller urban stores (such as the Bunnings in Melbourne's Collingwood), "traditional" smaller Bunnings stores in some regional areas, and Bunnings Trade stores (which are typically created on a somewhat temporary basis to provide building supplies in areas with active building and construction projects).

    In addition, Mr Gillam pointed out that these markets are serviced through a range of means, including relationship marketing, direct marketing and standard mass marketing techniques. He described the structure of Bunnings as being a "multiple hybrid", which was engaged in both retail and wholesale operations. In describing the range of Bunnings' activities, Mr Gillam said:
    We have nine major work areas, five growth drivers and four areas within our business that are looking to lift productivity and strengthen the core of the operations. Those work areas are all focused on making sure we have a winning offer, that we can do things that engage and involve our team even more, that we are growing the market, and from that perspective then looking to grow our share. All within that framework of long-term value creation.
    For the year going ahead Mike and Clive and the exec team for Bunnings Australia/New Zealand have clustered the nine work areas around three major themes. A way of simplifying and energising what we are doing, so that we have a new, strong message for our team. We want to create better experiences, we want to improve the core, and we want to drive growth.

    The nine work areas, as spelled out in the Bunnings "Plan" flyer provided for staff are:
  • Better everywhere; team, customer, community
  • Keeping it the community, caring for the environment
  • Stronger team
  • Lift productivity
  • Better stock flow
  • Even more customer value
  • Greater brand reach
  • Stronger commercial engagement
  • More merchandise innovation

  • If there was one theme that emerged from Mr Gillam's comments about both the Bunnings ANZ and Bunnings UK operations, it was an increased focus on the potential for outdoor living as a category. Mr Gillam has mentioned this at previous Strategy Days, but this time there was a particular emphasis.

    In the UK this is driven by what he generously described as "possibly the worlds' best gardeners", referring to the British. However, the push for outdoor living as a category was extended in some of his comments to Australia as well. Mr Gillam has also singled out better barbecues as one of the products the company has planned for Bunnings UK stores.

    The only other element that was a little unusual was that the idea of "brands" featured more prominently in Mr Gillam's statements. There was increased emphasis on the idea that the core Bunnings strategy was not just the low price, but also bringing established and well-known brands to customers at these prices.

    It is an interesting emphasis. Bunnings has avoided full vertical integration (which Kingfisher, for example, is moving a little closer to under its recent restructure in commodity products such as lightbulbs), but it does rely on a number of "captive" brands, such as Kaboodle in kitchens, and Ozito in power tools.
    The acquisition

    The plan for developing Homebase into Bunnings UK remains essentially unchanged. The first phase involves building a retail team and changing products to better reflect the Bunnings EDLP strategy.

    The most important point reached in the initial months will be the development of a number of pilot stores to test the Bunnings UK concept. The original number of pilot stores seems to have been four, but the UK financial paper-of-record, the Financial Times, is reporting there will be 12 pilot stores, to be rolled out over 18 months. It's likely both numbers are correct, with four pilot stores to be followed by a further eight stores to test the market in more regional areas, prior to a full-network roll-out.

    A report in the UK-based Guardian newspaper indicates that the first pilot store will open in October, followed by one or two more before the end of calendar 2016, with more to come in the first half of calendar 2017.

    According to Mr Gillam, the development of pilot stores that meet expectations will be something of a "hard stop". Until the pilot stores have provided a good indication of what will work in the market, the Bunnings UK rollout will not proceed.
    Some help

    One of the most interesting announcements Bunnings made was that it has formed an advisory panel to help it adjust to and understand retail conditions in the UK. The three people on the panel are all heavy hitters in the retail area - including Matt Tyson, the former head of the Masters Home Improvement retail operation in Australia. Mr Gillam praised his contribution in particular, saying:
    Matt Tyson is an interesting choice. Matt knows us very well, because he's been here competing against us. So he understands what Bunnings is. Maybe he understand things that we don't understand about ourselves. Strengths that we don't understand, or weaknesses that we don't know about. He is also a very very well-credentialed UK retailer, born of Kingfisher, and has been part of Kingfisher's expansion in France and in Russia, and also in helping them out of the mess they had in China. It's terrific to have Matt on board.

    The other members of the board are Archie Norman, the former head of Asda and a politician for the UK Conservative Party, and Michael Mire, a well-known McKinsey director, who has a background with both construction and the Kingfisher group.

    It is interesting that two of these choices have extensive past experience with Kingfisher, which Mr Gillam cited as a key competitor at the initial announcement of the acquisition in January 2016, but barely touched on in this presentation.
    Current status

    As Mr Gillam pointed out, Homebase has only been under Wesfarmers control for around four months, so there is little data that could be offered to support any changes made. He said that moves towards lower prices are already underway, and that the stores are moving rapidly away from the "soft" products, such as doonas, and towards an EDLP pricing strategy.

    In an amusing anecdote, Mr Davis recounted how some staff members at a store reported to him that the "scruffies" were starting to show up. This turned out to be a reference to British tradies, who had dared to enter the pampered confines of the Homebase stores, attracted by low prices. Mr Davis was very good humoured about the whole thing, but this does point at just how far Homebase needs to be taken. The class system, which is both frequently mocked and at times half-heartedly emulated in Australia, is alive and well, and sometimes raising barriers to successful retail in Britain even today. It is a long road indeed from welcoming light commercial customers as they "validate" a store, to regarding working men and women as "scruffies".

    The questions offered by the financial analysts were, in the main, not particularly good this year. It was almost as though they were a little stunned. To be fair, their mainstay is financial statistics, and Homebase in its current state just isn't producing much to go on just yet.

    The one exception was a long question proffered by the highly respected analyst for Bank of America Merrill Lynch, David Errington. Mr Errington has been raising grave concerns about Wesfarmers' investment in Homebase. In comments published in Fairfax Media before the Strategy Day, Mr Errington is reported as saying:
    We were critical towards Woolworths entering the Australian home improvement sector via Masters and we believe Wesfarmers entering the UK market via Homebase will be as equally a compromising decision for Wesfarmers. Paying $705 million for a business generating $40 million of earnings before interest and tax, and where that business is smaller scale in a tough industry, raises questions.

    In his analysis, Mr Errington questioned whether Wesfarmers would be able to maintain its high rate of dividend payouts.
    With the drop in earnings now expected and post its Homebase acquisition, which brings with it more than $600 million worth of annual rent expenses, this strategy now looks to be closing and with a fixed-charge ratio forecast to fall to 2.44 times, its growth options look challenged. Wesfarmers' balance sheet can no longer afford paying out 90% of its earnings in dividends ... and it cannot afford any of its businesses sustaining further drops in earnings.

    The exchange between Mr Errington, Mr Gillam and Mr Davis is provided at the end of the transcript in this issue of HI News. It's best read in the original, but suffice to say it indicates a good deal of conflict, potentially not only between Mr Errington and Wesfarmers, but also with other analysts as well.

    It is possible to feel some sympathy for the financial analysts. It is difficult to imagine a scenario that would more frustrate their analytical sensibilities than having Wesfarmers spend what could turn into AUD1.9 billion in total to first buy a failing home improvement retailer in a foreign country, then fix it up, and, when it is working reasonably well, replace it with a quite different brand imported from Australia.

    All this introduces a wide range of uncertainties which simply, particularly in combination, cannot be quantified. Risk quantification and prediction are what is at the heart of financial analysis.

    On the other hand, though, Bunnings' position must really be fully appreciated. One of the elements that was not explicitly mentioned by Mr Gillam or Mr Davis, but which emerged every time they spoke about the strategy, is just how deep the talent runs in Bunnings (and Wesfarmers as a whole). It's not just that Mr Gillam can easily tap both Mr Schneider and Mr Davis to take on leading roles, but that each of them can easily call on the services of five or six very competent executives to back them up.

    In the end, what has really happened with Bunnings is that it has found itself, at the end of over 20 years of hard development - and after fighting off a rival for six years which was willing to spend billions of dollars to obtain market share - with a surplus of talent and ability. It's as though a team of Olympic level runners has been built up over the past ten years, and for the moment (while real developmental challenges do remain in Bunnings ANZ operations) many of them would find themselves consigned to the equivalent of taking long walks in the park, or working on improving their poetry, or something.

    Most businesses really hate that kind of waste, but it is especially true of retailers. One of the frustrations that attends this talent surplus is that, given Australia's fears about its small markets coming under the control of monopolies, it is difficult for Bunnings to extend its reach in some markets.

    Viewed strictly in terms of capital allocation, the move into Homebase might not make entire sense. When talent allocation, operational expertise, retail smarts, and disciplined management practices are added to that equation, it all does start to make sense. It's not about creating waste, it's about ensuring waste does not happen.
    The real reason

    There is a place, however, where these two elements, the tending after capital allocation and the careful preserving of talent, do blend together when thinking about the Homebase strategy.

    One thing that HNN has learned is to take just about everything that is said by Bunnings (and especially John Gillam) very seriously. If it doesn't quite make sense at first, generally it's worth thinking about for some time.

    One statement that really puzzled us came out of the original acquisition announcement. This was the idea that Bunnings might have found some way to reduce the lower levels of retail activity during the "off-season", the winter months in Britain. It is easy to dismiss this. Many people who grow up in temperate climates find seasonal weather to be a bit odd, while those of us who grow up with seasons see them as welcome and a joyful part of life.

    What if, though, we began to wonder, Bunnings actually could do that? As a mild example, what if it were possible to extend the southern British growing season? The non-growing season runs on average pretty much exactly 16 weeks of the year. What happens if you take six weeks off of that, three weeks at both the start and end?

    The first thought one might have about this is, if it is such a good idea, why hasn't anyone else done it just yet?

    As it turns out, if you think about that question, some interesting possibilities open out.

    It seems to be quite likely that if you are operating a home improvement retailer that is based on a High/Low pricing strategy, increasing the length of the growing season might not just have little or no effect, it could actually end up decreasing sales revenues and margins.

    High/Low relies on and achieves high sales and high margins during times of what we might call "high sales compression". This is when there is a general spike in demand. This can be caused by certain celebrations, such as Christmas, Mother's day, and Father's day. It is also caused by moments of high seasonal demand, such as (in colder climates) the first two weeks of actual spring, when gardeners rush to buy seedlings for the coming summer.

    Spring comes and the local garden centre offers a "special deal" on petunias (or something). Customers rush down to buy their petunias at this great price - but then there are these other petunias, which are so much nicer, though a bit more expensive. We all know how that ends.

    For EDLP, the story is quite different. The petunias in the EDLP store consist of two kinds. There is the "better than expected" petunia, which is low-cost, but hardy and pretty enough. Then there is the "surprise" petunia. Much of the surprise is that a better petunia is offered at an unexpectedly low price. That sense of surprise is what triggers the purchase reaction in the customer.

    For EDLP, extending the time during which people can buy plants, and/or plant supplies, is going to be very positive. In the end, part of the power of the EDLP model is that it can restructure markets. It often brings these changes about not through single products, but through combinations of products.

    High/Low pricing, by contrast, does not rely on restructuring, but on creating a series of events. If a convenient cultural event is not available, then an event is created, by staging some kind of sale in a product category.

    The important aspect of all of this is that it means High/Low retailers are particularly vulnerable to attack by EDLP retailers. High/Low lacks the tools needed to restructure markets, so EDLP are free to gradually change markets in fundamental ways which benefit them.

    There are strategies that High/Low can employ to fight back against EDLP. However, those strategies tend to be sophisticated and complex.

    What seems possible is that what Wesfarmers/Bunnings has really spotted in acquiring the Homebase business has much less to do with Homebase itself (it is simply an adequate vehicle), and much more to do with the British home improvement market. It is a market, Bunnings believes, that has a very high vulnerability to an EDLP competitor. That is because not only because low prices will work in that market, but also that the existing retailers do not know how to fight back against EDLP strategies that alter market structures.

    That is the opportunity in Homebase - it's the market, not the retailer.

    Until next time,


    You can contact me directly via email or Twitter @HNN_Australia

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    HNN iPad App
    DeWalt launches FlexVolt: 20V to 120V tools
    The battery idea
    DeWalt Australia
    DeWalt FlexVolt table saw
    DeWalt DCS575T2 saw
    Click to visit the HBT website for more information
    In a very clever and commanding move, Stanley Black & Decker's DeWalt professional power tools division has launched a range of high-powered tools and accessories.

    After "teasing" the market for over a month, on 21 June 2016 DeWalt finally released details of the new product it has been developing.

    Named "FlexVolt", the new product range is based on some unique battery technology. The FlexVolt batteries have a nominal voltage rating of 60-volt (maximum) or in the Australian market, a non-maximum rating of 54-volt. However, these batteries remain compatible with DeWalt's XR range of 20-volt maximum, 18-volt non-maximum power tools. Additionally, DeWalt is also producing some cordless power tools operating at 120-volt - the standard US household current - that combine two of the 60-volt batteries.
    The battery idea

    Amazon is currently selling the batteries for USD199 for a two-pack of six amp-hour batteries.

    DeWalt is also selling a mains current adapter. This enables users to directly connect their FlexVolt cordless tool to household current, moderating concerns about running out of power on some tasks.

    DeWalt has also thought about the problem of air travel. Lithium-ion batteries about a certain wattage are not permitted on flights, as there is a potential they could catch fire. To get around this problem, DeWalt provides an air travel adapter that effectively makes the battery function like three smaller batteries tied together.

    Voltage switching is automatic between tools. Based on DeWalt's promotional video, the technology works by using three rows of batteries. When plugged into a 60-bolt tool, these connect in series. When plugged into a 20-volt tool, they work in parallel. The result is the high-power of a 60-volt tool, or what DeWalt claims as four times the runtime (per amp-hour) on a 20-volt tool.

    The FlexVolt range also includes what DeWalt is calling "high-efficiency" accessories, which it says are designed specifically to increase the runtime on cordless tools. These include circular saw blades, reciprocating saw blades, and disks for grinders.
    The tools

    DeWalt has announced two 120-volt tools and five 60-volt tools. In addition, it has announced plans to release three items of outdoor power equipment (OPE).

    The 120-volt tools are a fixed blade mitre saw, and a sliding mitre saw. The 60-volt tools are a circular saw, a table saw, a reciprocating saw, a grinder, and a stud/joist drill. The OPE range is expected to include a line trimmer, a blower and a chainsaw.
    Circular saw DCS575T2

    This saw has a 7-quarter inch full size blade, with an electronic brake that stops the blade after the trigger is released. This unit also has an LED light that provides clear sight to the cutline. DeWalt claims it can cut up to 339 cuts per charge in a 2x4 using a flexible battery.
    DeWalt DCS575T2 saw
    DeWalt DHS790AB double bevel compound sliding mitre saw

    Designed for cutting wood, this 120-volt mitre saw is capable of 310 cross cuts in baseboard moulding, according to DeWalt. Tall sliding fences support crown moulding up to 185mm nested and base moulding up to 175mm vertically against the fence. The tool weighs 25kgs.
    DeWalt double bevel compound mitre saw
    DeWalt DCS7485B table saw

    This table saw provides 600mm of rip capacity for ripping 4x8 plywood. Rack and pinion telescoping fence rails make fence adjustments smooth and accurate, with tool free adjustment of the guarding. Table coating reduces friction for smoother cutting. Adjustable rear feet are designed to level the saw on uneven work surfaces.
    DeWalt FlexVolt table saw
    DeWalt DCS388T1 Reciprocating Saw

    The saw has a keyless lever-action blade clamp, and a variable speed trigger. DeWalt claims it can cut up to 158 cuts per charge in a 2x4.
    DeWalt FlexVolt reciprocating saw

    Details on the other tools in the DeWalt line-up are a little hard to find just now, but HNN will keep you posted with more news as it becomes available.

    This is really a very good marketing move by Stanley Black & Decker. The need for more powerful tools, and hence a second battery system, has been growing over the past two to three years as cordless increasingly becomes the default, and having to make arrangements for corded tools somewhat annoying.

    DeWalt has managed to crack the primary problem with that: how do you introduce more powerful batteries without requiring clients to purchase an entire, second system of battery infrastructure? Using one battery that provides the extra power required, but remains compatible with the standard DeWalt tools, is very good.

    More than anything, though, this move has created a strong reason for businesses at the heavy end of building and construction to either stay with the DeWalt system they are already using, or even switch to it, either wholly or partially.

    Both Techtronic Industries (TTI) with its Milwaukee brand, and Bosch with its professional "Blue" brand, had begun to make inroads on that market through their adaptations of mobile phone technology, converting tools into part of the Internet of Things.

    That technology gap still exists, and Stanley Black & Decker will need to address it in some way in the near future. However, at the very least, this move provides the company with more time, and secures its credentials as being at the forefront of tool development.
    Mitre 10 FY2015-16 results
    Results for Mitre 10 FY2016
    Mitre 10
    Metcash results for FY2016
    The Northern Timber Group
    Click to visit the ITW website for move information
    Australian retail wholesaler Metcash has reported its results for its latest financial year (FY), from 1 May 2015 to 30 April 2016. Unusually, while the company has provided presentation slides for a financial analyst briefing, there appears to have been no such briefing as yet, so this report is based on the preliminary results and those slides. Should an actual presentation come to light, HNN will provide a supplemental report.

    For its overall operations, the company has provided results that would be described as poor for most wholesale sectors, but for the grocery sector, which makes up the bulk of Metcash's revenue, the result might best be described as average and acceptable.

    Totals sales for FY 2016 were AUD13,541.3 million, up from AUD 13,369.8 million in the previous corresponding period (pcp), which was FY 2015, a gain of 1.28%. Underlying profit before tax was AUD248.4 million up by 2.56% on the pcp. Earnings before interest and tax (EBIT) in FY2016 were AUD275.4, down 7.37% on the pcp.

    The decline in EBIT reflects increased costs of sales. As Metcash stated in its comments:
    There was continued improvement in both the Liquor and Hardware Pillars, that was more than offset by the decline in Food & Grocery, reflecting the planned investment in price by the Supermarkets business and a deterioration in the performance of the Convenience business.

    The underlying profit numbers benefitted from a decrease in finance costs, which were AUD27.0 million for FY2016, and AUD55.1 million for FY2015. The sale of the automotive assets netted the company AUD242.1 million before tax. Further asset sales provided another AUD57.3 million. This enabled the company to decrease its leveraging.

    The overall profit for FY2016 was AUD216.5 million. The profit for FY2015 was a loss of AUD384.2 million, due to a substantial write-down.

    The only other number that seems particularly significant for Metcash as a whole was an increase in salaries and wages, which reached AUD480.1 million for FY2016, up from AUD453.1 million in FY2015, an increase of 6.0%.
    Metcash results for FY2016

    Metcash announced that it plans to recommence paying half-yearly dividends as of the end of the 2017 financial year.
    Mitre 10

    Mitre 10 managed to produce quite good results. Sales revenue for FY2016 was AUD1056.6 million, up by 0.78% on the pcp. EBIT was AUD32.8 million up 8.97% on the pcp. Growth in like-for-like store revenues was reported as 2.5%.
    Results for Mitre 10 FY2016

    As the background growth in retail sales for hardware grew by 7.9% between Metcash's FY2015 and FY2016, the result would tend to indicate that overall Mitre 10 has lost some market share during this past year.

    FY2016 began with 327 stores signed up to Mitre 10. A further 10 stores joined during the year, while 28 chose to leave, so that the year ended with 378 stores attached to the banner. True Value Hardware stores changed little, going from 69 to 68.

    The company intends to intensify its efforts to cut costs, with an end target of taking AUD100 million out of the business, and an interim target for FY2017 of removing over AUD20 million in costs. The goal is to then use these cost saving to fund further expansion in the business itself.

    A new twist in Mitre 10 marketing which shows up in its financial reports is the phrase "Best Store in Town". It is not possible to tell if this is a marketing phrase used to attract potential members to the banner, or if this is destined to replace the retailers' current marketing phrase "Might Helpful Mitre 10".
    Joint ventures

    Appendix B to the financial statements note that Metcash acquired a controlling interest in two hardware retailers during FY2016, Northern Hardware Group and Timberten Pty Ltd. The company now owns 84.7% of Northern Hardware Group, and 100% of Timberten.

    Note 8 to the Metcash financial statements shows that the company no longer has a joint venture with hardware retailer BRJ Pty Ltd. It previously held a 36% share.

    The 2015 financial statements noted Metcash had entered into joint ventures with G Gay Hardware Pty Ltd, and Woody's Timber & Hardware Pty Ltd. These joint ventures (JVs) continue, along with JVs with Waltock Pty Limited and Banner 10 Pty Ltd.

    In terms of Mitre 10 itself, one imagines that the managing director of Metcash, Ian Morrice, must be very pleased with the Mitre 10 CEO Mark Laidlaw and his team. They have managed to deliver just what Metcash, as it faces troubled times in its IGA business, needs: contained costs and a good EBIT result.

    What is less clear is whether this particular role is really what is best for Mitre 10 as a company, and for the members who have signed up to the banner. HNN has noted that marketing efforts seem often to be well-designed, but ultimately so constrained by cost control that they are not as effective as they could be.

    Speculation continues about whether Mitre 10 will be combined with HTH Group stores, either within Metcash, or in an external company, the latter move possibly funded by one or more groups of private capital investors. This result may very well help to encourage those moves, as it is a clear indication of a business that has more potential than is being made use of by its current owner.
    Masters exit

    The exit of Masters from retailing is likely to have some negative effects on sales for Mitre 10 during the first half of its FY2017. Masters would seem to be in the second stage of what will most likely be a four-stage discount sell-out. We can expect further, deeper discounts, likely in around mid-August 2016, followed by very steep discounts probably some time in October 2016.

    During the second half of its FY2017, however, there should be some sales positives, as consumers seek out an alternative to Masters stores. It will be interesting to see if Mitre 10 is able to ramp up its marketing during this period, and so help its member stores grow their sales.

    Metcash-Mitre 10 H1 results - HNN
    Metcash full year 2014-15 results - HNN
    Big box update
    The new Bunnings store in North Orange (NSW) is officially open
    HNN Sources
    Bunnings has decided to pull out of the Nectar rewards scheme in the UK
    The July 4 deadline for the bids for Woolworths' home improvement division may be extended
    Click to visit the HBT website for more information
    The full version of "Big box update" appears in HNN's HI News PDF magazine. The Sunshine Coast council is deciding on applications for Bunnings Warehouse at Coolum Beach (QLD); Bunnings store in North Orange (NSW) is open for business; Bunnings store planned for Victor Harbor (SA); Construction of the $10 million Bunnings Yarrawonga outlet has begun; Bunnings Warehouse in Kingsgrove (NSW) is close to completion; analyst David Errington disapproves of Bunnings' growth strategy in the UK; Bunnings latest movements in the British market include pulling out of the Nectar rewards scheme, failing to trademark its advertising taglines and letting go of Homebase garden staff; and there is a possibility the deadline for Woolworths' sell off of its home improvement division may be extended.
    New stores
    Bunnings fights for Coolum

    The big box retailer will continue to pursue a new warehouse in Coolum (QLD) after the Sunshine Coast Council refused two out of the three development applications it had put before the local authority. Bunnings general manager - property Andrew Marks told the Sunshine Coast Daily:
    We are very disappointed that Sunshine Coast Regional Council has refused the application for a new Bunnings Warehouse in Coolum.
    A Bunnings Warehouse in Coolum would provide a number of key benefits to the community, including employment opportunities for local residents, ongoing support for community groups, and investment in the local economy. Bunnings will continue to work with authorities to facilitate development and bring employment opportunities to Coolum.

    Bunnings' intentions to build an 8,600sqm warehouse at Coolum Beach have also been dashed, but its fight is not over. It has a third application before Sunshine Coast Council officers for a smaller development.

    Councillors unanimously voted against the second application for Bunnings to build at Coolum shortly after voting against its first application for a larger than a 12,150sqm store.

    The third application, which should come before council in a couple of months, is for a 5600sqm store.

    Mayor Mark Jamieson noted his concerns the council was failing Coolum Beach in that it was not creating new job opportunities.

    But Lyn Saxton from Development Watch believes the number of jobs Bunnings would create would be offset by the number of jobs lost from long-existing small businesses in the area. She said the community's preferred use for the site would be for "government offices or more sports fields".

    Bunnings tries a second time to build in Coolum - HNN
    Bunnings Orange store unveiled

    Rugby league legend Brad Fittler helped to officially open the new Bunnings store in North Orange (NSW). He told the Central Western Daily:
    I've been working with Bunnings for a while now, I'm a regular customer at the store and I believe in the company's principles. I've built a few houses myself but not very handy - I like watching and organising rather than hammering the nails. It's a massive store but the area will handle it, which says a lot about Orange.

    The $31 million Bunnings Warehouse is a significant upgrade and includes an undercover nursery that is four times the size of the old nursery. The home section has doubled in size from the previous store in the homemaker's centre on the Mitchell Highway.

    In the past, customers had to order stock that could take as long as three days to arrive, but the size of the new facility means most products will be on the shop floor. The new Bunnings outlet has been more than $8 million worth of stock.

    Store manager Jason Bootsma said everyone was extremely excited to finally be open. He said the store would be "tradies heaven".
    Our indoor timber is three times the size of what it once was and would be the biggest range in the Central West for sure. We have a fully enclosed trade yard which is also twice the size it was before which gives us an infinite range for construction - everything is just big.

    You can view a video of the new Bunnings Orange store, courtesy of Eyetrix Productions, here:

    Big box update: Bunnings' Orange site gains endorsement - HNN
    Re-zoning allows Bunnings to build

    Bunnings, along with Coles and Aldi, will erect new stores in Victor Harbor (SA) following the Minister for Planning John Rau's decision to rezone the land for retail. Bunnings general - manager property Andrew Marks said it is too early to be able to provide detail of any development application. He told the Victor Harbor Times:
    Bunnings is happy with the decision and we are looking forward to submitting a development application for a new warehouse for the Victor Harbor community. If approved, Bunnings would represent an investment of over $23 million and would be expected to employ over 110 team members.

    It is envisaged the Bunnings warehouse will be 9000sqm, which will be smaller than the one at Mile End, and similar to the new Seaford store.

    City of Victor Harbor mayor Graham Philp acknowledged the Minister's decision, but expressed his disappointment in the process. The Minister took control of the planning process from the council after it was judged council took too long to make a decision. Mr Philp said:
    Our focus has always been on achieving the best outcome for our community and the negotiation of infrastructure agreements was our priority. We maintain our position that the Victor Harbor ratepayers should not have to bear the cost of infrastructure required because of new developments.
    Construction starts on Bunnings Yarrawonga

    Bunnings' latest store in Yarrawonga (VIC) is expected to open in November 2016, and have a total area of more than 6,000sqm. Bunnings general manager property Andrew Marks told McPherson Media Group:
    Bunnings' investment in Yarrawonga will provide great job opportunities for the local community with approximately 60 jobs expected to be available in the Bunnings team following the opening of the store...The community has been waiting to see this project commence and we're pleased construction activity is under way.

    In line with Bunnings' commitment to sustainability, the Yarrawonga store will implement a number of energy and water saving design features, such as energy efficient LED lighting as well as rainwater harvesting tanks to reduce energy consumption. Project manager Gareth Phillips said the Yarrawonga location is a fantastic site. He said:
    It is really good ground to build on with hard compacted clay, this makes for a strong foundation.

    Big box update: Bunnings in regional Victoria - HNN
    Bunnings opening in Kingsgrove

    Work on $58 million Bunnings Warehouse in Kingsgrove (NSW) is nearing completion with the internal fitout scheduled for August, according to the Daily Telegraph. The store will measure more than 16,000sqm. It makes the Kingsgrove store the largest in Canterbury-Bankstown, with the Bankstown Airport and Greenacre outlets slightly smaller.

    Bunnings general manager of property Andrew Marks said the new warehouse would offer strong employment opportunities and give local residents a wide range of products to choose from.

    The nearby Masters Chullora store is set to be sold but will remain open in the meantime, said a Woolworths Group spokeswoman.
    Is Bunnings set for failure in the UK?

    Influential Bank of America Merril Lynch (BAML) analyst, David Errington has described Wesfarmers' acquisition of UK home improvement retailer, Homebase as "compromising" and compares it directly to Woolworths' disastrous experience with Masters. His comments have been widely reported in all the major Australian newspapers.

    Wesfarmers' $705 million purchase of Homebase puts is credit rating and generous dividend at risk, according to Mr Errington. He said the damage to investor returns and business performance at Wesfarmers from Homebase would "equal" the impact of Woolworths' costly Masters experiment.
    We were critical toward Woolworths entering the Australian home improvement sector (via Masters), and we believe Wesfarmers entering the UK market (via Homebase) will be as equally a compromising decision for Wesfarmers as Masters was for Woolworths.
    Homebase dilutes returns on investment ... and we think it comes with material business risk.

    Mr Errington also said Homebase appeared to have the "distinct competitive disadvantage" of high base costs and low sales.
    Being the lowest cost while having the highest costs is basically unsustainable and irrational for any business.
    Paying $705 million for a business generating $40 million of earnings before interest and tax, and where that business is smaller scale in a tough industry, raises questions.
    And when a further $1 billion is being committed over the next five years to improve the business, we are highly sceptical.
    Due to the planned overhaul of the Homebase business, we believe marketing costs are likely to be hefty as Bunnings has no brand recognition in the UK. We have concerns that Homebase will likely "chew up" any profits currently being generated in re-branding, marketing, pricing and service costs.
    The growth in the home and garden market in the UK has been low for an extended period as shown below. The current five year CGAR (Compound Annual Growth Rate) suggests growth has been below 1.5% Homebase currently holds about 3-4% market share and we question its ability to grow in a slow market against a backdrop of economic uncertainty (Brexit, global GDP concerns).

    Earlier this year, Bunnings CEO John Gillam said the property costs in the UK were higher at something like 2.6 times the percentage of sales paid in Australia. Mr Gillam has said it will take two years before Wesfarmers will be able to show whether the acquisition will be successful.

    Because the rental costs are high, he will operate in smaller format stores much akin to Aldi and Lidl in the UK who are enjoying fast growth over the bigger majors in their large format stores.

    It is believed that Mr Gillam will put the case for the company to open a pilot Bunnings store in the second half of 2016 and, subject to performance, roll out stores from there. This is down from the plan shared with suppliers earlier this year, when it was confirmed that the first Bunnings store would open in the European summer and with another five or six stores in the pipeline.

    It is also understood that Mr Gillam will stress the company is not committed to spending any further money in the UK unless it is fully justified. He will highlight that the Homebase business is not great, adding that the acquisition gave Bunnings entry to the UK market, not an operating business.

    A number of industry participants are concerned the turnaround of Homebase will be costly and require significant investment to build the network and promote the Bunnings brand in the UK, a market dominated by the Kingfisher-owned B&Q.

    It is believed Wesfarmers is testing several different models before rolling out the Bunnings brand and UK hardware sources have suggested to Fairfax Media that it is already working on changes to the product mix.
    Impact on Wesfarmers

    Its expansion into the UK and declining earnings from its industrial businesses could lead to lower dividends and a fall in Wesfarmers' credit rating, reports The Australian.

    Mr Errington said declining profits from Target and Wesfarmers' non-retail businesses, notably coal, will constrain the group's ability to support the British push.

    Mr Errington argued the fixed charge ratio (which measures costs and balance sheet risk and a key metric used by rating agencies) at Wesfarmers fell from 3.17 in 2014 to 2.99 last year and would fall to 2.54 this year and 2.44 in financial year 2017. It is falling as a result of weak performances from its Target chain, and coal and industrial units.

    Combined with $600 million in annual rent charges from Homebase, Mr Errington said Wesfarmers' credit rating could slip by as much as two "notches" from A-negative to BBB, the same level as wounded rival Woolworths.

    It is understood the ratings agencies have looked into the Homebase deal in some detail and sources close to Wesfarmers suggested the fixed-charge ratio was only one metric used to calculate ratings.

    In January, Standard & Poor's downgraded its risk-rating outlook for Wesfarmers from stable to negative, however, Moody's said Wesfarmers' rating was unaffected by its then proposed acquisition of Homebase.

    The recent note from Mr Errington is the latest in a series of reports that are against Wesfarmers and for Woolworths, with him having a buy on the latter and a sell on the former.
    Mr Errington's reputation

    Sean Smith writes in The West Australian, that Mr Errington has long been known for his forthright, sometimes contentious financial analysis. His record on Wesfarmers, however, is mixed, and his calls on the company have occasionally triggered public clashes with management.

    He was an early, vocal critic of Wesfarmers' $19 billion purchase of Coles, warning back in 2007 when the deal was struck that Wesfarmers had under-estimated the scale of the now successful turnaround and that "the actual outcome could be substantially worse than even our cautious predictions".

    He has also supported the break-up of Wesfarmers to release capital to sustain its retail businesses.
    Those in agreement

    Brian Walker, principal of advisory group Retail Doctor, told The New Daily website that selling hardware to Australians is very different than operating in the UK.
    Australia has a big do-it-yourself market and lots of shopping centres, so the big box model works well. In the UK it is a 'you do it for me' culture and health and safety rules mean you can't do a lot of things for yourself that you might do here.

    And while Australia has long enjoyed high home ownership rates, the same has not been true in Britain, where in the post-war years renters were almost as numerous as home owners. Since the 1980s, ownership has jumped but Mr Walker said it's at 65% and declining now. He said, "In Australia it's 72%".

    A tradition of home ownership fuels the DIY urge in Australia, while in Britain a rental culture makes people more inclined to call a tradies when things need doing.

    Bunnings also relies on servicing tradespeople, but in Britain that niche is served by specified "trades counters" at stores such as Wickes and B&Q, competitors to Homebase. Those factors will make it difficult for the Bunnings model to translate into Britain.

    UK-based industry website, Insight DIY agrees with Mr Errington's assertion that "marketing costs are likely to be hefty as Bunnings has no brand recognition in the UK".
    Bunnings have got rid of the most experienced, senior people from the Homebase business. They are planning to dump the Homebase brand and in the process alienate a large proportion of the existing customer base, who didn't mind paying more for the exclusive brands and the softer shopping experience. To successfully replace just one of those elements, people, brands or customers is a massive task in a challenging retail environment, but to successfully replace all three is going to be a monumental challenge.

    Homebase acquired by Wesfarmers - HNN
    Wesfarmers-Bunnings Q3 2015-16 results - HNN
    Support for Bunnings' move into the UK

    Stephen Bartholomeusz writes in The Australian that Bunnings' entry in the UK market will not resemble Woolworths' unsuccessful foray in the Australian home improvement industry.
    ...[W]hatever the eventual outcome of Bunnings' offshore expansion, it won't look anything like the disastrous end to Woolworths' attempt to take on Bunnings in home improvement.

    He goes onto say that Woolworths and Lowe's invested about $3 billion - and lost more than $1 billion - in their ill-fated and poorly-executed attempt to build a rival to Bunnings from scratch.

    Mr Bartholomeusz also points out what Bunnings isn't doing in its first venture offshore. The retailer isn't planning to go from a blank sheet of paper to a 150-store network within five years. This forced the Masters joint venture to embark on a frenetic scramble to acquire sites and construct new stores.

    To read more, go to the following.
    Bunnings won't repeat Woolworths' Masters mistakes - The Australian
    Wesfarmers bets on Britain

    John Durie also writes in The Australian that the local market is leery about companies venturing outside Australia and fund managers would prefer companies to sit in cosy duopolies at home, returning excess cash to shareholders.

    To grow earnings, particularly in this market, companies need to take a risk, which means some pressure on its balance sheet. If everything goes well, this risk will be short term, but companies need to take risks and Wesfarmers CEO Richard Goyder should be congratulated for doing just that.

    Bank of America Merril Lynch (BAML), it should be noted, has a buy on Woolworths and a sell on Wesfarmers so it could be expected to take a negative view on the latter. The aim of the game is to get more people to buy Woolworths and sell Wesfarmers, but at the end of the day, this is based on company performance, and what BAML is doing is positioning ahead of what it thinks will be a change in performance.

    You can read more here:
    Goyder's British bet - The Australian
    Bunnings exits UK loyalty card scheme

    As Bunnings focuses on cutting prices in-store through its recently acquired Homebase chain, it has decided to pull out of the Nectar rewards scheme, the biggest loyalty card in Britain.

    The Aussie retailer will cease to offer or accept points for Nectar's 19 million UK cardholders at the end of December.

    Along with British retail giants such as Sainsbury's and BP, Homebase was one of Nectar's cornerstone members with its shoppers able to redeem points at other businesses such as restaurants, holidays, entertainment packages and other shops.

    But after seven years, and with Wesfarmers planning to transform Homebase into "Bunnings UK", it has decided it can better focus its capital on lowering shelf prices and keeping it competitive with other British hardware chains than be part of the Nectar loyalty program.

    Public notices have been appearing in Homebase stores warning shoppers of the change. The notices, displayed at tills across the chain, read:
    After a careful review Homebase will leave the Nectar programme at the end of the year. This means customers will no longer be able to collect or spend points in store after December 31 2016. Our priority now is offering customers everyday low prices across a wider range of home and garden improvement products.

    Bryan Roberts, retail analyst at loyalty consultant TCC Global, told The Mail on Sunday:
    This is going to be a blow to Nectar. Retailers have been diluting the benefit of their loyalty cards over the past year or two. And there's a sense that loyalty cards are misnamed judging by what's going on, with shoppers flooding to retailers who don't have loyalty cards. Retailers are reviewing strategies and investing in lower base prices rather than loyalty schemes.

    The re-positioning of Homebase as a low price operator by Bunnings will be one of the biggest transformations for a UK retailer. The big box retailer and some of its major suppliers have registered dozens of trademarks in the UK as the group prepares for an overhaul.

    Homebase staff said the transformation would include flooding stores with products bought by the parent firm and already well known in its core Australian market. The Mail on Sunday has learned this will include a host of new names, such as bathroom brand Mondella, lighting range Luce Bella and heavyweight power tool brand Full Boar.

    The supply of old Homebase stock is already dwindling but the flood of new labels could alienate some shoppers.

    Some industry observers believe Bunnings' latest moves could set alarm bells ringing at other home improvement retailers such as B&Q, which have long benefited from the disarray and underinvestment at Homebase. Neil Saunders, managing director at retail research firm Conlumino, said:
    It seems Bunnings is clearing the decks before implementing a big overhaul of Homebase. This is likely to include a complete revamp of the product offering, an improved focus on own brands, and a change in in-store experience. In essence, Bunnings seems to be taking the business back to its DIY roots.
    Such change is sensible given that Homebase has struggled to create a clear position for itself due to a relative lack of investment and focus, especially against the might of B&Q. Bunnings has the financial muscle and expertise in home improvement to challenge existing players.

    He said success would lie in the group's ability to differentiate itself from the likes of B&Q, Wickes and Ikea in product range, in-store experience and service, as well as price.
    UK IP office rejects Bunnings

    Insight DIY reports that Bunnings tried to register its well-known advertising straplines "Lowest prices are just the beginning" and "Lowest prices everyday" for use in the UK - to support its "Everyday low price" approach through Homebase. But the slogans were both rejected as trademarks by the UK Intellectual Property Office (IPO) because the wording was deemed too common. The slogans were classed as "too general" by the IPO.

    Bunnings will now have to find another slogan to represent its every day low price offer and differentiate it from competitors such as B&Q.

    In Australia, Bunnings won an argument with the Australian Examiner when it tried to register "Lowest prices are just the beginning''.

    Bunnings is in the process of rejuvenating the Homebase business and has been lodging a portfolio of trademarks. Some of Bunnings' suppliers have also registered names with the IPO including PPG-owned Taubmans, and bathroom and heating ranges Caroma, Stylus, Fowler and Dorf, which are owned by GWA Group.

    The Mail on Sunday also reports that Bunnings registered trademarks for a number of outdoor furniture and barbecue ranges, including Jumbuck, Mimosa and Matador.
    Homebase gardening staff gone

    Homebase has shed its head of DIY and gardening as well as at least two senior gardening buyers, according to Horticulture Week.

    Jon Kemp was Homebase trading director - DIY and garden, and had been at Home Retail Group for 20 years. Andy Goddard was horticulture category manager at Homebase.

    Jane Templar, who was Homebase plant buying manager has also departed. Paul Emslie was commercial director at Homebase before moving to Wyevale Garden Centres as trading and marketing director. Their replacements have yet to be announced.

    Wesfarmers have not confirmed who were replacing the staff who have left the company.
    Masters bidders want more information

    The July 4 deadline for the bids for Woolworths' home improvement division may be extended because of the scale of its problems and the complexity of the business.

    According to a report in The Australian, a number of suitors have expressed doubt the initial date can be adhered to and anticipate this phase of the process may finish at the end of next month instead. Bidders are continuing to demand more information.

    In the first half of 2016 Masters' free cash flow hit negative $324.6 million. While the retailer's problems are well known, contenders for its profitable Home Timber & Hardware (HTH) are also attempting to acquire some of Masters' stock.

    But any bids for HTH, which is being pursued by Metcash's Mitre 10 and Anchorage Capital Partners along with other smaller rival hardware retailers, will require a ruling from the competition watchdog, the ACCC, amid concerns the wholesale industry would fall in to the hands of just one player.

    However, that line of argument has angered some industry participants who point out smaller retailers are simply attempting to scoop up HTH on the cheap. They also maintain that by keeping the wholesale industry fractured it will heighten the dominance of the industry's biggest retail force, Bunnings.

    The hardware chain has linked up with Harvey Norman and Automotive Holdings to purchase some of Masters' stores while Blackstone and Charter Hall are also in the market.
    Indie store update
    Metcash chief executive Ian Morrice is still keen on buying HTH
    HNN Sources
    Simon Home has purchased a $1.5 million processing system
    Olsens Home Timber and Hardware in Warwick (QLD)
    Click to visit the ITW website for move information
    Metchash is still keen on Home Timber & Hardware; top HTH retailers may be forming a break-away buying group; Simon Home invests in machinery; and a brief profile of Alan Olsen from Olsens Home Timber and Hardware.
    HTH, Mitre 10 merger still "compelling"

    Speaking to the Financial Review, Metcash chief executive Ian Morrice confirmed that it was still interested in buying Home Timber & Hardware (HTH) from Woolworths amid growing speculation it might be forced to withdraw from the auction due to regulatory concerns and unease among independent retailers. He said:
    Woolworths has declared it's a committed seller, we've declared we're an interested party and we have made a submission to the Australian Competition and Consumer Commission (ACCC). Our position is that independent retailers are under enormous pressure in the hardware sector and have been through a lot of footprint growth from the chain stores in recent years.
    We believe it can strengthen the competitive position of independents to have more buying scale and have one unified buying group. We believe that's the best way to compete and the most efficient way for independent operators in hardware to get the best price and most competitive proposition.

    Mr Morrice declined to say if Metcash would be prepared to make undertakings to the ACCC - including passing on cost savings and synergy benefits - to secure approval. He said: "We think it's quite a compelling argument."

    Sales at Metcash for the 12 months ending April rose 0.8% to $1.05 billion. This compares with Bunnings' sales growth of 10.9% in the nine months ending March.

    About 17 Mitre 10 stores either closed or quit the network in 2016, reducing the number of stores to 378. Excluding store closures, Mitre 10's like-for-like wholesale sales rose 2.5%.

    Despite weak revenue growth, Mitre 10 grew earnings before interest and tax by 9% to $32.8 million by improving the performance of joint venture stores and cutting costs, including closing its distribution centre in NSW.

    Mitre 10 managing director Mark Laidlaw said Metcash had decided to close some larger unprofitable stores where lease costs were "killing us". He said:
    And then there's the Bunnings impact - we would lose 15 stores a year from new Bunnings stores being opened.

    Mr Morrice declined to say whether Metcash would raise capital to fund a successful acquisition of HTH, saying a decision would be made later. "At least we've created the capacity or opportunity to fund it in a number of different ways," he said, referring to the $400 million reduction in Metcash's debt over the last year.
    HTH Group spin-off?

    According to Fairfax Media, it is understood an alliance of Hardware Timber & Hardware's biggest members are drawing up plans to build a break-away buying group rather than waiting for Woolworths' protracted sale process to decide their fate.

    One hardware insider told the newspaper it made sense for these experienced retailers to strike out on their own and avoid the uncertainty associated with Woolworths' exit from the industry. He said:
    A lot of these independent retailers are annoyed with how they've been treated by HTH and they're not sure that Metcash will be much better. These traders account for as much as 50% of the revenue coming from Home's franchised network, not including its corporate-owned stores.

    A defection on this scale would be a big blow to Woolworths' sale campaign, including its negotiations with Metcash, with its proposal to combine HTH and its own Mitre 10 network.

    Metcash's plans are yet to get the green light from the competition watchdog despite first approaching Woolworths almost a year ago and the HTH business could still end up packaged into a sale deal with Woolworths' loss-making Masters Home Improvement chain.

    HTH members are currently receiving an additional 2% discount on all wholesale purchases through the network as Woolworths battles to place a protective barrier around its franchised operators and discourage any further departures.

    It is believed Woolworths asked influential hardware store Hume & Iser to draft a letter confirming its commitment to the HTH network after the Bendigo outlet moved its trade business to rival buying group Natbuild. Hume & Iser managing director Stephen Iser said in a letter shown to Fairfax Media:
    While Hume & Iser has joined Natbuild, we have done so as a possible future alternative for our business should the new owners of the HTH Group not fit our requirements. We remain fully committed to Home Timber and Hardware and supporting the group, of which I have been a proud member since its foundation over 20 years ago.

    Mr Iser would not comment on the letter, and denies being part of any breakaway group, but he said there was considerable concern among the top 30 HTH retailers over the future ownership of the operation. He said:
    They all have this nasty taste in their mouth about the private equity purchase of Dick Smith and we all know what happened there. We would like some sort of certainty and the new operator or owner to be committed to the timber and hardware markets, I think Mitre 10 would be...and I think they have the best intentions, providing Metcash hangs on to it. Because you just don't know, Woolworths got into hot water and they just let it go.

    Mr Iser said a combined HTH-Mitre 10 business would deliver a strong competitor for Bunnings but there was still considerable concern the business could be sold off to private equity.
    If an equity group bought it, it would be done on a return on investment and they might get the price up and the business going and then they might just offload us and we would be back here again. We really want to be convinced that the right group is buying Home Timber & Hardware.

    Mr Iser acknowledged HTH could get bundled up in a deal with Masters although he did not think this was the most likely outcome.

    Woolworths will not comment on the sale process or its HTH stores, except to say that it was not unusual for independent group stores to be a member of more than one buying group.
    Simon Home's OH&S commitment

    Paul McDonald, operations manager at Simon Home's Coolum Beach-based location said his company took innovation to another level recently with the purchase of a $1.5 million processing system.

    The new multi-component system consists of a linear saw that pivots in any direction and allows timber to be cut at any angle, an automatic conveyor system and an auto-set jigging system. A final product design is loaded electronically from the office, cut by the linear saw, and the automatic conveyor system sends it to the next stage of processing.

    The system has significantly reduced the need for manual handling in the factory as well as delivering components accurately and on time to the assembly area, according to Mr McDonald. He said the ultimate goal was to have every step of frame and truss manufacture "sensibly automated" so that factory workers operated machines, not hammers and saws.

    Thanks to the recent upgrade, the Coolum Beach site is well on its way. Mr McDonald told the Sunshine Coast Daily:
    The steps taken by the directors and board to commit to and install what we have here today was quite forward-thinking. Our plant in Coolum Beach will be the most up-to-date and efficient truss production system in south east Queensland, if not Australia.

    The Simon family has been in the industry operating sawmilling businesses as early as 1928. In 1950 Simon Pty Ltd was formed and now manufactures frames and trusses, and supplies timber and hardware through its three retail outlets in Coolum Beach, Toowoomba and Ipswich.

    Simon Home supplies timber and hardware as well as engineered building components to a diverse range of customers, from major project building companies to small family builders and handymen.

    The business recently featured at the Doing Timber Business in Queensland conference, held at Novotel Twin Waters Resort.
    Alan Olsen's life in hardware

    The owner of Olsens Home Timber and Hardware, Alan Olsen spoke to the Warwick Daily News about continuing the work his grandfather started in 1928.

    After completing a Bachelor of Business majoring in accounting in Toowoomba (QLD), Mr Olsen said he returned to Warwick in 1981 to join his father and uncle in the family business. He said:
    I've never worked as an accountant though, I didn't particularly want to be pushing numbers all day. I began working in the office and brought a few new skills and ideas to the business when I returned. Not long after I got back, my uncle died and I stepped up further to help my dad run the business.

    In 1983, the Olsen family bought Warwick Hardware. He said:
    It had been there for probably a hundred years, under various owners, and was about 30 years behind the times when we took over. They were still selling everything in bulk and you bought your nails and screws by weight. The customers probably liked that 'old way' of doing things though.
    They had this pulley-type system and the cashiers would send the money up on this rope to an office and the change would come back down. It hadn't been used in a while but I don't know, maybe they didn't want the cashiers handling the money?

    Mr Olsen said the building was dilapidated when they took over.
    White ants had gone through everything. The story goes that there's an underground stream that runs through that part of town and over towards the Condy Club. That's the story anyway, but it might explain the moisture that the termites just love.

    These days, Mr Olsen said they still try to make service and staff the reason why people want to shop there.
    Most of them have been here since the start, I think the customers like having someone they know and trust behind the counter. Apart from that I sit as chairman of the Warwick Credit Union, for 10 years now, which is something I'm passionate about. The rest of my time is for my family. My wife, kids and grandchildren are very important to me.
    Retail update
    IKEA Australia revealed it would start testing an online store by the end of the year
    HNN Sources
    Kogan hopes to raise $50 million through its initial public offering
    Retailers could be facing a millennial "tsunami"
    Click to visit the ITW website for move information
    A number of online stores will be developed by IKEA Australia; Kogan is part of the latest retail revolution; and The Good Guys CEO refers to a millennial "tsunami" for retailers.
    IKEA's online initiative

    IKEA Australia revealed it would start testing an online store by the end of calendar 2016. Fairfax Media reports it will start trialling different fulfilment models in several urban locations.

    IKEA has been trying out small-format stores as click-and-collect points in Spain, Germany and the UK for more than a year now. It appears the rollout of the Aussie online operations will take a similar format to what has been tested in Europe over the past 12 months, according to Power Retail.

    Country manager David Hood believes the online store could eventually be the company's bricks and mortar operations, where sales will rise around 20% this year, passing the $1 billion mark for the first time. He said:
    Over the next few years, we want to create more opportunities for IKEA customers to access the brand in different ways and in new locations.

    In the UK, IKEA's online store has become the largest outlet in the country, without cannibalising sales from existing stores.

    Mr Hood expects similar results in Australia, citing latent demand from consumers who now drive two or three hours to shop at a bricks and mortar store. Australians travel further to visit an IKEA store and are therefore more willing to spend more time and money when they do.

    The new Canberra store, for example, is attracting shoppers from the NSW South Coast, Albury and Wagga. He told Fairfax Media:
    It's a huge growth engine in the UK but it's not taking away from stores.

    IKEA is also opening another five large-format stores as well as between six and eight smaller-format stores and online pick-up points in Australia.

    The small format stores will be around 3000sqm - around one-tenth the size of flagship stores such as Tempe in inner Sydney - and will enable shoppers to browse a limited range of products. But they will also be able to order online from its full range of 9000 products or pick up previous online orders.

    Crucial to IKEA's online ambitions in Australia is a $155 million 70,000sqm multi-function distribution and logistics centre currently under construction at Marsden Park in Sydney's west and due for completion around March or April next year.

    The solar-powered distribution centre, which uses high-bay storage technology with robotic pallet storage and retrieval cranes, has capacity for 100,000 pallets and will enable IKEA to increase the number of products stocked in Australia from 1300 to almost 9000, cutting the time it takes to ship orders to stores, pick up points or directly to online shoppers.

    The new distribution centre will replace the company's existing distribution centre at Moorebank.

    IKEA's online store in Australia will come ahead of a planned global site within the next two years.

    IKEA currently sells online in 13 of the 28 countries in which it operates and generated only EUR1 billion ($A1.5 billion) in online sales last year, 3% of global sales.

    Same-store sales at IKEA Australia have risen about 8 or 9% this fiscal year - with Melbourne and Brisbane out-pacing Sydney - and topline sales have been boosted by the opening last November of a new store in Canberra, which is trading 20% above expectations.

    There are eight IKEA stores in Australia, including one owned by a franchisee, and a ninth is set to open in North Lakes, north of Brisbane, by the end of 2016. The North Lakes store will be Queensland's second IKEA, adding to the existing location at Logan, south of Brisbane.

    Mr Hood expects sales on the east coast of Australia to reach $1.8 billion or $1.9 billion by 2020 as IKEA opens its new stores and online pick-up points. He said:
    I do believe that sort of figure is more than achievable, especially now we see the online possibilities coming.

    Last year, the retailer celebrated 40 years in Australia. Mr Hood told News Corp. the eventual plan is to make sure there's an IKEA location within an hour's drive of 85% of the eastern seaboard.

    IKEA picks up online offering in Australia - HNN
    IKEA CEO admits online tardiness - HNN
    Kogan going public

    Online retailer Kogan hopes to raise $50 million through its initial public offering, which it priced at $1.80 a share.

    It is known primarily for selling consumer electronics but has a range of hardware and equipment products on the site. It also has a brand of private label tools under the Certa label.

    Kogan, which will have a market capitalisation of $168 million when it starts trading, is challenging existing brick-and-mortar retailers such as JB Hifi and Harvey Norman with its low-cost, online-only business model.
    How it started

    Ruslan Kogan founded in 2006 in his parents' garage, selling private-label televisions sourced directly from Chinese factories and smartphones and tablets sourced from grey markets.

    In recent years it has expanded into general merchandise and services such as mobile and travel.

    The company now claims to be the largest pure-play online retailer in Australia, with 52 million visitors to its website a year, 621,300 unique customers and 3.6 million active subscribers.
    What the prospectus says

    According to the prospectus, expects annual revenues to grow 20% to $241 million in 2017. Earnings before interest, taxes, depreciation and amortisation (EBITDA) is forecast to jump 138% to $6.9 million in 2017 and net profits are expected to rise six-fold to $2.5 million.

    Kogan expects revenue to reach revenue of $201.1 million for FY 2016 from $200.3 million in FY 2015. This represents an increase of only $800,000. But Kogan forecasted revenue for FY 2017 to hit $241.2 million even without its Dick Smith acquisition. This would be an increase of $41.1 million, or close to 20%.

    Its FY 2016 forecast for EBITDA is $2.9 million, up from $1.6 million in FY 2015. (The figures exclude Dick Smith sales.)

    It also reported a net loss after tax of $100,000 in FY 2015, which is forecast to balloon to $2.9 million in FY 2016, ahead of its expected ($2.5 million) profit in FY 2017.

    While past earnings look patchy, Mr Kogan and chief operating officer and chief financial officer David Shafer said the company had been EBITDA positive since day one and blamed last year's loss on problems implementing a new enterprise resource management system. Mr Shafer told Fairfax Media:
    It didn't go seamlessly but we're now in a very good place and now, as part of this IPO, we have the capital to fund our growth plans, which are meticulously thought out.

    The company has never had any external equity funding up until now.
    Buying Dick Smith

    Kogan's prospectus also reveals that the company paid $2.6 million to acquire assets of failed retailer Dick Smith including brands, online website and customer database.

    It estimates that the Dick Smith business will add about $95 million a year to its sales tally. Kogan also gained 1.3 million active subscribers through the acquisition that weren't already in its customer database.

    The prospectus outlines synergies such as cross-marketing between Kogan and Dick Smith email databases, extracting sourcing and operating efficiencies.

    Kogan reopened Dick Smith as an online-only business just two months after the acquisition.
    Where will the money go?

    A majority of the funds raised will be used to fund growth and pursue new verticals like it has with its telecommunications business Kogan Mobile and holiday booking business Kogan Travel. It will also look to expand into higher margin product categories such as private label and third-party branded products.

    The company will be operating in a local online retail market that has grown rapidly, but remains under-served compared to other developed economies. Fairfax Media reports that Euromonitor estimates the value of this market at $17 billion in 2015, and is forecast to grow at an annual 11.5% to 2019 helped by a shift in consumer preferences, technological innovation, increasing internet usage and faster download speeds.

    Kogan's initial offer will not be open to the general public. The newly issued shares will be offered to institutional investors, brokerage firms and nominated investors, as well as eligible Kogan employees.

    Bunnings' share of small electrical - HNN
    Preparing for millennials

    Michael Ford, chief executive of appliance chain The Good Guys, said retailers were facing a millennial "tsunami", with the digitally savvy generation expected to account for 30% of discretionary spending by 2020. Mr Ford told an Australia Israel Chamber of Commerce retail forum in Sydney recently: "We need to know how to deal with them".

    Digital technology and data analytics would force retailers to rethink not only what they stocked in bricks and mortar stores and online but how they marketed to, and communicated with customers, and measured productivity. He said:
    Retail has been a pretty sleepy old industry for the last 150 years and it's really now at the technology forefront of change.
    Today most retailers recognise productivity growth on sales per square metre and like-for-like sales - technology will enable retailers to measure customers on like-for-like growth. That's probably one of the most significant changes retailers are going to see.
    Measurements will move away from the box that you operate out of and your labour productivity to your share of wallet from an individual customer and what they generate on a year-on-year basis.

    "Big data" would also shake up customer relationship management (CRM), described by Mr Ford as "the most overspent, over-talked about and often over-capitalised initiative in retail", and clarify the debate between traditional marketing such as catalogues and television and digital marketing. He said:
    Actuating what you derive from big data is going to make your CRM program much more effective. That's going to be critical to growth.

    For example, The Good Guys uses two data insights teams: one that mines point of sale receipts to see what categories and products are selling well and another that analyses how customers shop in its stores and those of other retailers. Mr Ford said:
    Through these data insights ... instead of using all those seasoned cliches of satisfying the needs of the customer they're actually going to be anticipating them - that in itself will be the most influential element of how they spend their marketing dollars.

    He also acknowledged the threat from Amazon, which is preparing to enter the Australian retail sector, but said local retailers had a "home team" advantage. He said:
    Amazon is coming like a tsunami but it has ... struggled in Canada because of the tyranny of distance and Australia is a similar sized country and logistics are challenging in this market.

    At the same forum, Myer chief executive Richard Umbers said:
    Amazon is fascinating and we can all learn from what they do but in our world it's actually domestic bricks and mortar retailers getting online that are getting the biggest growth rates in Australia right now.
    That's because of the home team advantages of established customer connections, your existing supply chain and supplier relationships and your ability to be able to return products in your local market. I don't think domestic bricks and mortar retail is down and out yet.
    Supplier update
    Dulux Snapshot allows users to match any surface to a colour from Dulux's "World of Colour"
    HNN Sources
    Spectrum Brands' award-winning packaging
    GWA Group has begun registering trademarks in the UK
    Subscribe to HNN weekly e-newsletter
    The full version of "Supplier update" appears in HNN's HI News PDF magazine. Dulux develops the Snapshot with a local startup company; GWA Group has begun registering trademarks in the UK on the back of Bunnings' move; Brickworks provides a trading update; and the North American Retail Hardware Association has recognised Spectrum Brands and its excellence in packaging.
    Dulux Snapshot for colour matching

    Local startup Palette has worked with Dulux to develop the Snapshot after participating in the 2013 Melbourne Accelerator program.

    Dulux Snapshot allows users to match any surface to a colour from Dulux's "World of Colour" that has over 4,500 colours. It helps solve the problem of accurately identifying colours on real-world surfaces, such as walls. Palette CEO Djordje Dikic told Gizmodo:
    We're working with Dulux to take colour to a new level. Snapshot saves time, reduces errors, all while being incredibly easy to use.

    The idea of the product came about when one of the founders of Palette was renovating his parents' home. The task of matching the colour of a wall proved a little trickier than seemed necessary, and so the idea for Palette was born. A Kickstarter campaign was launched, $150,000 was raised and the rest, as they say, is history. Dulux marketing and innovation director, Helen Fitzpatrick said:
    We are thrilled to bring this innovative technology to the Australian industry. Dulux Snapshot will enable everyday colour inspiration to now be accurately translated into any project or creative pursuit. It's important to us as a company to support local talent and ideas.

    Palette pairs with iOS and Android devices, with a corresponding app that lets users save colour matches, organise colours into project groups and rename colours to something that is easier to remember. Users can also share their Dulux Snapshot colour selections via email or social media.
    GWA banking on Bunnings' UK move

    Bathrooms and kitchens fittings supplier GWA Group has begun registering trademarks in the UK for a range of its most popular products. It is preparing for a potential earnings windfall from supplying Bunnings' recently acquired British home improvement retailer with toilets, taps, baths and sinks.

    Recently appointed chief executive Tim Salt told The Australian the step to protect its branding was a precursor to preliminary talks with Bunnings as it sought to ride on its coat-tails into Britain, where Bunnings has bought Homebase, the second biggest retailer in the nation's GBP38 billion ($73 billion) hardware and home improvement sector. He said:
    Bunnings are a very important customer of ours and if we can support their push into the UK we are keen to help. There is no commitment at the moment but we figured it was a prudent thing to do.

    Documents seen by The Australian show the ASX-listed GWA has registered trademarks with Britain's Intellectual Property Office for the Dorf, Caroma, Fowler and Stylus brands. Mr Salt said:
    We have been a longstanding client of Bunnings and if that sort of creates opportunities for us, we would love to seize them. Bunnings obviously have to get their feet under the table and work out what they want to do there, but if the opportunity arises, then we keen to have a go at it. I suspect others (suppliers) will be doing the same as us.

    Bunnings' entry into the huge British hardware and home improvement market could be a bonanza for suppliers that enjoy a strong relationship with Bunnings, with the potential to also supply the 265 Homebase stores across Britain and Ireland.

    Mr Salt said some of his products already stocked in Bunnings, such as Caroma bathroom products or Dorf taps and showers, had a proven track record.
    Bunnings know the quality of our brand, they understand how we operate, they have reassurance around that, service, quality, innovation, etc. and I think those things will be relevant in the UK market for Bunnings.

    GWA sells more than 95% of its products in Australia, and a push into Britain via Homebase could prove a new and highly lucrative export channel.

    GWA Group FY 2014-15 full year results - HNN
    Property, building drives Brickworks

    Diversified building materials group Brickworks has indicated better than anticipated earnings for the current financial year, as a result of building activity and a higher contribution from its property development arm.

    The company said it is also bringing forward some planned developments that will give earnings a further lift in the next financial year.

    When releasing its half-year to January results recently, Brickworks indicated that second half earnings would be in line with the first half, when it posted an underlying net profit of $75 million.

    Brickworks managing director Lindsay Partridge pointed to strong demand for building products on the east coast of Australia. He said:
    Momentum within the building industry continues unabated. The building products group is on track to deliver a significantly improved result for the full year.

    The most recent trading update hasn't changed the outlook, although on present indications, the property arm is performing a little better than expected.

    When releasing its half-year results in late March, Brickworks said the east coast housing industry was operating at capacity, which was limiting prospects for further growth.

    The value of home loans made in April declined 1.8%, due largely to a 5% drop in lending to investors. But an overall, high ongoing number of loans have been extended, signalling that underlying activity remains robust.

    Brickworks has been restrained in expanding production capacity in its building materials arm in the present upswing, so it has maintained its focus on lifting prices where possible to boost margins. This has been an ongoing effort since at least the global financial crisis.

    In the latest trading update, the company highlighted its property development activities, particularly in western Sydney. Mr Partridge said:
    The level of activity in western Sydney continues to drive demand at our Oakdale Estates and increase earnings from the property trust.

    It also highlighted additional pre-commitments at the Oakdale Central development west of Sydney, with plans now progressing for a new warehouse development to be completed early next year.

    Later in 2017, Brickworks said it expects to generate about $90 million in income from the sale of property at Oakdale South, which is located nearby. Revenue will also come from the sale of 27.9 hectares of land via its property trust, which includes the sale of seven hectares to Sigma Pharmaceuticals and 6.4 hectares to Toyota Motor Corp Australia.

    Following these sales, work at Oakdale South will focus on developing the remaining 43 hectares of land to meet the pre-commitment market, the company said.

    Due to "strong demand", Brickworks said it would look to bring forward the development of its land holding on Bakers Lane, Kemps Creek ("Oakdale West"), which is expected to provide an additional 90 hectares of developable land and could be ready for occupation by new tenants by mid to late 2018, Mr Partridge said.

    Brickworks' H1 profit comes from housing - HNN
    Packaging prizes for Spectrum Brands

    The North American Retail Hardware Association (NRHA) has recognised Spectrum Brands and its pet, home & garden division for excellence in packaging for five of its product as part of the 2016 NRHA Packaging and Merchandising Awards.

    The AccuShot[tm] Continuous Power Sprayer expansion, Spectracide(r) concentrates and ready-to-use trigger sprayer range, Fire Ant Shield[tm] line, and Liquid Fence(r) brand relaunch were acknowledged at the annual NRHA awards expo in Las Vegas recently.

    NRHA hosts the annual competition to inform independent retailers about trends and leading packaging, and to celebrate the home improvement industry's best merchandising and packaging.

    Spectrum Brands' pet, home & garden won packaging awards for shelf appeal, innovation and design excellence.

    The Spectracide Fire Ant Shield range took the gold award in this year's competition. The newly launched products offer solutions for controlling fire ants. They have a tougher look and carefully organised messaging to better meet the demands of homeowners with fire ant problems.

    The Spectracide series of weed and insect control concentrates earned the silver award. With the addition of a side handle and easy-measure cap, the brand's updated bottle design makes it simple for consumers to see it as a concentrate that it gets the job done.

    The AccuShot Continuous Power Sprayer expansion also received a silver award. The successful launch of this sprayer in 2015 gave consumers an intuitive, easy-to-use sprayer with an extendable wand that allowed for precise bug and weed control where they needed it.

    The new, expanded lineup provides more options in the battle against pests. Each AccuShot product is designed to communicate key consumer information clearly while visually demonstrating the strength and efficacy consumers expect.

    Also honoured with a silver award were the Spectracide ready-to-use trigger sprayers, which saw a bottle and front panel upgrade with modern, sleek curves and a much larger billboard to more effectively convey product benefits to consumers.

    Finally, the Liquid Fence brand relaunch received a silver award by NRHA. The brand's assortment of repellents against deer, rabbits, dogs, cats, snakes and other animal pests was hampered by an outdated look and too much label information. The award-winning redesign elevates the line with a more appealing design, and provides a distinguished look to a brand already well regarded by consumers.

    The winning products were showcased during the National Hardware Show as part of the 2016 Packaging and Merchandising Awards Expo at the NRHA Village.
    Seeking opportunities
    A senior area manager - retail required at Saint-Gobain's head office in Victoria
    HNN Sources
    HTH Group needs a communications specialist
    Valspar's regional sales manager will be based in WA
    Visit the Mecca Website
    Saint-Gobain has an opening in its Victorian sales team; Home Timber & Hardware Group is looking for a communications "superstar"; and Valspar is seeking an experienced regional sales manager for its WA office.
    Selling Saint-Gobain

    The senior area manager - retail at Saint-Gobain is responsible for the achievement of budgeted sales targets for the retail business unit, managing new and existing business clients. The individual will assist the key account manager in nurturing and growing existing key accounts as well as monitoring and researching the marketplace to identify and secure new business opportunities.
    A senior area manager - retail required at Saint-Gobain
    Communicating HTHG's message

    Home Timber & Hardware Group needs a passionate and energetic communicator who understands the world of retail and can sit at the table with senior executives. The right person can help lead internal and external communications and support the strategic plans for the business as it undergo its latest change program.
    HTH Group needs a communications specialist
    WA-based Valspar position

    Valspar's regional sales manager must have a proven sales management background and existing commercial relationships. Based at its office in Bayswater (WA) and reporting to the state sales manager, this role will lead and direct the activities of the WA retail and trade sales team.
    Valspar's regional sales manager will be based in WA
    Restoring home imperfections
    DAP All Purpose Wood Filler has made wood repair application process easier
    It provides a permanent solution for those who want to repair wood surfaces
    DAP PLASTIC WOOD-X is sold through The Home Depot
    Click to visit the HBT website for more information
    DAP(r) PLASTIC WOOD(r) All Purpose Wood Filler can help rejuvenate wood surfaces to make them look new again. And now, DAP PLASTIC WOOD-X makes the application process simpler with the patented DryDex(r) Dry Time Indicator. It has a unique formula which goes on pink and dries natural, letting users know when it's time to sand and stain.

    Both products feature a latex-based formula that is easy to clean up with water, low in odour and looks and acts like real wood.

    The All Purpose Wood Filler is engineered to dry with minimal shrinking and no cracking to provide a permanent solution for professionals and DIYers who want to repair interior and exterior wood surfaces. Its thick, knife-grade consistency spreads smoothly and evenly, which is ideal for vertical surfaces or to mould and sculpt corners.

    Once cured, the wood filler is three times stronger than most other products on the market and provides strong nail and screw anchoring capabilities. While other wood filler products appear speckled or discoloured, Plastic Wood All Purpose dries a consistent natural colour to maintain a blemish-free appearance that can blend well with real wood when stained or painted.

    It is also available in squeeze tubes and comes in multiple wood shades, including natural, golden oak, red oak, walnut and white. Kate Piche, group product director at DAP said:
    Using DAP PLASTIC WOOD All Purpose to easily repair unsightly holes, scratches and gouges in wood surfaces can give your home a refreshed look. It is the perfect solution for repairing imperfections in wood trim, floors, furniture, cabinetry, doors and more.

    DAP has made wood repair application process easier by adding its patented DryDex dry time indicator to the performance of PLASTIC WOOD - creating PLASTIC WOOD-X. Working in the same way as the All Purpose Wood Filler, PLASTIC WOOD-X goes on pink and dries natural so there's no guesswork when it's time to sand and stain. It can create an invisible repair.
    Fibre cement technology
    Fibre cement by Allura is being used for backyard decks
    PR Newswire
    It can reduce maintenance costs
    Allura USA fibre cement products are for commercial and residential construction
    Click to visit the HBT website for more information
    A technology once used exclusively for home siding is making its way to backyard decks. It can eliminate costly repairs associated with water damage, fading deck colour, wood rot, wood-boring insects and board gaps.

    Water, humidity, pollen and sun exposure can leave an outdoor retreat looking faded and dingy after just one season. This can turn having backyard deck into a maintenance nightmare for homeowners. In response, many US homebuilders are turning to fibre cement decking by Allura.

    Fibre cement stands up to weather conditions in all climates, it does not rot and wood-boring insects are never an issue. The product is flame resistant, cooler on feet and unlike real wood, doesn't fade, peel or chip. Tom Taylor, Allura's director of customer relations said:
    The only time you have to repaint or stain fibre cement is if you want to change the colour. Allura decking looks like wood, but with none of the hassles. Fibre cement is changing everything we previously came to accept about backyard decks. It's an affordable choice for transforming a landscape.
    USA update
    The Home Depot is ensuring its stores become fulfillment centres
    HNN Sources
    Lowe's new app can be seen on Lenovo's PHAB2 Pro
    Ace Hardware tops the J.D. Power 2016 US Home Improvement Retailer Store Satisfaction study
    Click to visit the ITW website for move information
    The Home Depot continues to build for an online future; Lowe's new app is made to work hand in hand with Google's Tango technology; and Ace Hardware has come out on top of the latest J.D. Power 2016 US Home Improvement Retailer Store Satisfaction study for the tenth year in a row.
    Final mile strategy at Home Depot

    The Home Depot is expanding its Buy Online Deliver From Store, or BODFS service. This means it will need more last-mile transportation capacity to deliver everything from power tools to drywall and paving stones.

    Customers can already buy online and pick up goods in Home Depot's 2,200 US stores and about 40% of online orders are picked up at stores rather than shipped to customers. Online sales grew 21% in the first quarter and exceeded USD4 billion last year.

    Rolling out its BODFS service "means our stores are a fulfillment option as well" said Stephanie Smith, vice president of direct fulfillment and delivery for The Home Depot. "This is one more bow in our quiver to support our customers."

    Since 2009, Home Depot has pursued a strategy it called "interconnected retail" that blends its brick-and-mortar and e-commerce business, a strategy empowered by widespread use of smartphones. BODFS is the latest extension of that strategy. Ms Smith said:
    From a Home Depot associate perspective, this takes a lot of complexity away from scheduling deliveries. For customers, it not only makes it easier to schedule deliveries in the store, but online. We're creating an interconnected space between the website and stores.

    More consumers are going to websites before heading to stores. A customer planning a trip to Home Depot could click on an item online, a grass edger, for example, and receive a text with the exact location of that item in the store. Ms Smith said:
    We're very focused on the interconnectivity between mobile phones and stores. More and more of our customers are walking into the store with smart phones. With BODFS, however, the retail store comes to the customer, delivering goods to homes or work sites.

    Home Depot has been testing the service regionally and expects to roll it out throughout the US by the end of the year. Demand at many stores exceeded initial expectations, she said, which put pressure on delivery capacity.

    Although the retailer didn't come up short on home-delivery trucks or drivers, "we had to adjust our expectations about delivery capacity," Ms Smith said.
    We've been able to do that market by market by working with a network of regional and national carriers.

    Last-mile delivery requires more than vehicles that can handle oversized, over-dimensional loads and deliver to residential addresses. It requires drivers that not only drive vehicles but can install products.

    Schneider, the largest privately owned US truckload carrier, recently acquired Watkins & Shepard, a trucking company specialising in difficult deliveries of home products, including furniture and flooring, and Lodeso, a technology company focused on last-mile logistics. Mark Rourke, executive vice president and chief operating officer of the USD4 billion transportation company, said:
    Online shopping is no longer constrained by the size of the product. Furniture and appliances are among the fastest growing segments of e-commerce. We put that all together and decided we need to get in front of that.

    At Home Depot, Ms Smith oversees a last-mile transportation team. She said:
    Their job is forecasting demand and working with our carriers to ensure we have the available capacity. We're using box trucks and flatbed trucks. A lot of it comes down to forecasting.

    The flatbed trucks in particular are used to haul heavier products and construction materials to the building sites of Home Depot's professional customers. Ms Smith said:
    We expect a heavy pro market penetration, but we're still in the early days. A lot of customers are utilising BODFS for bigger, bulkier things such as a ride-on tractor, pavers, mulch, dry wall.

    As the rollout continues from store to store, "we're only going to go as fast as we need to and ensure we maintain excellent customer service and have the capacity we need," she said.
    Lowe's Tango app for projects

    Lenovo Group recently unveiled the first smartphone compatible with Google's Project Tango, a technology designed to measure and map surrounding objects and spaces. Lenovo's PHAB2 Pro has all of the right sensors and other assorted software and hardware to make Google's Tango work.

    At its Tech World conference, Lenovo revealed not only the large phone itself, but one of the first third-party, consumer-facing augmented reality apps made to run on its enormous 6.4 inch screen; an app from home improvement retailer Lowe's.

    The new app from Lowe's is made to work hand in hand with Tango to make it easy to preview any home improvement projects and pieces of furniture or appliances, seeing exactly how they'll look in a home through Tango's advanced augmented reality technology.

    The app can check out the measurements and materials in a home to let users see exactly how something will or won't fit, or how new carpet or flooring may look. Just about any improvement is assumed to be fair game, from checking out a new shower curtain and toilet along with a small rug, to using terra cotta instead of wood for your floors.

    Lowe's Vision app provides a real-world solution not only for interior designers, but also DIYers who are looking to spice up their houses on their own.

    Not much more information was released, but it's safe to assume that the app will have some kind of integration with Lowe's product catalogue to ensure that users who preview something will actually be able to buy it.

    On top of offering up an app for Tango, it was revealed that Lowe's will be selling the PHAB2 Pro in their stores. The large handset will come to users unlocked, for the price of USD500.
    Ace Hardware tops customer rankings - again

    The J.D. Power 2016 US Home Improvement Retailer Store Satisfaction study ranked Ace Hardware "Highest in Customer Satisfaction among Home Improvement Retail Stores" for the tenth year in a row.

    The J.D. Power study is based on responses from nearly 2,995 consumers who purchased home improvement products or services in the previous 12 months. Ace Hardware ranked highest among major retailers with an overall satisfaction index score of 810 on a 1,000-point scale. According to consumers, Ace performs particularly well in the categories of staff and service, as well as store facility.

    The score is based on performance in five areas: merchandise, price, sales and promotions, staff and service, and store facility. Ace Hardware president and CEO, John Venhuizen said:
    Given the impressive list of retailers with which we compete, in no way do we take our tenth consecutive J.D. Power award for granted. My grateful and sincere thanks goes to the consumers who have honoured us with this award, the Ace team who never ceases to amaze me and most importantly, our frontline, red-vested heroes who so passionately serve our customers.

    In 2015, Ace Hardware launched the Ace Center for Excellence, a division created to help businesses and organisations around the world improve upon their customer experience utilising Ace's award winning approach. Through keynotes and workshops, the centre shares the strategies and principles that help leaders cultivate, and team members to contribute to, a culture of customer service that exceeds the consumer's evolving expectations of helpfulness.
    Industrial & Tools News Vol. 2 No. 7
    Download the latest Industrial & Tools News, issue number 2.7
    Industrial & Tools News Vol. 2 No. 7
    The DeWalt Died Crimper has been released for the American summer
    CSR reports its 2015-16 FY results
    Click to visit the HBT website for more information
    The ITN e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out. Just use the following link to download the PDF:
    Industrial & Tools News - Volume 2, issue number 7

    Some stories have already appeared in ITN's sister publication, HI News 2.9.

    In this issue of ITN, power tool brands Milwaukee, DeWalt and Lowe's Kobalt range have released their latest products in time for the North American summer. Some of the tools will eventually find their way to the Australian market.

    Building products company CSR has returned strong results for its 2015/16 financial year. New product categories will enable it to take advantage of growth in multi-unit construction.

    Japan-based Hitachi Koki experienced a slight bump in sales in its 2015-16 FY results. However its expanding operating costs bring profits down.

    Boral chief executive Mike Kane speaks on housing and announces a change to the company structure. Other supplier news includes STIHL's investment in Chinese power tool company Globe Tools; Saint-Gobain's new logo and H.B. Fuller's acquisition of Cyberbond.

    New updates for big box stores include the development of the Bunnings Kingsgrove store in NSW and July 4 is the deadline for binding offers for Woolworths' home improvement business. There is also speculation that some major Hardware Timber & Hardware stores are banding together to create a separate buying group.

    The Housing Industry Association, Blackwoods and Kubota are featured in the news section and there are products from Welding Industries of Australia, Miller Electric, Hilti, Troy-Bilt and Apex Tools, among others.
    CSR 2015-16 results show strong growth
    CSR FY2016 results
    Growth in building products for CSR 2012 to 2016
    CSR chart of alterations and additions
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    CSR has returned strong results for its 2015/16 financial year, which ran from 1 April 2015 to 31 March 2016. Net profit after tax (NPAT) came in at AUD166 million, up by 13.16% from the results for the previous corresponding period (pcp), which was the CSR financial year running from 1 April 2014 to 31 March 2015.

    These results and CSR's well-formulated forecasts for FY 2016/17 reflect the mixed conditions that are likely to prevail over the next year to two years. While the market forces which have contributed to this performance are nearly all quite positive for CSR, for the hardware/home improvement retail industry there are some negatives as well.

    Sales revenue for CSR was AUD2,298.8 million, up by 13.61% over the pcp. Earnings before interest and taxation (EBIT) for the overall company (excluding significant items) was AUD276.8 million, up by 17.59% over the pcp.

    CSR's chief financial officer, Greg Barnes, pointed out that the results include a contribution from PGH Bricks, a joint venture formed with Australian building products company Boral, of which CSR is a 60% owner. This has been in operation for a year as of May 2016, and is responsible, according to Mr Barnes, for up to 5.0% of the growth, which means EBIT growth for CSR alone would be around 9.0%.

    The strongest contributor to this EBIT result was its building products division, returning AUD169.1 million, up 39.87% over the pcp. Mr Barnes indicated that, excluding the PGH Bricks contribution, EBIT would have risen by 28%.

    CSR was also pleased by the result from its Viridian glass products division, which increased its EBIT from AUD3.1 million in the pcp, to AUD8.1 million in the reporting year, a rise of 161.29%. CSR's aluminium operations returned an almost flat EBIT at AUD104.1 million. EBIT for its property division -- which is largely dependent on timing of sales -- fell by 22.85% over the pcp, coming in at AUD23.2 million.
    CSR FY2016 results
    Growth contributors

    Speaking at an earnings conference call for investment analysts held in Sydney, Australia on 11 May 2016, the managing director of CSR, Rob Sindel, outlined three main drivers of CSR's good performance for its FY 2016.
  • The first was the strong result in building products, which has been supported by strong market demand, but also by better margins, and growth in both new products and new categories.
  • The second driver was what Mr Sindel referred to as "recent transactions", which include the positive results from PGH Bricks.
  • The third driver was what Mr Sindel sees as a good performance from both the aluminium and property divisions of CSR.
  • Building products growth

    Regarding the growth in its building products division, Mr Sindel offered the following comments:
    Our forecast growth in multi residential has actually been much stronger and has accelerated as we've seen in the last 12 months. We identified this as a key opportunity due to our lower relative share in this segment. That's, of course, compared to our traditional high market share in the detached market.
    The main drivers of growth in multi residential included the increase in cost of land, combined with a desire by young people and -- for everyone to have a higher proportion of inner city living. So combined with increasing labour costs and trade shortages, this meant that the industry needed to develop smarter, faster and easier ways to construct buildings, less reliant on the traditional construction trades.
    So we've developed our strategy to help solve these issues, particularly with the growth in Hebel, the acquisition of AFS and with new products like the Velocity offsite walling system.
    Growth in building products for CSR 2012 to 2016

    The end result of the improved market, and selling both a higher margin product mix and increased volume was an EBIT margin of around 11.5% in the second half of CSR's FY 2015/16, according to Mr Sindel.
    CSR acquires AFS Products - HNN
    PGH Bricks

    This joint venture with Boral has performed well for CSR. Its overall earnings were AUD37 million, of which AUD22 million accrued to CSR. The joint venture has resulted in operational savings of AUD2.7 million so far, according to Mr Sindel, and he expects it will fully realise the projected AUD10 million in annual savings.
    Aluminium and property

    The aluminium division saw an incres of 4% in its sale tonnage. Sales increased by 4% over the pcp to reach AUD2,525 million (including hedging), down 4% on the pcp. Mr Sindel pointed to better operational efficiencies coming online at CSR's Tomago smelting operation, which is located 13km west of Newcastle, New South Wales.

    The property result was achieved through the sale of New Lynn in Auckland, New Zealand, along with the property at Chirnside Park, a residential development 35km to the east of Melbourne, Victoria. Mr Sindel said this latter project was around halfway through its expected total sales target. Some 263 lots in the 533 development have been sold, and a further 100 contracts exchanged.

    Mr Sindel also mentioned future developments at Schofields and Horsley Part in western Sydney. These are properties formerly used in the production of bricks, which have been vacated on the formation of the PGH Bricks joint venture.
    Viridian glass products

    Viridian provided AUD 301.3 million in sales, up by 8% on the pcp. The growth has been driven by a maturing business that has been targeted at commercial double-glazed windows and coated glass products. Mr Sindel mentioned in particular the Viridian LightBridge product. This is a coated and double-glazed product designed for use in residential construction.

    Mr Sindel also pointed to Viridian's ongoing growth in the New Zealand market, where CSR is working to acquire the outstanding 42% of its New Zealand glass venture.

    In looking ahead, Mr Sindel pointed out that Australian building approvals were now over 230,000 in the year to March 2016, with building starts lagging behind. When asked by an analyst whether he believed that the numbers gave support to the idea there were constraints on the construction industry, Mr Sindel said that he believed the major constraint was the availability of good quality construction tradespeople.

    He said the high level of demand in the multi-dwelling (apartment) market was creating a shortage in detached as well. He indicated that this might be particularly the case when it came to bricklayers.

    CSR has successfully transitioned to a company with the right mix of products to take advantage of the growth in multi-unit residential developments. While the company is clear that its present good results are in part an outcome of a building cycle that will likely pass through its peak in calendar 2016, it is also evidently counting on the ongoing resilience of the multi-unit market.

    This contradicts the assertions of some analysts more directly tied to the real estate market and industry who see multi-unit as some kind of a "boom" or "bubble" that will end in sharp price deflation. As HNN has suggested previously, it seems more likely that multi-unit is taking over two markets: first-time home buyers and those seeking out the inner-urban lifestyle.

    In the Sydney market, multi-unit has already been largely integrated into the overall housing market. Brisbane has a different integration, but seems to be moving towards the fully integrated model as well. Melbourne has started down this path only relatively recently.

    For the hardware/home improvement retail market, the forecast situation outlined by CSR has both some positives and negatives. With building construction skills in ongoing demand, sales of items such as tools will likely continue to do well. However, the shift from detached and attached dwellings to multi-unit apartment construction means that there could be an ongoing, systemic decline in demand for the kinds of construction materials supplied by hardware retail.
    CSR chart of alterations and additions

    Furthermore, the strong demand for trades generated by multi-unit construction is likely to increase prices in the residential renovation market. This could lead to a further depressing of the large-project, tradesperson-built renovation market through to the end of FY 2016/17, with an increased shift from outsourced, trade-managed projects to more DIY projects. This will benefit some hardware/home improvement retailers, with a shift from low-margin trade supplies to higher margin DIY supplies and tools.

    For retailers who rely more on the building trades it could create a slight downwards pressure on sales.

    CSR results for first half FY 2015-16 - HNN
    CSR full year results for FY 2014/15 - HNN
    Hitachi Koki posts 2015-16 results
    Hitachi Koki 2015-16 results
    Hitachi Koki
    Hitachi Koki geographic distribution of power tool revenue
    Hitachi Koki geographic power tool revenue distribution
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    The Japan-based, global power tools and life sciences equipment company Hitachi Koki has released the results for its 2015/16 financial year, which ended on 31 March 2016. (Note that this is referred to as the 2015 financial year by the company, following the Japanese custom.)

    The most important recent event for Hitachi Koki has been its acquisition of the European cordless power tool company Metabo, which was completed on 1 March 2016. This is important not only because it has been a major financial and strategic commitment, but also because Hitachi Koki is using this event as a trigger to bring in a number of comprehensive changes.

    The company's current results reflect its drive for reorganisation, and a revitalisation of its global strategy. Revenues reached YEN141,570 million, a gain of 4.2% over the previous corresponding period (pcp), which was the 2014/15 financial year. However, operating income declined sharply, down 58.6% on the pcp, coming in at YEN2645 million. Income before taxes was YEN2776 million, down 55.7% on the pcp, and net income attributable to shareholders was YEN1086, down 69.1% on the pcp.
    Hitachi Koki 2015/16 results

    While most regional power tool sales revenues were down on those for the pcp, sales in North America improved by 26.4% to reach YEN39,733 million. This was likely driven by Hitachi's deal to be exclusively distributed through Lowe's Home Improvement in North America.
    Hitachi Koki geographic distribution of power tool revenue

    As a consequence of this growth, North America contributed 29% of overall power tool revenue, up from 24% in the pcp. All other regions contributed 1% less in the balance.
    Hitachi Koki geographic power tool revenue distribution
    Strategic plans

    Operating income gained from both a modest increase in sales of YEN500 million, and changes to the company's pension plan, which brought in a further YEN900 million.

    Operating income expenses increased for structural transformation (YEN2,100 million), and cost of the acquisition of Metabo (YEN1,100 million). There was also a currency exchange loss of YEN1,300 million, and a YEN1,100 million loss attributed to a decrease in production.

    The goal behind this expenditure is very ambitious. Hitachi Koki plans to reach revenues of YEN230 billion by FY 2018/19, with an operating income of YEN18.7 billion. Its FY 2016/17 is a stepping-stone along that path, with the company projecting revenues of over YEN140 billion.

    The core strategy has two parts to it: increasing sales in highly developed countries, including Europe and North America, and improving its business structure in Japan drastically.

    In Japan it plans to review its current selling system, and to explore new sales channels by leveraging its association with the greater Hitachi Group. The goal is to increase Japanese revenues to around YEN40 billion.

    In Europe and North America Hitachi Koki's plans involve two parts, based on expanding its current Hitachi business, and also expanding business through leveraging its acquisition of Metabo.

    In the North American market, the company plans to increase non-Metabo sales from USD326 million to USD380 million. On top of that, Hitachi Koki plans to expand Metabo sales in North America from their current USD5 million to USD65 million. This will bring the total revenue from North America to USD445 million.

    In the European market, the company plans to increase non-Metabo revenues from EUR291 million to EUR308 million. To that will be added EUR291 million in Metabo sales, bringing the total to EUR599 million.

    Hitachi Koki's strategic move to increase its size in the market is no doubt in part motivated by the realisation that the other four major players in power tools -- Techtronic Industries, Bosch, Stanley Black & Decker and Makita -- have been steadily pulling away from it over the past three years.

    The Metabo acquisition has brought it not only a broader, established channel in the European market, and some additional access to the US market, but also a much-needed technology boost. It has essentially added a first-rate battery technology to its already first-rate brushless motors.

    If Hitachi Koki does have a fault, however, it likely lies with the firm's marketing of its products. Techtronic Industries (TTI) has done a great job marketing its Milwaukee brand as the power tool equivalent of a high performance muscle car. Stanley Black & Decker have built an appreciation of its DeWalt line as reliable precision tools for the professional. Bosch has turned its Blue brand into the signature choice for the no-nonsense craftsman who gets the job done with a sense of style. Makita has found a sweet spot where well-regarded Japanese values of endurance, repairability, balance and refinement mesh with similar Western values.

    In this brand sense, Western, developed markets are a little at a loss to understand what Hitachi stands for. The same is true, to a certain extent, in North American markets for the Metabo brand.

    When you hear someone who really understands his brand and understands selling speaking, such as Joe Galli, the CEO of TTI, one of the most striking things is what they don't say about the tools and their development. Listening to him give his half-yearly and full-year results, you can hear him deliberately step around even some great new features, because he knows that mentioning them will not actually help people be enthusiastic about the product.

    At the moment, most brand contacts a buyer has with Hitachi Koki products consists of just about every technological detail about the products. If the company is going to succeed at its worthwhile and ambitious plans for the next two or three years, it needs to craft a brand image that immediately communicates its many advantages. This is especially the case in Australia, where retailers can sometimes really struggle to communicate with customers about what has, unfortunately, become one of the less known brands for many tradies.
    USA summer of tools
    DeWalt Died Crimper
    HNN Sources
    Kobalt 24V Max Circular Saw
    Milwaukee M18 Fuel Sawzall with One-Key
    Click to visit the HBT website for more information
    If in the northern hemisphere spring a young man's thoughts turn lightly to love, by the time June rolls around the thoughts of building and construction crews have largely turned to three almost unanswerable questions:
  • Is it level?
  • Seriously, the guy who drew this thinks he's an architect?
  • And - especially for those just a bit older - how bad is doing this now going to hurt tomorrow?

  • Fortunately, there is relief at hand to these difficult questions, and it comes in one of the best forms imaginable: new tools.

    Well, "new" may be pushing it just a little, as some of the tools that get highlighted have been released a couple of months before, and some of then have been "pre-released" to the media, but they are certainly new to the people putting down some hard-earned money at a local hardware store, ready to invest in a new set of tools now that the work book is starting to fill up with new jobs.

    This year Stanley Black & Decker's top brand DeWalt has surprised us with some new specialty cordless power tools, the Lowe's home brand Kobalt has finally released the 24-volt tools it promised a few months ago, and Milwaukee is keen to remind us of the tools it has built, and the tools yet to come, including their promised 9 amp-hour 18-volt cordless tool battery.
    The buying decision

    Looking over the tools that are available, HNN would suggest there is something of a difference between this year and the past several years. Every professional/tradie buyer has a kind of imaginary meter in their heads: on one end of the scale is "Me like, me want to buy", and on the other end of the scale is "Could make a difference".

    That "could make a difference" reading is important to independent craftsmen and contractors. It can be the tool that saves that one crucial hour which means that the job gets finished, instead of having to come back the next day as well, or that saves a few percentage points on costs, or is simply safer, faster and gives a better finished result. It can be the difference between making a decent margin on a job, or keeping a key customer happy.

    This year there are quite a few tools that fall into the "difference" category. They do that by pushing the boundaries of what is expected just that one notch further. Rather than optional, nice to have if you have the money tools, they are what HNN is calling "the new essentials".
    DeWalt ramps up

    The big news coming out of DeWalt is something that hasn't happened just yet: the release of a "mystery technology" which it hinted at a month ago in its most recent results release.

    The hint has become a little more defined now, with DeWalt launching a landing page on the web that further teases the product with the brand statement "A Power Shift is Coming". Speculation is rife in the power tool community, and ranges from everything from a line of 24-volt tools to a more efficient battery technology.

    DeWalt promises that we will know all on 21 June 2016 in the US, which will be 22 June 2016 in Australia. HNN will keep you updated. Meanwhile, you can check out the tease at this URL:
    World's First at DeWalt
    20V Max threaded rod cutter

    Designed to easily cut through mild steel rods up to 13mm, and stainless steel rods up to 10mm, the DeWalt DCE350 will likely find acceptance with electricians, mechanics and plumbers currently using corded tools. It uses a four-sided rotatable cutting die, enabling the user to choose the right-sized die for each cutting task. Its design helps to cut down on chips and sparks in the cutting process.
    DeWalt DCE350
    20V Max U-Type Died Crimper

    This is an interesting tool, as it is part of DeWalt's foray into more connected tools. The DCE300 has what DeWalt is calling its "Crimp Connect System". This system will record details of the date/time of a crimp, the force employed, and the total number of crimp cycles the tool has performed.

    While details remain incomplete, it would seem this data can be downloaded from the tool using a USB connector, possibly to custom software. A control panel on the top of the tool shows battery information and service requirements.

    The crimper can deliver up to 118 kilonewtons (12-ton) of crimping force. It features a head that can pivot through 270 degrees, and is designed for one-handed operation.
    DeWalt Died Crimper
    20V Max Dieless Crimper

    The DeWalt DCE350 is very similar to the DCE300, except that it is dieless, of course. It features the same Crimp Connect System, and a similar control panel. It uses a four-pusher design and the head rotates through the full 360 degrees.
    DeWalt Dieless Crimper
    20V Max Press Tool

    This tool can press pipe fittings from 12mm to 100mm in both copper and stainless steel. It also has the Crimp Connect System, and a control panel. The Dewalt DCE200 has a head that can rotate through 320 degrees, and is compatible with a wide range of crimping heads and attachments.
    DeWalt Press Tool
    20V Max Cable Cutter

    No images of this tool are yet available. The DeWalt DCE150 can cut a wide range of cables, and features a hardened steel cutting blade.
    Lowe's Kobalt 24-volt tools

    While HNN has already previewed these, based on pre-release media coverage from the US, these tools are now selling in Lowe's, and user reviews give us a better perspective on them. One surprise is that Lowe's is already offering discounts on some of its 24-volt tools, cutting prices by around 15%.

    The average review rating on the tools ranges from four to five stars, which isn't unusual on the launch of a tool, as it is typically enthusiasts who buy them first. We're just going to look at three of the most significant tools: the circular saw, drill and impact driver.
    24V Max Circular Saw

    Reviews of the saw are particularly enthusiastic, with an overall five-star rating. Many users praise its extra power and depth of cut (it's a 6.5 inch saw, but has the cutting capacity of a regular 7.25 inch saw). For many it is evident this is the first cordless saw that actually makes sense, and helps them to do tough jobs such as cutting 4x4 fence post flush, with ease.

    Bare tool, USD129.
    Kobalt 24V Max Circular Saw
    24V Max Cordless Drill

    As with the saw, this drill received a five-star rating. While users universally praised its power, a few also commented on its increased weight. At the same time most felt that it was a well-balanced tool, that felt good to use. Some mentioned a lack of small touches, such as their being no magnetic bit holder.

    With 2.0 amp-hour battery, charger and soft case, USD149.
    Kobalt 24V Max Cordless Drill
    24V Max Cordless Variable Speed Impact Driver

    Two features of this Kobalt impact driver received a great deal of comment. The first was that it seems to users to be no heavier than standard 20V max impact drivers. The second was a real appreciation for the drivers "finish" feature. Pressing a button (which then illuminates) makes the driver use the hammer for only the first second of operation. This means the user can "pulse" the trigger, and hopefully get a better set to a screw, as well as limiting over-torque, which could snap the screw head.

    With 2.0 amp-hour battery, charter and a soft carry case, USD149.
    Kobalt 24V Max Impact Driver

    Most of Milwaukee's most interesting innovations have to do with its One-Key system, which brings Internet of Things (IoT) connectivity to power tools.

    This was the highlight of its annual (northern) summer promotional event, the New Product Symposium. However, there were plenty of coming innovations alongside that to keep most tool buyers interested. One of the most significant is the coming release of Milwaukee's 9 amp-hour battery. Promised for close to a year, Milwaukee says its release is now imminent.

    For the Milwaukee 12-volt range, the company is releasing a larger battery as well, increasing it from the current 3 amp-hour to a 6 amp-hour unit.

    Milwaukee is also at the start of making a major play in outdoor power equipment (OPE), using the same 18-volt batteries used in its cordless tools. This line of equipment is set to be launched in January 2017.

    Milwaukee heavily promoted its One-Key tool tracking feature, which seems to be evolving in terms of interface. As this system relies on an internal battery inside the tool, it is difficult to defeat - those batteries last for as long as 18 months. According to the company, something like 1000 tools that were lost or stolen have now been found again by using One-Key.

    One-Key has also added a lock-out feature, which makes it easy to remotely shut down a tool so that it won't work until its owner unlocks it.

    In terms of new tools in the One-Key line, the star is currently the M18 Fuel Sawzall. Here the One-Key system can provide a vital service. By altering the way the saw performs based on the type of material being cut, blade life can be considerably enhanced, and cutting tasks can be achieved both more easily and safely.
    Milwaukee M18 Fuel Sawzall with One-Key

    The patterns that we have seen in tool development in the recent past have largely been about design convergence. Most cordless power tool manufacturers have been keen to match the offering of their competitors, and possibly squeeze out a slight advantage by offering just that little bit more.

    This year, each of these major manufacturers have largely gone their own way. We could interpret DeWalt's push into its downloadable data tools as being a "catch-up" effort in the face of Milwaukee's One-Key system. There may be an element of that, but these tools are also more likely to appeal to smaller contractors who are less concerned about connectivity, and don't find downloading data to be a bad thing to do.

    The Kobalt 24-volt tools represents a brilliant move by Lowe's. It has identified a particular strong slice of the market, which is those professionals/tradies who are unwilling to entirely let go of their corded tools as they don't like to compromise on power.

    These tools are, according to the initial reviews, well-designed, and deliver on the power promise. Lowe's also promises they will have long lives, due to using less-stressed systems, and time will prove whether this bears out. If it does, then Lowe's may be on its way to establishing a "must have" set of tools for specific contractors involved in areas such as fencing and framing.

    Milwaukee has done amazing things with its technological development of its One-Key tools. While the features it currently offers are very attractive to owners of large fleets of tools, it will be interesting to see how well the company "gears down" these capabilities so that smaller contractors and even individuals are interested in them as well.

    The One-Key Sawzall is one clear step in that direction. Being able to offer a high degree of fine control, as well as "remembered" settings for different situations would be enough to make heavy users of these tools take a second look at the Milwaukee system.

    The story of tool development over the next two years will be one of understanding how to bring more technology to specific markets, in such a way that its uptake is high enough to pave the way for yet more technology. Each of these companies has selected a specific path, and it is going to be interesting to see how these strategic choices play out.
    STIHL buys minority stake in Globe Tools
    STIHL has secured a "substantial" minority share of the China-based Globe Tools Group
    PR Newswire
    Globe Tools supplies customers mainly in North America and Europe
    STIHL will be able to expand its cordless product line
    Subscribe to HNN weekly e-newsletter
    The STIHL Group has secured a "substantial" minority share of the Globe Tools Group, a China-based manufacturer of corded and cordless outdoor power tools under its Greenworks brand. STIHL executive board chairman Dr. Bertram Kandziora said in a statement:
    Our stake in Globe Tools means we are systematically consolidating our strategy in the growing market for cordless power tools. We will utilise synergies in the development and production of cordless products.

    Owner and managing director of the Globe Tools Group, Mr. Yin Chen, said:
    We are pleased that we will have STIHL on board in the future as a strong and reliable partner. This involvement is a milestone in our growth story.

    Globe Tools is a supplier of power tools to customers mainly in North America and Europe. STIHL makes products for professionals in forestry and agriculture, landscape care and the construction industry as well as consumers.

    The two companies complement each other in the market for cordless and corded electric power tools and intend to create achieve gains in efficiency. Dr. Kandziora said:
    This move enables us to quickly expand the STIHL cordless product line for the customers of our servicing dealers in the entry-level segment and offer high class products in STIHL quality at competitive prices.

    Moreover, STIHL will make use of the "favourable" production costs of Globe Tools in China, as well as the procurement of components.

    Along with the fresh injection of capital to fuel further growth, Globe Tools said it expects to benefit significantly from STIHL's many decades of experience in the industry.

    Mr Chen runs the Globe Tools Group as a family business. It has a high level of vertical integration and produces around eight million cordless and corded electric products annually. Turnover last year amounted to USD325 million, according the company.

    The Globe Tools Group has a workforce of around 4,000 people in Hong Kong, Changzhou (China), North Carolina (USA), Newmarket (Canada), Moscow (Russia) and Cologne (Germany). Its manufacturing operations are in Changzhou while the company's US distribution headquarters are based in Mooresville, North Carolina.

    Terms of the deal ha have not disclosed nor was the size of the stake in Globe Tools that STIHL purchased. Approvals from antitrust and other authorities in several countries still have to be granted before the transaction can be completed.
    Digital tools for renos
    General Tools' ToolSmart range includes a mobile app for wireless connection
    Toolsmart's digital angle finder has a range of 225 degrees
    The digital multimeter measures voltage, current, resistance and surface temperature
    Click to visit the HBT website for more information
    General Tools' ToolSmart[tm] line includes a free Android or iOS mobile app that uses Bluetooth or Wi-Fi technology to wirelessly connect to four handheld measuring and inspecting tools. Data from each device is instantly transmitted to the app, which automatically stores and catalogues the information and determines the materials and tools necessary to complete the project.

    The ToolSmart product range includes a laser distance measurer with a range of 100 feet; a video inspection camera with a pencil-thin camera-tipped probe that can capture videos and photos; a digital multimeter for measuring voltage, current, resistance and surface temperature; and a digital angle finder with a range of 225 degrees. Greg Bonsib, vice president of marketing at General Tools said:
    General Tools is excited to be teaming with Lowe's to help tradesmen, DIYers and craftsmen work smarter, measure better and be more productive.

    The design of the ToolSmart app eliminates the need to jot down readings on scraps of paper that often get lost in cluttered project areas. In addition, the precision of the ToolSmart devices combines with the app's capability to store and integrate data. This combination can also generate a list of materials and tools to minimise human error. Product manager, Andrew Micallef said:
    Working in concert, the ToolSmart app and devices provide precise support for even the most intricate and complex building, remodelling, woodworking or inspection projects.

    Founded in 1922 as General Hardware Manufacturing, General Tools has over 1,200 products including specific-purpose mechanical hand tools as well as precision measuring and inspection tools.
    Troy-Bilt adds to FLEX line
    New products have been added to Troy-Bilt's FLEX range including an aerator
    PR Newswire
    The FLEX Dethatcher covers more ground in fewer passes
    Troy-Bilt's FLEX line was introduced last year
    Click to visit the HBT website for more information
    Three new attachments have been added to Troy-Bilt's FLEX range, a customisable yard care system that was introduced last year. The system revolves around one engine that can accept multiple attachments.

    The FLEX Dethatcher, Plug Aerator and Water Pump now join the original attachments, the FLEX Wide-Area Mower, Leaf Blower, Snow Thrower and Pressure Washer. In the US, they are exclusively stocked at Lowe's stores.

    The FLEX system has been honoured by the Edison Awards with a gold award in the Home Tools & Maintenance category. Originally established in 1987, the Edison Awards have recognised excellence in new product and service development, marketing, design and innovation.

    The FLEX Dethatcher covers more ground in fewer passes, combing grass with 7.5-inch, zinc-coated, double-torsion spring tines. It offers six different height settings to ensure quality performance through all types of grass.
    Plug Aerator

    The FLEX Plug Aerator has a 28-inch operating width engaging sixteen, 12-gauge galvanised steel plug spoons that manually rotate to extract soil plugs as deep as two inches. The integrated weight trays accommodate several weight sources commonly found around the home - like cinder blocks or paver bricks - which will help dig even deeper.
    Water Pump

    The FLEX Water Pump has a 120gpm (gallons per minute) max water flow rate and a 20-foot reinforced suction hose designed to supply water to the pump in all appropriate pumping applications. The water surge is subsequently discharged through a 25-foot flat discharge hose, with up to 80-foot total lift and 20-foot suction lift. It can work in a variety of positions, high and low.

    Additionally, this water pump comes with all pieces and parts, including hoses, all couplings and integrated storage to keep everything in one place - so it's ready to go wherever and whenever it's needed.

    Modular yard care system - HNN
    Pliers designed to pull
    The Crescent Code Red Nail Pulling Pliers in action
    HNN Sources
    They guarantee a therapeutic release for fasteners
    The Nail Pulling Pliers are available from Apex Tool Group
    Click to visit the HBT website for more information
    The new Crescent Code Red[tm] Nail Pulling Pliers is becoming known for its ease-of-use and durability.

    It is the speed, strength and function of these pliers that makes it competitive. With the curved foot of the Nail Pulling Pliers and quick grip parallel jaws preventing slippage, users can apply maximum force simply by leveraging weight into the curved foot.

    The racing red, ergonomically designed, comfortable grip allows for one hand operation so any work can be done quickly.

    Pulling old nails and stuck staples used to be a struggle but Crescent has engineered the Code Red Nail Pulling Pliers to guarantee a therapeutic release for all manner of fasteners.

    The hand tool is designed to pull finishing nails; floor staples; wire and coaxial staples; headed nails and brads.

    No matter the degraded state of the nail head, whether it is in the front or back of the material, how stubbornly fixed it is or where the staple or fastener is located; the Crescent Nail Pulling Pliers are made to work the first time and with less damage and marring than traditional nail pulling pliers.
    Light steel frames for luxury custom homes
    BONE Structure uses a patented light steel frame building technology to build its custom homes
    AZO Build
    The home's shell produces near zero waste, and is made of 89% recycled steel
    The company is scaling up to produce 1,000 residences per year
    Click to visit the HBT website for more information
    BONE Structure(r) has been using a patented light steel frame building technology and integrated process for its high-end custom homes. It recently broke ground on its first California net zero-energy project.

    BONE Structure creates custom homes built from columns and beams that are laser cut in a manufacturing plant and delivered to the site for assembly. A licensed BONE Structure assembly crew of five workers will assemble the shell of the home in days, each using battery powered drill, and one type of self-tapping screw to secure the steel columns and beams in place.

    Electrical, plumbing, heating and ventilation systems are easily connected thanks to pre-cut openings acting as "highways" within the structure. Pre-cut insulation panels clip into place between the steel columns and polyurethane foam insulation is sprayed on the exterior that tightly seals the building and acts as a vapour barrier. Together, the steel structure, insulation panels, spray insulation, and the roof create a tight, energy efficient envelope.

    The Canada-based company began assembly on the 3,200 square foot home in Stanford that will meet California's 2020 Zero Net Energy (ZNE) new home building requirements.

    The home was commissioned by professor Mark Jacobson, the head of the Atmosphere and Energy Program at Stanford University to serve as his personal residence. He said:
    I wasn't in the mood to build a house, but after having looked at a lot of houses, I thought I could make the home more energy efficient and to my liking if I built it myself. I looked into a couple of prefab companies to reduce waste and disruption on the jobsite. I selected BONE Structure because it allows for a custom design to make the most of my odd-shaped lot.

    While any architect can utilise BONE Structure's steel construction system in its design, Professor Jacobson opted to have one of BONE Structure's in-house architects design the new home. He said:
    The steel frame system allows for exciting design features that would not be possible using traditional building methods. Interior spaces and window lines can run up to 25 feet between columns.

    BONE Structure homes can have a large open plan interior space and double height ceiling allowing for natural light throughout. Future reconfiguration is simple, and changed as needed. The home's shell produces near zero waste, made of 89% recycled steel, and is 100% recyclable, seismically resilient and safe from damage by termites and mould. Charles Bovet, vice president of BONE Structure - US said:
    This is a great first project for BONE Structure in California and a perfect example of the benefits of our system...Our shells are net zero ready, meaning they are extremely energy efficient and with the addition of a small solar system they can produce more energy than they consume.

    BONE Structure expects to build 50 new homes in California in 2016. The company is scaling up to produce 1,000 residences per year to meet a growing demand for this disruptive home construction technology. It is the only net zero-ready energy builder that can produce homes on a large scale.
    HIA's project home winner
    The façade of the prize winning kalka project home
    News Corp.
    The kalka-built bathroom
    A bedroom in the kalka project home in Grange (QLD)
    Subscribe to HNN weekly e-newsletter
    A five-bedroom home located in the Brisbane suburb of Grange has won top prize in the 2016 HIA-CSR Australian Housing Awards in the project home category. It was made by construction and development company, kalka.

    Judges were impressed by how the home managed to blend into the existing streetscape by observing the size, scale and style of neighbouring homes. kalka founder and director Hugh Bridle said it was a fantastic achievement to be acknowledged among so many major contenders. He told News Corp.:
    We place such a high importance on design, functionality and quality so it's an honour to be recognised with an award that reflects these attributes. The beauty of the award is that it acknowledges the work that our team are doing and goes a long way to recognise their continued commitment to kalka and the way we do things.

    The two-level home, with a contract price under $400,000, was built to Brisbane Small Lot Code requirements, with attention to high quality interior layout and finishes.

    The overall design maximised the indoor/outdoor living space, with features such as heightened ceilings to create a sense of openness, and windows positioned for cross airflow and interior natural light.

    The open plan kitchen, dining and living has spaces defined by different ceiling heights, with the bedrooms and main bathroom upstairs.

    HIA managing director Shane Goodwin said the awards program represented the exacting standard of its more than 40,000 members involved in residential construction. He said:
    HIA members are dedicated to achieving the very best workmanship and standards in every project they undertake. HIA's awards provide a tremendous opportunity for our members to showcase their projects and highlight building and design excellence.
    A smarter way to measure
    The Hilti PD-C Laser Range Meter is designed for building professionals and tradies
    Power Tools Reviews
    It is engineered to take fast and accurate measurements
    The Hilti PD-C Laser Range Meter has 4GB memory
    Click to visit the HBT website for more information
    The new Hilti PD-C Laser Range Meter is designed for building professionals and tradies alike. They often spend more time than they'd like writing and organising paper measurements so workers won't waste time on materials from incomplete data.

    To save time and eliminate the worries of incomplete data, the Hilti PD-C with touch screen is engineered to take fast and accurate measurements.

    Aside from its touch-screen capability, the Hilti PD-C Laser Range Meter also offers a powerful camera. This combination of features allows the user to sketch distances directly on the photos taken. With one hand, the operator can capture a laser measurement - simply point, shoot and mark dimensions directly onto the photo. The device is able to accurately measure heights of ceiling and long distances up to 656 feet.

    The camera features a targeting function where a user can spot the laser target easily whether indoors or outdoors and under any light conditions. The Hilti PD-C has time saving intuitive guides and geometric calculations built into the software, which are visible on the large smartphone-like screen.

    The Hilti PD-C Laser Range Meter has 4GB memory, so the user can take more than 3000 measurements on any given day. It can convert and share data in single PDF or CVS reporting formats and transfer it though USB to any computer or via Bluetooth to Android devices. Photos with measurements can also be exported as a jpeg files.
    HI News Vol. 2 No. 9
    Download the latest HI News, issue number nine
    HI News Vol. 2 No. 9
    DuluxGroup reports positive results for the first half of 2015-16
    Bunnings will be part of the Chadstone Homeplus Homemaker Centre in Melbourne
    Click to visit the HBT website for more information
    The HNN e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out. Just use the following link to download the PDF:
    HI News - Volume 2, issue number 9

    In this issue, we explore the impact of DIY TV shows on the Australian home improvement industry at a time when their popularity may be waning. DuluxGroup also reports positive results for the first half of 2015-16 but we question whether it can adapt to a changing environment.

    This edition has a number of updates for big box stores, independent stores and other retailers related to home improvement. Some of the stories include Bunnings move in Albury (NSW); Steinhoff-owned POCO looking at buying Masters sites; The Good Guys contemplating an IPO; and Mitre 10 gaining a new member in Kellys Wodonga.

    On the international front, we feature quarterly results from The Home Depot, Lowe's, Kingfisher, Ace Hardware, Travis Perkins and Grafton Group.

    In terms of suppliers, there are stories about Boral's Mike Kane's reference to the housing market during his speech at the Macquarie Australia conference and Valspar's second quarter results.

    There are new products from Dynamic Paintware, Troy-bilt outdoor equipment and Cub Cadet.

    Valspar, Milwaukee Tools and DuluxGroup are also highlighted in the careers section.
    DuluxGroup H1 2015-16 results
    Results for DuluxGroup first half 2015-16
    Strong record of DuluxGroup growth
    DuluxGroup's strategic goals
    Subscribe to HNN weekly e-newsletter
    Australia's DuluxGroup (Dulux) has reported its results for the first half of its 2015/16 financial year. The company has delivered a positive performance, as compared to the previous corresponding period (pcp), which was the first half of the 2015/16 financial year.

    Highlights of its performance include an increase in underlying earnings before interest and taxation (EBIT) of 4.5% over the pcp, while underlying net profit after tax (NPAT) also increased, growing by 3.7%.

    Overall sales grew by a more modest 1.7%, below the accepted rate of inflation. Sales were adversely affected by some corrections in the retail sector of the paints and coatings market, as volumes of lower-cost paint increased. Additional costs included those associated with the introduction of Dulux's improved "Wash and Wear" brand of premium consumer paint, which had high marketing costs.

    Dulux was also affected by its destocking from Mitre 10 operations in New Zealand. Poor economic conditions in Papua New Guinea have also hampered its planned expansion in that market.

    Dulux reports that its two main infrastructure projects, the construction of a new paint factory in Melbourne, and a new distribution centre in New South Wales, are both proceeding on-time and within their budgets.
    Paints and coatings

    This segment of Dulux had sales of AUD452.5 million, up by 2.3% on the pcp. EBIT (excluding non-recurring items) was AUD91.1 million, up by 4.0% on the pcp.

    The CEO of DuluxGroup, Patrick Houlihan, outlined the following forces that have affected the paints and coatings business of the company:
  • Overall growth for the Australian business was 4.0%.
  • The market contracted for Dulux paints in New Zealand, as Mitre 10 New Zealand (a separate entity to the Metcash-owned Mitre 10 in Australia) ceased to stock Dulux paints. Mr Houlihan put the effect of this at around AUD1.0 million in terms of EBIT.
  • The renovation/repaint market for Dulux fell by 7%. This was due to two main factors. One of these was that during the pcp the company had experienced a surge in sales of cheaper paints, providing a tough comparison with the current market. Also, there were substantial destocking activities by retailers during the results period. In addition, there were promotional activities, including discounts, associated with the introduction of the company's latest "Wash and Wear" paint brand.
  • During the current report period, new housing supply in Australia grew by close to 8.0%, helping to bolster sales in Dulux's less profitable paint sector.
  • Commercial/trade sales also grew during the period, increasing by 5.0%.
  • Texture coatings grew well, boosted by the increase in building activity.
  • Protective coatings fell overall, as spending on infrastructure in areas such as mining continued to decline.
  • Margins were boosted by an increased preference by consumers for premium, higher-margin paint products.

  • Mr Houlihan was clear in pointing out that, whatever the fluctuations may be, the underlying market for paint in Australia and New Zealand remains sound.

    EBIT margin grew from 17.8% for the pcp to 18.3% for the current period. The company predicts that overall EBIT margin for its financial year 2015/16 will be higher than for the previous financial year. This segment contributed 53% of the company's sales revenue, and 73% of its overall EBIT.

    Dulux reports that it is now expecting decreased costs from the planned decommissioning of some product lines previously produced at its Rocklea facility (replaced by production at the new Melbourne-based factory). This is due to the company choosing to shift the production of some products from outsourced suppliers to the Rocklea facility, which it predicts will result in overall cost savings.

    The full benefit of the savings from the new factory are expected to reach the balance sheet only in the second half of 2018.

    Mr Houlihan said that part of the company's expansion plans for this segment included the introduction of more specialty products. He reiterated in response to the question of an analyst that Dulux sees the market largely adhering to its longer term patterns over the coming year. This would mean growth in the market of between 1.0% and 1.5%, with additional price growth of around 2.0%.

    He also provided details on the expanded Wash and Wear paint range. The product retails in four-litre cans for AUD72, up from AUD69 for the previous version. Mr Houlihan pointed in particular to the improved performance of the matte paint, which enabled painters to use it in areas where they previously might have used low-sheen paint. He also mentioned the Dulux Wash and Wear Super Hide paint, which has a higher level of Titanium oxide, and is able to conceal a black surface with just two coats of white paint. Super Hide costs AUD80 for four litres.

    Mr Houlihan did not rule out trying to supply Bunnings UK with some products, but pointed out that this would be a difficult market in which to compete, given the number of long-standing brands available there.

    Asked by an analyst about expected competition from the merger of Valspar and Sherwin-Williams, with the two US-based companies having a market presence in Australia, Mr Houlihan reiterated aspects of previous answers to competition questions. He stated that he did not see the merged company as posing any greater threat than past competitors, such as Nippon paints, or PPG. In particular, he noted that Sherwin-Williams had pursued an own-store strategy, while Dulux had partnered with both Bunnings and Mitre 10 in Australia.
    Consumer and construction products

    Sales for this segment were AUD125.7 million, a 5.2% decline over sales for the pcp. EBIT, excluding non-recurring items, also fell, coming in at AUD13.9 million, down 7.3%.

    Dulux places much of the blame for the decline on destocking at the hardware operations of Woolworths, as that company begins its exit the home improvement retail business. Exclusive of Woolworths, the company says that sales of its Selleys products grew by 3.0%.

    Mr Houlihan clarified that the destocking originated with the Woolworths businesses, including both Masters and the HTH Group. When pressed on why HTH Group would be destocking, he responded that Dulux sold directly into the Woolworths' wholesale warehouse, and that HTH Group seemed to be rebalancing its stock levels of Selleys products.

    The Parchem business continues to struggle, due to the decline in general infrastructure spending. In contrast with the pcp, there was also a reduced level of rebuilding activity in New Zealand, with a spike originally triggered by the earthquake in Christchurch. These factors resulted in a decline in EBIT for Parchem alone of AUD900,000. On the positive side, both gross margins and operating efficiencies were improved.
    Garage doors and openers

    Sales for this segment improved, but EBIT remained unchanged. Sales were AUD84.3 million, an increase of 7.0% over the pcp. EBIT came in at AUD5.5 million.

    Growth was boosted by the acquisition of the Western Australian assets of Gliderol. The company predicts the coming half of the financial year will provide stronger results. Sales performance remained strong, both through direct sales to builders, and the company's distribution channels.

    On the negative side, manufacturing costs were higher than anticipated. However, Dulux is anticipating a stronger performance in the coming half-year.

    Mr Houlihan outlined some of the advances that have been made in this segment. This includes the relaunching of the B&D garage opener/door business under a new brand, Home Safe Home. This has been backed up by a new website.

    New products and features have also been introduced. This includes a second generation kit for integrating door openers with smartphones, and a first for the Australian market, a lock-in device that prevents garage doors from being forced open from outside.

    Dulux's chief financial officer, Stuart Boxer, hinted that there would be stronger marketing activities during the remainder of 2016. Mr Houlihan was also quick to defend the position of the business segment. He pointed out that the business has a 30% market share, which provides a margin in earnings before interest, taxation, depreciation and amortisation (EBITDA) of around 14%.
    Other businesses

    Cabinet and architectural hardware sales improved by 8.2% over the pcp, coming in at AUD88.9 million. EBIT also grew, up 38.9% over the pcp, at AUD5.0 million.

    For the remaining businesses, including Yates, sales fell by 1.0% over the pcp to reach AUD105.9 million, while EBIT was AUD7.3 million, up from 7.2 million in the pcp.

    While there continues to be something satisfying about the way in which Dulux constantly churns out good earnings, it is difficult to not be a little concerned about the future. Mr Houlihan provided a chart in the earnings presentation that showed the company's progress through 20 years of revenue and EBIT numbers. Excepting a dip around 2001, it is an impressive set of numbers.

    The difficulty is, of course, how relevant it will remain in the future. While there is a good deal of both sense and experience in Mr Houlihan's certainty that Dulux will not suffer unduly from competition brought on by the merger of Valspar and Sherwin-Williams, it does seem possible that he may be, in the longer term, proved only half-right. What makes this challenge different is that it is a signal of just how consolidated and global the business of paint is becoming. The threat from such mergers is at least in part a greater ability to control the prices on some of the more expensive inputs, such as Titanium-oxide. Plus, of course, other benefits that accrue to global businesses, such as amortisation of costs in product development and marketing.

    Perhaps an additional signal of how this world is developing is that Dulux used the stars of the US TV show "Mythbusters" as promoters of Wash and Wear. Even as a brand that prides itself on being "special" to Australia, and one of the nation's most trusted names, internationalisation still has an impact.

    The most worrying of the DuluxGroup segments still does remain its garage door opener business. The point Mr Houlihan has made about this acquisition is that it makes use of many of the same marketing principles as the paint business. As he put it in this results announcement:
    I reminded you at the full year that the B&D business is a profitable market leader in a well-structured market, with a bias towards the existing home. In fact, the market characteristics of the garage door market have some strong similarities to those of the decorative paint market.

    It is here that the problems seem to begin. It is certainly true that the current garage opener market is "well-structured", but the chances of its remaining so are very slim. It is evident that the garage door market is on the cusp of being restructured. Recent innovations from Ryobi and others point towards it becoming a prime centre of development for the connected home as it connects with the Internet of Things.
    Ryobi's garage technology hub - HNN

    That may take another two years to become a real force in Australia, so the real question isn't what is happening in the market now, but what Dulux can do about the future market. Unfortunately, the answer would seem to be "not a lot". The company does not know how to innovate in the design and manufacture of electrical and electro-mechanical products.

    There is the real potential here for this - very small - part of the Dulux business to become rapidly unprofitable, and end up being written off.
    Big box update
    Bunnings will be part of the Chadstone Homeplus Homemaker Centre in Melbourne
    HNN Sources
    POCO is in contention to takeover the sites set to be vacated by Masters
    Bunnings will establish pilot stores in the UK
    Click to visit the HBT website for more information
    Bunnings should be a major drawcard at the Chadstone Homeplus Homemaker Centre; Bunnings is moving to a new warehouse in Albury (NSW); the $43 million Bunnings warehouse in Toowoomba (QLD) is scheduled to begin development later this year; another potential entrant in the Masters, Home Timber and Hardware battle; international big box retailer could take over the former Masters sites; Metcash said to be looking at Masters assets along with HTH; Bunnings will roll out pilot stores in the UK; Bunnings brands in Homebase stores; and the Bunnings Berri store in the Riverland (SA) has just opened.
    Bunnings signs onto Homeplus Centre

    Newmark Capital has signed up Bunnings in a 10-year deal to be part of its Chadstone Homeplus Homemaker Centre in Melbourne. The big box retailer will open a large-format 7600sqm store at the centre, located about 500 metres from Chadstone Shopping Centre.

    Bunnings will share space in the Homeplus Centre with other major retailers such as Barbeques Galore, The Good Guys, Snooze, Freedom, JB Hi-Fi, E&S Trading and Adriatic Furniture.

    Newmark was founded by former Hawthorn football star Chris Langford and Simon Morris who previously headed Peninsula Development Group. The Homeplus Centre, bought for $55 million in 2011, was the start-up syndicator's first single-asset fund. Its value is likely to soar above $80 million after the deal with Bunnings.

    Industry sources suggest rents for a large retailer such as Bunnings were likely to be between $280-$320 per square metre.
    New Albury warehouse for Bunnings

    Bunnings has lodged a development application for a $27 million replacement store in Albury.

    The big box retailer opened its existing store in Young Street in 2003 before an expansion six years later. The plans are for new store on the corner of the Riverina Highway and Drome Street. It will be located next door to the Harvey Norman Centre. Bunnings' trade centre in Romet Road, Wodonga will transfer across to Albury as part of the move.

    The replacement warehouse will be over 18,000sqm with room for more than 400 carparks.

    Bunnings recently purchased the site including the Kimberly Clark factory which closed last year. Bunnings general manager of its property division, Andrew Marks, said the redevelopment was a show of faith in the Albury market.

    Acting Albury mayor David Thurley welcomed the announcement from Bunnings. He said:
    Albury Council has been supporting the Bunnings team with information and assistance for its investigations into the proposed purchase of the new site for several months. We are very pleased that Bunnings has seen fit to invest in the expansion of their presence in Albury...

    Bunnings is also building a 6900sqm store on the eastern edge of Yarrawonga which is expected to open later this year.
    Toowoomba store set to go

    The Bunnings store approved to be built at the former foundry site in Toowoomba North is scheduled to begin construction before the end of the year.

    Bunnings general manager - property Andrew Marks confirmed Hutchinson Builders as the builders behind the new warehouse.

    The development was approved in April 2015 by the former Toowoomba Regional Council. The store will employ 180 people, with 380 jobs to be created during construction. The car park will incorporate 481 parking spaces.
    Blundy bid for Masters, HTH

    Australian businessman Brett Blundy may be buying into Woolworths' hardware operations, according to DataRoom in The Australian. Apparently, he has made a tilt at parts of the Masters hardware portfolio and potentially also Home Timber and Hardware (HTH).

    Mr Blundy founded BB Retail Capital in 1980 and built up his initial fortune by growing a single record store called Disco Duck into a 238-store strong Sanity Entertainment Group, encompassing HMV and Virgin Entertainment, before it was divested in 2009.

    BB Retail Capital may be working with JB Hi-Fi and Steinhoff International, the majority shareholder of the listed Freedom Furniture. (More about Steinhoff later.) It is also understood JB Hi-Fi and Steinhoff Asia Pacific may have submitted bids for the Masters property portfolio as part of a consortium involving other parties, including a property developer.

    JB Hi-Fi's interest in parts of the Masters portfolio stems from its move to push further into the home appliance sector, which would require larger format stores. Yet its interest would likely depend on whether it successfully acquires The Good Guys.

    Steinhoff is also bidding for The Good Guys as well as the Masters portfolio, as is Harvey Norman.
    POCO enters race for Masters sites

    Home furnishing and hardware store, POCO is now in contention to takeover the sites set to be vacated by Masters.

    POCO is a South African-owned warehouse retailer that stocks discount furniture, hardware, white goods, bedding and other low cost household items such as soft furnishings and some electrical goods. It houses brands like Simpson, TEAC and Breville.

    Its South African parent company, Steinhoff International, also owns Freedom Furniture, Snooze and Bay Leather Republic.

    Fairfax Media reported that POCO was planning to move into 20 vacated Masters sites around Australia. Prior to that, trade publication Channel News reported that a Steinhoff International source said the company wanted to open 45 Australian POCO stores in two years and as many as 100 outlets within five years.

    Complete with its distinctive yellow and red colour scheme, POCO first opened its doors in Australia in 2012 and now operates six store across the country, including outlets in Blacktown and Casula in NSW.

    Queensland University of Technology retail expert Dr Gary Mortimer told The New Daily that POCO represented the same threat to Bunnings that discount German supermarket Aldi posed to Coles and Woolworths. He said:
    The POCO model tends to be an Aldi or to a lesser extent a Costco-style one. Fairly good quality, but low price. Not a significantly large range or a lot of branded products.
    POCO will tap into that value seeking consumer that wants relatively good furniture, cheap white goods but still good quality.

    Dr Mortimer said it was a very different offering to Masters, which meant POCO would have a better chance of standing up to Bunnings.
    What Masters did was try to emulate Bunnings but in a high end air conditioned store. That inferred to the shopper it would be high price. They didn't understand their market. People would go to buy hardware but also see cushions and throw rugs.
    New 'Aldi-style' superstore could buy Masters sites - The New Daily

    Retail analyst and managing director of Marketing Focus, Barry Urquhart, doesn't see POCO becoming a major competitor in the big box market, and said it would lose a lot of profit while it expanded its store network over the next five years.

    Mr Urquhart said POCO could follow in Masters' footsteps and fail because it wasn't focused on doing one thing and doing it well.

    POCO stretches itself across a number of different markets and Mr Urquhart doesn't believe it's what consumers want.

    Mr Urquhart also said POCO had to tread wisely if it wanted to expand the number of stores in Australia at such a rapid rate.
    There will be a period of loss therefore they have to be very careful. If they run out of money, they run out of time and if you run out of time, you're run out of business.
    Failed Masters sites could be replaced with an international big box retailer -
    Metcash looking to buy Masters too

    The DataRoom column in The Australian has revealed that Metcash may be interested in both Masters and Home Timber and Hardware. Apparently, the Mitre 10 owner, has been sounding out Woolworths about a potential acquisition of the stock within the hardware operation of Masters.

    It has always been thought that it was only HTH that was of interest to Metcash, but it is now believed the group also expressed an interest in understanding what stock Masters has and at what price.

    HTH is more attractive to buyers than the loss-making Masters and is known to have strong synergies with the Metcash Mitre 10 operation.

    Citi is working on the process on behalf of Woolworths and is expected to have now comprised a short list of bidders for the second round of the contest.
    Bunnings launching UK pilot stores

    John Durie in The Australian writes that over the next six months, Bunnings will establish pilot stores in two or three of the 260 Homebase sites in the UK.

    The big box retailer is three months into the process of transferring its operating style into the UK. Bunnings' UK operations is being led by veteran executive PJ Davis with some ongoing help from his boss John Gillam.

    Michael Schneider is in charge of the Australian and New Zealand operations and the plan is to keep the operations separate.

    The Bunnings team in the UK has the job of exporting much the same way that back in 1993 when Mr Davis was part of the Bunnings team in the then McEwans takeover.

    Once its pilot stores are established, other stores will be in the new model. This means, among other things, that everyday low prices instead of the high-low strategy which has been the hardware mainstay in the UK for a long time.

    That's a big change for the stores, which will continue to run as Homebase stores but without the myriad concessions that now populate them.

    Bunnings is in the process of undoing the contracts Homebase had with these concession operators. Among these is Argos, the catalogue based retailer owned by former parent company Home Retail Group, and a furniture concession.

    This process is likely to see an adjustment to the sales base to be used for the acquisition, which will be stated with ongoing starting sales of around $2.4 billion as against the previous stated sales of around $3 billion. The lower sales base will measure the stores minus Argos and the furniture concession.

    The process to be undertaken now is equipping Homebase with the expertise needed to operate as a standalone retailer, with adjustments to distribution centres and the addition of a property team to handle ongoing lease and purchase decisions.

    The actual Bunnings rollout will not be set on any public timetable, with the two or three pilot stores to be operating by year's end, simply to test the model and work out where to make adjustments.

    The UK demographics are vastly different, with some18,000 people per square kilometre against just 400 in a large Australian city. This means delivery is cheaper and explains why catalogue shopping has been more popular and why online shopping is more prevalent.

    When the rollout starts it won't be Bunnings running a Homebase store but a replacement store, with Homebase replaced by a Bunnings.

    Bunnings acquires Homebase - HNN
    Bunnings brands hit UK stores

    Tactix, CraftRight, Saxon, Morgan, Ultimate Storage, Flexi Storage, Move Master, Jumbuck, Marquee and Smart Storemaster are all Bunnings brands that have been stocked at Homebase stores, according to InsightDIY.

    The first containers arrived at UK ports from China and the stock has now been allocated out to the Homebase stores. In many cases, stock is displayed in either cardboard dump-stacks or dressed quarter pallet displays in space that Homebase previously refused to use, as they focused on clinical, neat and tidy displays.

    Space is also being created as the new team begin the on-going clearance of homewares that don't fit the Bunnings model.
    Indie store update
    Kellys Wodonga joins Mitre 10
    HNN Sources
    Beaumont Tiles has opened a distribution centre in Rochedale (QLD)
    Mitre 10 NZ has opened a drive-through garden and landscape centre in Dunedin
    Click to visit the ITW website for move information
    Kellys Wodonga has joined Mitre 10's stable of stores; Beaumont Tiles opens large distribution centre at Rochedale (QLD); and Mitre 10 New Zealand has opened a drive-through garden and landscape centre.
    Mitre 10 adds major Wodonga store

    Kellys Wodonga has officially become part of Mitre 10 group after starting out in Wodonga (VIC) in 2007 selling rural supplies. The store's re-badging follows the closure of the Mann Mitre 10 business after its sale to Bunnings.

    Kellys moved three years ago to the Melbourne Road location into a building, which ironically, was a Mitre 10 store up until 2010. Managing director Adrian Kelly said the company had almost come a full circle. He told The Border Mail:
    We've been looking to developing into a Mitre 10 for a number of years. Customer demand and market demand for an alternative to Bunnings helped clarify the decision for us.
    News DC for Beaumont Tiles

    Beaumont Tiles has opened one of the largest distribution centres in the southern hemisphere at Rochedale in Brisbane's south.

    The state-of-the-art 13,287sqm head office and warehouse facility employs 75 people and will service Beaumont's growing network of 28 stores in Queensland and northern NSW.

    Beaumont Tiles has a 19-year lease on the Rochedale Motorway Estate (1 Brickworks Place). The facility is 60% larger than Beaumont's previous site at Archerfield and it allows the retailer to run 16 hours a day.

    The Rochdale facility is part of a $20 million dollar investment in Queensland by Beaumont Tiles. This retailer also launched its new high-end 730sqm design studio in Fortitude Valley.

    Managing director, Bob Beaumont, said Queensland is a vibrant renovating market with particular growth in the south east, the western corridor and north Queensland in line with population growth and construction activity.

    He said the company has increased its national footprint by 25% in Queensland in the last five years and expects turnover to increase from $60 million a year to $100 million over the next five years.
    The opening of Rochedale is a whole new chapter for Beaumonts in Queensland and it demonstrates our deep commitment to the state and to grow with it through employment and infrastructure investment.
    We've designed the facility to suit our unique needs for stock holding and to vastly improve our heavy-vehicle and customer traffic management. This means customers can get what they want, when they want it and we can maintain market leading price points.

    Rochedale takes Beaumont's national distribution centre holdings to 50,000sqm across Sydney, Melbourne, Brisbane and Adelaide with the same footprint again in its 106-store network.
    Mitre 10 NZ drive-through store

    Mitre 10 New Zealand has opened a drive-through garden and landscape centre in Dunedin right beside its MEGA store. The stand-alone centre boasts a large range of garden products and tools, giving local landscapers and outdoor DIYers a dedicated space to source their supplies.

    Store owner and Mitre 10 chairman Martin Dippie said it is completely self-contained and has an exciting range of features. He said:
    The garden and landscaping centre has its own entrance, checkouts and cafe and is staffed by a dedicated team who have a wealth of experience in landscaping, horticulture and gardening.
    By expanding our existing garden centre into the new building we've been able to greatly increase our product offering, catering for everyone from casual DIYers to professional landscapers.

    Features of the new centre include a shed village, glasshouse displays, a bigger range of plants and professional gardening tools, and a drive-through bulk product area with express parking.
    Seeking opportunities
    An opportunity exists for a senior account manager at Valspar
    HNN Sources
    A content producer is required at Milwaukee Tools
    DuluxGroup requires a website manager
    Visit the Mecca Website
    Valspar is seeking an experienced individual to drive sales with a major Victorian-based account; Milwaukee Tools is recruiting for a content producer for its social media channels; and DuluxGroup is searching for a website manager to be part of its digital marketing team.
    B2B selling for Valspar

    An opportunity exists for a senior account manager at Valspar, selling established brands to a well known group within the industry. The key function of this role is to direct and champion the designated account, to achieve sales revenue and profit targets as well as increase market penetration through building strong relationships with group members.
    Key account manager role at Valspar
    Milwaukee brand content producer

    A highly organised content producer is required to project manage Milwaukee Tools' social media portfolio, based at its Rowville (VIC) head office. Reporting directly to the digital manager, main responsibilities for the role include developing short and long-form content for a variety of social channels, such as Facebook, Instagram, YouTube and Twitter.
    A content producer is needed at Milwaukee Tools
    Managing DuluxGroup's websites

    Over the last 18 months, DuluxGroup has built a digital marketing program that is now driving results across multiple business units and brands. The next phase of the process is to further build the capabilities of the team with a hands-on website manager who has strong technical skills.
    A website manager is needed at DuluxGroup
    Retail update
    Beacon Lighting warned recent sales have fallen short of expectations
    HNN Sources
    The Good Guys is up for sale in a dual-track process
    Ray's Outdoors has turned into RAYS
    Click to visit the ITW website for move information
    Beacon Lighting experiences a sales slowdown and its shares take a hit; private equity shows interest in acquiring The Good Guys; an IPO is also on track for The Good Guys; JB Hi-Fi is in preliminary discussions to buy The Good Guys; Harvey Norman brushes off JB Hi-Fi and Steinhoff concerns; Harvey Norman also launches a three-hour delivery service in major capital cities; and Super Retail turns Ray's Outdoors into RAYS.
    Sales decline at Beacon

    The value of Beacon Lighting shares took a hit after the retailer warned recent sales have fallen short of expectations. Beacon shares dropped 34 cents, or 21.3%, to $1.26.

    The earlier timing of the Easter break this year - a key home renovation period - took a toll on sales, along with weak consumer confidence, tough competition and reduced advertising, the company said. Sales during the past 10 weeks had not met management's expectations.

    Subdued sales come after the retail group said it had experienced a positive start to the second half of the financial year, in terms of comparative sales. It has a network of 91 stores and achieved a 22% increase in first half profit to $11.1 million.

    Beacon said it is expecting to achieve earnings before interest, tax, depreciation and amortisation (EBITDA) in the 2016 full year of between $28.2 million to $29.2 million, compared to $27.4 million in the previous year.

    Beacon Lighting public debut - HNN
    Private equity exploring The Good Guys

    The DataRoom column in The Australian reports that global private equity firm Blackstone has emerged as a potential suitor for The Good Guys, and remains in the contest to buy the Masters and the Home Timber and Hardware businesses from Woolworths.

    The buyout group may be among a number of global private equity names circling the consumer electronics retailer that is being sold through Bank of America Merrill Lynch.

    The company is up for sale in a dual-track process; a float of the family-owned business on the Australian Securities Exchange also remains a strong possibility. Based on forecast EBITDA between $100 million and $110 million, the company could have an enterprise value between $800 million and $900 million.

    Despite private equity interest, most observers believe the successful buyer will come form the same industry.

    Sources continue to point to JB Hi-Fi, which is in search of opportunities for expansion. Harvey Norman has also expressed interest, as has South Africa's Steinhoff, owner of Freedom Furniture, Snooze, POCO and Bay Leather Republic in Australia.

    The Australian Competition & Consumer Commission is preparing to examine a possible takeover of The Good Guys by JB Hi-Fi after posting a notice on its public register, signalling a review. It has classed its interest in the possible tie-up of the two consumer electronics retailers as "monitoring". The ACCC said:
    A public review will be commenced in due course once the parties provide a submission.
    The Good Guys' path to an IPO

    Fairfax Media reports The Good Guys has moved a step closer to listing on the share market. The appliances retailer said it would "consider any alternative ownership proposals that emerge" but, in the meantime, is pushing ahead with its plan to list on the ASX.

    It is aiming to lift earnings by between 18% and 29% in its first year as a public company if owner and chairman Andrew Muir proceeds with plans for an initial public offering.

    It is understood that for the 2015 financial year, The Good Guys generated just under $80 million of earnings before interest, tax, depreciation and amortisation (EBITDA), while turnover is about $2 billion, growing at an annual rate of about 2%.

    The company expects to earn around $85 million before interest, tax, depreciation and amortisation on a proforma basis in the 12 months ending June 30, 2016. As previously mentioned, it is forecasting EBITDA between $100 million and $110 million in 2017, according to sources close to the company.

    The 2016 proforma earnings and the 2017 forecast assume that all 100 The Good Guys stores are wholly owned by the company and that margins will improve and costs will fall under a centralised management structure.

    At the moment, 56 of the 100 stores are joint ventures between the Muir family's private company, Muir Electrical Company Pty Ltd, and individual store managers.

    Mr Muir has bought back about 35 stores over the past few years and now owns 44 stores. He flagged the buy-back of the remaining 56 joint venture stores last October, and expects to complete this process by the end of June, in time for an IPO.

    However market sources believe Mr Muir is more interested in a trade sale than an IPO because it would enable the Muir family to exit the business cleanly and fully crystallise value. Other sources said that the IPO plan was "serious" and "there's a good chance an IPO will go ahead."

    The Good Guys hopes to issue a prospectus in August or September, once it has a full set of June 30 consolidated accounts, and offer shares to investors in September or October.

    Sources said Mr Muir had been trying to sell The Good Guys for five years, but potential buyers were deterred by his high asking price, which was originally about $1.5 billion, the chain's complicated joint venture structure, and lack of centralised buying and merchandising systems.

    Over the past few years the company has invested in e-commerce, merchandise planning and inventory systems, centralising ordering and replacing more than 90 order books for company-owned and franchised stores with a single buying function.
    JB Hi-Fi considers Good Guys buyout

    JB Hi-Fi chief executive Richard Murray confirmed in a report in the Financial Review's Street Talk column that the consumer electronics retailer was in early talks to buy The Good Guys.

    Industry observers believe Mr Murray has had his eye on The Good Guys for years because it is an ideal fit for his company as it expands into the higher-margin home appliance sector.

    So far, JB Hi-Fi's foray into whitegoods and small appliances has been through an internal expansion of its "Home" format stores.

    It operates 194 stores across Australia and New Zealand, of which 56 sell home appliances. A further 22 existing JB Hi-Fi stores added small appliances in the half-year to December, with another 15 expected over the rest of the financial year.

    ChannelNews suggested that JB Hi-Fi may offer the Muir family a combination of cash and shares to avoid triggering a large capital gains tax liability. But other sources suggested to Fairfax Media Mr Muir would rather exit the sector entirely and not be exposed to the sharemarket.

    There are obvious synergies between combining the companies, which are both focused on the discount market in their respective product categories, consumer electronics and appliances.

    JB Hi-Fi has an edgier brand and many of its stores are based in large shopping centres while The Good Guys is more attractive to the "mums and dads" making weekend purchases.

    The big challenge for potential buyers is conducting due diligence on a company with 57 different owners.

    The deal, if it happens and things are at a very preliminary phase, would transform Mr Murray's business at a time when retailers and their suppliers are consolidating globally.

    JB Hi-Fi is just one of a number of interested parties which have made non-binding indicative bids for The Good Guys. Other potential bidders are believed to include Steinhoff International, private equity firms Bain Capital, TPG and KKR.

    One source suggested to Fairfax Media that Steinhoff may be using The Good Guys sale process to garner intelligence on the $4.6 billion Australian appliances market as part of its POCO expansion strategy. (Read more about POCO in "Big box update" in this edition.

    Harvey Norman chairman Gerry Harvey also indicated he may be interested, although it is understood the company did not submit an indicative offer when first round bids were due.
    Harvey Norman "not concerned"

    If Mr Harvey was worried about two of his biggest competitors joining forces he wasn't admitting it, saying he would not raise any objections to the competition watchdog about the potential tie-up. He told Fairfax Media:
    I'm not worried at all. I'd have zero objections to JB Hi-Fi buying The Good Guys - I wonder if they'd have zero objections to me.

    The Australian appliances market could eventually become a two-player market, he said, citing the demise of chains such as Retravision, Clive Anthonys, Clive Peeters, Brashs and Rick Hart.

    Mr Harvey also dismissed the potential threat from Steinhoff, saying POCO's offer differed significantly to Harvey Norman. He said:
    I don't think Harvey Norman would see it as opposition - it's a different sort of store altogether.
    Delivery service from Harvey Norman

    Harvey Norman has teamed up with Aussie logistics start-up Shippit to make deliveries more efficient for online shoppers.

    Enabled by Shippit's proprietary technology and smarts, which connects online retailers to traditional courier companies, Harvey Norman is the first major retailer to offer a three-hour delivery option in major cities across Australia.

    Available for small appliances, consumer electronics and other small goods, the partnership allows customers to select a three-hour delivery window between 7am-10pm weekdays.

    The delivery option has been integrated into the payment screen and costs are determined by the time of the day customers would like their products to arrive. Customers can also track their parcel online in real time through SMS and email alerts and have the option to reschedule or reroute the delivery after the purchase has been made.

    Harvey Norman chief digital officer Gary Wheelhouse told
    Click and collect made it easier for customers to buy online and then come in store to pick up the product, but we still saw delivery as one of our major challenges. Customers would often have to wait for the next business day to receive their goods and that just wasn't convenient.

    Mr Wheelhouse said the option was now available to customers to use.
    At the moment we only offer the service in capital cities, but if we see demands we will expand to our other stores across the country.

    Joint-chief executive of Shippit, Rob Hango-Zada said his company was excited to help solve an issue for Harvey Norman.
    We worked with the retail giant to co-develop a ship-from-store dispatch process that literally strips hours of wasted time from the whole shipping process for store staff.
    Super Retail revamps Ray's

    Super Retail Group plans to turn Ray's Outdoors into a shopping destination for campers, hikers and adventurers. After a strategic review lasting several months, Super Retail has finally signed off on a new concept that is expected to return Ray's Outdoors to profitability and boost earnings from its leisure division by $8 million a year.

    Super Retail chief executive Peter Birtles believes Ray's can become a leader in the outdoor adventure market by providing engaging and inspiring "solutions" for customers in camping, hiking, paddling and adventure travel activities.

    The new concept stores have a wider range of outdoor clothing and footwear, camping equipment, sleeping bags, travel gear such as backpacks and accessories and tents. It will compete in a market worth about $2.2 billion and currently dominated by outdoor brands such as Kathmandu, Patagonia and Paddy Pallin.

    After successfully testing the concept in five of its 55 Ray's Outdoors stores, Super Retail said it would now accelerate its total revamp of the Ray's Outdoor retail group. The store footprint will be cut from 55 to 17, with other Ray's Outdoors outlets to be either closed or rebranded under the company's other retail arms, such as Rebel Sports, Super Cheap Auto, BCF and Amart. The chain will be known as RAYS.

    Mr Birtles said while the new concept stores had performed well, heritage stores continued to disappoint and Ray's was expected to post losses this year. He told the Macquarie Securities investment conference recently:
    This underlines the importance of implementing the transformation of Ray's Outdoors to RAYS promptly.
    The new Ray's business is so different from the old Ray's Outdoor business, and so it's like starting again and essentially we are going to focus initially, predominantly on the Melbourne market ... and then we will build from there and really launch the new brand properly.

    Super Retail expects to book restructuring costs and write-downs of $43 million this year and $16 million next year. The one-off costs, which include $28.5 million in cash costs and $14.5 million in non-cash charges and writedowns, will dent bottom-line profits, but the restructuring is expected to boost earnings before interest and tax by $13 million once completed.
    US retail update
    The Home Depot said its 2016 first-quarter sales totalled USD22.8 billion, up 9%
    HNN Sources
    Lowe's said total sales were USD15.2 billion, up 7.8% from the same quarter last year
    Do it Best Corp. held its Spring Market gathering recently
    Click to visit the ITW website for move information
    Home Depot posts increases in revenue and earnings in its first quarter; Lowe's first quarter same-store sales rose slightly above Home Depot's for its US business; Lowe's offers installation and assembly services through its subsidiary, ATG Stores; evolution at Lowe's Canada following its acquisition of Rona; Ace Hardware reports an increase in 2016 first quarter revenues; Do It Best emphasises growth and Rona posts a loss but higher revenues in its first quarter results.
    Home Depot thrives in an Amazon environment

    US home improvement chain The Home Depot reported an increase in first quarter comparable (same-store) store sales and raised its full-year earnings guidance. The management team attributed better-than-expected results to market share gains, productivity improvements and a strengthening housing market.

    Home Depot said its 2016 first-quarter sales totalled USD22.8 billion, up 9% from USD20.9 billion for the previous corresponding period (pcp), and better than the USD22.3 billion analysts expected.

    Comparable store sales for the first quarter were up 6.5% from last year, and comp sales for its US stores increased by 7.4%.

    Net earnings for the first quarter of fiscal 2016 were USD1.8 billion, or USD1.44 per diluted share, compared with net earnings of USD1.6 billion, or USD1.21 per diluted share, over the pcp.

    For the first quarter of fiscal 2016, diluted earnings per share increased 19% from the pcp.

    Home Depot now expects fiscal 2016 sales growth of approximately 6.3% and comp sales will be up approximately 4.9%.

    Ted Decker, executive vice-president - merchandising said that during the first quarter, transactions for tickets under USD50 were up 2.7%.

    Transactions for tickets over USD900 were up 9.5% in the first quarter. The drivers behind the increase in big-ticket purchases were appliances, roofing, sheds and windows.

    Home Depot's sales have been robust despite the rapid rise of low-cost competition from online retailers. It has seen growth in both in-store and e-commerce sales. The big box retailer's online business grew 21.5% in the most recent quarter.

    With USD4.7 billion of revenue in 2015, Home Depot is one of the 10 largest e-commerce businesses in the United States. It has grown at a compound annual growth rate (CAGR) of almost 40% over the last three years, despite its large size, according to Matthew McClintock from Barclay's. He said:
    E-commerce offers an incremental value added proposition to both the DIY consumer and pro that more localised competitors lack the scale to match.

    Home Depot's key online strategy is called Buy Online, Ship to Store (BOSS), which provides customers with access to over 300,000 items that are available for pickup in the stores. The program was fully rolled out by the first quarter of 2013 and gives customers access to over 10 times the number of products stocked in a typical Home Depot store. Mr McClintock said:
    This interconnected retail approach has resulted in over 40% of all online orders leveraging the actual physical store infrastructure for pickup, as well as 10% of orders taking place from a device within the store itself. Furthermore, approximately one-fifth of customers who come into the store to pick up items end up purchasing additional items as well.

    The underlying strength of the housing market is also driving increased store traffic. Home Depot's CFO Carol Tome said people continue to spend more on their homes.
    We've seen home equity values increase 94% since 2011. How is that possible? Because home prices are up to 25% and people have been continuing to pay down their mortgages. So there is a wealth effect that's occurring with homeowners.
    If you feel like your home is an investment and not an expense, you spend differently in your home and you can see that in our big-ticket categories.

    And, after extensive research Home Depot has conducted on the next 10 years of the business, it has concluded that millennials remain a driver of housing-related spending going forward. Ms Tome said:
    What our research tells us is that basically this is a delayed cycle that the millennial generation has many of the same desires that generations prior to them have. We are seeing as household formation goes up, roughly a third or so of those formations are happening with millennials at that age group. It appears there is about a six-year delayed cycle here, but our research indicates that in many ways, they will act the same as previous generations.
    The average age of new homebuyers last year was 33 years old. So that is a proof point. At some point, they want to own a home too.

    Ms Tome also pointed to productivity improvements underway, including a new software project called Project Sync that's aimed at optimising the company's supply chain.

    The Home Depot sales high for FY 2015-16 - HNN
    Lowe's delivers on same-store sales

    For the first quarter, Lowe's said total sales were USD15.2 billion, up 7.8% from USD14.1 billion during the same quarter last year.

    Comparable store sales climbed 7.3%, topping analysts' 4.3% prediction. And US same-store sales at Lowe's rose 7.5%, edging out Home Depot for the first time in a decade.

    Lowe's posted net earnings of USD884 million for the quarter, up from USD673 million and a 31.4% increase from the previous corresponding period (pcp).

    Diluted earnings per share increased 40% to USD0.98 from USD0.70 over the pcp.

    Based on this performance, the home improvement retailer lifted its guidance for the year. For 2016, total sales are expected to increase approximately 6%, including the 53rd week. Lowe's also expects comparable store sales to rise 4%.

    Lowe's said lawn and garden, timber and building materials, millwork, paint, and tools and hardware were the product categories that performed "above average".

    CEO Robert Niblock reiterated Home Depot's belief that millennials represent a "great opportunity" since they have been renting for so long but have said in recent surveys that they wish to own their own home one day.
    Lowe's offers home services is providing installation and assembly services to Lowe's through the Porch Retail Solution. Porch is a home services platform that connects homeowners to home improvement professionals.

    The Porch Retail Solution is available to customers in 25 markets across the US. It allows homeowners to book home improvement assembly and installation as an add-on to their product selection such as lighting, furniture and plumbing. These services can now be added to the cart at the online checkout. president Michelle Newbery said: is committed to addressing consumers' home improvement needs from concept to completion. With the Porch Retail Solution, we are delivering a more robust service experience that makes online shopping and home improvement stress-free.

    All Porch professionals who complete jobs booked through are local to customers' geographic area and backed by Porch's guarantee.

    The Porch Retail Solution implementation to points to the expansion of the existing Lowe's and Porch partnership, which brings Porch services into all Lowe's US stores and includes advertising on Jay Rebello, vice president of emerging business at Lowe's said:
    Our partnership with Porch is a valuable asset and another way we provide personalised care and solutions to both our DIY and professional customers. By offering the Porch Retail Solution on, we believe customers will find the additional support they need to complete all of their home improvement projects.

    Lowe's acquired as an independent, wholly owned subsidiary in 2011.

    Lowe's reveals US$28m funding of - HNN
    Brand awareness and growth at Lowe's Canada

    Lowe's Canada is focused on becoming the top choice of shoppers following its takeover of Rona. Chief executive Sylvain Prud'homme told the Globe and Mail:
    We believe we can become the No. 1 choice for home improvement retail in Canada.

    The CAD3.2 billion transaction will create a chain with 539 stores, with over CAD6 billion in annual revenues and 28,000 employees.

    Lowe's, which launched its first stores in Canada in 2007, had only 43 big box outlets compared with 496 Rona stores under different banners and in different sizes. But neither Lowe's nor Rona was as familiar a name in Canada as the No. 3 player, Home Hardware, according to industry observers.

    Now, as Lowe's Canada takes over the larger Rona, it believes it can finally bolster its brand awareness along with its business.

    Michael McLarney, president of industry publication Hardlines, said Home Hardware has enjoyed stronger consumer awareness than either Lowe's or Rona, partly because of its catchy advertising slogans over the years. He said:
    Home Depot may have the biggest sales but Home Hardware still has the biggest brand awareness.

    Home Hardware, whose ad tagline is "Home owners helping homeowners" and previously "Home of the handyman," emerges as a top name among retail brands in Canada in ranking studies, said Mr McLarney.

    He suggests that Mr Prud'homme wants to achieve that brand awareness for Lowe's Canada.

    Lowe's is acquiring in Rona an array of different banners, including Rona and Reno-Depot. Mr Prud'homme insisted Lowe's will keep its various chains with no plans to consolidate them, although some observers have suggested the retailer may consider dropping some of them eventually.

    Home Depot Canada, disclosed recently its annual sales are just over CAD7 billion, while Lowe's-Rona has combined sales of more than CAD6 billion; Home Hardware has an estimated CAD5.5 billion-plus in annual sales while those of Canadian Tire's hardware and home improvement business are also estimated to be about CAD5.5 billion, Mr McLarney said.

    Mr Prud'homme said Lowe's Canada wants to become the country's top choice in home improvement by sharpening the merchandise and customer segment focus of each of its current stores to take on rivals more aggressively.

    Refining its target markets has helping the retailer achieve double-digit sales growth in each of the past three years, he said.

    Mr Prud'homme said Lowe's Canada has "a lot of advantages" over Home Depot, which has superstores while Lowe's has both large and smaller outlets at a time when consumers are showing some preference to the latter. He said:
    I believe if we do a good job defining the role and value proposition of every one of these formats and banners, we'll be able to attack the market, or grow our business, with multiple customer segments.

    Appliances and e-commerce will be the initial early changes. Like its main rival, Home-Depot, Lowe's is a big seller of appliances, including washers and dryers, stoves and refrigerators. It also operates a successful omni-channel offering that sells more than 100,000 items online, compared with 40,000 in store. Rona's e-commerce site has about 45,000 items for sale.

    Lowe's has set aside capital required to upgrade Rona's less mature e-commerce network, Mr Prud'homme said.

    He said initially Lowe's Canada will focus on internal growth rather than acquisitions.
    But we'll always keep our eyes open to any opportunity that would allow us to grow and better serve our customers.

    Lowe's to buy Rona in Canada - HNN
    Revenues up, profit down in Q1 for Ace

    Ace Hardware Corporation posted first quarter 2016 revenues of USD1.2 billion, an increase of USD50.7 million or 4.3% from the first quarter of 2015.

    However net income was USD26.1 million for the first quarter of 2016, a decrease of USD3.8 million from the first quarter of 2015. The company said this was a planned reduction due to the timing of promotions. John Venhuizen, president and CEO said:
    Our first quarter was marked by modest revenue growth compared to the 10% increase in the first quarter of 2015. Nevertheless, all four of our pillars of growth are ahead of plan including Ace Hardware Domestic, Ace Hardware International Holdings, Ace Retail Holdings and Ace Wholesale Holdings.

    A 2.2% increase in same-store-sales has been reported by the approximately 3,000 Ace retailers who share daily, retail sales data. This was primarily the result of a 2.9% increase in average transaction size.

    Increases were noted across categories such as outdoor living, with electrical and tools showing the largest gains.
    Ace Hardware 2016 first quarter results

    Retail revenues from Ace Retail Holdings (company-owned stores) were USD50.6 million in the first quarter of 2016. This was an increase of USD4.3 million, or 9.3%, from the first quarter of 2015. Same-store-sales increased 4.4% compared to the first quarter of 2015.

    Ace added 24 new domestic stores in the first quarter of 2016 and cancelled 33 stores. This brought the company's total domestic store count to 4,302 at the end of the first quarter of 2016, an increase of 50 stores from the first quarter of 2015.

    Ace Hardware delivers growth, again - HNN
    Interview with John Venhuizen

    Ace Hardware CEO John Venhuizen spoke with HBSDealer at the co-op's recent convention. Here are some highlights.

    Q: What can you say about new member acquisition and turnover? You have mentioned in the past that Ace had an issue with its aging population. Are your members getting younger?

    A: Not dramatically, though we have made good progress in that regard. We've got a number of initiatives for the next generation, one of which is called Progressive Ace Leaders, where we try to get the sons and daughters of owners who are up and coming in business together. That has been an exciting, good group and it gives me encouragement that the next generation is taking over.

    And the second is new investors. New blood coming in tends to be significantly younger than our owner base.

    Third, member turnover. We lose some stores to our competitors; we get a lot of stores from our competitors. We hate losing any of them, but on balance, the score has worked out pretty well in our favour. I would say in the last four years, we have had 280 more stores come to Ace, and we've lost 130. So it's more than double, and the dollars are more like triple.

    Q: What are Ace's biggest threats at the moment?

    A: There's a lot to be afraid of. I usually go to the three Cs: we operate in a very competitive environment. All retailers do; hardware retailers significantly do. We have some very strong, well-funded enemies. Never take them lightly.

    Second is, it's a very capital-intensive business. Brick-and-mortar retailing is struggling.

    Third, the world and the business just seems to get more complex. Not easier. Between competition, the capital it takes to be good, and just the complexity of business, you can't get too pride-filled about past success when everything that lies in front of us is still challenging.

    Q: Is there anything your competitors are doing that you admire or seek to emulate?

    A: Lots. We learn from our competitors regularly, both in our industry and outside. Look at Home Depot and Lowe's - they're clearly competitors of ours. And yet I'll tell you, they're great retailers. Look at their numbers. They're both on very impressive runs.

    What Home Depot is doing with the pro, what they've done with Christmas gifts, what they've done with their store operations - there's a lot to learn there. They're very good at what they do.

    Q: Last year was supposedly the year of the light bulb. How did that go?

    A: We sold a few light bulbs. Let me put it into perspective for you here. It's probably more like the decade of the light bulb. We can hardly keep up, and in fact, some of our suppliers can hardly keep up. Every retailer is selling a lot more LEDs. In general, I think we were up 350% in light bulbs. So that includes all of them.

    It is an incredibly important category to our stores for the next five to 10 years. And that's just consumer. Now we're making a major push into LED for stores and businesses. We'll be pounding that drum pretty hard for a long time.
    Catching Venhuizen - HBS Dealer
    Do it Best focuses on growth

    Hardware Retailing reports that independent retailers from more than 50 countries gathered in Indianapolis (USA) for the Do it Best Spring Market. Growth was a recurring theme at the event. Communications director Randy Rusk told the magazine:
    We are really promoting opportunities for our current members who are committed to growing their stores and expanding their product selection, as well as those who are adding new locations. This continues to be a primary focus for us.

    He said the retail co-op is having one of its best year with its retail performance programs. These programs help Do it Best retailers who want to reset or renovate their stores, doing anything from updating key departments to remodelling inside and out.

    Retailers who use the Signature Store Design program to completely remodel their stores typically see a 17% growth in sales the following year, according to Mr Rusk.

    Dan Starr, who took over as CEO for the co-op in January, also commented on the company's continued focus on growth. He said:
    We have an aggressive strategic plan that ties directly into our growth initiative. We are looking at all opportunities for growth - wherever it makes the best sense in supporting our retailers.

    One growth area highlighted on the market floor was lighting. After an extensive line review, Do it Best has partnered with Philips as its new primary vendor for both branded and private-label light bulbs. The light bulb assortment upgrade includes a focus on the increasingly popular LED lighting options.

    Highlights of the new program include multiple planogram options for urban and rural stores, an extensive offering of LED bulbs across multiple price points and a full selection of legacy and specialty bulbs.

    Also popular at the market was the paint area. Rusk said:
    Our partnership with Sherwin-Williams and Valspar has resulted in bold new packaging for our popular paint lines, as well as improved formulations and a brand-new colour selector, all of which will support larger margin opportunities for our members.
    Do it Best spring market focuses on growth - Hardware Retailing
    Rona Q1 sees loss but increased revenue

    Rona posted a CAD16.5 million net loss for the quarter ended March 27, 2016. The loss in the first quarter included CAD3.5 million in restructuring costs and CAD4.1 million in acquisition costs.

    However revenue was CAD819.2 million, up from CAD778.8 million a year earlier. Same-store sales grew 3.1% with strong performance in Ontario, British Columbia and the Reno-Depot banner in Quebec. The company saw a decline in Prairie same-store sales.

    After excluding restructuring and other items, Rona's adjusted loss was CAD9 million. By comparison, Rona's net loss in the first quarter of 2015 was CAD11.7 million. Its adjusted loss was CAD11.2 million.
    UK retail update
    Kingfisher's Screwfix business delivered a 23.5% increase in sales
    HNN Sources
    Total sales at Travis Perkins grew 5%
    Britain's young adults are not into DIY
    Click to visit the ITW website for move information
    Kingfisher said it made a solid start to its new financial year; Travis Perkins has seen growth pick up in the first quarter; Grafton Group experiences strong performance in the first four months of 2016; and DIY among under-30s continues to decline in the UK.
    Kingfisher makes money during turnaround

    Total sales at Kingfisher grew 5.1% to GBP2.72 billion in the three months to April 30, its fiscal first quarter. This result is in line with expectations.

    The group reported a 3.6% increase in comparable (like-for-like) sales in the first quarter.

    Sales in the UK - Kingfisher's largest market which accounts for almost half of its income - increased by 1.3% to GBP1.25 billion, although like-for-like sales were 6.2% higher.

    However sales at Kingfisher's B&Q DIY chain in the UK and Ireland dropped 4.2% to GBP951 million, as it continued to shrink store numbers. A total of 10 B&Q outlets were closed in the quarter, bringing the total number of closures to 40 out of the planned 65.

    Kingfisher added that the closure of 15% of surplus space at B&Q remained on track and it plans to close an additional 10 stores.

    On a constant currency basis, like-for-like sales at B&Q also grew 3.6%, because sales of indoor products jumped as a result of colder weather. Items such as wallpaper, paintbrushes and fires sold particularly well, the company said.

    Chief executive Veronique Laury unveiled a "transformation" strategy in January that it hopes will boost annual profits by GBP500 million after investing GBP800 million over a five-year period.

    The plan involves unifying the product offer across the business, improving its ecommerce capabilities and driving efficiencies. In this quarter, the five-year plan included the installation of a united IT platform in all B&Q outlets, which was done ahead of schedule. Ms. Laury said:
    We have made a solid start to the year, trading in line with expectations. In addition, I am pleased with the early progress we are making on our operational milestones for this year, the first year of our ambitious five-year plan.

    She also said the firm would return GBP600 million to shareholders over the next three years through share buybacks.

    Kingfisher FY 2015/16 results - HNN
    Screwfix revenue up 16%

    Busy tradesmen and women across the UK helped Screwfix enjoy a 16.2% rise in like-for-like sales over the last three months as more households ditch DIY in favour of hired help.

    The Screwfix business delivered a 23.5% increase in sales to GBP301 million on the back of an expanded range of hand tools and switches and sockets on offer, as well as the opening of 10 new stores.

    Kingfisher's five-year plan includes a shift in focus to Screwfix stores, at the expense of its B&Q business.
    International growth

    Sales growth at Kingfisher was also driven by a strong performance in Poland in the first quarter of this year. The Polish stores delivered 15% growth, with like-for-like sales up a healthy 11%. They benefited from supportive market conditions and well-received new ranges.

    The property market in France, which has been under pressure, drove more modest growth for Kingfisher where total sales were up 2.2%. Same-store sales only rose by 0.2%,

    In the French market, sales at its Castorama DIY chain were up 0.2%, although same-store sales were down 0.9%, while trade-focused Brico Depot recorded sales growth of 4.5% and a 1.5% in same-store sales.

    Sales increases in the UK and Poland offset a 4.5% decline in Russia and a 3.2% drop in Spain.
    Repairs market lifts Travis Perkins

    Builders' merchant Travis Perkins has reported encouraging sales growth in the first quarter of the year, driven by improving conditions in the repairs, maintenance and improvements (RMI) markets.

    Total sales at the group, whose brands include Travis Perkins, PTS, Keyline, CPS, Toolstation, Benchmarx and Wickes, increased 5%.

    The company said like-for-like sales were up 4.2% from the same quarter last year, and that overall trading was in line with expectations. More specifically, like-for-like sales per division were up: 4.7% in general merchanting, 2.2% in plumbing and heating, 2.1% in contracts and 7.3% in Consumer.

    The company's Tile Giant and Toolstation brands, which it acquired in 2007 and 2012 respectively, also grew their market share. Chief executive John Carter said:
    All of our businesses demonstrated good growth in the first quarter of 2016, driven by the recovery in the RMI market and by the investments we have made to improve our customer propositions as part of our five-year plan.

    He added that the business would continue to focus on modernisations, improving its Wickes brand and restructuring its plumbing and heating division.

    Wickes' transformation has seen the DIY retailer introduce one-hour click and collect during its latest full-year, as well as a new store format. It will compete directly with Bunnings' rebranded Homebase stores.

    Overall, trading was in line with expectations, and the group said is targeting earnings growth of around 10% in 2016.

    Travis-Perkins FY 2015 results - HNN
    Strong start for Grafton

    Concerns that UK voters will opt to leave the European Union in the Brexit referendum are beginning to weigh on the housing market there, according to Gavin Slark, chief executive of Irish builders merchanting group Grafton.

    But the company said that despite the concerns, it has had a strong performance in the first four months of 2016. Group revenue for the period rose 13.2% to GBP790 million, helped by acquisitions.

    Like-for-like revenue at its Irish merchanting business climbed 10.9% in the first four months of the year, while total revenue at the unit was 11.1% higher. In the UK, the corresponding figures at its merchanting business were 4.8% and 9% respectively.

    Merchanting sales declined 5.2% in Belgium due to a weak economy, the impact of the Brussels terrorist attacks in March and sale of a readymix business last year.

    Grafton made its first foray into the Dutch market last year, buying tool distributor Isero. The subsidiary delivered 4.7% like-for-like merchanting sales growth in the reporting period.
    Grafton Group acquires tool distributor - HNN

    Grafton generates about 75% of its business in the UK, where it owns strings of builder merchants and plumbing outlets. In Ireland, it owns the Woodies DIY and Atlantic Homecare chains, as well as Heiton Buckley and Chadwicks outlets.

    Retailing sales increased 2.1% on a like-for-like basis as increased Irish employment and disposable incomes helped the group's Woodie's DIY stores.

    Looking ahead, Mr Slark signalled he's comfortable with analysts operating profit estimates for this year of about GBP147 million, which would represent almost 16%growth on last year's result.
    "Generation rent" not into DIY

    Britain's young adults are no longer putting up shelves, hanging wallpaper or retiling bathrooms, according to figures that reveal DIY is in steep decline among the so-called "generation rent" who cannot afford to buy and fix-up their own home.

    Credit card provider MBNA said spending by the under-30s on DIY had fallen by a third since the mid-90s. It blamed the rise of buy-to-let landlords. Mark Elliott of MBNA said:
    Generation rent is usually barred from making home improvements by clauses in their tenancy agreements. Although [overall] DIY spending has grown by 42% in real terms since 1996, an increase in the proportion of people renting in the UK could impact the sector's growth in the future.

    Its figures, based on spending trends among millions of credit card customers, showed under-30s' spending on DIY had decreased by 32% since 1996, to an average of GBP108 a year.

    At the same time 45- to 60-year-olds had increased their spending to an average of GBP240 a year. Mr Elliott said:
    Any further increases in the average age of first-time buyers could impede the DIY sector's future growth by narrowing the window in which most people undertake DIY tasks during their lives.

    The figures coincided with a report from lender Halifax that showed the average age at which people buy their first home was still rising, with buyers having to take on longer mortgages in order to get on the housing ladder.

    Research issued by Halifax reveals that the typical first-time buyer is now almost 31, compared with 27 in the early 1990s. Some forecasts say the average age of such buyers could be above 40 within a decade.

    The young adults who are able to clamber on to the property ladder are stretching themselves with ever-longer mortgages, said Halifax. It said 26% of first-time buyers were taking out 35-year mortgages - up from 16% in 2007.

    Figures on tenure in England and Wales issued by the Office for National Statistics show that the number of dwellings rented privately has more than doubled from 2.13 million in 2001 to 4.74 million in 2015, while over the same period the number of owner-occupied properties has fallen slightly.

    Separately, figures from standards body the National House Building Council show falling house completions. In the first three months of 2016, 28,398 new homes were registered in the private sector, a 7% decrease on the 30,560 a year ago. In the public and affordable sector, it was down 15%, with 8,168 new homes registered compared with 9,584 in the same quarter last year.
    Supplier update
    Boral CEO Mike Kane recently spoke at a Macquarie event
    HNN Sources
    Valspar said earnings declined in its latest quarter
    A new agency has been appointed to promote the EGO outdoor power equipment range
    Subscribe to HNN weekly e-newsletter
    Boral CEO Mike Kane speaks at the Macquarie Australia conference; Valspar misses expectations as paint volumes slide; and EGO Power Equipment appoints an advertising agency.
    Boral chief speaks on housing

    Boral chief executive Mike Kane has dismissed fears of a crash in Australia's residential housing market while warning productivity will be hit unless the industrial relations watchdog is reinstated.

    The building materials company said it continues to be quizzed on the real estate market by investors and said it is seeing strong underlying conditions continuing to support new building construction. Mr Kane told the Macquarie Australia conference in Sydney recently:
    The question the headlines try and give out is there's going to be a collapse in the Australian housing market but there's really no reason to think there's going to be a collapse imminently.
    I think it's reasonable to assume that we're going to continue to see decent demand for the next two years. And then it will slowly come back to trend with the exception possibly of NSW which will continue to bound along. It happens to be the best footprint I have in the country so it will play to our strengths.

    Mr Kane said the boom in infrastructure work combined with ongoing orders from the resources sector and housing growth meant Boral and the industry were being stretched to capacity.
    There's so much work in this infrastructure pot that no one company can take it all. So everyone can fill their boots. When you look at this transition from the resources side to the housing side to the infrastructure side, it's not like one starts and the other stops or there's gaps in between. There is a lot of overlap and there will continue to be overlap.
    And frankly if there is not a reasonable slide back in housing, there's just not enough materials to do it all. Our industry in particular would be impacted if the perfect storm hits and all demand stays at historically high numbers.

    The Turnbull government is pushing ahead with a $50 billion infrastructure program and Mr Kane said it was leading to real projects being deployed across the industry. He told Fairfax Media:
    Believe me there is a lot committed. We are bidding on projects that are real projects and I have every confidence that these projects being talked about in Canberra are and will be committed.

    Boral full year results for FY2015 - HNN
    Earnings fall at Valspar

    Valspar, in the midst of a merger with rival Sherwin-Williams, said earnings in its latest quarter fell amid restructuring costs and lower paint sales.

    In its second quarter, Valspar said merger-related costs totalled USD18 million. The Sherwin-Williams deal is still on track to close by the end of next year's March quarter, the company said.

    In addition to merger costs, lower paint volumes dragged down first-quarter earnings. Total volume slipped 1% as a 6% decline in paint volume offset a 2% increase in the larger coatings segment.

    Overall for the quarter, Valspar reported a profit of USD80 million, down from USD90.3 million, from the previous corresponding period. Sales fell 2.1% to USD1.06 billion.

    Excluding merger and restructuring costs, among other items, earnings per share rose to USD1.22 from USD1.11.

    Because of the pending merger, Valspar said that it had withdrawn its guidance for the year.

    In March, the paint maker agreed to the USD9.3 billion cash deal, a price tag that represented a 35% premium and that gives Sherwin-Williams more access to DIY painters who tend to buy supplies at retailers such as Lowe's and Ace hardware stores, places where Valspar is particularly strong.

    Valspar also sells industrial coatings and last year acquired Quest Specialty Chemicals, which specialises in automotive refinishes.

    HNN will look more closely at Valspar's most recent results alongside Sherwin-Williams in an upcoming issue.

    Sherwin-Williams acquires Valspar - HNN
    EGO range campaign

    Chervon Australia has appointed Noisy Beast to promote the EGO outdoor power equipment range. Adam Hilton, managing director of Noisy Beast said:
    We're incredibly fired up to be working with EGO. Their technology is ground breaking, and the opportunities for growth are enormous - we're looking forward to helping them achieve a huge surge in market share.

    EGO has been in the Australian market for 18 months. Its entire line up is cordless, and all powered by the industry's first 56-Volt Lithium Ion battery. Chervon business director Barry Crowhurst said:
    We have enormous ambitions for the EGO Brand in Australia and New Zealand and we feel that Noisy Beast is absolutely best placed to help us achieve them.

    Noisy Beast is a full-service communications agency "with a difference" employing over 50 people in Melbourne, Sydney, London and China. Noisy Beast represents many leading brands such as Swisse Wellness, Swann Insurance, Infiniti Cars and PGT.

    Green alternative to outdoor power equipment - HNN
    Eco-friendly paint products
    The Enviro-Roller replicates the feel of wool and is available in various sizes
    Dynamic Paintware
    The Enviro Trim Cup features a magnetic brush holder and contoured edge
    Dynamic is distributed in Australia by Tenaru Timber & Finishes
    Click to visit the HBT website for more information
    With a commitment to lowering its carbon footprint, Dynamic's Enviro-Paintware range includes the world's first roller made from post-consumer PET (Polyethylene terephthalate). They are ideal for professionals seeking environmentally friendly paint tools.

    The Enviro-Roller is a shed resistant fabric cover woven from yarn originating from used soft drink bottles and other PET products. It does not compromise results with paints and enamels, according to the manufacturer. Replicating the feel of wool, the Enviro-Roller is available in various sizes for any painting task.

    The Enviro-Paintware range also includes a paint trim cup and paint trays. Safe to use with all paints, the Enviro Trim Cup features a magnetic brush holder and contoured edge to hang conveniently on paint cans for quick and easy access.

    Tested by professionals to ensure the highest quality and reliability, the Dynamic line includes brushes and rollers, trays, extendable poles, caulking guns, blades, scrapers and wall fillers, as well as protective wear and drop cloths.

    Dynamic is a Canadian supplier of paint tools and accessories. Recognised globally for products that deliver on both innovation and value, the company has been supplying paint products for over 41 years.

    The Dynamic range is distributed in Australia by Tenaru Timber & Finishes, distributor of Sikkens timber coating and Hammerite metal care paint.

    Dynamic Paint range in Australia - HNN
    HI News Vol. 2 No. 8
    Download the latest HI News, issue number eight
    HI News Vol. 2 No. 8
    Makita replaces Maktec with MT Series
    Digital moves at Canadian Tire
    Click to visit the HBT website for more information
    The HNN e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out. Just use the following link to download the PDF:
    HI News - Volume 2, issue number 8

    The HBT National Conference in Townsville (Queensland) was memorable for many reasons. The warm tropical climate always helps, especially for attendees from colder climates in Victoria and Tasmania. This time, HBT as a group, seemed to come of age with some of its new initiatives and steps toward a more digital approach. All the ideas presented at the conference are options for members, not dictates from head office.

    We report on Stanley Black & Decker's first quarter results and speculate about the innovation it is set to release later this year. This edition also has the latest renovation, retail and housing statistics with a focus on Queensland, South Australia and Western Australia.

    There are updates on big boxes, independent stores and suppliers. We include stories on Airco Fasteners acquiring Otter Group and local, online tradies marketplace Oneflare gaining a $15 million investment from Fairfax Media.

    New products are featured from HPM Legrand, Mr Fothergill's, Fiskars and Smartstone. Job opportunities at Yates, Valspar and Haymes Paint are profiled in this issue.
    Cutting through tough yard projects
    Troy-Bilt's CORE-driven products are designed to draw power more efficiently
    The motor is smaller and lighter than copper-wound motors for easy manoeuvring
    All Troy-Bilt products powered by CORE can operate on the same battery
    Click to visit the HBT website for more information
    Troy-Bilt powered by CORE[tm] offers homeowners a different approach to cordless outdoor power equipment that rivals the power of gas. Products using this system include a string trimmer, leaf blower and hedge trimmer. A push walk-behind lawn mower is coming soon.

    The patented CORE motor design works together with a responsive, load-sensing controller to deliver more torque. By applying cutting-edge intelligence to basic power principles, CORE has been designed to draw power more efficiently and deliver concentrated power when and where it's needed. CORE co-inventor Lincoln Jore said:
    Real power comes from the motor -- the heart of the tool -- not the battery or the voltage as many may think. The battery simply supplies the energy, but the motor converts that energy into torque, which is what's needed to power through yardwork without slowing down.

    With more power, users experience a longer runtime, and can trim, blow and cut quickly to achieve what they want in the yard. The unique motor is smaller and lighter than copper-wound motors for easy manoeuvring. Its high efficiency leads to less heat, and less wear and tear. CORE also offers the industry's only motor backed by a limited lifetime warranty. Troy-Bilt brand manager Megan Peth said:
    Troy-Bilt has been manufacturing gas-powered outdoor power equipment for more than 75 years, so we know the types of challenges homeowners face in their yards. With this revolutionary cordless system, we're excited to offer the power and performance consumers expect from Troy-Bilt, but now without the gas.

    Using Troy-Bilt powered by CORE is simple. The proprietary CORE controller communicates with the motor to monitor how hard it's working and automatically responds when more or less power is required. By managing the flow of energy to and from the motor, the product can achieve maximum runtime.

    Additionally, the string trimmer and leaf blower are equipped with a colour-coded power display panel that tells users how much power is being used, giving more focus on the job and less on the equipment.

    All Troy-Bilt products powered by CORE units can operate on the same battery, allowing consumers to save money by purchasing just the bare tools if they already own one battery.

    All CORE tools are backed by a 5-year limited warranty. All CORE batteries and chargers are supported by a 3-year limited warranty.
    Tankworks Australia joins Kingspan
    Tankworks Australia will become part of the Kingspan Group
    Established in 1934, Tankworks has become a leading name in the rainwater harvesting industry
    Tankworks' products are for homes and businesses
    Subscribe to HNN weekly e-newsletter
    Rainwater harvesting systems maker, Tankworks Australia has reached an agreement to join the global building products manufacturer Kingspan Group. It will now be known as Kingspan Environmental Pty Limited.

    Kingspan is the world's largest manufacturer of high performance insulation and building fabric solutions. Kingspan's environmental portfolio has innovative solutions for wastewater, rainwater management, service and telemetry, solar hot water, energy storage and renewable energy generation.

    The acquisition will provide the Australasian markets with a better range of products and expertise. Stuart Heldon, business unit director at Kingspan Environmental, said:
    This is a very exciting time for our business. Kingspan Environmental's ambitious growth plans and its extensive sustainable product range will offer existing customers and the wider market with better choice and excellent customer service.

    Heldon added that the corporate values of both businesses also made the new venture an ideal fit.
    Tankworks has always held strong environmental and people values, as does Kingspan, and that gives me great confidence that we are heading in the same direction, the right direction for a sustainable future.

    These sentiments were echoed by Pat Freeman, managing director of Kingspan's environmental division. He said:
    We are looking forward to offering the Australasian markets with some of the best environmentally responsible products available in the global construction industry, providing cutting edge technology for both homes and businesses.

    Established in 1934, Tankworks Australia was then known as Parramatta Tank Works. Since then it has manufactured quality, long-lasting water tanks and accessories. It has become a leading name in the rainwater harvesting industry. The company's longevity can be attributed to the fact that incorporates the latest manufacturing processes and technology in its products.
    Construction industry goes robotic
    Construction drones give a bird's-eye view of a site and provide progress reports
    3D-printed concrete buildings are being developed at Loughborough University
    Cool Bricks are 3D-printed porous bricks that can be filled with water
    Subscribe to HNN weekly e-newsletter
    The building site of the future could look very different to the one we are all used to today. Instead of people in high-visibility jackets and hard hats, there are going to be drones buzzing overhead, robotic bulldozers and 3D printers churning out new structures.

    That at least is the hope of those making technological solutions. But first they have to convince the traditionally risk-averse construction industry that such change is necessary.

    US startup Skycatch is using drones on some high-profile building projects -- although it cannot name them because of commercial sensitivity. The drones give a bird's-eye view of a site and provide progress reports, speed up the logistics of construction by monitoring deliveries and offer real-time updates on any changes that may need to be made to the plans.

    Japanese construction machinery giant Komatsu has gone one step further -- using the Skycatch drones to provide the eyes for automated bulldozers. The drones send 3D models of a building site to a computer, which then feeds the information to unmanned machinery to plot their course.

    Skycatch's chief executive Christian Sanz thinks such combinations of technology could kickstart a robotic building site. He said:
    The more visible data that you have on a site, the more you'll see machines and robots moving things around rather than humans.
    3D housing

    One of the potential solutions to housing problems could be 3D printing, which is already making an impact on the construction industry. It can cut both the time and cost of building houses.

    The United Nations estimates that by 2030 approximately three billion people will require housing and has mooted 3D printing as one possible solution.

    A team in the School of Civil and Building Engineering at Loughborough University in Leicestershire (UK) has been working on the technology since 2007. It first developed a 3D concrete printer within a frame and more recently adapting it to work with a robotic arm.

    Using a robotic arm means that the team can print up to 10 times faster and create a huge variety of forms, including curved, hollow and geometrically complex shapes. Lead researcher Professor Simon Austin said:
    I think that companies who become early adopters of 3D printing will learn a huge amount about automation and robotics and how they can be exploited on a site.

    The team decided to work with concrete as its main material and two years ago the research moved into a new phase. It is now building an industry prototype, working with partners -- construction firm Skanska, architects Foster and Partners, materials supplier Tarmac and Scandinavian robotics firm ABB.

    The prototype is being tested at the Manufacturing Technology Centre in Coventry (UK), which to date has only worked with hi-tech industries. This represents its first collaboration with the construction industry. Professor Austin said:
    3D concrete printing, when combined with a type of mobile prefabrication centre, has the potential to reduce the time needed to create complex elements of buildings from weeks to hours. We expect to achieve a level of quality and efficiency which has never been seen before in construction.

    Professor Austin sees the future of 3D printing in construction as a way of printing key components of buildings rather than whole structures created in China. He said:
    I'm not convinced 3D-printed concrete would appeal to the high-end of the housing market and in the developing world labour is cheap and they have developed ways of building homes with local materials that have worked for hundreds of years. So the idea of bringing a gantry and printing machine to a site to print whole houses is a bit far-fetched.
    On the other hand, printing building components where a variety of geometry is sought is an attractive approach that will soon be realised.
    Nature-inspired designs

    It isn't just concrete that is getting a hi-tech makeover. Design studio Emerging Objects has come up with 3D-printed porous bricks called Cool Bricks that can be filled with water to bring down temperatures.

    Each 3D-printed cool brick, has a three-dimensional ceramic lattice-like structure that can hold water in its pores, like a sponge. When air flows through the porous brick it absorbs evaporated water vapour, becoming cooler in the process. According to the designers, if all the walls of a home were built with porous, water-logged cool bricks, the air flow through them could bring down the home's internal temperature.
    Construction site drones - HNN
    Mow in your own way
    Cub Cadet's LX42 ride-on mower is fitted with premium Multi-Trac tyres
    Hardware News Network
    It is part of the Enduro series
    Cub Cadet Australia's website
    Click to visit the HBT website for more information
    The LX42 ride-on mower from Cub Cadet features a tighter turning circle, which enables the user to better manoeuvre in cramped areas and around common outdoor obstacles such as trees, fence posts and flowerbeds. This reduces the need for unnecessary laps of the garden and saves the rider time and fuel.

    As a standard, the LX42 is fitted with premium Multi-Trac[tm] tyres - with a uniquely designed tread to minimise slippage and spinning, even on wet grass. The tread directs power straight into the ground for less turfing, precise manoeuvring, and better results for lawns. Each ride proves to be smooth and efficient when partnered with a 22hp Kohler 7000 Series V-Twin OHV, and the hydrostatic drive system.

    Alongside precision handling and power, a mower must be hardy. The LX42's Corrosion Defence System is e-coated, delivering automotive-grade corrosion resistance against the elements, as well as general wear and tear. This provides users with the best-in-class protection of critical components.

    The LX42 is designed to be hassle free, allowing the operator to effortlessly change the deck height. The 107cm (42") deck lift is spring-assisted so that when the user changes the deck height, the spring applies force to the deck and takes the strain away.

    On top of convenience and accuracy, the LX42 mower has the new Cub Comfort[tm] seat, which features a 10-degree incline and slide mechanism to provide an ergonomic riding experience. This works in harmony with the smoothness of the cruise-control, and the high-back seat reduces fatigue when mowing for extended periods.

    The Cub Cadet LX42 ride-on mower is finely tuned and visually bold.
    Makita replaces Maktec with MT Series
    The new MT Series impact driver
    Hardware News Network
    The Makita MT Series packaging
    The Maktec brand is frequently featured on Makita's Indian website
    Click to visit the HBT website for more information
    Japanese-based power tool company Makita has launched a replacement for its off-brand Maktec range of power tools. The new diffusion brand, named "the Makita MT Series", signals a change of market strategy at what has been one of the world's best tool design/manufacturing companies. It is also inline with what seems to be a more general shift in the overall cordless power tool market.

    "Cordless" is a key term, as one of the major differences between Maktec and the MT series is that the latter (unlike the former) will include a range of Lithium-ion (Li-ion) battery-powered tools. (Maktec did have one cordless tool, the Nickel-Cadmium battery-powered MT065SK2 drill.) Not only are they Li-ion cordless, but they also make use of standard Makita 18-volt 1.3 amp-hour batteries and chargers, showing integration into the main Makita line of tools.
    Why Maktec and MT Series makes sense

    The core idea behind Maktec - and behind the new MT Series - is a sound one. It relates both to market needs and the costs associated with the design and manufacturing of tools.

    At the end of any durable product's manufacturing run, the manufacturing company finds itself left with a number of valuable assets. There is the design itself, of course, but also the hard manufacturing assets used in production which, with the change of product, no longer have much residual worth. Added to that are the "soft" manufacturing assets.

    Typically, during manufacturing a number of lessons are learned, both in how to make a product a little better, and how to cut costs in numerous small ways, which can add up to considerable efficiencies.

    Maktec was likely initially conceived as a means of giving those assets a "second life". Power tools which had been superseded by newer and better designs, but which were still competitive against the average tools in the market, could be produced using some of the existing assets.

    Costs were cut by the reduced asset expense required, and also by shifting production from Makita's higher operating cost factories in Japan to its less expensive resources in mainland China. That worked out well, because the Japanese factories excel at the Japanese manufacturing art of continuous improvement.

    By the time manufacturing shifted to the purely cost-focused factories in China, the processes were highly refined. This resulted in an ideal blending of a higher-cost, high-development environment, and lower-cost, low-development manufacture.

    There is something in this of the Japanese concept of "shibui". On the surface is what seems a quite usual re-use of older assets. Underlying it, however, is a balancing of the strengths and weaknesses of the different resources in the company.
    The Maktec problems

    The problem Makita faced was that even when they were a couple of generations old, Makita tools were still so good that they could take market share away from Makita's newer tools - what is sometimes referred to as "cannibalisation". To help overcome this problem, Makita came up with the "Maktec" brand, which included different tool casing designs, in particular the orange colour that sharply sets these tools apart from Makita's teal tools.

    (There is also a degree of "colour play" in this choice of colours. The official Makita colour is defined under the Pantone Matching System as number 321. Reproducing that colour in red, green, blue (RGB) settings, it comes out as 0, 140, 149. So it is a close matching of green and blue, but slightly more towards blue. In the Japanese culture/language, this blue-green colour (which in English we call "teal" when it is more blue, and "aquamarine" when it is more green), is actually regarded as a primary colour, known in transliteration as "ao". So, in the Japanese language of colours, Makita has used a primary colour for its main Makita range, and a secondary, derived colour, orange, for its off-brand Maktec tools.)

    The Maktec tools, which were marketed in particular through Mitre 10, tended to confuse the market, as Makita was not always that clear about what these tools were, or how they expected them to be used. In promotional materials, Makita usually categorised the tools as being ideal for DIY and "semi-pro" uses.

    In the Australian context, the take-up of these tools for DIY use would seem to have been very low. The same would really hold true for both interpretations of "semi-pro": they weren't the tool of choice for odd-job handymen, and certainly not for the prosumer, either.

    They did have an appeal, however, for tradie/professional users who made occasional use of a certain type of tool, but not enough to justify buying the topline, most expensive model. Examples of that kind of use would include mixers, routers, and heavy-duty corded drills. Tradies liked the Maktec tools for these uses because the tools would be retained for long past their warranty, and used for the equivalent of two or three weeks a year. What they were purchasing was, in effect, long-term reliability.

    It's not surprising that one of the more popular Maktec tools was its line of corded routers. This is the kind of mechanically complex tool that Makita knows how to build as a hard-wearing, reliable unit, something that could not be said for most of the routers cost-competitive with the Maktec range.
    Makita resolves conflict

    As far as HNN has been able to determine, there seems to have remained something of a slight conflict within Makita management over what should be done with the Maktec tools. In the end the company chose to go ahead with the project, but the tools received quite limited distribution and promotion.

    These conflicts have been clearly resolved with the replacement of the Maktec brand by the Makita MT Series brand. Makita is now aligning these less-expensive tools with its main brand. The change in the name - now incorporating "Makita" - and the use of the primary Makita colour both reinforce this very different approach.

    Early indications are also that the company will be seeking wider distribution of the brand. For example, it is now available through the Hardware & Building Traders (HBT) group. The marketing approach has yet to be released, but the Makita stand at the HBT 2016 National Conference in Townsville, Queensland was strongly promoting the MT Series, and it seems likely this will be a general approach.

    What might have helped resolve the previous conflict over the Maktec brand is simply the accelerated pace of development in the power tool market. We are effectively entering, in 2016, the third stage of cordless Li-ion tool development, after the technology has been on the market for just 11 years. This contrasts with the relative stability of the previous Nickel-Cadmium (and its derivative Nickel-metal hydride) battery technologies, which evolved very slowly from their introduction in the late-1970s by Makita.

    For example, there is now a very clear differentiation between brushed and brushless power tools, with most professionals today unlikely to consider brushed motors for their daily use tools, as the advantages of brushless tools are considerable.

    One very important fact is that the MT Series cordless tools are being sold with the Makita BL1813G 1.3 amp-hour battery as standard. As long-time Makita users know, "high-drain" Makita tools are made so that they cannot use the 1.3 amp-hour batteries, requiring the 3.0 amp-hour and up batteries instead.

    What we could see happening over the next three years would be for Makita to move most if not all of its brushed tools into the Makita MT Series. This would offer a dual benefit. Not only would it establish a clear, individual brand identity for tools that were built to the same high standards as all Makita tools, but with lower-cost technology, it would also clearly define all the pure Makita branded tools as being of the highest quality.
    South-East Asian markets

    It's notable that other power tool makers have also adopted a downshift in the professional market. Most notably, Stanley Black & Decker (SBD) have begun a wider distribution of their Stanley FatMax brand, including through HBT.

    One cause for an increased interest in downscale tools is preparation for an expanding market in South-East Asian countries, such as Indonesia, Vietnam and the Philippines, well as the Asian sub-continent. Not only are the tool manufacturers struggling with economies where much of the building is done informally and "on the cheap", they are also dealing with building professions where the move is not from corded to cordless tools, but from hand tools to cordless tools.

    The Maktec range has been used by Makita as a bridge into these markets. The front page of Makita's Vietnamese website frequently features Maktec tools. Makita's Indian site not only features Maktec tools, but also describes some models of these as designed specifically for the Indian market. It is highly likely that the introduction of the MT Series brand into these markets will boost sales considerably.

    Stanley has made some progress in these markets as well, especially in the Philippines. It does seem possible, however, that the Makita MT series may have an advantage over FatMax for the next two or three years in the less-developed markets, as its profile of high durability and ongoing repairability are a good fit.
    The Australian market

    Given this change in its marketing, and a far clearer definition of what Makita MT Series tools are, replacing the fuzzier sense of what Maktec tools were, which markets will find these tools appealing?

    One clear market will be professionals who, for a range of reasons, still need some corded tools in their kit for special uses. Another evident use would be as the "backup" tool to that one tool a tradie simply cannot do without, such as an impact driver. Instead of purchasing a cheaper brand, and thus a whole new battery system, as insurance against that day when the apprentice drops the Makita off the roof of a two storey building onto the concrete below, a builder can have a Makita-branded replacement ready, using the same battery system, without spending too much.

    Beyond those markets, HNN does also believe that the MT Series could find a decent market with a certain band of DIYers. These would be people largely involved in maintenance and repair work who, more than anything, are looking for a tool that can absorb bumps and small falls, and will last for more than six years.

    Where it is far less likely to succeed is in the field of prosumer users. These markets tend to look for advanced features. In fact, the Stanley FatMax brand is just about an ideal fit for the prosumer.
    The Australian situation

    It is possible that there is another, slightly more dire, reason why some of the power tool companies are marketing down-spec tools in the trade market. The forecasts from the Housing Industry Association and other sources indicate that both 2016/17 and 2017/18 are likely to see a mild decline in construction activity.

    At the moment the forecast would indicate a mild recovery in 2018/19. However, this is less certain than the declines over the next two years. It is just about as likely that 2018/19 will be a flat year for construction growth.

    Given that less than positive future, the tool manufacturers may be gearing up to supply tradies who are doing it tough with good-enough, less expensive tools.
    Tool company strategy

    With the introduction of the Maktia MT Series this is a good time to look at the overall strategies of the leading tool companies.

    There are surprising similarities in the strategies of Techtronic Industries (TTI) and Bosch. Both have two major lines of tools, one consumer DIY, and the other high-end trade/professional. While TTI's Milwaukee brand certainly has the technological edge at the moment with its One-Key connectivity options, indications are that Bosch is on a stretch project to catch up over the next two years.

    There are some similarities, but not as many, between the strategies of Makita and SBD. Both are offering a split range to the pro/tradie market. Bosch has a good product for prosumers, and Makita a good product for less-developed countries. SBD, let us not forget, also has a very good pure DIY offering with its Black & Decker tools, something that Makita has not developed.

    One real similarity between SBD and Makita, however, is that both companies are lagging in the Internet of Things (IoT) development of their tool systems. SBD has brought out a Bluetooth-equipped battery for both its B&D consumer range and DeWalt, but indications are that sales are slow for these products. SBD has promised a surprise hi-tech innovation for later in calendar 2016, but no details have become available as yet.

    Makita, on the other hand, has not indicated any development work in IoT product enhancements. This could, in part, reflect the fact that of the major tool companies, Makita has the lowest reliance on fleet tool sales, which is what IoT is generally aimed at.

    In terms of strategy over the next six or seven years, the difficulty HNN sees is that the endpoint of IoT development will be the integration of Hilti-like tool leasing arrangements for the major tool companies. If that does happen, Makita could find itself quite disadvantaged in the market.

    HNN has not, of course forgotten the other major power tool company, Hitachi Koki. Hitachi has made an excellent move in acquiring the German-based Metabo, but we expect the fruits of their merged technologies will not be available until mid-2017 at the earliest.

    That is something to look forward to. In fact, 2017 is set to be something of a "banner year" for tool development. We will likely see a second generation One-Key product from TTI/Milwaukee, Bosch will be launching its tools with integrated Bluetooth control, and DeWalt will be developing whatever its new innovation is.

    For retailers facing something of a "down" market in Australia, it will be particularly good news, as tool innovations will help spur demand for tools, and hopefully give revenues a good boost.
    Big box update
    A proposal for a Bunnings store has been submitted for a site in Kembla Grange (NSW)
    HNN Sources
    A short list of bidders for Masters and HTH Group is coming together
    More staff cuts and discounting at Bunnings' Homebase stores
    Click to visit the HBT website for more information
    A $30 million Bunnings development is being proposed for Kembla Grange (NSW); Bunnings Warehouse's new store in Orange (NSW) is set to open; a shortlist is formulating of final bidders for Masters and Hardware Timber & Hardware (HTH); Metcash asks the competition watchdog to investigate its planned acquisition of HTH; Bunnings has slashed prices at its Homebase chain in Britain; Bunnings is testing its template on Homebase stores; more cuts at Homebase head office; a look at Bunnings' service strategy in the UK; "higher" prices at Bunnings do not discourage consumers; and new Bunnings stores in New Zealand.
    Panel reviews Bunnings plan

    Bunnings Properties has lodged plans with Wollongong City Council to demolish existing structures at the Northcliffe Drive and Canterbury Road site in Kembla Grange. It wants to build a 12,000sqm hardware and supplies store with parking for 455 cars on the ground level of the building, reports the Illawarra Mercury.

    The plans also include a 2,000sqm "pad site" which will make way for a future development. According to the application, the development will comply with all council controls except for height, with some parts of the building exceeding the 11metre limit.

    The Joint Regional Planning Panel will decide whether to approve the proposal as it has a capital investment value of more than $20 million.
    Bunnings Orange to open

    Following its approval in May 2015, Bunnings Warehouse's store in Orange (NSW) is just weeks from opening. Bunnings Warehouse Orange will replace the existing warehouse. Complex manager Jason Bootsma has been a part of the team for over seven years and said he is excited to welcome the new team members. The warehouse will include an indoor playground, cafe, and provide parking for over 300 cars. Bunnings Warehouse Orange will be located on the corner of Northern Distributor Road and Leeds Parade in Orange, and is expected to open mid-June.
    Shortlist for Masters

    Private equity giant Blackstone has emerged as a shortlisted bidder for all of Woolworths hardware operations, according to The Australian.

    Blackstone's offer is understood to have extended to Masters and its property portfolio, along with the separate Home Timber & Hardware division.

    Metcash is also understood to be through to the second round as it seeks to buy HTH, and also mulls a potential bid for all of the Masters hardware stock.

    While property group Charter Hall and its retail consortium comprising Bunnings, Harvey Norman and Automotive Holdings, are yet to be confirmed as through to the next round, the listed property investor and its backers are widely expected to be in the final stages of contention. The Australian's Data Room column previously reported the consortium was interested in up to 20 Masters stores.

    Charter Hall is also understood to be working with US discount retailer, Costco which is seeking to grow its footprint in Australia. Sources said it had looked at four development sites held by Masters.

    It is understood that while multiple parties originally bid for the assets, two to three groups will be short-listed for each component of the business up for sale to create competitive tension. The list of final bidders should be formalised by the month's end.
    Initial offers

    More than half a dozen parties are understood to have submitted bids for Masters and HTH.

    In an attempt to maximise the overall value, Woolworths' adviser Citigroup is allowing bidders to pick and choose assets, even offering to match bidders who are only interested in certain sites or lines of stock with other bidders to come up with an "integrated" solution.

    It seems increasingly likely any indicative offers will be used by Woolworths to put a realistic value on the home improvement business after failing to agree on price with its joint venture partner, Lowe's.

    Woolworths planned to buy out Lowe's to widen its exit options, but after months of negotiations and valuations by two independent experts the pair have failed to agree on what Lowe's stake is worth. They are now likely to use the auction to reach a valuation.
    Metcash goes to ACCC about HTH

    The Australian Competition & Consumer Commission (ACCC) said it had begun initial inquiries into a Mitre 10-HTH tie-up after being informed of a proposal from Metcash to acquire the group.

    ACCC chairman Rod Sims said its review would investigate how a merged Mitre 10-HTH business would affect the broader hardware market and importantly, whether it would decrease competition in both the retail and wholesale markets.

    He said the review was seeking information on a range of issues, including to what extent a combined Mitre 10-Home operation would increase wholesale or retail prices, as well as potentially damage service levels and product range.
    On the one hand, Mitre 10 is going to argue this will allow it to get more scale and therefore be stronger competitor to Bunnings. The alternative view, which we have to weigh up on the other side, the independent hardware players -- those that can decide whether to get their wholesale supply from Metcash or Danks...lose the ability to have two choices...

    The ACCC will make an announcement on its review on June 30.

    One analyst suggested Metcash's decision to request a review from the ACCC was a strategic move, designed to ensure it had broad support for its bid to build a serious second player in Australian hardware. He told Fairfax Media:
    This is really Metcash's way of saying this is good for the market, that it's increasing competition.

    It is not known how much Metcash has bid for HTH but speculative valuations range from between $150 million and $200 million. The company's share price has gone from 99c in September 2015 to over $1.78 on rumours of the acquisition, and talk that it would partner with private equity to fund the bid.
    Bunnings re-positions Homebase

    Bunnings has been drastically cutting prices of some garden and outdoor products as much as 20% in the UK market as it looks to position its Homebase retail network as the cheapest operator in the sector.

    Research by hardware retail intelligence group InsightDIY ranked a basket of goods purchased at Homebase against key competitors B&Q, Wickes and Wyevale, revealing a major shift in Homebase's pricing. It compared a basket of gardening goods to a similar basket bought in April 2015. The report said:
    Comparing April 2016 to April 2015, the B&Q basket has decreased by 1%, Wickes has reduced by 10%, Homebase has dropped by a whopping 21% and Wyevale increased their prices by 4%.

    Last year, Homebase was ranked as the second most expensive. InsightDIY said:
    With the new fitter, streamlined Homebase being fuelled by high-octane Bunnings BBQ gas, it's probably no surprise that they've taken the crown away from B&Q. Credit where credit is due, that's quite an achievement for Homebase in only a three-week period.

    A report from Morgan Stanley retail analyst Thomas Kierath said that while retailers tend to travel poorly because of differing consumer tastes, cost bases, local store and zoning planning regulations and divided management focus, if any Australian retailer has earned the right to make a play overseas it is Bunnings.

    Turning to the British hardware sector, Kierath drew on a recent visit to Australia by Morgan Stanley's British retail analyst Geoff Ruddell, who believes there are clear differences between the Australian and British home improvement markets. Kierath said:
    Notably, the UK home improvement market is shifting towards 'Do It For Me' from 'Do it Yourself' - that is, trade players have performed considerably better than DIY retailers.
    UK may be shifting towards DIFM - HNN

    Kierath suggested analysing the state of the current Homebase business was pointless because of the changes Bunnings intended to make to the store footprint, range, pricing and management.

    Big box update: DIY price war in the UK? - HNN
    Bunnings' model in the UK

    Bunnings' British hardware business Homebase recently posted a 3.1% decline in full-year sales and sliding margins. However there were cost savings after an aggressive store closure program helped deliver profits.

    Home Retail Group sold Homebase to Wesfarmers earlier this year for $704 million, and has issued its final financial report that covers its ownership of Britain's second-biggest hardware retailer.

    It reveals a business still struggling to match it with leading hardware operator B&Q in the UK market, as it slashed away at Homebase's store numbers and rationalised the business over the past two years.

    While still profitable, with Homebase's full-year profit rising 18.6% to GBP23.5 million for the 12 months to February 27, the retailer did suffer a 3.1% slide in total sales to GBP1.43 billion.

    In 2014, Homebase announced it would close 25% of its stores in the face of weak trading, which helped comparable store sales with like-for-like sales in 2015 increasing 5.2%. Its gross margin rate decreased by 125 basis points while total operating and distribution costs decreased by GBP44 million.

    When Wesfarmers released its third-quarter sales update last month it did not include sales figures from Homebase. It officially took control of only on February 27, translating to only four weeks of trading.

    Homebase is now being led by former Bunnings chief operating officer, Peter Davis and fellow Bunnings executive Rodney Boys.
    Bunnings culls Homebase managers - again

    UK-based InsightDIY reports that Bunnings has taken the axe to the remaining senior Homebase personnel. It believes all of Homebase trading directors will leave the business between now and the end of August 2016.

    Apparently there is no voluntary redundancy being offered; everyone has been mapped to a specific role within the business and is currently going through an assessment. It is designed to score every Homebase team member out of a total of 130 points, with 25 points being deducted if the person doesn't want to be part of the new Bunnings team.

    InsightDIY said Bunnings is aiming to implement an entirely flat structure, with twenty-two buyers plus assistants, reporting into nine category managers, who then report to the general manager responsible for merchandising Craig Castelino.
    Bunnings' service strategy in UK

    InsightDIY has also turned its attention to Bunnings' "best service" approach and examines whether it be executed successfully through its Homebase stores. Managing director Steve Collinge sees an opportunity for Bunnings/Homebase to create a real point of difference.

    There are obvious challenges to install store staff with the relevant knowledge and experience overnight, to be able to provide a strong service offering. It can take 20 years to become the kind of experienced plumber and electrician that Homebase will need. These tradespeople also need to be convinced they want to work for Homebase on retail salaries that are nowhere near what they can earn as professional tradies.

    Ultimately, Collinge believes British consumers would welcome any investment in the service area. If the investment is made over the long term, he thinks Bunnings can make a difference.

    To read more about InsightDIY's perspective on Bunnings' entry to the UK market, click onto the following links:
    Will Bunnings' strategy work in the UK: service - InsightDIY
    Bunnings in the UK: lowest prices - InsightDIY
    Bunnngs in the UK: widest range - InsightDIY
    Bunnings' "high" prices, guaranteed

    The New Daily website has conducted an analysis of Bunnings prices and believes it is cashing in on Australia's home renovation and construction boom by inflating prices of common building products and materials.

    An investigation by The New Daily found that Bunnings has been charging consumers high prices for building materials such as concrete, paving sealers, plaster board, paints, doors, nails, screws, brushes, sinks and lighting since January 2015.

    In some cases the mark-ups on these products were extreme, with the price of a popular stainless steel sink rising 54% during the 12-month period. The cost of LED lights and paint brushes marketed by Bunnings spiked by more than 40%.

    The Bunnings price increases defy the Australian Bureau of Statistics' official measures of inflation, which show that average retail price rises for building products such as cement, paints, renderings and plaster in 2015 were less than 3%. But The New Daily's research suggests the average cost of renovating a bathroom or extending a house rose by more than 11% for Bunnings customers.

    To read more about The New Daily's audit of Bunnings' prices, go to:
    Bunnings turns the screws on home renovators - The New Daily

    The website also turned its attention to Bunnings' prices last year:
    Bunnings prices designed to nail customers - The New Daily
    Readers reaction

    The New Daily followed up its story on Bunnings' prices with one that illustrates that although some consumers say the hardware giant exploits its dominance, they enjoy the fact it's a "one-stop shop".

    Readers of The New Daily corroborated the findings of its investigation into the rising prices of building products at Bunnings, but many say they will continue to shop at the hardware chain because of its wide product range. One reader said:
    I'll still always use Bunnings for the vast array available of everything you could possibly need.

    Others were skeptical about the gap between Bunnings' marketing pitch and its prices. Another reader said:
    The best thing anyone can do is online shopping -- there are thousands of small online Australian suppliers that work on a much smaller markup. All large stores like Bunnings work on using a lead-in line at low prices just to get you in the shop, then once there buy more items at inflated prices.
    Bunnings expands in New Zealand

    Bunnings is building a NZ24.7 million store in South Hamilton and another one in Auckland's Arch Hill.

    The Hamilton store will be more than 11,340sqm and include parking for more than 260 cars. At Arch Hill, plans for a large Bunnings store were highly controversial and the Arch Hill Residents Society sought initially to stop it.

    However planning commissioners allowed it. The society then entered confidential Environment Court mediation to win some major concessions. These included issues over traffic, truck movements, lighting and sound. Nearby houses were to be checked for structural damage from the building work, summer trading hours will be limited, loud speaker use will be controlled and traffic slowed by a proposed raised roadway to soften the big box store's arrival.
    Seeking opportunities
    Yates needs a state sales manager
    HNN Sources
    A regional sales manager role is available at Valspar
    Haymes Paint has a number of business development opportunities available
    Visit the Mecca Website
    A state sales manager role is available at Yates; Valspar is seeking an experienced regional sales manager in Adelaide; and Haymes Paint is boosting its business development ranks.
    Hardware or horticultural knowledge

    The state sales manager at Yates will be tasked with "managing, developing and leading a team of sales professionals in a highly competitive market". The individual in this Sydney-based role will be responsible for the state's retail segment that includes corporate accounts, buying groups and independent stores. The role is both operational and strategic.
    Yates is searching for a state sales manager in Sydney
    Valspar regional sales

    The regional sales manager at Valspar will have a proven sales management background and existing commercial relationships. Based at its office in Kilburn (SA) and reporting to the state sales manager SA/NT, this role will lead and direct the activities of the SA retail and trade sales team. The successful candidate will also work closely with the company owned and independent trade paint store network.
    Valspar has an opening for a SA-based regional sales manager
    BDM roles at Haymes Paint

    Two business development opportunities currently exist at Haymes Paint. One is based in Launceston (TAS) and the other is in Darwin. The successful candidates will be responsible for the servicing and growth of current business activities within a geographical territory, and the implementation of strategies to grow trade and retail business.
    Haymes Paint is seeking business development managers
    Indie store update
    There is ongoing support for a Mitre 10-HTH merger
    HNN Sources
    A new Mitre 10 Sapphire store is being built in South Australia
    Mitre 10 Loganholme has been in the news. Image credit: Alice Workman @workmanalice
    Click to visit the ITW website for move information
    Dahlsens chairman John Dahlsen believes the wholesale merger of Mitre 10-Home Timber & Hardware (HTH) merger is "the better of two evils"; uncertainty over the future of the Mitre 10 and Home Timber & Hardware brands could be driving defections to other groups; a new Mitre 10 store is being built in Nuriootpa (SA); Boyne Island Mitre 10 is closing its doors; and a Mitre 10 store in Loganholme (QLD) is taking the fight up to Bunnings.
    Support for M10-HTH merger

    John Dahlsen, of Dahlsens Building Centres, has urged the competition regulator to approve a merger of Mitre 10 and HTH even though it appears to be anti-competitive.

    Mr Dahlsen will make a submission to the Australian Competition and Consumer Commission supporting a merger of Metcash's Mitre 10 and Woolworths' HTH on the grounds it would strengthen the ability of independent hardware retailers to compete with market leader Bunnings. Mr Dahlsen told Fairfax Media:
    While prima facie it would appear that to allow two wholesalers to merge may at first blush be anti-competitive, it would in fact be pro-competitive. I think [ACCC chairman] Rod Sims will conclude it's the better of two evils.
    The big problem in the hardware sector is the dominance of Bunnings, more so after the failure of Masters. Bunnings has massive economies of scale, their clout with suppliers is unparalleled and their market share in core categories [such as paint] is very high.
    The issue facing the ACCC is, what can be done for the sector to make it more competitive. The reality is there are independents closing and failing by the day...when Bunnings comes into the market they just can't compete. As Bunnings comes into even smaller markets the threat increases.
    By putting these two wholesalers together and doubling their volume it gives them more leverage with suppliers and gives them the ability to rationalise distribution and take out a lot of costs. If those benefits are handed on to independents they'll be much better off.

    The ACCC is seeking feedback from the hardware sector about the impact on competition if Metcash's Mitre 10 were to acquire HTH from Woolworths and its US joint-venture partner Lowes.

    The merged group would have annual sales of $2.2 billion and 5% of the market rather than the 3% Mitre 10 claims now. It would supply thousands of independent bannered and non-bannered hardware stores and would also own 98 retail stores, although it is likely these stores would eventually be offered for sale to independents.

    However, a Mitre 10-HTH merger would lead to a two-player market consolidating into one, leaving independent retailers with limited choice of wholesalers.

    Mr Dahlsen believes the merged Mitre 10 and Danks would have no choice but to pass on merger benefits rather than pocketing synergy benefits -- estimated by Deutsche Bank to be $25 million a year -- and raising prices. He said:
    They won't survive if the independents don't survive," he said. "There's no doubt since Mitre 10 was taken over by Metcash they've improved the outlook of independents materially in a number of respects.
    I'd be surprised if they wouldn't continue to do what they can to help the remaining independents -- they can't afford to let any more independents fall over.

    It is understood that Mr Dahlsen is interested in buying some of the stores owned by Mitre 10 and HTH. He said:
    My view is most of the independents will welcome [a merger]. There will be some opposed to a merger, people always like to have a choice, but the overwhelming number feel more threatened by Bunnings than by a merger of the two independent wholesalers.

    The ACCC is investigating whether the merger could lead to a substantial lessening in competition and is seeking views on the extent to which the merged group would be in a position to raise wholesale prices, placing further pressure on independents. Mr Sims told Fairfax Media:
    The issue is clearly going to be on the one hand independent hardware companies, and particularly smaller companies, are going to have less choice as to who they use as wholesalers as two goes to one.
    On the other hand we have to weigh up whether it creates a dominant wholesaler who can help those smaller players compete.

    The ACCC will also look at whether Bunnings should be given clearance to buy 15 to 25 Masters stores from Woolworths and Lowes.

    John Dahlsen speaks out on Bunnings - HNN
    Retailers seeking alternatives

    A report in Fairfax Media says that defections from Mitre 10 and HTH could be a bigger risk to Metcash's bid to create a number two player than the competition watchdog investigation.

    Hardware & Building Traders (HBT) has enjoyed a significant spike in new members since Woolworths and its US joint venture partner Lowe's announced plans to sell Masters and HTH Group. HBT revealed that most of the retailers had come from the HTH network but it said there was also a significant number of Mitre 10 operators who were concerned about how the current upheaval in the sector would affect their operations.

    Natbuild has also expanded its business on the back of the uncertainty, with long-time HTH member Hume & Iser in Bendigo (VIC) recently joining the trade buying group. Natbuild CEO Peter Way, who is working on a submission for the Australian Competition and Consumer Commission, said a lot of franchisees had questioned the value of their membership to the two big retail networks since Woolworths signalled it plans to exit hardware. He told Fairfax Media:
    I think turmoil in the industry creates opportunities so we have a window of opportunity that we do need to take advantage of absolutely and I certainly...see that as a benefit.

    Mr Way said he accepted the need for consolidation in the hardware sector but he was not totally convinced a Mitre 10-HTH merger was the ideal outcome.
    From our point of view we are attacking it from the buying side of things, not so much the operational side of things because that's what we can make comment on. We are dealing with suppliers on a day-to-day basis for our members and that's the area we can probably provide some feedback on.
    We understand there needs to be some rationalisation. Do we see this as the best rationalised move? Possibly not. Is there any alternative? Definitely not at this stage.

    Peter Womersley's family has been part of the Mitre 10 network for more than 60 years, during which time he has watched Bunnings evolve into the "price setter" for the industry. He supports a merger of Mitre 10 and HTH on the basis that it will give the expanded operation the might to "slow Bunnings." He said:
    I'm very supportive of it because it will make us more relevant and give us a better chance to compete with Bunnings.
    Retailers may abandon merged Mitre 10-HTH business - Fairfax Media
    Mitre 10 development in SA

    The Barossa Community Co-operative Store - often referred to as "The Co-op" -- has appointed Ahrens to build the new Mitre 10 store in Nuriootpa (SA). Slated to be one of the largest Mitre 10 in South Australia, the store is being built with the locals in mind. Store manager, Terri Hollenberg, said:
    We have listened to our customers, our tradies and our members, and we are building a store that will meet their needs. It includes a state of the art trade centre, large garden centre, and a huge range of hardware designed to satisfy even the most discerning of customers.

    This store will be the latest Sapphire store and is part of the larger shopping centre redevelopment for The Co-op. There are plans for it to be open prior to Christmas this year.
    Mitre 10 Boyne Island is closing

    Mitre 10 Boyne Island is conducting a final closing sale and clearing stock from its shelves. The store is expected to close for good by the end of the month. After owning the store for 27 years Kevin Hooper and his wife Annie say the "financial downturn" is the main reason.

    It leaves the nearby Glenfords Tools Centre as the only independently owned general hardware store in Gladstone. The owner-manager of that store, Russell Partington, said he's also feeling the pinch of tough times.

    More than 12 months ago, Mr Partington was selling up to 100 grinders a month. Now he is lucky to sell five. He told the Gladstone Observer:
    We're both up against the big business (Bunnings) so we would always work together. If Kev didn't have something a customer asked for and I did I would sell it to him at the price the supplier sold it to me, and he would do the same thing. It'd be good if Gladstone people could support local companies, not just in hardware but it any industry.
    Mitre 10 takes on Bunnings

    Ian Gill, owner of Loganholme Mitre 10 in Queensland, will compete directly with Bunnings in the Hyperdome Home Centre. Mr Gill has owned the Mitre 10 for the past 18 years, and said there were plans to build a Bunnings in the centre near the BCF store.

    Mr Gill employs 10 staff and said with Bunnings going in, he would have to become even more competitive. He told The Reporter:
    I think Bunnings will be good, but there's no protection for small business. Competition is always good, it will keep people in the area and it will be up to the customer to determine which is better service.

    He is calling on the local community to get behind him and support small business. Mr Gill said in the past 10 years there had been five hardware stores between Springwood and Beenleigh that had gone bust.
    I'm confident we will be able to compete. We've had to match Bunnings prices.

    Bunnings general manager - property, Andrew Marks confirmed Loganholme was an area of interest for Bunnings and it did plan to open a smaller format store. He said:
    There is ample room within the market for larger operators, independents and speciality providers. Almost everywhere we operate we have a number of successful competing businesses located close by which are capable of doing well.
    PM visits Loganholme Mitre 10

    The Guardian Australia describes Loganholme Mitre 10 owner, Ian Gill, as a "Liberal campaign extra from central casting". Mr Gill and his store provided the ideal backdrop for Prime Minister Malcolm Turnbull's recent visit.

    With an annual turnover of $3.2 million, Mr Gill will be getting a tax cut that he wouldn't have got before Mr Turnbull's "jobs and growth economic plan for a new economy" was unveiled in the latest budget. And, unsurprisingly, he is pretty happy about it. The Guardian Australia describes the encounter.

    As he entered the store, Mr Turnbull asked rhetorically: "Looking forward to the enterprise tax cuts in the budget?"

    Mr Gill replied: "Yes, they should be quite good for us."

    Mr Turnbull said: "Can I just say we are so committed to supporting businesses like yours. You are the engine room of the economy. We always say that but it is absolutely true. This is where the additional investment comes from, this is where the jobs and growth are being found...We recognise that the fastest growth in jobs comes from the ability to respond in firms like yours. It is so much greater than the big firms, the big firms respond too, but you're in a position to move so fast."

    Mr Gill is also extremely worried about the competition he is about to face from three big hardware stores about to move into the area. He said: "We feel the competition laws are tipped too heavily in favour of the big guys."

    Mr Turnbull said: "Well, Ian, that is a really good point and one of the changes we are making is to section 46 of the competition laws. We are introducing an effects test, to give businesses like yours more protection from the big guys."

    The chief executive of the Council of Small Business, Peter Strong, who fought for years for the changes to competition law, confirms they would almost certainly not help Gill's looming competition from the "big guys" at all. He told Guardian Australia:
    If one or two big hardware stores move into an area where a small hardware store is operating, there's really nothing you can do about that. It's just competition.

    So if the "big guys" are about to move in, and it does have the effect Gill is fearing, he might not be growing or employing even with the tax cut.

    And even putting the looming competition to one side, when Mr Gill gets a tax cut will it definitely boost "jobs and growth"? He told Guardian Australia that he would use the extra money either to put on another staff member (he now employs eight full-time and two part-time) or buy extra stock and "make more money".
    Liberals extra from central casting gives glimpse into reality of Turnbull show - The Guardian
    Supplier update
    SharkBite is a Reliance brand; the company has a market cap of $1.5 billion
    HNN Sources
    Hills Limited has secured new financing
    GUD will sell its Sunbeam stake to Jarden Consumer Solutions
    Subscribe to HNN weekly e-newsletter
    The Reliance Worldwide Corporation initial public offering has been one of the biggest in Australia this year; Hills Limited has secured finance totalling $51 million over the next five years; and GUD Holdings is selling its remaining 51% stake in the Sunbeam brand to its US-based joint venture partner.
    Billion dollar market cap

    Investors have pushed Reliance Worldwide Corporation shares to $3 for a market cap of $1.5 billion.

    The company gains 60% of its revenue from the US market with its SharkBite range of "push to connect" plumbing products. The SharkBite brand accounts for 80% of the brass push to connect fittings sector and has important relationships with key retailers such as Home Depot.

    Sales are split roughly 40% retail and hardware, 40% wholesale and professional, and 20% direct to manufacturer. Almost 60% of sales are derived from its top 10 customers.

    Push-to-connect fittings are a key growth product but its suite of "behind the wall" products refers to a range of valves, pipe fittings, and other products that connect from the water meter through to the wall. Reliance also sells its fittings to companies such as Rheem, Reece and Dux and to local retailers such as Tradelink.

    The company expects revenue of $535 million in 2015-16, generating EBITDA of $98 million. Its prospectus forecasts 2016-17 sales of $588 million and EBITDA of $117 million. This forecast puts the stock on a multiple of 25 times.

    Reliance has been compared to the recent listing of another plumbing company, Reece that trades on a lower multiple of around 18 times.

    The key difference between Reece and Reliance is that the former is a plumbing retailer and distributor, while the latter is a manufacturer. Because Reliance's products are used behind the walls, the company has almost no consumer recognition.

    A common feature of both plumbing businesses is that they are more oriented to the repair and renovation market than new housing. This means they are less dependent on the housing cycle.

    After a quiet period, the renovation market is hotting up in response to the property price increases. The likely reason is that owners are more willing to invest in their more valuable homes, while being less inclined to move to an equally inflated property.
    Reliance trading high, but may tap into US housing - The Australian

    Reece fortunes connected to housing - HNN
    Reliance background

    The plumbing supplies group has grown from a single-site operation to an international operation with more than 800 employees and 11 manufacturing facilities. The company has operations in Britain, Australia, Canada, New Zealand and has just entered Spain.

    Chief executive Heath Sharp, who joined Reliance in 1990, still has the newspaper clipping for the Courier-Mail job ad he responded to as an engineering graduate all those years ago. He said:
    Back then it was a sub-$20 million business, a single-site business, and a domestic Australian-only business. I'm not sure anyone at that stage would have suggested we would get to this point.

    Sales have grown at a compound annual rate of 13.3% from 2005 to 2015, according to Mr Sharp.

    Reliance is owned by the Melbourne-based Munz family -- the sole shareholder -- who acquired the business in 1986. Its chairman is Jonathan Munz, who is also chairman of Victoria's Thoroughbred Racehorse Owners Association. Mr Sharp told Fairfax Media:
    As far as current ownership is concerned, they've allowed us to get on and make the correct long-term decisions for the business and we've had their full support. There's a pretty clear demarcation between the ownership of the business and the leadership of the business.

    Mr Munz, Mr Sharp and chief financial officer Terry Scott have been with the company for 30, 26 and 26 years, respectively.

    Mr Sharp said the IPO is about funding the next stage of growth, not an exit plan. He said:
    We've got new products coming through and some really interesting geographic expansions as well. Behind-the-wall plumbing is not the most glamorous industry in the world but we're doing some pretty cool stuff.

    The push-to-connect fitting has major benefits because it attaches and detaches easily to copper, PEX and PVC pipes and can be rotated. It is easier to use for tradesman less skilled in soldering copper pipe. He said:
    We created this [product] category in 2004. We've grown it from zero back then to what it is today and it is a high-value product.

    Mr Sharp said his push-to-connect fitting is worth around five times a standard fitting and distributors and retailers are pleased to carry a product that increases the category value.

    In addition to SharkBite, other key brands include Cash Acme, Auspex, Reliance Water Controls and RMC Water Valves.

    Mr Sharp, who is based in the US, said Reliance is working on products targeted at new housing to tap in to the home building recovery in America.
    Reliance Worldwide Corp roars down the IPO pipe - Fairfax Media
    Financing facility for Hills

    The new financing secured by Hills Limited includes $36 million from financer Assetsecure and a $15 million secured debt facility from the Commonwealth Bank of Australia. This replaces Hills' prior facility of $110 million in unsecured finance.

    The deal is good news for Hills, which has undergone a "back to basics" transformation by attempting to repair relationships with vendors, customer and employees.

    In 2015, Hills faced a number of major hurdles including one of its biggest vendors, home automation company Crestron, switching to a direct model. In its full-year results, Hills made a $94 million write-down of good will and admitted it needed to make another $66 million non-cash impairment for goodwill, intangible assets, deferred tax assets and freehold property.

    Chief executive Grant Logan said that Hills was looking for new financing that would better fit the company's size and nature as it transformed from an industrial manufacturer to a technology and health distributor.

    Hills experienced a $69 million loss for the half-year period ending 31 December 2015. Revenue fell 27.7% to $164.1 million for the six-month period.
    Hills Limited secures $51 million in new financing - CRN

    Hoist maker plunges to $69m loss - HNN
    GUD divests Sunbeam

    GUD will sell its Sunbeam stake to Sunbeam Products Inc, which trades as Jarden Consumer Solutions (JCS). Jarden owns a portfolio of appliance brands with $US2 billion a year in global sales.

    JCS already owns the Sunbeam brand globally except for the Australian and New Zealand markets, which until now have been owned by GUD. The company sold the other 49% of Sunbeam to JCS in November 2014 under a joint venture agreement. Sunbeam products were not manufactured in Australia.

    GUD also said that it is selling its 49% share of Jarden Consumer Solutions (Asia) Ltd to its joint-venture partner. It expects to get about $35 million from both transactions, which are expected to be completed in July 2016.

    The sale of the joint venture interest mark GUD's withdrawal from the small appliance market. GUD has been a supplier of small appliances for 20 years since it acquired Sunbeam Victa Corporation in 1996.

    GUD managing director Jonathan Ling said in a statement that its Sunbeam business had benefited from the connection with JCS, including JCS's product-sourcing capabilities. But since the start of the joint venture, the pace of globalisation in the small appliance industry had led GUD to conclude that shareholders' best interests were served by an exit from the joint ventures.

    Mr Ling said JCS could provide Sunbeam with the global scale that it currently lacks. The exit from small appliances would also allow GUD to focus on its other businesses, which include cleaning products, warehouse racking and industrial and office storage.

    GUD suffered a 90% drop in its first-half profit to $1.7 million, following $18.5 million in impairments related mainly to its Dexion storage and shelving business. The Sunbeam business generated an earnings loss as currency movements forced up product costs and price increases were deferred.
    GUD sells Sunbeam stake - Yahoo! Finance
    Online tradies battle for market share
    Oneflare has gained an additional $15 million investment
    Oneflare founder and CEO Adam Dong
    The Fairfax investment is in exchange for 35% equity
    Subscribe to HNN weekly e-newsletter
    Oneflare, a digital marketplace for local trade services, has secured a $15 million investment as part of a new strategic partnership with Fairfax-owned Domain Group. This investment is in exchange for 35% equity, valuing the startup at more than $40 million.

    It comes after Oneflare's biggest competitor hipages recently partnered with Fairfax rival News Corp. through a reported $40 million investment in exchange for 25% equity.
    News Corp buys into home improvement start up - HNN

    Fairfax Media CEO Greg Hywood said in a statement:
    We continue to see significant opportunities to invest in Domain Group as it expands into adjacent markets. Local trade services represent a substantial market and Oneflare is very well positioned to take advantage of the growth in this rapidly-emerging digital marketplace.

    Oneflare founder and CEO Adam Dong said he has been in discussions with Domain for more than two years. He told StartupSmart:
    It just makes logical sense -- home buyers, sellers and renters are all looking for the services we provide. Since November last year it got more serious and turned towards an investment.

    He said the partnership would extend beyond just the funding, with Oneflare becoming integrated into Domain's "ownership" section. The funding will be used to help expand different aspects of the business, according to Dong. He said:
    It's primarily to build out the products and we'll have a hiring growth spurt, as well as a bit of marketing.

    Founded in 2011, the Oneflare platform connects users with experts in categories such as concreting, renovating, painting and cleaning. Dong said the site now attracts 1.3 million monthly visitors and has 80,000 registered businesses. It doubled in size from last year.

    With two tradie marketplace companies now aligned with large media corporations, the competition seems to be heating up. Dong said:
    It has become a two-horse race. If you look at Australia there's only room for one or two big players in one vertical. We have one solid competitor and we're definitely here to beat them.

    While hipages was valued significantly higher with its investment from News Corp, Dong said Oneflare has the edge when it comes to reviews.
    It's important to have users that really trust your platform. We're leading them on reviews, and they're key to the platform and to the users. It's about making sure customers really trust the platform.

    UK expansion for OneFlare - HNN
    Oneflare raises another $3m - HNN
    Aussie app for home improvement - HNN
    Digital moves at Canadian Tire
    Canadian Tire is transitioning from a bricks-and-mortar icon into a global retail innovator
    IT World Canada
    The latest catalogue helped to double the retailer's weekly online sales
    The Edmonton store features huge interactive video screens
    Click to visit the ITW website for move information
    An augmented reality catalogue, virtual reality store displays and a gaming lab are all part of a push to transform the 94-year-old Canadian Tire from a bricks-and-mortar historical icon into a global retail innovator.

    The retailer sells sporting goods, hardware, electronics, housewares, garden and patio, and auto accessories.

    In a presentation at the CIO Peer Forum in Toronto recently, chief technology officer (CTO) Eugene Roman made it clear he's not just playing catch up; he wants to make Canadian Tire a digital leader the rest of the pack will have to keep up with. He said:
    We aren't interested in best practices. That's for our competitors. What we're looking at is next practices.

    Hence the three digital innovation centres Canadian Tire has opened since 2013 in Calgary, Winnipeg and Kitchener-Waterloo. There's a lot going on, including app development and testing, a cloud computing facility, a high performance data centre and a digital content warehouse.

    Roman has kept those facilities busy since he became CTO in 2012. The company's Fast Find technology, which took three years to develop, can provide an almost real time view of any product's availability anywhere in the retailer's inventory and distribution chain.

    Recently, Canadian Tire also created its own point-of-sale system. It is cloud-based, 50% cheaper to run than its predecessor, modifiable on demand and, in Roman's estimation, four to six times faster than most POS solutions.

    The CTO also mentioned that some of this innovation involves dabbling in the Internet of Things (IoT), bots, 3D printing, the neuroscience of shopping behaviour and even gaming.

    Roman acknowledged the company has dropped a fair amount of money on its digital efforts over the past three or four years. He said: "We spent $400 million because we were behind."

    While many retailers are shutting stores to go completely digital, Canadian Tire is sticking with a bricks-and-clicks model. Roman said:
    Stores matter. Online matters. It all matters. Companies that do not figure that out will not survive, I guarantee that.

    He calls Canadian Tire's approach "phygital", a strategy that emphasises both physical stores and digital channels. One example is the chain's 140,000 square foot Edmonton store that opened last June. It features huge interactive video screens shoppers can use to design their patio or backyard with help from Oculus Rift virtual reality headsets.
    Interactive catalogue

    The recently released Wow Guide catalogue similarly bridges augmented reality with more traditional customer channels.

    The spring-summer edition looks like an ordinary store catalogue but when viewed through a mobile phone using the Canadian Tire app, the pages provide shoppers with additional detail, down to which stores have the product, how many are in stock and in which aisles.

    Twelve million copies of the catalogue were produced in paper form. But readers who use the retailer's mobile app can also get clickable details or video links about certain products when they hover over the catalogue with their smartphone or tablet.

    The catalogue is having such a big effect on Canadian Tire's e-commerce business that immediately after the launch of the book, the retailer's weekly online sales doubled.
    Ongoing challenges

    Chief executive Michael Medline believes the transition from the old world to the new world of retail is one of the most difficult tasks a retailer can face. He said:
    Our transition to new-world retail through investments in e-commerce, loyalty and digital is helping us to meet the changing needs of our customers. Digital disruption is happening on a scale larger than any of us could have imagined, and no industry, including retail, will be immune from those changes.

    He said Canadian Tire stores in the Ottawa area are testing a number of online concepts and "most things we test work...if you fear failure, then you don't test anything."

    Still, when it tried to put lockers in stores for e-commerce order pickups, "our customers didn't like it" and the retailer abandoned the idea. Many Canadian Tire products, such as barbecues, don't fit in a locker, he said.

    The digital transformation journey is still unfolding at Canadian Tire. Although Roman said "the two major competitors are Amazon and Walmart," his own company has yet to provide something offered by both US giants: home delivery for online purchases.

    Canadian Tire's digital shopping evolution - HNN
    Canadian Tire opens another digital laboratory - HNN
    Lowe's uses mobile video
    Lowe's "FlipSide" videos on Facebook are short, two-sided live action videos
    Wall Street Journal
    The "In-a-Snap" series is on Snapchat
    The "House Love" video will be shared on Lowe's social media channels
    Click to visit the HBT website for more information
    Lowe's is turning to Facebook mobile video and Snapchat to help first-time millennial home buyers discover home improvement tricks.

    The home improvement retailer and Omnicom agency BBDO created the new series of social videos to showcase easy spring cleaning and DIY projects in a quick and more interactive way for younger consumers.

    The push is part of Lowe's ongoing strategy to reach potential consumers who are increasingly spending time on visual-driven social media platforms. Chief marketing officer Marci Grebstein said:
    The challenge as a marketer today is, how do you continue to engage consumers differently and within different social platforms. We have to be able to create informative and entertaining content based on how the platform works.

    For Facebook, Lowe's will be the first marketer to take advantage of a flip video application on Facebook's mobile feed that allows viewers to change the orientation of the video.

    The retailer's "FlipSide" videos are short two-sided live action videos that show simultaneously what can happen if a homeowner doesn't clean the gutters and air filters or prune overgrown shrubs, versus what happens when a homeowner does proper spring cleaning. The videos link back to

    Viewers can watch either story line at the top of the video player depending on how they tilt their phone.

    Lowe's is also pushing into Snapchat for the first time. The retailer's "In-a-Snap" series aims to inspire both young homeowners and renters to pursue simple home improvement projects such as installing shelves to build a study nook.

    Users can tap on the screen during the Lowe's Snapchat story to put a nail in a wall or chisel off an old tile in a game-like fashion to complete a project. The "In-a-Snap" series is not a paid brand story or part of Snapchat's Discover tab. Instead Lowe's is using its Snapchat channel to share the content. Ms Grebstein said:
    Doing a home improvement project does not have to mean gutting and renovating your entire home or kitchen.

    She added that the retailer will also have another series of video tutorials on Facebook and Instagram called "Home School" that uses drawings from chalk artists to animate maintenance projects.

    This isn't the first time Lowe's has made big pushes into the social space. Lowe's launched its first "Fix in Six" Vine campaign in 2013, which featured six-second looping videos centred around a home improvement hack. The retailer's Hypermade series, which launched in 2014, documented DIY projects in super-fast speed on Instagram. Both social media campaigns helped increase brand engagement, according to Ms Grebstein.

    While the social campaigns aim to help first-time homeowners or young renters learn more about home improvement, Lowe's also wants to help consumers think differently about the brand beyond its product and services.

    Lowe's has debuted a long-form video online called "House Love" about the relationship between two young children who live across the street from each other and the relationship between their neighbouring houses. Ms. Grebstein explains:
    The one component that 'House Love' really is about is about driving an emotional engagement.

    Millennials who are becoming first-time homeowners, in particular, "want to know more about the companies they do business with and not just the products and services they offer. They want to understand the deeper meaning of what a company is trying to stand for." She add:
    We have to be a lot more innovative and thoughtful about how and where to capture that millennial audience.

    The "House Love" video will be shared on Lowe's social media channels and will run as ads in movie theatres in the US starting in May. Ms Grebstein said Lowe's may later consider running the creative on more traditional vehicles such as TV.
    It's official: Airco buys Otter Group
    (l&r) Airco Fasteners managing director John Jamieson and general manager Brett Jamieson
    Hardware News Network
    The Melbourne officers of the Otter Group
    Airco supplies its own range of Airco tools, Colt Compressors and Senco products
    Subscribe to HNN weekly e-newsletter
    Airco Fastener's acquisition of the Otter Group should provide distributors with a central supply of quality fasteners and tools via a national network of warehouses and representatives. Brett Jamieson, general manager at Airco Fasteners said:
    The Otter Group has a long and proud history in the Australian hardware and construction industries. Like Airco, it is an Australian business that is backed by decades of family expertise passed down through the generations, making it a natural fit for our portfolio.

    The acquisition sees Airco Fasteners expand its offering to supply all Otter Group products including Titan, Screwfix, National Nails and the Interbath brands. Airco also supplies its own range of Airco tools, accessories and fasteners, the iconic orange Colt Compressors and Senco products.

    Airco is committed to growing the Otter brand and has welcomed the majority of the Otter team to its business. Jamieson said:
    Otter's experienced and dedicated staff have deep knowledge of the business and products. We are proud to retain this expertise, working with the Otter team to expand existing product lines and develop new offerings.
    An extensive network of warehouses and service technicians will see our customers benefit from tailored solutions, streamlined order processing and more efficient distribution.

    Airco stocks products at warehouses in Sydney, Melbourne, Brisbane, Perth, Adelaide and Townsville.

    Otter will also have a larger on-the-ground presence with more than 40 infield representatives around Australia, providing distributors with a dedicated representative to help grow their businesses. This will be supported by a service that offers access to mobile and in-house technicians for faster and easier repairs.
    Bulbs for winter planting
    Gladioli Mon Amour is ideal for a big floral show
    Hardware News Network
    Potato King Edward is a large variety with creamy white flesh
    Hellebore Mix are dainty nodding blooms
    Click to visit the HBT website for more information
    Mr Fothergill's has just launched a number of new produce and flowering bulb varieties for planting this winter. Managing director Aaron Whitehouse said while autumn is considered the prime bulb planting season for traditional spring favourites such as daffodils and tulips, there are many varieties that should be planted in the colder months.
    Winter is the key season for planting summer bulbs and getting started in June is ideal for flowering perennials such as lilies and gladioli, and produce including strawberries and asparagus, that enjoy cooler temperatures.
    Produce bulbs

    Seed Potato Dutch Cream is a creamy potato variety with rich yellow flesh. Ideal for boiled or mashed but is also suitable for baking or used in soup.

    Seed Potato King Edward is a large variety with creamy white flesh and a light, floury texture. It rarely discolours when cooked and is useful for roasting.

    Seed Potato Russett Burbank is a popular variety with dark brown skin and few eyes. Its flesh is white, dry and high in starch making it ideal for baking, mashing and particularly hot chips.

    Unfortunately these potatoes are not available in WA or TAS.
    Flowering bulbs

    Gladioli Mon Amour is perfect for a big floral show. The elegant spires of ruffled blooms provide an explosion of cream, pale yellow and pink.

    Hellebore Mix are dainty nodding blooms that bring months of colour into winter gardens. Hellebores are drought tolerant, long lived and suited for partly shady spots in the garden.

    Lilium Mapira are large, deep purple, almost black blooms with vibrant orange stamen and a faint fragrance.
    Efficient LED downlights
    HPM's new LED Downlights DLI Series
    Hardware News Network
    Legrand has launched a tamper resistant SecurIT LED Exit Sign
    Legrand's Edgelight LED Exit Signs offer a versatile solution
    Click to visit the HBT website for more information
    HPM has unveiled its LED Downlights DLI Series, designed to set a new benchmark for lighting efficacy. Emitting up to 880 lumens at 7 watts, the range features a lumens per watt ratio of up to 125 lm/w. This should deliver serious energy savings and lighting performance.

    The one-piece design has a fully integrated dimmable driver to significantly reduce installation time, and the downlights' IC-F rating allows them to be installed underneath insulation.

    In an industry first, the DLI Series specifies a proven lifespan of 20,000 hours under insulation. This is backed by extensive testing in HPM Legrand's local NATA --National Association of Testing Authorities -- accredited laboratory. The range delivers 35,000 hours lifespan in free air.

    As a manufacturer of both dimmers and downlights, HPM delivers a dimmer compatible LED range for smooth dimming and no flickering. Contractors should be able to install them with confidence.

    The DLI Series has a screw-less terminal cover for easy hard-wired connection, and 2,500 volts electrical surge protection provides added safety. Created for 90mm or 125mm cut outs, it has a low profile for easy installation in slab canisters and low ceiling cavities. Other design benefits include a fitted one-metre flex and plug, and a 10mm recessed diffuser for reduced glare.

    With a colour rendering index (CRI) of 80+ for truer colour expression, the downlights can emit between 700 and 750 lumens of warm white light and 820 to 880 lumens of cool white light. The downlights are IP44 weatherproof and are suitable in covered outdoor areas.
    Lighting up exit signs

    Emergency lighting maker Legrand has launched a tamper resistant SecurIT LED Exit Sign for institutional environments and correctional facilities. Mahmoud Kebbi, category manager for commercial and emergency lighting at HPM Legrand said:
    Clear and visible communication is essential for smooth emergency evacuation. A one-size fits all approach is rarely suitable for emergency evacuation products. Evacuation signage should be specified for the precise requirements of a building to ensure it is always visible and the potential for damage is minimised.

    The SecurIT LED Exit Sign has been specifically made for prisons, detention centres, police stations and psychiatric wards. It features an unbreakable flexible thermo plastic diffuser, which cannot be used as a weapon if dislodged.

    Anti-tamper Resitork screws prevent the removal of the sign, while a 6mm interior cover prevents entry to electronic components and LEDs. Four watt LEDs deliver up to 50,000 hours of light, reducing the need for regular maintenance.

    Legrand has also added a new Large LED Exit Sign to its offering. Created for easy viewing from up to 60 metres away, these are ideal for large shopping centres, entertainment venues and industrial applications.

    Ceiling and wall installation options are available, and 5.6 watt LEDs deliver up to 50,000 hours of light. An auto-disconnect terminal block provides additional safety. The terminal block is quick to connect and auto-disconnects easily.

    Legrand's Edgelight LED Exit Signs are a versatile solution that can deliver a modern aesthetic for office buildings and public spaces. Winner of a 2015 Good Design Award and a Commendation Award from the Illuminating Engineering Society of New South Wales, this exit sign is made to deliver unobtrusive high performance.

    Recessed and surface mounting allows for flexible installation to suit wall, ceiling and sloped applications. The LED strips and electronics are locally designed and manufactured.

    All products can be set up as individual signs or networked with Legrand's wireless emergency lighting system, AXIOM.
    Surfaces that look like stone
    Smartstone used in a kitchen renovation
    Architecture and Design
    The Smartstone range has low maintenance qualities
    Smartstone has been a major distributor of engineered quartz surfaces since 2002
    Click to visit the HBT website for more information
    The growing popularity of engineered quartz surfaces has seen the product often replace marble and granite as the material of choice for benchtops and splashbacks.

    More durable than granite or concrete, quartz surfaces are less likely to chip or crack, do not require sealing, are non-porous, resist spills and stains, and can be maintained hygienically. This can them a highly practical choice for modern working environments. Best of all, engineered quartz surfaces also replicate the attractive aesthetic of natural stone.

    Smartstone has been a major distributor of engineered quartz surfaces since 2002. It offers a range of well-finished durable surfaces for kitchens and bathrooms. The company's surfaces are composed of a minimum 93% quartz and a unique mix of resins and pigments. They are balanced and engineered to create natural stone finishes.

    The Smartstone collection is a tailored palette of visually striking options, comprising of four classic ranges with 24 unique styles that match the look of real natural stone without the expensive price tag. By offering the natural stone aesthetic in a more affordable and durable product without compromising on quality, Smartstone is an ideal value-for-money solution for projects of all sizes.

    It can meet the needs of homeowners who wish to combine looks and practicality in their selection of building materials.

    The Smartstone range also has low maintenance qualities. Being non-porous, these surfaces do not need sealing, are stain-resistant and absorb very little moisture. They are suitable for kitchen worktops as well as bathroom vanities and bath surrounds. Smartstone engineered quartz surfaces also provides a 15-year limited warranty.
    @HBT2016: Supplier awards
    Kim Runje from Riversands looks pleased to be receiving the award from Tim Starkey
    Hardware News Network
    (l&r) Tim Starkey with Justin Newman from ITI Australia
    Macsim Fastenings gained the most nominations from members
    Click to visit the HBT website for more information
    Everyone knows that nothing really happens in the hardware industry without the support of suppliers. Criteria for the HBT Supplier Awards include support for conferences, growth in business volume and general support for the aims of the group. HBT group manager, Tim Starkey says it is his favourite time of the day when he gets to acknowledge top suppliers.

    This year at the HBT Townsville conference, winners include:
  • Grand Champion for Timber - Hume Doors & Timber
  • Growth Champion in Timber - ITI Australia
  • Grand Champion for Hardware & Building - Macsim Fastenings
  • Growth Champion in Hardware & Building - Riversands

  • Macsim Fastenings was singled out for receiving the largest number of nominations and for doing more business with HBT members than any other supplier, in any category.

    @HBT2016: Store awards
    Queensland store, Herbert Hall is the winner for best HBT store in 2016
    Hardware News Network
    Steve Gilbert from Cost Less Bolts & Industrial Supplies receives his award
    The registration desk in Townsville (QLD)
    Click to visit the HBT website for more information
    If there is a prize available for hard working, salt-of-the-earth retailers working in the hardware industry, then any number of HBT or Industrial & Tool Traders (ITT) stores would receive one. In 2016, two businesses made the cut.

    Herbert Hall Hardware from Charters Towers (QLD) won the best HBT store award for its growth and positive working relationships with suppliers, among other criteria. A family owned and operated business, it has been servicing the Charters Towers and surrounding districts for over 30 years.

    Victoria-based Cost Less Bolts & Industrial Supplies won the first ever store award for an ITT member. Group manager Tim Starkey mentioned that owner, Steve Gilbert helped to establish ITT by encouraging many others to do join. Gilbert is one of the stars of HBT's current advertising campaign.

    @HBT2016: Industry overview
    Tim Starkey presents his perspective on the industry
    Hardware News Network
    Tim asks whether Lowe's could purchase Masters
    Tim speculates a future where Mitre 10 buys HTH Group
    Click to visit the HBT website for more information
    Group manager, Tim Starkey provided his perspective on the state of the industry at the recent HBT conference in Townsville (QLD). He began with Hydrox Holdings and the ongoing battle between Woolworths and Lowe's about the valuation of the Masters hardware chain. Hardware Timber and Hardware (HTH) Group is also part of the sale of Woolworths' home improvement division.

    Referencing Mitre 10, Tim pointed out the ACCC had contacted industry participants about the possible effects of a merger. According to Tim, it appears the ACCC's focus is on the wholesale market.

    He speculates as to whether Lowe's might purchase Masters based on its international experience and recent acquisition of Rona in Canada. Tim goes a little further and wonders whether US-based Ace Hardware would consider entering the Australian market and buying the Mitre 10 or HTH business, or both. Ace also has a global presence.

    For more of Tim's musings on the current state of the industry, you can view the 10-minute video here:

    @HBT2016: New initiatives
    Aimee Blake is the manager for member services and "director of fun"
    Hardware News Network
    HBT is developing "H"-branded house products
    HBT's association with the McGrath Foundation is new to the group
    Click to visit the HBT website for more information
    As the manager for HBT member services, Aimee Blake is front and centre of the latest projects the group is rolling out in the next 12 months.

    The trailer and boat competitions that work as in-store promotions are new to many HBT members. However Aimee and her team will be assisting the marketing collateral, set-up and legalities to help make the process easier. As Aimee explains, what was too difficult to do in the past is now achievable.

    "H"-branded house products are also in development. The main point of difference will be in the quality of the products and should help retailers offer a compelling alternative in their local markets.

    HBT's association with the McGrath Foundation is also brand new and has received enormous support from members so far. They see a genuine "fit" with their businesses and can see real benefits in the relationship with the breast cancer charity.

    @HBT2016: People of HBT
    Kerrie Windus is the office manager and looks after rebates and accounts
    Hardware News Network
    Ashlin Fisher rose to the logistics challenge of the Townsville event
    Steve Fatileh is the group buying manager for hardware at HBT
    Click to visit the HBT website for more information
    Organising an event -- large or small -- can be thankless task but the HBT team makes it a seamless experience with a modicum of tension. This is no mean feat for a group that has now grown to 594 store members.
    Taryn Kocwin is in administration and member & supplier services

    Ashlin Fisher is responsible for conferences at HBT. She rose to the logistics challenge of the Townsville location.

    Kerrie Windus is the office manager and looks after rebates and accounts. A long-standing HBT staffer, Kerrie's calm demeanour is a delight at an annual event when things can go easily wrong.

    Steve Fatileh is the group buying manager for hardware. He negotiates deals for both members and suppliers. His detail-oriented yet laidback approach makes Steve a meaningful addition to the HBT team.
    Madison Chippendale's bandana expertise was much needed in Townsville

    Taryn Kocwin is heavily involved in administration along with member and supplier services. A fun personality and happy smile does not detract her from the work that needs to be done.

    Newcomer Madison Chippendale's unique bandana expertise was a highlight at the Townsville conference.

    FLASHBACK 2015: HBT gala dinner
    (l&r) Tim Starkey and Gavin Keane speaking to HNN. The "HBT yacht" is in the background.
    HNN Sources
    (l-r) Lawrie Peck (Romak), Betty Tanddo (HNN) & Mitch Cameron (Cameron's H Hardware)
    Another successful event for HBT
    Click to visit the HBT website for more information
    Tim Starkey and Gavin Keane explain that its latest event in Melbourne is the biggest yet in terms of supplier and member participation. The mood was upbeat but it was tempered with a dose of reality. As Tim says: "There is naturally a level of concern about the future...but there is plenty of hope and...these guys can be competitive if they are dealing with the right people."

    This year's event was also an opportunity to reflect on what the group has achieved, especially in the last two years. "We are the only group that covers traditional timber and hardware and the industrial tools area, and that is bringing interesting benefits to members in both areas...We are now the biggest industrial tool, welding, fastener group in the country..."
    Bringing more value to members

    Stanley Black & Decker 2016 Q1 results
    Stanley Black & Decker 2016 Q1 results
    Stanley Black & Decker
    Mockup of a DeWalt drill/driver with a small touchscreen
    Regional revenue breakdown for Stanley Black & Decker
    Subscribe to HNN weekly e-newsletter
    Stanley Black & Decker (SBD) has reported net sales of USD2672.1 million for the first quarter of 2016, up 1.6% over the previous corresponding period (pcp), which was the first quarter of 2015. The company attributed 4% of growth to an increase in volume, 1% to better pricing, and saw unfavourable exchange rates as subtracting 3%.

    Earnings before interest and taxation (EBIT) from continuing operations were USD254.1, up 14.8% over the pcp. Net earnings were USD189.4, up by 13.5% over the pcp. Earnings were advantaged by a reduction in restructuring costs to USD8.0 million, down from USD24.9 million in the pcp.

    Diluted earnings per share came in at USD1.28 for the quarter, up from USD1.04 in the pcp, an increase of 23.0%. This was partially due to a reduction in the number of outstanding shares to 147.6 million, down from 156.5 million during the pcp.

    The tools and storage segment of Stanley Black & Decker (SBD) delivered solid results for the quarter. Net sales for the segment came in at USD1,706.9 million, an increase of 4.6% over the pcp. Profit also rose, coming in at USD262.0 million, up by 2.0% over the pcp.

    An increase in the volume of sales contributed 7% of growth over the pcp, the company stated, while better prices added a further 1%. Unfavourable shifts in exchange rates provided negative growth of 4%.

    The main growth drivers for tools and storage were its North American markets, which grew by 10%, and its emerging markets, which grew by an unusually high 9%. Power tools were particularly strong during the quarter, growing by 10%.

    Australia did not fare as well as other geographic regions, with its sales performance declining by 1%.
    Regional revenue breakdown for Stanley Black & Decker

    SBD's other two main segments, security and industrial, also performed well. While net sales declined for both segments, profit increased. The profit for security was USD60.2 million, up 9.9% over the pcp. The profit for industrial was USD76.0 million up 1.7% over the pcp.
    Stanley Black & Decker 2016 Q1 results

    Based on projected outperformance by the tools and storage division during FY 2016, SBD has increased its earnings guidance for the year. The guidance was previously for USD6.00 to USD6.20. It has been lifted by USD0.20, to between USD6.20 and USD6.40. Growth in tools and storage is now projected to be a mid-single digit percentage.

    The company's chief financial officer Don Allan outlined the positive contributors:
    As you can see we're now expecting organic growth of 3% to 4%, versus the original estimate of approximately 3%. The primary drivers of the change are an increase in our Tools & Storage growth assumption to mid single digits on the back of a solid first quarter performance, strong POS data and signs of continued strength in [residential] and [non-residential] construction markets.

    The company also indicated it would be more aggressive in pursuing non-organic, acquisition-based growth. The company's chief operating officer, Jim Loree, stated:
    You may also see some inorganic activity in the near future, as we have capital to deploy and are actively developing an acquisition pipeline with emphasis on bolt-ons in the tools and industrial segments.

    Asked for more detail on this by an investment analyst, John Lundgren, SBD's chairman and chief executive officer, said in part:
    Having said that, I think importantly our pipeline is quite full and the reason being as you know we've been on somewhat of a moratorium, self-imposed for the last 18-plus months. But it doesn't mean we stop looking at, assessing and in many cases keeping targets warm. So there's plenty out there in our previously identified areas of strategic focus.
    SBD teases a new innovation

    The company made a strong mention of the role of innovation in its 2016 performance. The analyst Jeremie Capron of CLSA followed up on this theme during the question session, and Mr Loree responded at some length:
    The breakthrough innovation initiative is something that we started -- really started getting into -- in the early part of 2014. The concept behind it is that we do a pretty good job in what we call core innovation, and we did this in both legacy Black & Decker and legacy Stanley. Those are the kind of things that are driving the, you know, the organic -- big driver behind the organic growth today and some of the new product introductions that I alluded to in the core innovation area.
    But those are more things like, in the hand tools business for instance, we introduced a line of FatMax hammers and pry bars and knives and blades, an innovative line in one of our large retailers and another large retailer we introduced DeWalt pry bars and pocket knives. And then in professional power tools, compact generation tools DC brushless, some really interesting innovations in the DeWalt Pneumatics line, a Mac impact wrench but you get the idea here.
    This is sort of the day-to-day innovation that just goes on as a matter of course, but I would say the level of activity in this area, and the freshness of the company's product lines has never been greater in our recollection.
    So what is the breakthrough innovation? The breakthrough innovation is a concept where we actually took people out of the mainstream of the core innovation and set them aside, a small group of people, 10 or 15 people in that range, we just said come up with the next major breakthrough innovation for Power Tools. And we gave them a timeframe and we gave them resources, and support. And lo and behold, in a relatively short period of time, they came up with something very, very interesting.
    What is that? You'll have to wait and see what that is, but from a scale point of view, we say with it is a breakthrough innovation -- and this is not the only breakthrough innovation team in the company by the way, this was just the first one.
    Product line performance

    The company was clear that all three of its power tool lines were generating growth: the DIY brand Black & Decker, Stanley, and the Pro (tradie) line DeWalt. During the presentation the strong performance of the new DeWalt brushless line was highlighted several times. This is driven in part in the important US market, by a "Made in the USA" campaign.

    Mr Lundgren, in an answer to an analyst's question, also pointed out that the DeWalt brand was performing well in the company's online e-commerce offerings:
    The Black & Decker brand for DIY users is extremely popular, both DIY Power Tools, outdoor products, et cetera, but a real driver is DeWalt. It's the brand the pros go to. It's available, it's available online, and we're very thoughtful in terms of the extent to which we promote it, make it available, push it, because prior to the Stanley Black & Decker merger, DeWalt actually, other than via a retailer's own online opportunity, DeWalt wasn't offered online.
    It is now. It's doing well. But think of our three power brands, Stanley, DeWalt, Black & Decker, their specific end-user groups and to each and every one, they're all doing encouragingly well. The biggest single dollar percentage, though, would be DeWalt.

    The Stanley brand has also achieved strong performance, especially in emerging markets.

    Mr Allan stated, in the context of an answer outlining how the merger between Black & Decker and Stanley continued to reveal additional strengths:
    And I would say a current example of those revenue synergies we touch on here and there is what we've been doing in emerging markets where we've been rolling out the mid price point products in particularly Power Tools that have the Stanley brand on it. So that's a great example of continued generation of revenue synergies six years after the merger.

    Mr Loree also added comments to indicate that the baseline Black & Decker brand had improved its performance since it was refreshed in 2014:
    I'd also just add that very interestingly a couple years ago we did a complete refresh of the Black & Decker brand, and it had really gotten a little bit stale and it had lost a bit of its identity. And when we did the refresh, we tried to bring a millennial sort of focused element to it, and we added some lifestyle elements related to the millennial population, as well as the ECOSMART aspects, which is the sustainability of some of the products and packaging, and so on.
    And the Black & Decker brand has really made a lot of progress with the millennial population. It is definitely not your father's Oldsmobile. It's gone from sort of the mature demographic to the up and coming, so even though it's not the dollar leader in terms of what we sell in e-commerce, it is, for the medium to long-term, has tremendous potential as the generational shift continues.

    As you might expect, HNN's attention has been drawn to the issue of what the major new innovation is that SBD is promising for the second half of calendar 2016. Given that SBD has already done some work in the Internet of Things (IoT) area, with its Bluetooth-enhanced cordless tool batteries for both the DeWalt and the Black & Decker line of tools, it seems quite possible the new innovation will be in this area.

    This is, of course, also a highly competitive area. Techtronic Industries/Milwaukee has already launched its One-Key system, which enables advanced inventory tracking, and tool-by-tool specialised settings, which integrate with selector buttons on the tools themselves. As HNN has described in the past, settings could range from a slow-speed, max torque setting for stirring paint with a cordless drill, to a high-speed, low-torque setting for driving screws into finished wood.

    Bosch Power Tools has announced it is developing a similar system, which differs in that the connectivity will be provided by a tool plug-in. This means that the company can release a single line of tools that can be enhanced with the plug-in. That has some advantages, but it also means that tasks such as moving from one tool setting to the next will be less convenient, as they will have to be changed via a mobile phone, rather than just by punching buttons.

    Looking at the weaknesses in these two systems, HNN can see two potential areas of innovation.

    One would be the addition of a "rugged" touchscreen to the DeWalt line of tools, which would enable tradies to adjust the performance settings directly and immediately on the tool. These could also provide status/performance information, and potentially advice and aids to using the tool as efficiently as possible. Where the Milwaukee tools offer a range of four settings, a touchscreen could provide ten or twelve similar options with ease, and the ability to easily "tweak" these setting while operating the tool to get the very best results.
    Mockup of a DeWalt drill/driver with a small touchscreen

    Another innovation might be a solution to the networking problem that both One-Key and the proposed Bosch system suffer from. Both are reliant on the proximity of a Bluetooth-enabled smartphone running the appropriate app to "phone home" to the cloud network where inventory data and settings are stored. SBD might be considering setting up a tool networking system based on WiFi protocols instead, operating over a mesh network.

    A worksite WiFi network could be established by using static equipment such as cordless radios and lighting to house routers. A mesh network would mean that every tool on the worksite would not need to be in direct connection with that network, as the tools would communicate with each other, and as long as one of the tools was in range of the WiFi network, they would all have access.

    Add just a simple GPS chip to the tool along with this system, and you would have a much more stable IoT connection for the tools, and a far better way of tracking lost/stolen tools as well. The network technology is already available on the market through Google.

    Investment advice website Seeking Alpha has provided the transcript for the SBD analyst conference call. HNN would like to thank them for their generous policy of permitting this content to be used in commentary on the company. It's a great way to improve financial analysis online. We encourage readers to read the full transcript at:
    Stanley Black & Decker Q1 2016 - Seeking Alpha transcript
    A modular revolution in Wagga
    Prominda creates modular houses and buildings in Wagga (NSW)
    Daily Advertiser
    The company can put together a three-piece module home
    A bedroom in a Prominda-built modular house
    Subscribe to HNN weekly e-newsletter
    Gavin King is the man behind Wagga's ground-breaking modular building firm, Prominda. He believes its way of doing things is no threat to traditional construction.

    King explains to the Daily Advertiser how a three-piece module home will be manufactured at Bomen (a suburb north of Wagga) in just 15 weeks, hoisted on the back of a truck and assembled in Lockhart (in the Riverina, NSW) -- bolted to the ground -- in a further two weeks.

    Off-site construction saves time and money, he said, but disagrees the efficiency is destined to put local tradies out of work. King said:
    We are no threat...It's comparing apples with oranges; there is no way modular building can compete with project homes because they are rarely seen in a suburban setting.

    However, the Wagga branch of the Housing Industry Association (HIA) is concerned about the potential for outsourcing labour, particularly to major cities such as Sydney and Melbourne.

    Of particular concern is modular building's foray into the commercial sector, which the HIA regards as most at risk. And the city is already seeing the construction of its first commercial project in the $14 million Rules Club redevelopment, which is having its modules manufactured in Sydney.

    Rules Club general manager Jack Jolley said modular design came in at 30% cheaper than a project build and it cut down on construction time by six months. He said:
    We checked out the quality and we wouldn't have done it if the quality was compromised. With the expansion, it's so far, so good -- we haven't had any problems with it. Off-site construction allows more room for any changes you want to make to the design; it's much easier to change if you want to.

    King, whose business employs local sub-contractors, expects modular building to expand in coming years. He said:
    In the last 12 months, inquiry has really escalated. It's good for Wagga; it's good for local business because we still need those sub-contractors to put it together.

    Asked whether Prominda would consider expanding into the commercial sector, King said: "Time will tell."
    Screwdriver invention
    Flipout is a rechargeable screwdriver that fits into tight spaces
    Bellingham Herald
    The idea for Flipout Screwdrivers came about in 2003
    It has a rotating head with more than 350 positions
    Click to visit the HBT website for more information
    Joel Townsen made a rechargeable screwdriver that fits into tight spaces with a rotating head with more than 350 positions. He discusses his journey to get his product in front of consumers.

    The idea for Flipout Screwdrivers came about in 2003 when Townsen was trying to replace a speaker in the door of his car. He explains:
    The drill I was using wouldn't fit inside the door panel and the idea hit me: why not invent an electric screwdriver that transforms into different shapes? Power tool companies had been making the same type of products for years -- large bulky drills that were difficult to use in confined spaces and offered no versatility whatsoever.
    I thought if I could incorporate the flexibility of a robotic arm into an electric screwdriver I would be on to something. The first prototype was built using pieces of acrylic for the housing and plastic gears I got out of a robotics mail-order catalogue. It wasn't anything fancy, but it worked and gave me a sense of excitement that drove me to push forward and keep trying harder.

    Townsen said it took him almost a decade to get the product to market with a lot of sacrifices along the way. He said:
    I ended up dropping out of school in order to work full time, usually 60-plus hours a week to fund my dream. Any spare time I had was often spent working on the latest prototype. The product was fairly involved and had numerous parts. I spent years perfecting it until it actually worked. On top of this, everything was super expensive -- patents, prototype parts, CNC machining, injection moulding, trade shows, marketing materials -- you name it! It all cost money.

    The path to market for Townsen involved licensing. He said:
    Licensing is basically where another company makes and sells your product, in return you get a percentage of the net profits. It's a good route for inventors who have a great product idea but aren't sure how to go about manufacturing it themselves or how to deal with retailers.
    For me, landing a licensing deal was extremely difficult. I took part in trade shows and contests, applied to present my product on Shark Tank, and pitched every company under the sun trying to secure a licensing deal. The turning point for me was after I launched the product through crowdfunding -- after the campaign ended, I received several emails from big-name power tool companies who were interested. In the end, I hooked up with a manufacturing company out of Seattle and together we pitched Lowe's for a DRTV deal. Before I knew it, Flipout had its own TV commercial and we sold hundreds of thousands of units in a matter of months.

    Direct response television (DRTV) is any television advertising that asks consumers to respond directly to the company -- usually either by calling a telephone number or by visiting a web site. This is a form of direct response marketing.

    The biggest challenge Townsen faced was overcoming the enormous costs involved with prototyping. He said:
    When I started this project, affordable desktop 3D printers were not readily available. Since I was designing a hand-held power tool, I went through a lot of different variations to make it work properly and fit comfortably in the hand. Nowadays, I just print the parts on my 3D printer and it costs me USD1-2 per part, as opposed to USD50-100 per part.

    Townsen advises any aspiring inventor is to take that first step and build a prototype, even if it's made out of cardboard. He said:
    The point is we all have to start somewhere. Anything that will help you get a sense for how a product looks, feels, and works.
    HI News Vol. 2 No. 7
    Download the latest HI News, issue number seven
    HI News Vol. 2 No. 7
    Can Bosch Power Tools keep up?
    Lowe's brings unicorns, flamingos to life in its latest campaign
    Click to visit the HBT website for more information
    The HNN e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out. Just use the following link to download the PDF:
    HI News - Volume 2, issue number 7

    Bunnings' dominance of the hardware retail market is not impenetrable. In this issue, we explore six main ways that can help independent retailers compete more effectively against the big box chain. The areas that are analysed include service, community, segmentation, pricing, margins and DIY projects as a category.

    We also examine Bosch Power Tools' current trajectory and whether the company will be able to catch up to its rivals such as Techtronic Industries and Stanley Black & Decker when it comes to Internet of Things (IoT) technologies.

    This edition also has the latest renovation, retail and housing statistics with a particular focus on New South Wales and Victoria. There is a conflict in the most recent crane index and AI-HIA performance of construction index; and micro modular apartments could represent future city housing.

    In addition to the regular big box update, we take a look at Bunnings' third quarter results. Queensland-based TradeTools and Mitre 10 feature in the indie store update.

    There are new products from ECHO, DeWalt, Hilti and Husqvarna, among others. Other news stories include the latest ad campaigns from Lowe's and B&Q, as well as the growth in online home services at Amazon.

    Companies highlighted in the employment update include Husqvarna Group, Haymes Paint and Super Retail Group.
    Six ways to do better against Bunnings
    Article on setting price points
    Hardware News Network
    How Bunnings provides online help
    Set of four videos on deck construction from Bunnings
    Give to Amnesty International
    Over the past 15 years Bunnings has come to dominate the Australian home improvement retail industry. As HNN has described elsewhere, this was not a process that benefitted overmuch from luck, nor was it a case of a large company leveraging investment to control a market.

    Bunnings' success has been built on risk-taking, experimentation, a lot of hard and diligent work -- and, we have to say, mistakes made by other major retailers in the industry. It bears repeating that at one stage Bunnings and Mitre 10 held equivalent market share in home improvement retail. Mitre 10 launched a programme to gain additional share. When that fell apart, Bunnings emerged with a dominant market position. Mitre 10, much diminished, was then acquired by Metcash, and chose to specialise in trade rather than DIY sales.
    2016 will challenge independents - HNN

    While these are known facts, a feeling persists among independent retailers that something not quite right has gone on here. They can't put their finger on it, but there is a sense that Bunnings somehow is not just another competitor.

    They're right. What Bunnings did was not just to go out into the marketplace as a kind of "super retailer" and do everything retailers of the past had done, only better. What Bunnings really did was to restructure the market itself -- or, to put that another way, Bunnings actually changed the customer.

    Having done that, while their competitors are still trying to sell to the "old" customer, they remain almost completely isolated from competition.
    Getting back to DIY

    Any analysis of the state of the home improvement market today is going to conclude that there is one thing that is essential and vital: home improvement retailers outside Bunnings need to think about ways to expand their sales revenue gained from consumer DIY. That is, without doubt, the strongest growth area, not just in revenue, but also margins and hence profit as well.

    HNN is quite certain that if we all could get a look at the longer term plans of Bunnings and Wesfarmers, what we would see is an intent to build the retailer up to be twice its current size, through expansion first in the UK and later elsewhere in Europe. That kind of scale is going to give the company extraordinary advantages in the supply-chain.

    It might take Bunnings a bit longer than it is presently ready to admit to get the UK business going, more like five or six years than three, but it is highly likely to succeed. That means that Australian retailers have something like a three or four year "grace period" to reclaim market share, and set themselves up for the future.

    HNN has six concrete suggestions about how retailers might get started with that process. Before we can get to that, however, we have to delve a little deeper into Bunnings, what it did to change the home improvement market, and what Bunnings really has come to represent to its customers.
    The "Bunnings people"

    When we discuss market strategies here at HNN, we quite commonly find ourselves mentioning the "Bunnings people". While this is a little hard to define, we all know what is being referred to by that. Go to just about any Bunnings on a busy Saturday or Sunday, and you'll find them there, wandering through the aisles, having a sausage out the front of the store, a coffee in the cafe, their kids trailing after them with a free balloon, or their faces painted to resemble a lion.

    It's an energetic scene, and customers at Bunnings quite often experience the store as an energising place. It is also unique, in Australia, in home improvement retailers. Mitre 10 and Home Timber and Hardware stores might bustle and feel active, but there is seldom that kind of Bunnings energy to them.

    To understand how Bunnings has come to occupy this position in people's lives, it's necessary to look back a little in history, and understand some features of Australian society and culture as they have developed over the past 50 years and more.
    Post-war: the distributive economy

    When Sir Robert Menzies began his second term as Prime Minister of Australia in 1949, he set in place an economic and social system that would arguably dominate Australian culture for the next 30 years and more. It was based on Australia operating as a primary producer of agricultural and mining commodities for export, while high tariffs were introduced on imported goods so as to protect domestic industries.

    This was what could be described as a "distributive economy". By introducing inefficiencies in terms of the supply of manufactured goods to the Australian populace, high employment was maintained, and the Federal Government retained a range of levers with which it could control business and industry.

    It is worth quoting what remains the signature statement of the Menzies government, a definition almost of a core set of Australian beliefs. It's an extract from Sir Robert's speech on what he called Australia's "forgotten people":
    I do not believe that the real life of this nation is to be found either in great luxury hotels and the petty gossip of so-called fashionable suburbs, or in the officialdom of the organised masses. It is to be found in the homes of people who are nameless and unadvertised, and who, whatever their individual religious conviction or dogma, see in their children their greatest contribution to the immortality of their race. The home is the foundation of sanity and sobriety; it is the indispensable condition of continuity; its health determines the health of society as a whole.
    The unravelling

    The fatal blow to the systems set in place by the Menzies Government occurred when Britain joined the forerunner of the European Union, the European Economic Community (EEC) in 1973. What is not widely understood is that Britain was required to sever its economic ties with Australia (and other Commonwealth nations) as a condition of entry into the EEC -- it had twice been rejected at the behest of France's President, Charles de Gaulle, in 1963 and 1967.

    The German-born, Australian-based academic Oliver Marc Hartwich describes the effect of this move in an article in The Guardian newspaper:
    After Britain had joined the EEC Australian butter exports dropped by more than 90 per cent; the Australian apple trade declined from 86,000 tonnes in 1975 to just 27,000 tonnes in 1990. The economic consequences of Britain's European ambitions for Australia were severe.

    For the next 20 years after this event, Australia's economic history is dominated by efforts to somehow balance the expensive social programs put in place by the Menzies Government and enhanced by subsequent governments, with the increasingly dire economic realities.

    This began with broad-based cuts of 25% in most tariffs in 1973. These cuts were later continued through the 1980s.

    The Australian dollar was floated in December 1983, and in 1986 the Australia Acts were passed in both Australian and British Parliaments, severing the paternalistic legal relationship between the two nations. The latter year was also the occasion for then-Treasurer Paul Keating to make his infamous "banana republic" comment, pointing out that inflation and a rising trade deficit were destabilising the nation. The US stock market collapse of 1987 helped plunge Australia into deeper trouble.

    A recession resulted from these factors. This lasted from September 1990 through until September 1991. Full recovery did not arrive until late in 1992. However, the changes made during this period did stabilise the economy, and by 1994 a period of prosperity had begun that lasted for 11 years.
    Cultural changes

    In many ways, today's "Bunnings people" have inherited many of the cultural biases of the Menzies Era's "forgotten people". They, too, are family-orientated, non-trendy, and regard building a good life for their children as important.

    Where they differ is that they are also ambitious in ways the "forgotten people" were not. In Australia, however, that ambition does not show itself in the same manner as the ambitions of family people in, say, Los Angeles, London, or Paris.

    In most other nations, this kind of ambition translates fairly directly into earning more money at a better job, then spending that money to enhance family life. For these Australians, it's not all about money. It is clear to them that working longer hours at a stressful job cannot possibly create a pleasant life. Instead they have followed a kind of "middle path". They want a good, well-rewarded job, but they also want time at home, and leisure in which to enjoy life.

    In the end, their ambition is all about gaining valuable and rewarding life experiences. It is in this sense that Bunnings has come to play an important role for them. When they buy an impact driver, a mitre saw, flooring, decking materials, paint or lighting, their goal is to use these to enhance their dwellings, usually for the purpose of garnering more of these experiences.

    They are less interested in the impact driver as a tool, and more as a helpful mechanical device which means they can put together a deck in less time. The purpose of that deck is likely to entertain people, to gather friends close around on certain warm summer evenings, to experience that kind of life. Bunnings makes all of this more possible.

    In doing so, Bunnings has become their ally, their aid. Walking into a Bunnings they are not thinking about a lot of dreary chores they have to get done. They are thinking instead about opportunities.
    Retail culture

    Many independent home improvement retailers today have been more heavily influenced by the way Australian retail operated in the recent past than they know.

    If we think back to the time when tariffs were still used to heavily distort the market economy -- which is a scant 30 years ago -- one of its characteristics was that retail really didn't make much sense. Instead of quality, design and manufacture being the main determinants of a product's price, the most important aspect was whether it was made in Australia or elsewhere.

    Products also tended to have very similar prices across manufacturers, usually set a specified amount below the tariff-inflated price of superior imported products. There were no, or only very limited, opportunities to work the supply-chain more efficiently to get a product imported at a better price.

    So, given high levels of price similarity, how did retailers differentiate themselves? Largely they did this through service, and through building lasting relationships with customers. A butcher became "your" butcher, a shoe store "your" shoe store -- and a hardware store, "your" hardware store.

    While the vestiges of that approach have all but died out in most of Australian retail, they still linger in home improvement retail. There is a strong expectation on the part of those retailers that want customers "really" want is personal, informed service to help them make their purchases.

    Right from its inception, Bunnings had the idea that this was perhaps not really needed anymore. Freed from the influence of most tariffs, and launched into the aftermath of a recession in 1991, Bunnings understood right from the beginning that it could use price as a strong differentiator. It wasn't really, though, all about selling "cheap stuff". It was just as much about delivering unexpected quality at familiar price points.

    That's the deep background. Now let's explore the six key points of what retailers need to do in order to compete more effectively with Bunnings.
    1: Service

    Virtually any conversation you might have with an independent hardware retailer about Bunnings will begin with the complaint that they provide better service, which customers just don't seem to appreciate.

    There are pretty much just two alternatives going on here. Either the retailer is simply right, and they do provide better service, and the customer doesn't appreciate it, or else Bunnings does provide decent service, it's just that it is in different ways than the retailer does.

    Such as, for example, renovating an entire house, and making videos about every step of that process, which can be downloaded from their website. And, indeed, that is just what Bunnings has done. It also offers regular DIY workshops. A new feature HNN has seen developing is that Bunnings offers those workshops in a range of languages, such as Portuguese and Mandarin Chinese.

    We're not saying that the service offered by Bunnings is equivalent to that of the best independent hardware retailers, but it is often good enough for customers to get what they are looking for.

    In any event, whatever is going on, the numbers truly indicate that if an independent retailer is trying to use service as the main differentiator with Bunnings, it just isn't working in the majority of cases. It might be one, helpful ingredient, but much more than that is needed.
    2: Community

    When you speak about community with independent hardware retailers, they will mention the direct support they give back to the regions where their stores are located. They might support the local under-16s footy or cricket team, donate to a charity, repair the equipment in a local playground free of charge, and so forth. All that is very worthwhile and highly commendable.

    When you speak about community at Bunnings, however, while it might involve some of those aspects as well, it is as much about the kind of community that gets created in-store. Every decent sized Bunnings warehouse has a cafe, a playground for children, and a room for DIY classes, sometimes grouped together in a single "community pod".

    This helps to establish the Bunnings store as not just a place to buy stuff from, but as a fun place to visit. Consequently, people will save up little purchases -- lightbulbs and batteries -- to get at Bunnings, at the same time they pick up a coffee and their children play in the slides at the play-space. And, as we all know, one of the cardinal rules of retail is that often small purchases lead to big purchases.

    Obviously, smaller retailers can't afford to set up their own cafe. But one retailer we know of sets out a couple of picnic tables in an open space beside the store on sunny days. The local bakery doesn't have a great place for people to sit outdoors, and it is quite common to see a few Mums and Dads drinking a coffee at the tables on a sunny Saturday morning. This is also community.
    3: Segmentation

    The issue of segmentation in establishing a market is a deep and rich one. As HNN has pointed out in the past, the strategy that Bunnings pursues is very much an unsegmented one. In determining its market activities, Bunnings just has two questions it asks: Who is not coming to our stores, and how do we get them in? And, of those people who do come to our stores, what are they still buying elsewhere, and what do we need to do so that they buy from us instead? This is what is known as a segmentless approach.
    Segmented, unsegmented market advantages - HNN
    Segmentation could replace price as market driver - HNN

    One of the retail principles that can be borrowed from asymmetric (guerrilla) warfare, is that when you are facing off against an overwhelmingly superior force (like Bunnings) you should never compete on the same terms that they do. So, if Bunnings is using a segmentless approach, to compete effectively you may need to consider a segmented approach.

    Segmentation often just doesn't make sense to smaller retailers. Their instinct is that by specialising in one key area, they are turning customers away from other areas where they could also be earning revenue.

    To understand why segmentation works for smaller retailers, you have to understand that it has three key parts to it. Firstly, it enables the retailer to establish a clear point of difference from other retailers. That means the retailer is giving potential customers a good reason to at least check out what is in their store if they are buying that particular product.

    Secondly, segmentation is all about taking a set of limited resources, and using them in the best way possible to get the maximum return.

    Thirdly, segmentation is a key element in developing a means of marketing your retail operation on an expertise basis, thus avoiding the issue of low prices or price comparison.
    The lawn mower example

    To see how all those advantages might play out, let's take lawn mowers as an example. Developing a differentiated, segmented offering in standard lawn mowers is very hard to do. At the same time, if you are just selling ordinary lawn mowers, will you really ever be able to compete with Bunnings on price?

    What if, however, a store chose to segment and specialise in cordless electric lawn mowers? The store is still competing with Bunnings in this area, and Bunnings does have some winning products there, but its range is quite limited as compared to regular lawn mowers.

    Also, this is one area where it is likely the staff at Bunnings are not going to be all that well informed. Do they know how long each mower will run for? Do they know the types of lawns they are most suited to? Can a prospective buyer turn one on to see just how quiet and vibration-free they are? (No, because of health and safety requirements.)

    The display area that the store previously used for a range of lawn mowers that really didn't sell all that well suddenly becomes a dedicated area for a very attractive product range -- a better use of that space. Instead of training staff to understand the general characteristics of three brands and six models of petrol lawn mower, they are learning the basics of how the electric lawn mowers work. This is more limited, but it's a better use of their skills as they can go deep instead of broad.

    Consider also how this plays into marketing. External banners, product leaflets, mailbox flyers, online websites -- all these benefit from this kind of specialisation. Segmentation gives a particular shape to the business, and can attract customers who are not going to buy an electric mower, but are sort of interested in the technology, and might buy something else.
    4: Pricing

    Once again, applying the core technique from asymmetric warfare, don't match the big competitor's strategy. Bunnings pursues an everyday low price (EDLP) strategy, so retailers need to consider the alternative, which is generally High-Low (HL) pricing.
    Tool price plateaus at Bunnings - HNN

    Most retailers think that they know how HL pricing works, but often it turns out they don't have that clear of an understanding. Sophisticated HL relies on establishing a set of expectations in the customer, then breaking through those in such a way that it triggers a "buy" event.

    Typically this is done by establishing pricing brackets across a product range. A retailer has, let us say, three different impact drivers of low, intermediate and high quality, priced in steps at $180, $130 and $99. The differences between the three products are real and meaningful -- perhaps the high end product has two-speeds and is brushless, the intermediate is brushed with two speeds, and the low end is brushed and one speed.

    If these are the regular prices of the tools, when you are executing a HL strategy, which tool gets the discount? It's not uncommon to find retailers discounting the low-end, $99 tool, on the basis that this is the tool that attracts the most price sensitive customer, and will thus produce the best sales results from discount.

    It is also not uncommon to see retailers discounting the top-end tool. This is often on the basis that they are carrying the most margin on that tool, and discounting will have a slightly lower effect.

    In both these cases, for customers thinking about buying one of these tools, which markets are being attracted? Discounting the high-end tool will attract those customers thinking about buying it, and also those who were considering the mid-range tool. Discounting the low-end tool will attract those considering the low-end tool anyway, and also possibly those considering the mid-range tool.

    However, if you discount the mid-range tool, you attract customers interested in it, in the high-end tool, and also those interested in the low-end tool.

    The discount buy-trigger isn't really a moment of price rebellion in the midst of a carefully bracketed price structure. It is a pricing technique that makes the most out of that bracketed price structure as possible.
    5: The margin is the outcome

    "The margin is the outcome" is something the CEO of Bunnings, John Gillam, finally said to investment analysts when he was being questioned about range and pricing. What he meant by this is that Bunnings does not set out to get products on the basis of what their margin is going to be. The retailer pretty much knows from its data what kind of feature-set and price combination is going to actually sell in its stores. The actual margin is the outcome of providing an attractive and quick-selling product, rather than the reverse, where margins are predetermined and this limits the choice of products.

    While smaller retailers cannot really pursue that particular technique, as it only works really well in consistent high sales volume environments, there are some aspects of this approach that need to be studied and applied.

    Most retailers know they need to solve a certain mathematical problem when they set about pricing a product. What is the optimum price/volume relationship that will provide the most profit for a particular product? It comes down to considerations such as knowing if you charge $20 you will sell only 40, and if you charge $15 you will sell 80, and the base cost to you is $10. Price/volume relationships like this typically are on a curve, which means it is likely the best price is actually somewhere between those two.

    What is interesting is that if you have enough data and you graph these relationships, you frequently find that the price/volume curve has two optimal solutions. One is a lower volume/higher margin solution, and the other is a higher volume/lower margin solution. (This occurs because of cost optimisations brought on by volume discounts, and certain supply-chain efficiencies.)

    Most retailers instinctively gravitate towards the lower volume solution, because they are aware both that it carries the least risk (higher volume sales in most categories can create additional risks relating to supply-chain, stocking and so forth), and because they know that high volume sales have certain opportunity costs that it is hard to capture in a pricing model. The staff is busy with the sale, so they might miss other sales, there is more space consumed in the stock room, more traffic congestion in the store, and so on.

    Bunnings, however, if given the choice, will tend to choose the higher volume solution to the price/volume problem. This holds even if that solution is not as optimal in terms of profit as the low volume solution. That is partly because Bunnings is set up for high volume sales, so the additional risk factor is very small. The main reason, though, is that Bunnings is constructed to take advantage of high traffic flow through its stores. Creating that kind of flow by choosing the high volume solution is likely to create secondary benefits, that are, again, a little difficult to capture in the complete pricing model.

    Smaller independent retailers can make use of the high volume solution as well, on selected products and under special circumstances. This is very different from HL pricing strategy, and is, in fact, actually mixing a bit of the EDLP strategy into HL.
    6: DIY = Projects

    One of the big opportunities that remains almost unexplored in home improvement retail in Australia is doing more to view customers in terms of the projects they are seeking to complete.

    There are really four key project areas that DIY consumers pursue: kitchens, bathrooms, deck/outdoor space, and storage. When you identify those four areas, you are probably looking at (easily) over 60% of DIY purchases made. One technique that HNN sometimes uses in assessing a retail space is to take each of those project areas and to count the number of steps a customer would need to take to find everything they need to complete such a project.

    Kitchens usually do well, and bathrooms do OK, but both deck/outdoor space and storage are often very poor. Even where there is, for example, a space dedicated to storage solutions, it can turn out you need to walk all over the store to find the things you really need to get the job done. Decking is by far the worst, however.

    It would actually be possible to establish an entire home improvement retail operation that offered nothing but tailored solutions to each of these project types. Failing that, it is a relatively simple store optimisation to consider providing some kind of grouping of the components of popular projects.
    No magic bullet

    It is tempting to find yourself yearning for something of a simpler time for retail. Having to resort to differential calculus to solve a complex dual-hump price/volume curve was probably not so much of a priority in the 1950s. But the reality is that today, we really do need to consider this kind of complexity. Because, of course, Bunnings didn't just change the customer, they also changed the entire business of home improvement retail.

    Until next time,


    You can contact me directly via email or Twitter @HNN_Australia

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    Wesfarmers-Bunnings Q3 2015-16 results
    Bunnings results for 2015/16 Q3
    Horticulture Week comments on Merrill Lynch report
    No doubt one of PJ's favourite Homebase ads
    Click to visit the HBT website for more information
    Wesfarmers announced its sales figures for the third quarter of its FY 2015/16 on 21 April 2016. Bunnings returned good results, with sales reaching $2,594 million, up by 11% over the previous corresponding period (pcp), which was the third quarter of FY 2014/15. Store-on-store (comp) sales also grew, by 8.3%. In the pcp sales had grown by 10.5% and store-on-store sales had grown by 7.6%.

    For the financial year to date, sales are now at $8,100 million, an increase of 10.9% over the first three quarters of the previous financial year. Two smaller format Bunnings stores were opened during the quarter.
    Bunnings results for 2015/16 Q3

    Coles recorded supermarket sales of $7,518 million, up 5.9% over the pcp. However convenience store sales fell to $1448 million, a decline of 8.9% over the pcp. This meant the division's overall result was an increase of 3.2% on the pcp.

    Kmart recorded good growth of 17.9% to reach $1,105 million, while Target sales rose by 2.3% to reach $678 million. Officeworks increased sales revenue by 7.8% over the pcp to reach $512 million.
    The Masters effect

    During the presentation to investment analysts, the managing director of Wesfarmers, Richard Goyder, was asked if discounting from Woolworths' Masters Home Improvement, which may be winding down, had affected the Bunnings result. He replied that it seemed not to have had any material effect, but repeated the warning from Wesfarmers' half-year results announcement that discounting could affect results in forthcoming quarters.
    Merrill Lynch on Homebase

    According to a report in the UK-based horticulture website Horticulture Week (HW), Merrill Lynch has released an investment report which is highly critical of the acquisition of UK big box home improvement retailer Homebase by Wesfarmers.

    Authored by the redoubtable David Errington, the report suggests that Wesfarmers' strategy as regards Homebase is deeply flawed. Mr Errington makes three main points. The first is that there is a high degree of environmental risk. Should the UK choose to exit from the European Union when it votes in a June 2016 referendum, this could lead to a strong slowdown in the housing market, and have other negative effects.

    The second point Mr Errington makes is that the Homebase business is so much unlike Bunnings' core business in Australia, that, while Bunnings has a strong management team, it will struggle to make the UK business work. The points of difference he outlines are as follows:
  • Homebase stores are smaller
  • Sales per square metre are currently far below the competition
  • Margins are less than competitors
  • Rebranding all the stores in the network could cost over $1 billion

  • The third point he makes is that Bunnings will be competing with Kingfisher, which has three times the sales of Homebase in the UK, and a total of seven times its sales across all its European stores.

    While HNN would agree with Mr Errington that Bunnings has perhaps been overly optimistic in its projections regarding the total required expenditure and the amount of time it will take to bring Homebase into profit, we do believe he may be in error as regards the overall wisdom of the investment.

    The real essence of the way Bunnings does business, we believe, is not a formulaic approach based on store format and margin potentials. It is far more based on being able to rapidly and effectively respond to the market as it presents itself through sales in its own stores and those of its competitors.

    While we would agree that Kingfisher is a formidable (in both the French and English sense of the word) competitor for Bunnings to face, HNN is not convinced direct competition with Kingfisher will be key to Homebase's success over its first two or three years. As we have pointed out in a past analysis, there are two other, smaller home improvement retailers in the UK market that would be easier to compete with.
    Homebase acquired by Wesfarmers - HNN

    Finally, while Mr Errington is certainly correct to point out the considerable environmental risk in European politics, it's unlikely that the results of a British exit from the European Union would be unmanageable.

    Perhaps as importantly, this should be balanced against some of the developing risk in the Australian home improvement environment. Modelling by HNN suggests that there could be a considerable slowdown in the renovation market coming between 2018 and 2022. This would be caused by the after-effects of the 2008 Global Financial Crisis.

    Building of new dwellings slowed considerably in some markets, in particular Sydney. This means the housing stock that should be feeding the renovation market post-2018 will not be there.

    While this is unlikely to generate a crisis, it could knock more than a few percentage points off retail growth in the home improvement market. Coincidentally, HNN modelling also shows that the UK market, due to its different renovation and building patterns, should be entering a good period around 2019. It is possible, that Homebase/Bunnings UK could end up ameliorating certain risks, rather than just being a net contributor to overall risk.
    Seeking opportunities
    The Gardena and Neta field sales manager is a dual leadership and key account management role
    HNN Sources
    The national operations manager at Haymes Paint is a senior executive role
    Super Retail Group is searching for a senior buyer for its BCF team
    Visit the Mecca Website
    The Husqvarna Group has an opportunity for a field sales manager to join its Gardena and Neta sales team; A Ballarat-based national operations manager is required at Haymes Paint; and Super Retail Group needs a senior buyer for its BCF stores.
    Selling Gardena and Neta brands

    The field sales manager at the Husqvarna Group is a dual leadership and key account management role. It involves the "profitable achievement of sales objectives for key account customers" and "effective management of their respective third party vendor merchandising team". The ideal candidate will have a minimum five years of business development experience in retail hardware.
    Husqvarna Group is searching for a field sales manager
    Haymes seeks operations manager

    The national operations manager at Haymes Paint is a senior executive role. The main purpose of the position is to manage and oversee the manufacturing, supply chain planning, procurement and national distribution functions. The successful candidate will contribute towards the development and execution of the company's corporate business strategy.
    Haymes Paint has a national operations manager role to fill
    Senior buyer for BCF

    Super Retail Group is searching for an experienced category manager/senior buyer for its BCF team based in North Brisbane (QLD). The successful candidate will "live and breathe the outdoors which encompasses boating, camping and fishing". The individual will have demonstrated experience in leading and executing promotional planning, range planning and negotiating trade partner agreements.
    Super Retail Group is seeking a senior buyer for BCF
    Can Bosch Power Tools keep up?
    Bosch NanoBlade sabre saw
    One of the tools is missing
    Ixo Swarovski - this is not a tool
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    Bosch Power Tools (BPT) has recently released results for its FY 2015 year. At a press conference in Germany, the president of the power tools division, Henning von Boxberg, indicated that turnover for the year had been EUR4.5 billion.

    For its 2014 year, Bosch generated revenues of EUR4.2 billion, indicating a 7% increase for the current year. However, the company reports that it experienced nominal growth of 10%, or around 5% in local currencies, as contrasted with the previous corresponding period (pcp), which was FY 2014. BPT suggests that the background growth rate for the industry is 4%. Using these numbers, this would indicate the company has gained market share.

    Regionally, BPT saw its sales grow by 17% in Germany, contributing to an overall European sales growth of 5%. North American sales grew by 12%, while 3% was the number for Latin America, and 5% in the Asia-Pacific region (which includes Australia). The company regards the total market in which it operates as being worth EUR26.9 billion, with power tools making up EUR13.6 billion of this. Mr von Boxberg was quoted in a press release as saying:
    We sold around 50 million power tools in 2015 -- more than ever before. Our success is based on consistently focusing on the user. We know what their needs are -- in particular, making work easier for do-it-yourselfers, and productivity for tradespeople -- and so we can offer the users suitable solutions.
    Changing channels of distribution

    One of Mr Hennings more unexpected strategic decisions announced with the results was that BPT is changing its approach to sales channels. He said:
    Previously, the user's buying behavior was heavily influenced by individual channels -- DIY enthusiasts bought their tools almost exclusively from hardware stores while professionals bought their tools from specialist retail outlets. We offered our products accordingly, based on separate channels. This strict division no longer applies. For a long time now, our blue and green tools have been available side-by-side from online retailers. Furthermore, away from the internet, both DIY enthusiasts and professionals are now buying their tools outside of their usual channels.

    Speaking perhaps mainly of the European market, he went on to say:
    This means, for example, that, as of autumn 2016, we will sell blue power tools not just in specialist retail outlets but also in hardware stores.

    He clarified this by adding:
    I want to emphasise that the specialist retail outlets are still the most important channel for us when it comes to selling professional power tools. What is important is that the customer is offered the right products through all of the channels -- and, of course, that they are impressed by our power tools.

    Given that Bosch Blue tools have been sold in general hardware stores for some time in Australia, it is difficult if this will have any impact here. It may signal something of a shift in the company's approach to its future growth plans.
    A changing company

    Most longer term observers of BPT would agree that the company has gone through something of an innovation lull in recent years. In particular, the years from 2011 to 2013 were marked by ongoing innovations, but not in the same areas where Bosch's main global competitors, Stanley Black & Decker (SBD), Makita, Techtronic Industries (TTI) and Hitachi were innovating.

    The BPT report on its FY 2012 year illustrates this. A change of leadership had just occurred, with Mr von Boxberg appointed president of the division from 1 January 2013, replacing, Dr Stefan Hartung.

    Dr Hartung had been appointed president of Bosch Power Tools in 2009, after a storied career in the Bosch/Siemens Dishwasher division. Mr von Boxberg had worked for some years in sales and marketing for Bosch Power Tools prior to his appointment.

    At the FY 2012 results announcement Mr von Boxberg chose to highlight Bosch's considerable advances in its measuring tools. He also celebrated the tenth birthday of the Ixo cordless screwdriver, one of BPT's most popular products in the DIY market. Mr von Boxberg mentions, for example, the variants added to the Ixo, including a corkscrew, a spice mill, and (of course) a Swarovski edition.
    A little bling for the serious DIYer

    Meanwhile, over at SBD, the company chose to highlight its Gyro screwdriver, named by Time magazine as one of the best inventions of the year, the launch of the Black & Decker Matrix drills, and the newest DeWalt (brushed)18-volt cordless drill.

    At TTI, 2012 was the year the company launched what has proven to be one of the defining products in power tools, the Milwaukee FUEL range, which featured brushless motors. It also launched its Ryobi 12-volt Li-ion products, and relaunched its Ryobi One+ line with newly designed and configured tools. The CEO of TTI, Joe Galli, used the 2012 results announcement to launch the next stage of FUEL, its sub-compact, 12-volt range.

    For 2012, Makita continued to expand its range of brushless tools, building on the innovations it pioneered originally in 2009.
    Reinvigorating BPT

    While BPT has never characterised its activities in this way, the tool maker has spent its time since early 2013 working to catch up to a power tool market that was quickly speeding away from it.

    For example, surprisingly, BPT had yet to release a line of brushless cordless tools by the end of 2012. It released plans to do so in November 2012, announcing that the products would be launched under the "Core" sub-brand. It was over a year before the company did manage to launch the actual tools, including the DDS182 drill/driver, and a range of impact drivers. These did not become widely available at suppliers until early 2014.
    Wireless charging

    The first genuine innovation that was brought to market under Mr von Boxberg's leadership was Bosch's wireless charging system. Released as a Bosch Blue tool in October 2014, this employs a special battery and a charging cradle. To recharge the battery, all the user needs to do is to set the tool down in the cradle. Drills can be simply rested on the charger. For tools such as circular saws, the battery can be attached to a vertical surface, and the tool is then slotted into the cradle.

    In the current results announcement for FY 2015, Mr von Boxberg also released the news that wireless charging will be extended to BPT's 10.8-volt range of power tools. This amounts to adding a wireless charging battery to the range, as the existing wireless chargers will work with the lower voltage tools as well.

    While it might seem a relatively simple idea, developing wireless charging was a long and difficult research project. The first prototypes, made in association with the US-based company Fulton Innovations, were demonstrated at the Consumer Electronics Show in Las Vegas in January 2009.

    The original made use of a world standard for wireless charging known as "Qi". Bosch subsequently decided to develop its own, non-standardised system. One reason was that Qi was designed for charging with less than 5 watts, and the Bosch system needed to deliver over 50 watts.

    Development challenges including building a system that would not, for example, attempt to charge a bolt that had been accidentally dropped onto the charger. BPT's solution to that problem was patented in 2011.

    The standard use-case that BPT suggests for the wireless charger is the contractor who has to drive from job to job. Using a special charging cradle for vehicles, or an L-Box case configured for wireless charging connected to a vehicle's power plug, all the contractor need do is store the tool away properly, and it will be charged by the time the next site is reached.

    It is difficult to see this as a compelling use case when compared to, say, buying an extra battery and a dual-port charger, and remembering to take the two minutes to slip the batteries into the charger before driving off. This is especially the case as both the wireless charger and the special battery required are quite expensive.

    There are two more compelling cases for using this kind of charging system. The first is in a light industrial/assembly situation, where cordless has been adopted both as a safety measure and to help speed workflow. The assembler could naturally set the tool down in its charging cradle when it was not in use. This would almost eliminate the need for a spare battery at each workstation, as well as the need to manage complex cycles of battery recharging.

    This seems to be hinted at in some of the promotional images released by Bosch:
    Wireless charging promotional image from Bosch

    The other use case would be for the DIY/Prosumer user in their home workshop, or in the house while performing repairs.
    Bosch Pocket Assistant

    Released in early 2016, the Pocket Assistant is something of a catch-up effort by BPT. This smartphone app enables a user to snap a picture of the box in which a tool is packed, and to then access information for that tool. Additionally, the app can also be used to register tools to obtain an extended warranty.

    Many power tool manufacturers have had a similar facility for some time. Ozito, for example, has a QR code on each tool box since at least early 2015. If you access the code with one of the free QR code readers available for all smartphones, it will load a web page with the tool details.

    Which, of course, brings up the question: why didn't BPT simply use QR codes? The system it does use is similar to that on the Australian "Viewa" app, which enables readers to "snap" a magazine page and then read additional details, something also used in the IKEA app for its printed catalogue. In the case of power tools, it would seem to add an extra layer of complexity and expense.

    While HNN can only offer a conjecture, it seems likely that in considering QR codes, Mr von Boxberg and his team would have faced a considerable delay in getting these printed on the packaging. Using the existing image of the packaging likely eliminated that delay.

    If this conjecture is true, it goes some way to describing some of the difficulties faced at Bosch, as it attempts to bring BPT up to speed with the market. It also indicates some of the resourcefulness of the BPT team itself.
    Track My Tools app

    If there is one single development during 2015 that really outlines the struggles of BPT to catch up to the market, and how it has managed to both partly succeed and partly fail, it is the development of its Track My Tools (TMT) system.

    BPT was facing a severe technology deficit when it comes to the developing field of connected tools. SBD's premium DeWalt brand released its Bluetooth-enabled battery in mid-2015, followed by the release of the similar SmartBattery by its DIY brand Black & Decker later in the year (with the clever addition of a USB charging port). Milwaukee developed its One-Key system for Bluetooth enabled tools during 2015, and released it in February 2016.

    BPT really didn't have much to offer, so it -- very cleverly -- developed its TMT system, which it launched in September 2015. This combines a degree of crudeness with some elegance -- and, unfortunately, also illustrates the company has yet to really understand how the modern market works.

    The hardware part of TMT consists of small devices like the one pictured below:
    Bosch's iBeacon-like tool tag

    These are priced at EUR14.90 per unit, with a minimum purchase of 10.

    The tool owner sticks one of these onto each of the cordless tools they own. When we say "sticks", we do quite literally mean sticks. Each device comes with its own two-pack polymer glue. The user finds a suitable place on the tool and sticks the GCC 30 TrackTag Professional Bluetooth module (as it is known) to it. For corded tools there is a slightly more elegant solution which attaches the TrackTag to the cord.

    The TrackTag is similar to what Apple has designated as an "iBeacon". However, knowing how much Bosch likes to have proprietary devices, it seems unlikely it follows the iBeacon specifications. What these devices do (in general) is to send out a pulse of information at regular intervals, using the Bluetooth Low Energy specification. This information consists of a unique ID. (In the iBeacon specification, it is actually two IDs, a major and a minor one.)

    In Apple's iBeacon specification, an interval of less than a second is recommended between pulses. The BPT implementation sends out a pulse only once every eight seconds. This contributes to the device's extra-long battery life, which is estimated at three years. It might also indicate that the Bluetooth radio pulse being sent out is a little stronger than is usual in an iBeacon.

    Once the TrackTag is attached to a tool, the tool owner then logs into the web interface to the TMT cloud-based database, and enters the details of the tools. The owner then uses a smartphone app to associate that particular TrackTag with the tool entry in the database.

    The tool owning business can then track the tool using a web interface. Tools are assigned to specific users using this interface. Whenever a TrackTag is within range of a smartphone with the TMT software activated, the Bluetooth pulse with the ID is detected, and this information is forwarded to the BPT cloud servers. That information includes the ID, the time the pulse was received, and the location of the smartphone at that time. The web interface then shows, if not the exact location of every tool, at least their location when they last "called in".

    The actual tool user can use the TMT smartphone app to access information about the tools. The primary information is quite simply location. For example, if someone has borrowed a tool on the jobsite and taken it elsewhere, the user can access location information on the app and determine its likely location.

    The app also provides a reporting function, which means if the tool faults, it can be reported immediately.

    A little more controversial is the claim that the app can make sure, for example, that a contractor has packed all the necessary tools into his vehicle. The problem with this is that iBeacon-type technology really doesn't give any kind of reliable proximity reading. Smartphones do read the signal strength of the beacon, but this is useful for determining only four situations: the iBeacon is within 50cm of the smartphone, within 1.5m, over 1.5m away, and out of signal range (usually around 30m, with a clean line of sight). It gets even more complicated and less accurate if you are checking devices attached to large lumps of metal like tools, locked in storage boxes, or inside a metal vehicle, which stores lots more metal.

    It would be very easy for the TMT app to report that all tools were present in a vehicle, when in fact several of them were still on the jobsite, within 30m. The only sure thing to do would be to drive 60m away, and then check. In fact, it seems that Bosch actually edited its YouTube video about TMT that showed a workman using the app to determine he was missing a tool. The missing tool scenario is still present as shown below:
    One of the tools is missing

    However, the video now shows him finding the tool, but the scene where the app informs him that all the tools are in his van has been edited out.

    The DeWalt Bluetooth battery system is more advanced, and offers a range of features not found in TMT, but does not provide the same kind of inventory approach. However, TMT does not even come close to what Milwaukee is offering with its One-Key system. That provides not only much better inventory management, and a location-checking system that is much better at detecting theft, but also full integration with the tool system as well, so that tool usage can be determined, and tool settings can be made as well.

    That said, and while there are several problems with the functionality offered by TMT, it is quite an inventive approach to adding some kind of connected functionality to an existing fleet of tools. As a move to start catching up, it makes a lot of sense.

    Except that, in the end, it doesn't. That's because BPT has made the peculiar choice to actually charge for the online services it is providing. The smallest fee, for a fleet of up to 100 tools, comes to EUR300 per year, or a monthly rate of EUR30.

    This shows how far behind in understanding the evolving world of power tools Bosch really is. Milwaukee, as an example, does not charge for its far more extensive, and far more useful One-Key service. It is a very telling mistake, and indicates just how far Mr von Boxberg has to go in transforming the business culture of BPT.
    The Future of Bosch Power Tools

    In the results announcement, Mr von Boxberg seemed to have a focus on the Bosch Green DIY tools. This included the announcement of a revolutionary new wood cutting tools for DIYers, the NanoBlade jigsaws and sabre saws. These work somewhat like miniature, 4mm wide chainsaws, and make cutting wood a much simpler and easier task for DIYers.
    Bosch NanoBlade sabresaw
    The NanoBlade itself

    More importantly for trade/professional users, BPT announced that it would be releasing an integrated, Bluetooth-based tool system in the northern autumn of 2016. According to the brief description supplied, this would be a module that could be plugged into a new line of Bosch cordless drill/drivers and combi-drills.

    The module would enable Bluetooth connectivity through the standard BPT smartphone apps, similar to the TMT modules described above. However, it will also deliver some control over the tool to the user, enabling them to change settings such as kickback detection, and to detect problems, such as overheating tools.

    This is evidently an effort to better match-up to the Milwaukee One-Key system. Once again, this approach reveals some good thinking, but also the obstacles that the vast Bosch development infrastructure present. Where Milwaukee is offering a special line of tools, that includes four buttons to activate different pre-determined settings on demand, the BPT alterations will require little external redesign of the tools. Connectivity will thus be marketed as an option on some tool lines, rather than sold as an integrated part of a parallel tool line.

    It is an understandable set of compromises, but the question remains how tool buyers will respond.
    From product-centric to user-centric

    By far the most hopeful sign that BPT is committed to change, and taking such change seriously, can be found in a YouTube video the company has released of its User Conference (uConn) held in late February 2016. Creators and designers, UX (user experience) and marketing experts, and sales representatives of BPT participated in the conference, where the importance of making tools for users was emphasised.

    Speaking at the conference, Mr von Boxberg had this to say:
    User centricity in fact is the centre of our strategy. Only if we fully understand our user problems, requirements and needs then we can derive the best product innovations, which is the basis of profitable growth. But we have to shift, and we have a paradigm change from a more product-focused, to a more user-centric organisation. Surely we have to improve in order to make sure that we are deriving innovations which are meeting our user requirements. Zero distance to the user and no waste.

    Marc Jost-Benz, head of user experience, backed up Mr von Boxberg:
    The uConn is a very important platform for us to develop from a technology and product-driven company towards a truly user-centric company. We are very happy that this concept seems to work out, and we really hope that the people will bring home whatever they experienced here in the different break-out sessions to their home, and that they really share the spirit towards a user-centric company with zero distance to our users.

    It is not uncommon for very large companies to develop the kind of situation that Bosch and BPT find themselves in for 2016. A dramatic transformation has occurred in their markets, their competitors and the potential for their products. Many companies in this situation react by actually promoting and appointing not the people capable of aiding change, but people who -- comfortingly -- represent more of a "business as usual" approach.

    Eventually good companies -- like Bosch -- "wake up", and realise they really do need to change. The difficulty is that today the pace of change is so intense and so rapid that waking up doesn't always guarantee success. Or, at the least, it can take a company four or five years to overcome a two-year period of reduced development.

    The difficulty facing Bosch is that it has slipped behind by two product cycles. When it releases its connected tools in late 2016, the systems it offers will not be as good as though released by Milwaukee in early 2016. What is more, Milwaukee will likely launch an improved version of its One-Key solution in the first calendar quarter of 2017.

    All that BPT can really do in these circumstances is to attempt to go from what will really be a version 0.5 of its connected product this year, to version 3.0 by the first half of 2018. That means the company will take something of a hit during 2017. The alternative would be to release a version 2.0 in late 2017, only to have Milwaukee release its version 3.0 in early 2018.

    And this scenario is leaving out whatever SBD will be doing, which is likely to be effective as well.

    One thing that does seem certain is that even though Bosch Power Tools is facing a tough period, the management team that has been put in place is making the right moves in the right direction. The question is how fast they can move, and whether the larger Bosch organisation can resist enforcing its old standards on a new line of business, as likely happened with the service fees tacked onto the TMT product.
    HI News Vol. 2 No. 6
    Download the latest HI News, issue number six
    HI News Vol. 2 No. 6
    Ryobi's Ultra-Quiet Garage Door Opener
    Kingfisher chief executive, Veronique Laury
    Click to visit the HBT website for more information
    The HNN e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out. Just use the following link to download the PDF:

    Home automation is the central theme of the current issue of HI News and includes a closer look at Ryobi's Ultra-Quiet Garage Door Opener. Other articles explore the ways home automation could change a large number of categories in home improvement, and the current three big industry players: Apple. Google and Amazon.

    This edition also has a number of results presentations from home improvement giant, Kingfisher, builders merchant Travis Perkins and US retail co-op True Value. There are also financial and product overviews of tool companies, Hitachi-Koki and Makita.

    The latest big box update features Bunnings' rollout of new stores, the mainstream commentary about its smaller format stores and the lead up to its European summer debut through Homebase. There is a summary on the Masters property portfolio and the deadline for parties making bids for the business.

    In the independent sector, Stewart's Hardware has opened in Nowra (NSW) and Home Timber & Hardware wins a customer satisfaction award.

    There are also new products from garden tool supplier, Ames; window furnishings company, Luxaflex; and lawn mower specialists, Rover and Gravely.

    Companies highlighted in the job update include Home Timber & Hardware Group, DuluxGroup and AEG Power Tools.
    Kingfisher FY 2015/16 results
    The CEO of Kingfisher, Veronique Laury
    Big box pilots
    Revenues by country
    Click to visit the HBT website for more information
    UK-based big box home improvement retailer Kingfisher has reported its results for its FY 2015/16. Total group sales declined by 2.6% over the previous corresponding period (pcp) which was FY 2014/15, to reach GBP10,331 million. However, using constant currency to remove the effects of fluctuating currency exchange rates, Kingfisher reports that its sales grew by 3.8% over the pcp. In like-for-like (LFL) sales measures, Kingfisher reports sales growth of 2.3%.

    Total profit for the group was GBP746 million, an increase of 0.7% over the pcp. In constant currency terms, Kingfisher reports the profit would be up by 7.4%. Kingfisher reports an operating margin of 7.2%, up from 7.0% in the pcp.

    During the year, Kingfisher closed 30 of its UK B&Q stores, a decline of 8%, and opened an additional 62 Screwfix outlets, an increase of 16%. Total selling floor space in the UK declined from 2,595 square metres, to 2,442 square metres, a fall of 5.9%.

    For the fourth quarter alone, Kingfisher reported total sales of GBP2,298 million, up by 0.7% on fourth quarter 2014/15. In constant currency terms, the increase would have been 4.7%, and 2.8% for LFL sales. Profit for the fourth quarter was GBP113 million, up by 35.7% over fourth quarter 2014/15.

    Presenting the year's results to analysts, the company's CEO, Veronique Laury, said:
    The second thing is we've delivered a good set of results. I am pleased with the results. I think we've delivered on expectation. And, even though we still have an underlying business which is volatile, because the things from customers' point of view haven't changed in a year, I am really pleased with the focus and the energy that the business has demonstrated to deliver those results this year.
    Regional results

    Ms Laury summarised the company's regional growth opportunities while speaking to analysts by saying:
    The other thing I want to remind you is that we have three strong businesses in UK, France and Poland and they are some of the biggest home improvement markets in Europe. And we have a growth engine with Screwfix.

    Summarising the results on a regional basis, the company's chief financial officer, Karen Witts, said they represented a
    ... mixed picture across our major markets, with good results in Poland and the UK, including a particularly strong performance from Screwfix, lower losses from our new developing countries offset by softer though stable market conditions in France.
    Revenues by country
    UK and Ireland

    Kingfisher's UK and Ireland region delivered the best results of all regions. Its trade sales business unit, Screwfix, recorded sales growth of 26.3%. Screwfix has a large online component to its sales, and represents over 10% of the company in sales revenues. This performance helped boost Kingfisher's performance in its UK and Ireland region to GBP4,853, a 5.5% increase over the pcp. LFL grew by 4.4%, the company reports.

    B&Q delivered an increase of around 1% in sales over the pcp, coming in at GBP3,799 million for the year. In LFL constant currency terms, growth was 1.9% over the pcp.

    Profit for UK and Ireland was GBP326 million, up by 18% over the pcp. Responding to a question from an analyst about growth in UK LFL sales, Ms Witts said:
    There are three contributing factors, I guess, to the LFL progression. One is the sales transference from our own store closures. Another is the sales transference from Homebase store closures. And then the rest is actually what we're doing.

    She also mentioned that there had been something of an uptick in sales of new kitchens.

    Overall sales for FY 2015/16 fell by 8.4% to reach GBP3786 million. In constant currency terms, Kingfisher reports sales would have grown by 1.2%, but LFL sales would have slipped by 0.4%.

    Commenting on activity in France, Ms Witts said:
    This was in an ongoing soft market impacted by weak consumer confidence and subdued housing and construction activity. We may have seen the first positive movements for four years with housing starts up 2% and building permits up 4% but I say may, as this only happened towards the end of the year. Gross margins were up 10 basis points.

    She added that, for Castorama, LFL sales of outdoor seasonal products rose 1.1% and building products fell by 0.5%.

    Brico Depot outperformed Castorama in constant currency sales growth, growing 2.5% for the period, versus the latter's 0.1% growth.

    Ms Witts also commented that progress with enhancing the digital offer in France was pleasing:
    We've also made good progress with click, pay and collect in France, rolling this out to 161 of our stores versus the 34 we had at the previous year end and well ahead of the 114 that we were targeting back then.

    Profit for France was GBP311 million, a fall of 1.6% in constant currency terms over the pcp.

    Kingfisher singled out Poland as one of its better performing regions. Sales came in at GBP987 million, down 6.4% on the pcp, but a reported increase of 3.3% in constant currency terms. LFL sales in constant currency grew by 3.6%. Profit came in at GBP113 million, down 4.0% on the pcp, but up 6.0% in constant currency terms.

    In pure revenue terms, the worst performing region was Russia, which recorded an over 20% fall to revenues of GBP325 million. However, in currency adjusted terms, Kingfisher reports Russia recorded a 12.9% increase.

    Spain suffered a 12.3% decline in sales revenues to GBP269 million, which in currency adjusted terms was still a loss of 3.2%, and 5% for LFL sales.
    Other regions

    Germany, Portugal and Romani all reported negative profits. Kingfisher's joint venture in Turkey returned a profit of GBP7 million, which represented a fall of 6.7% on the pcp in constant currency terms.

    Commenting on the Romanian situation, Ms Witts said:
    We booked an impairment charge, primarily relating to goodwill recognised on acquisition of our business in Romania, reflecting the loss-making performance of the business. The performance to date has been disappointing, but we've got a new management team in place in Romania and we're confident that losses will be significantly reduced this year.

    Screwfix continues to be the star of the Kingfisher divisions. Commenting on the ongoing growth at Screwfix, Ms Witts said:
    We've already said that we believe that there is a capacity for around 600 outlets in the UK and we will open around 50 this year. We explained in January that Screwfix, which has just won multichannel retailer of the year, will be the benchmark for our brilliant basics digital program in our transformation. Screwfix mobile sales were up 100% on last year, from about 2% to 3% of total sales. This will have helped our growth in click, pay and collect sales, which were up more than 50% from 10% of total sales last year to 12% this year.

    Asked by an analyst for more detail on how Screwfix was achieving its good growth results, Kingfisher's chief digital and IT officer, Steve Willett, said that some of the growth was coming from store maturity, as the recently opened outlets achieved better numbers. He also pointed to key elements of the online business:
    We keep improving the customer experience and, quite frankly, as we speak we're rolling out a new website into Screwfix, by the way, that will be finished by the end of this week, which is basically moving that experience even further.
    And then the other thing we're doing is what we would call online range extension, which is actually driving the web and the ranging experience, but it's also helping us tune the ranges in the trade counters.

    Ms Laury also commented on the potential for Screwfix in its new operations in Germany:
    Then Screwfix Germany. Karen talked about it. We've opened more stores. I've been with Steve in Germany as well very recently. We are positive about the results. It's still early days but we've decided to continue to grow in Germany. We are seeing right now a week-on-week 10% growth, which is very encouraging and we've decided to double the number of outlets in Germany. To be breakeven with Screwfix as a model we need 50 stores. We may accelerate.

    Mr Willett expanded on the situation with Screwfix in Germany in response to an analyst's question:
    So what we're doing in Germany, so I think there's a few bits. One is that the market structure in Germany is structured slightly differently but it's the same as the UK and what you've got is this serious bottom end of the pro market, very serious hobbyist-type market. So we're seeing the same market dynamic. It plays out slightly differently.
    The other thing we're seeing that we weren't sure about is in the UK people got conditioned to catalogue shopping, probably by Argos, and we weren't sure actually how that would drop into Germany. Quite frankly, it's been a non-issue. And, in fact, they get it absolutely as soon as they've been through it.

    In response to a question from an analyst, Ms Laury did go into some detail about her attitude towards Bunnings. She said:
    First, before answering your question I just want to say something about some of the selective quotes that have been in the press about my position around Bunnings. I'm very respectful of every kind of competition and I've always been. And I know the CEO of Bunnings very well. I had the opportunity to meet him a few months ago in London and I think he's a really good CEO. So all my respect to Bunnings.

    Ms Laury added a comment that Kingfisher had sent some people to Australia to take a look at Bunnings operations so as to better understand them as a competitor. In other remarks she mentioned that the company's newly appointed heads of sales and retail operations, Jean-Paul Constant, was at the time of the results release in Australia.
    Transformation program

    Ms Laury took time at the beginning of the presentation to analysts to revisit the goals of the five-year transformation plan she clearly outlined in calendar 2015.
    Cut the tail plan

    In her original analysis of what was troubling Kingfisher, Ms Laury and her team identified the very wide range of SKUs that were being offered, and the consequent cost in stock. She has reported good progress in changing this situation:
    I'm really pleased with the results that we've achieved because we cut the number of SKUs by 50% and we cut the value of stock by 40%, which I think is a very big achievement.
    The important thing that I need to tell you as well is that we've now put in place what we call a product lifecycle, so we won't be recreating the problems that we had. And, of course, as we move to unified and unique we won't have that proliferation of SKU creation in every business.
    Reduction in SKUs
    Developing big box best practice

    Ms Laury announced that there would be four big box best practice stores set to open over the coming six months. There is a store each in the UK, France, Russia and Poland. The goal of these stores is to experiment with ways of making big box retail work better. As Ms Laury explained it:
    What is this about? It's about really taking the best of what we do today in the Group and putting it together, and I will come back on what are the four key areas we have been working on. I think, again, this is a journey. This is not about the store of the future. As every retailer, we have to think about what do we need to do from a store perspective with the digital working together. Like every retailer, we have to do that but it is a step. I think it was -- this is a learning curve. We needed to work together as well and this has been a good exercise to make operational people working together.

    The four aspects of the stores that will be worked on are: Merchandising principles, which includes elements such as store layout; services; interaction between staff and customers; and efficiency.
    Big box pilots

    Ms Laury took some time to outline the roles and potential of the two most recent appointments to the leadership team, Pierre Woreczek as chief customer officer, and Jean-Paul Constant in sales and retail operations.
    [Mr Woreczek] will work on how we integrate all the customer knowledge that we are developing into all our thinking and how we do things, as well as working on the customer experience, of course, with his colleagues, especially with Steve, on how we implement the digital aspect of things.
    [Mr Constant] has worked for Decathlon for almost 30 years. And what is special about Decathlon is the fact that they are used to a unified and unique offer. They used to one store format and one platform of communication, as well as being able to generate high level of engagement in their store. And I think that combination is almost unique.
    People at Kingfisher

    At this stage in its transformation, it is very difficult to draw any concrete conclusions about Kingfisher, either in terms of its progress towards its goals, or whether those goals will repay the investment in time and Capex that will have gone into them. This is particularly the case given the global situation and local market situation in the EU and greater Europe at this time.

    That said, there are certainly some very positive signs emerging from Kingfisher. While Screwfix is only 10% of the entire business (by revenue), its success and growth show that something is working well within the company.

    At the same time, questions do arise as to whether Kingfisher is doing enough to fix its moribund markets in France, and its declining market in Spain. The externalities in both those markets are highly unlikely to improve by much over the next five years or so. That doesn't mean, however, that these markets lack potential. Is there a bit too much of a European acceptance of current conditions, and not enough attention to finding good sources of growth?

    If we were to point to what seemed particularly lacking in this results report, it was a sense of product development. What we are seeing at the moment is a lot of preparatory work, and while that is certainly necessary, there would seem little that would stop a focused approach to product development running in parallel to it.

    Again, all that development activity may be going on beneath the surface of Kingfisher, and we may find out more in another six months of so. But if there is an amber light flashing on the Kingfisher dashboard, it's about whether the company should be quite so complacent in accepting market downturns, and not more concerned with the core business of home improvement retail: discovering what people need for their homes, and finding a way to get it to them at an attractive price.

    Kingfisher results 2015-16 first half - HNN
    Kingfisher conjures new transformation - HNN
    Kingfisher results for third quarter 2015-16 - HNN
    Travis-Perkins FY 2015 results
    Wickes online
    Innovations at Travis Perkins
    Market forecasts
    Click to visit the ITW website for move information
    UK-based building merchants and hardware wholesaler/retailer Travis-Perkins has reported what it sees as a good result for FY 2015 in the difficult conditions created by an "on-again, off-again" market.

    Total revenue for the company was reported as GBP5,942 million, up 6.5% on the previous corresponding period (pcp), which was FY 2014. Earnings before interest, taxation, and amortisation (EBITA), exclusive of property sales, came in at GBP389 million for the year, up 8.7% on the pcp. Overall operating margin remained the same, at 6.9%.

    The company has completed the second year of a five-year transformation plan.

    Not surprisingly, Travis-Perkins is concerned about the entry of Bunnings into the UK market through its purchase and re-branding of Homebase. In response to an analyst's question during the results presentation about whether the company really should be looking at margin growth given the new competitive environment, the company's CEO, John Carter, responded:
    I think we're in a situation where we'll anticipate Bunnings coming in to the market. Given the backing they have from Wesfarmers, they're going to be a considerable competitor, and they've declared they're going to invest in the business. I think we're investing in our business. We can only do when we address the challenges that we face. We're pretty confident and upbeat. I think we have to be conscious that we're not going to see huge growth in margin until we see exactly what their proposition is. So we may see a little bit of a drift up, but I think I would indicate holding that steady at the moment. We can make investments on price and value and drive the volumes, but, at the moment, I'd really keep it steady in 2016.

    The point was later pushed by another analyst, who asked:
    And then, just a wider one in terms of Simon and the team at Wickes, given what Bunnings are clearly going to come in and do, I understand exactly your point about let's wait and see, but shouldn't you actually -- if I go to most DIY stores in the UK you're pretty underwhelmed with what are shabby, run-down looking facilities pretty much around the place. Don't you want to steal the march and actually snaz up what you've go, because nice green glossy prices to the lowest price, whatever the strap line is. But actually, given what they're going to probably do, don't you need to be on the front foot a bit more in terms of getting there and doing things to snaz up the Wickes offer before they start?

    Mr Carter responded directly to the point about Bunnings:
    Just on Bunnings, we're not sat on our hands, but it is difficult to fight a phony war when you're not really sure. Simon is chasing me; every other word is Capex. And you're not going to be surprised that we've already been to Australia in terms of understanding what we're going to be up against. But we're travelling well, and we're focused very much on our customer. We've got some good momentum, and we're not going to be found wanting.

    This comment was followed on directly by one from the chief financial officer of Travis-Perkins, Tony Buffin.
    And just on the Bunnings point, obviously, I know the Wesfarmers business reasonably well, having worked for them, so I've got to say hello to PJ and John Gillam, who I'm sure will be listening in on the call. So hello, PJ; hello, John Gillam. I did ask John Gillam whether PJ had brought his Milo fishing boat from Hamilton Island in North Queensland, but I don't think he's got as much use for it in Milton Keynes. Anyway, we know the business quite well. We've got a fair handle on what they'll try and do.
    What we shouldn't be diverted from is the plan that we've put in place for our Wickes customers. We've invested in some new real estate, we'll keep doing that. And we'll invest in our format proposition; we'll invest in online. And we've invested, and Simon's done a great job I think, in getting the value proposition right in Wickes. We've got a significant advantage over our competitors. And the ranges are now better, as John and Simon mentioned earlier, with own label range now about 75% of the turnover, 25% is branded. And that clearly resonates with serious DIYers and trade. So all the things we've been doing are the right things, and we're being rewarded for that. And I think we should keep going and we should, if anything, as you say, accelerate our plans. I think we won't be complacent, because they're a good operator. And we know them well. I'm sure PJ will say on the phone that he's thinking about some different things for the UK, but we know them reasonably well. And we'll be aggressive in our plans as well. But I think we're in good shape.

    (Mr Buffin was chief financial officer for Coles, the Wesfamers-owned supermarket business, from July 2009 until early in 2013, when he joined Travis-Perkins.)

    The company reported some growth in the first half of the year, followed by slowing markets in the second half. The company pointed in particular to weakness in the repair, maintenance and improvement (RMI, same as US MRI) market during the second half. According to the company's report:
    The link between the RMI market and the level of secondary housing transactions shows a strong correlation. The impact of the Mortgage Market Review on the availability of mortgages, and therefore the number of secondary housing transactions, along with uncertainty at the time of the election, had a negative impact on the RMI market in the second half of 2015. Whilst the summer months, especially August, were particularly weak, the significant recovery in RMI spend in October was not sustained consistently through November and December.

    This led to, in particular, a weaker fourth quarter for FY 2015 in the company's construction, professional businesses, but did not affect its consumer-based businesses (in particular Wickes), which continued to grow.
    General merchanting

    Revenue for this division was reported as GBP1,972 million, up by 5.3% on the pcp. Operating profit also grew, coming in at GBP182 million (excluding non-recurring elements), up by 7.7% on the pcp.

    Like-for-like (LFL) revenue growth was 6.7% in the first half, then fell to 1.4% in the second half, giving overall LFL growth of 3.9%. This is down from the 12.9% LFL growth recorded for FY 2014. Volume contributed 2.8%, and price and mix contributed 1.1% to the LFL growth.
    Revenue results for general merchanting

    The two drivers of growth were heavyside materials (construction materials such as sand, ballast, timber, boards and glass) and tool hire. The company commented that these two had proved complementary, as supply-chain arrangements meant that both heavyside materials and tool hire assets could be dispatched from a central location to branches on a next-day basis. This arrangement means that tool hire can be offered even at smaller branches, which could otherwise not hold sufficient hire stock. The arrangement also allows for more efficient use of hire stock, with fewer units required to service a larger market.

    In response to an analyst's question, the company indicated that it had seen costs increase during the first half of the year, but had worked hard to curb those costs in the second half.

    Travis-Perkins developed 12 new and re-sited branches during the year. Branches are also being steadily refurbished. The company reports that 20 branches are now using a new format, and that early results indicate they are net positive in terms of performance.

    Travis-Perkins also reports good results for its wholesale kitchens and joinery business Benchmarx. The company said it expanded to 38 additional sites during FY 2015, consisting of 26 standalone sites, and 12 sites opened in existing Travis-Perkins operations. The year also saw a product line refresh at Benchmarx.
    Plumbing and heating

    Revenue for plumbing and heating grew by 1.3% over the pcp to come in at GBP1,371 million. Adjusted EBITA also fell, down to GBP46 million, a decline of over 29%.

    LFL growth declined, losing 1.4%, with the losses occurring largely in the first and fourth quarters of the year, down 6.1% and 1.9% respectively. Loss of volume contributed 0.1% to the decline, with price and mix making up the other 1.3%.
    Revenue for plumbing

    The company put the declines in LFL down to two factors. The first was the anniversaring of the government-backed ECO scheme from 2014, which had artificially boosted sales of boilers, an event not repeated in 2015. The second was the accelerated rollout of a re-segmentation plan, which saw the company convert former PTS outlets to City Plumbing branches. This program was almost entirely completed in FY 2015, six months ahead of schedule.

    Its rapid completion led to substantial disruptions to the business. Some 114 outlets were converted, with 30 closed and further three relocated. City Plumbing is now operating with 344 branches. The company reports a strong, positive response by customers to this move. The plumbing business has also expanded through the acquisition of the Primaflow and Underfloor Heating Store businesses.

    Travis-Perkins stated that the plumbing business continues to be highly competitive, especially in larger volume deals for contractors. The company also saw margin declines through sharp decreases in commodity prices, particularly copper, as well as decline in the price of plastic piping, as pressure on petroleum prices eased.

    The contracts division returned a strong results, with FY 2015 revenue of GBP1,214. This is an increase of 13.2% over the pcp. LFL growth was 8.2%, still down from the FY 2014 figure of 11.8%. Volume contributed 7.4% to this growth, and price and mix contributed 1.1%. Adjusted EBITA was GBP83 million, up by 15.3% on the pcp.
    Revenue for contracting

    Much of the growth occurred in the Keyline and CCF business lines, which are focused on construction supplies. Keyline has become increasingly focused on the delivery of civil, drainage and heavyside materials to large, commercial customers. CCF has expanded by opening a further eight branches. Some 13 Keyline branches will be converted to Travis-Perkins stores during 2016.

    In contrast, the BSS plumbing business experienced some difficulties in a highly competitive market.

    The consumer division saw revenue increase by 8.0% over the pcp, lifting to GBP1,386 million. Adjusted EBITA was GBP95 million, up by 23.4% on the pcp. LFL growth was 5.3%, down from 11.8% in the pcp. This was entirely due to volume, which grew the business by 8.5%, while price and mix were negative, bringing it back down by 3.2%. LFL growth was fairly consistent throughout the year, with only the third quarter dropping below 6%.
    Revenue for consumer

    The company emphasised the continued development of Wickes, which has better rationalised its product lines, and took something of a hit through clearance sales to help achieve this. A new format store for Wickes is being rolled out, and there are currently eight stores operating in that format. Online has continued to improve for Wickes, with it now accounting for 8% of all sales.

    Toolstation underwent a significant expansion, opening 40 new stores during FY 2015. Asked by an analyst whether the strong results from Kingfisher's Screwfix business didn't make Travis-Perkins a little cautious, Mr Buffing responded:
    We've got about 400, just over, of these outlets in the UK at the moment. There are 5,000 builders' merchants. So are we worried about overcapacity and space? At the moment, I don't think so. Screwfix, I think, have said they'd like to open about 600 outlets. We've, of course, have got our plans in place. We opened 40 in the year. We've guided to more than 30 in 2016, and I think we've got some capacity to keep going. And like-for-like sales growth are very good. Underlying like-for-like sales growth were not impacted by cannibalisation or new store openings. It's very strong. So it's resonating, so we should keep going. And these are small boxes, very low capital intensity; we can put them down on short-lease terms and make good returns. So we should keep going.

    Travis Perkins is continuing its repositioning to adjust to changes in the UK and overall European markets. The core tensions in these markets consists of increased and steadily increasing demand for housing, meeting up with increased costs and unfavourable changes to the credit position of future potential home-owners.

    The fragility to Travis Perkins' position is that much of the way in which markets develop over the next three years will be outside of their influence. It will depend on both how governments and housing providers choose to respond to these tensions. Underlying those responses is uncertainty on how best to stimulate and sustain some difficult economies.

    Travis Perkins results for 2015/16 H1 - HNN
    Homebase acquired by Wesfarmers - HNN
    UK may be shifting towards DIFM - HNN
    Hitachi-Koki kickstarts 2016
    The high-torque drill from Hitachi
    Chart of regional results for Hitachi-Koki Q3 FY 2015/16
    Corded impact wrenches from Hitachi
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    Japanese-based power tool and life-sciences equipment company Hitachi-Koki has started out 2016 with some prominent product news. The company won the prestigious IF Design award for three of its power tool products. It has also launched a new, high-torque cordless Li-ion drill, which comes with a new 6.0 amp-hour Li-ion battery.

    While this is all positive news, Hitachi-Koki has also released its results for the third quarter of its FY 2015/16, which indicates some slowdown in sales for the company during this quarter. Consequently, the company has also revised its sales forecast for Q4 2015/16 down as well.
    Q3 FY 2015/16 results

    While the overall results for Hitachi-Koki in the first nine months of its FY 2015/16 showed an improvement over the first nine months of 2014/15, the underlying numbers for the third quarter itself showed some sharp declines.

    Sales for the third quarter of FY 2015/16 were YEN32,914 million, an increase of 2.11% over the previous corresponding period (pcp), which was third quarter 2014/15. However, the company's operating income for the quarter was YEN527 million, down by over 62% over the pcp. Net income for the quarter was YEN509 million, down by over 33% on the pcp.

    The numbers indicate that the company had a very robust first half for FY 2015/16, but has suffered some setbacks in the third quarter. Sales have increased but profit measures have not performed as well. This could indicate that it has undertaken some discounting activity in some markets to continue to expand its overall market share.
    Power tool division performance

    The power tool division returned revenue of YEN32,402 million for the third quarter. The life-sciences division contributed revenue of YEN1117 million for the same period.
    Regional performance nine months to date

    Outlining its regional performance for the nine months of the first three quarters of FY 2015/16, Hitachi-Koki states that it maintained sales levels in its home Japanese market, despite a drag created by local economic factors.

    It states that it saw sales increase throughout much of Europe, but suffered a major slump in sales in the Russian market, in part due to a steep depreciation in the Russian currency, the rouble. The result was an overall decline of 9% in sales for Europe. Despite this, Hitachi states that sales in local currency for Russia actually increased by 5% over the nine months of the first three quarters.

    North American results showed positive trends. Sales increased by 31% for the nine months. Hitachi-Koki attributes this to both positive moves in currency exchange rates, and its developing relationship with the US big-box home improvement chain Lowe's. Much of its sales growth at Lowe's has originated with pneumatic tools marketed to the building trades.

    Outside Japan in Asia, India returned solid results, but overall results fell by 6% over the nine months. This was the result of reduced sales in Australia, China and Thailand.

    Additionally, the company incurred expenses for its merger and acquisition activity related to the European power tool company Metabo.
    Regional performance for quarter

    Hitachi-Koki does not provide comment specific to its quarters, but does provide financial information for each quarter. Looking at the financial results for the third quarter of FY 2015/16 alone, sales in Japan were essentially flat at YEN10,371 million. Sales for Asia (outside Japan) declined by 19% over the pcp to YEN2665 million. Sales for Europe declined by 8% over the pcp to reach YEN9349 million. Sales in North America grew by 34% to reach YEN9481 million.

    Hitachi-Koki reports ongoing positive results for its operations in North America, buoyed both by increases in sales, and the appreciation of the USD in relation to the YEN. In the remaining geographies, Hitachi-Koki reported a fall of 25% in revenues, down to YEN1460 million.
    Chart of regional results for Hitachi-Koki Q3 FY 2015/16

    In response to the difficulties the company faces in some markets, Hitachi-Koki has revised its forecast for Q4 FY 2015/16 downwards. It is now projecting revenue for all of FY 2015/16 to come in at YEN141,500 million, 2.4% down on its prior forecast. Operating income is now forecast to be YEN2000 million, down by over 70% on the prior forecast.
    Hitachi-Koki IF Awards

    Hitachi-Koki was privileged to receive FI Design awards for three of its power tool products in February 2016. The products that received the awards were: the DH40, DH45 and DH52 series rotary hammers, the WR22 and WR25 impact wrenches, and the UR18DSDL worksite cordless radio.
    Rotary hammers

    These rotary hammers are quite unique to the market. While they are corded products, they feature an AC brushless motor, which provides a high-power rating and also reduces maintenance needs (brushes do not need to be replaced).

    The motors also provide smooth performance, even when operating in a low-power situation created by the use of inefficient extension cords. They also feature a vibration absorber, which reduces operator fatigue on lengthy demolition projects.
    Hitachi DH40MEY Rotary Hammer
    Impact wrenches

    The 22mm WR22SE and 25mm WR25SE impact wrenches also make use of brushless motors in corded tools. Hitachi claims that these wrenches and the smallest and lightest in their class, in part due to their use of an aluminium housing for the tool. The WR22SE weighs 4.6kg and is 280mm long. The larger WR25SE weighs 7.7kg (1.3kg than the tool it replaces) and is 340mm in length.
    Corded impact wrenches from Hitachi
    Worksite cordless radio

    Hitachi's UR18DSDL cordless radio features a unique triangular design that looks like it makes the radio virtually tumble-proof. It can operate on both 18v and 14.4v batteries, and provides access to DAB/DAB+ and FM radio. It also functions as a Bluetooth speaker which can link to smartphones and other devices.

    The radio has two seven-Watt speakers, and is designed to withstand five minutes exposure to rain, making it waterproof against most worksite splashes.
    Cordless radio from Hitachi
    The new big drill

    In addition to its six amp-hour battery, released first in Japan at the end of 2015, Hitachi is now also distributing a new, powerful brushless hammer drill in the UK market. The Hitachi 18V Brushless Hammer Drill DV18DBXL/JX features a very powerful 136 N*m of torque, putting in the same ranks as the top Milwaukee FUEL tools. The drill is 204mm and weighs in at 2.5kg.

    It is currently being sold in a kit with the 6.0 amp-hour battery, which has a claimed fast charge time of just 38 minutes. It comes with 22-stage torque settings, a built-in worklight, and what Hitachi is calling "Reactive Force Control", which helps protect the user from kickback.

    Power Tool World is the UK is selling the drill kit, complete with two 6.0 amp-hour batteries and a fan-cooled rapid charger for GBP289.
    Hitachi DV18DBXL/JX hammer drill
    Metabo acquisition complete

    On 1 March 2016 Hitachi Koki completed its acquisition of Metabo, a power tool company based in Nurtingen, Germany. The president of Hitachi Koki, Osami Maehara, was clear in a press statement that Metabo was to retain its own identity, despite the acquisition:
    We have the greatest respect for the outstanding results the Metabo team has achieved in recent years. We will therefore not only retain Metabo as a distinct brand, but also run the business as a company within the company and allow it the necessary independence to continue this success in the future.

    The CEO of Metabo, Horst Garbrecht, pointed to the synergies and shared competence of the two companies:
    Given that battery technology is plainly the big topic for the future in our market, being able to utilise synergies in the development of cutting-edge drive and battery systems, and pooling in procurement are key factors that will boost our competitiveness.
    CEO Metabo, Horst Garbrecht (l), president Hitachi Koki, Osami Maehara (r)

    In addition to the above news, Hitachi has also recently announced the closing of Hitachi Koki Europe Ltd, a manufacturing plant in Ireland. According to a company press release:
    Since it relied upon assembly of imported components from Southeast Asia and China, its operation has gradually been affected by the financial crisis after the bankruptcy of Lehman Brothers, depreciation of Euro under the European credit crisis, and recent economic downturn in Russia. These series of events have affected total order volumes as well as overall productivity of the company. Under such circumstances, we finally determined to close Ireland plant, as a part of structural reform. The production of this plant will be transferred to plants in Malaysia and Fujian, China, to increase the cost competitiveness of the products.

    While Hitachi-Koki is taking steps to ensure its supply chain remains as efficient as possible, the company is also, through the Metabo acquisition, anchoring itself to a four-year strategy based on the European market recovering substantially. This is an emerging theme in the home improvement and construction industries, with Wesfarmers' purchase of the UK home improvement retailer Homebase, for example, indicating a similar strategy.

    In Australia, the brand is likely to suffer some setbacks from the exit of Woolworths from the home improvement industry, as it makes moves to sell-off its Masters Home Improvement retail operation. While it has widespread distribution through other outlets, it will be left with somewhat limited exposure to the consumer market. This is in sharp contrast to its market exposure in the US, where items such as its compound mitre saw (for example) compete in the higher-end of the DIY market with tools from SKIL and Kobalt.
    Lowe's online mitre saws
    HI News Vol. 2 No. 5
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    Techtronic Industries (TTI) continues to deliver growth
    Sherwin-Williams acquires Valspar, from the Australian perspective
    Click to visit the HBT website for more information
    The HNN e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out. Just use the following link to download the PDF:

    The latest issue centres on the latest results from TTI Industries and how the company with its major brands Milwaukee Tools, Ryobi and AEG will explore a digital future. It discusses other categories such as hand tools, lighting and floor care that the company is involved in. There is also a transcript of the presentation delivered by CEO Joseph (Joe) Galli.

    In the "Paintorama" section, we take a look at the most recent results from paint companies Valspar, Sherwin-Williams, PPG Industries and AzkoNobel. The story on Sherwin-Williams' acquisition of Valspar is taken from the perspective of the Australian market and what it means for local hardware retailers.

    Other stories include a list of the award winners from Home Timber & Hardware Group's conference and there is another extensive roundup on big box retail activities.

    The tiny house trend is featured along with BIS Shrapnel's report on the apartment boom that seems destined to go bust. Australian company PlantMiner is disrupting the construction industry and Brickworks announces its first half results.

    The regular update on job opportunities highlights roles at AEG Power Tools, PPG and Yates.
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    HI News Vol. 2 No. 4
    Kaboodle editorial is featured in Australian House & Garden
    Home Timber & Hardware launches its Easter campaign
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    The HNN e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out. Just use the following link to download the PDF:

    This issue focuses on the "battle" in the media between Bunnings-exclusive, kitchen specialist Kaboodle and flat-pack furniture giant, IKEA. The feature looks at the changing markets for kitchens, the potential impact of Masters' exit on the category and the strategies behind the advertising campaigns of both companies.

    We take a look at the consumer and commercial markets for outdoor power equipment and the latest range from Kobalt that has been launched the US.

    On the home front, an extensive big box update includes the news surrounding the Masters and Home Timber & Hardware (HTH) sell-off and private equity's interest in a merger between Mitre 10 and HTH.

    In terms of the independent retail sector, HTH unveils its Easter campaign and a Mitre 10 store in Sorrento (VIC) achieves a record price at auction.

    Also included in this edition are The Home Depot's annual results that delivered its best-ever revenues and its strong performance in the fourth quarter. Ace Hardware has released its latest advertising campaign with a new agency.

    There is a regular update on the latest job opportunities from Karcher and the Whites Group, and Methven's matte black tapware is also featured.
    In the (matte) black
    The Methven Gaston culinary sink mixer is a best seller
    The slim line Methven Glide collection is a popular choice
    Methven lifts first-half profit by 27%
    Click to visit the HBT website for more information
    Traditional chrome finishes for kitchen and bathroom tapware are increasingly being replaced by modern and sophisticated matte black. While chrome trends will never completely go out of vogue, matte black tapware is growing in popularity.

    Matte black tapware is ideal for customers looking to add a sleek and stylish look to their kitchen or bathroom. Its versatile and timeless characteristics can finish off most designs whether it is a cool monochrome, stone or warm timber.

    In the kitchen, black accents on a culinary sink mixer can make a statement. Whether the design is industrial-style, fitted with timber or concrete benchtops or with stone, the Methven collection is a premium option.
    The Methven Gaston culinary sink mixer is a best seller

    The Methven Gaston is the company's best selling culinary sink mixer. It meets the matte black trend and offers kitchen functionality with its pull out veggie sprayer, as well as a pause option and spring pull down hose.

    In the bathroom, the monochrome pairing of black tapware and white bathware creates a contemporary yet classic look. The minimalist Methven matte black tapware and shower mounted on white tiles instantly becomes a striking centrepiece.
    The slim line Methven Glide collection is a popular choice

    The slim line Methven Glide matte black tapware collection is a popular choice with customers because it balances retro chic with contemporary classic, giving end-users an edgy style option to the traditional chrome.

    Additionally, the matte black finish diminishes the appearance of fingerprints and watermarks, making them less visible than stainless steel or chrome. So the Methven range is easy to maintain.
    Kobalt launches 24-volt tools
    The battery behind the tools
    HNN Sources
    This is what an outrunner motor looks like
    Pro Tool Reviews on the new Kobalt 24-volt range
    Click to visit the HBT website for more information
    US-based big box retailer Lowe's will soon release a new line of 24-volt power-tools aimed at the trade builder/construction market. Lowe's recently allowed some media in the US to preview the tools, which will be finally released in June 2016.

    The lineup will initially include seven tools, with a further three to be released later in the year. The original group includes an impact driver, impact wrench circular saw and a reciprocating saw. All the tools will make use of brushless motors.

    One of the challenges the designers faced was keeping the size of the battery pack around the size of a standard 18v/20v max battery pack, despite the inclusion of extra battery cells. This was solved in part by removing part of the battery circuitry, and fitting this to the tools instead.

    Kobalt has also chosen the alter the electric motor configuration on some of the tools -- notably the circular saw -- so as to make them more compact. The main means they've employed to do this involves turning the motor inside-out to some extent.

    The two main parts of a brushless electric motor are the rotor and the stator. As you might expect, the rotor is the part of the motor that rotates, and the stator is the part that remains stationary.

    The rotor is fitted with permanent magnets (most of the time). The stator is fitted with electromagnets (coils), which can vary their magnetism as current is applied. Through the magic of a controller, which switches the current off and on in the stator coils, the magnetism produced in the stator affects the permanent magnets in the rotor in such a way that the rotor is forced to turn. Usually, two coils in the stator work on the rotor at any one time, one "pushing" (repelling) the rotor and the other "pulling" (attracting) the rotor.

    (Many of the advances we are seeing in power tools today actually originate in making the controller and its workings increasingly sophisticated. Where in the past the controller was a very simple integrated logic circuit, today it has become a micro-computer, which can be programmed to achieve different effects. As it is tied into a number of sensors, it can also provide lots of feedback about what is actually happening inside the motor at any time, or over a time period.)

    If you think about that design a little, one thing that becomes evident is that you could have the rotor inside the stator, so that the coils work inwards (sometimes called an "inrunner" motor), or you can just as well flip it the other way, and have the rotor surround the stator, with the coils working outwards instead (sometimes called an "outrunner" motor).

    As with just about everything to do with engineering, each arrangement has its advantages and its disadvantages. One of the advantages of the inrunner version (which is the more common) is that it helps with one of the big enemies of the electric motor -- heat. With the rotor at the centre of the motor, the coils of the stator where much of the heat gets generated, are exposed. They can radiate heat more easily, and it's a simpler matter to get a fan to push air over them as well.

    The outrunner setup, however, has the coils on the inside of the solid rotor. That means that the generated heat will be more contained in the motor.

    Looking beyond the heat dissipation, there are two advantages you get from the slightly less usual outrunner setup. One has to do with something called "cogging", which affects how roughly the motor runs as slower speeds, and is a little complex to explain.

    The other, big advantage is that, given two electric motors, one an outrunner and the other an inrunner, of the same specifications and the same diameter, the outrunner motor will be capable of producing more torque. That's because the turning "push" of the motor is generated at a longer distance from the motor's centre, as the rotor is on its outside, and not close to the centre.

    What that means effectively is that if you need a certain amount of torque from a motor, the diameter of the outrunner motor you need to achieve that will be smaller than the diameter of the necessary inrunner motor.

    So, by using outrunner motors in some of its 24-volt tools, Kobalt has added power, but kept the size down. What will be interesting to see is how clever they have been about heat management.

    Some of our favourite tool testers, the journalists at the US-based website Pro Tool Reviews, had some hands-on time with the first production test release units from Kobalt. You can read their very interesting review at the link below:
    Kobalt 24volt - Pro Tool Reviews

    Overall they are cautiously excited about these tools. It is partly about the increased power, but it is also evident the tools have been carefully designed as well. The circular saw has been designed to cut to the maximum depth permitted by its 165mm blade.

    The impact driver has a special "finish" mode. When activated, this shuts the tool down one second after enough resistance has been encountered to activate the impact action. This makes it easier to use the impact driver to set screws "just right" into media such as plasterboard. The switch triggers a time-activation -- like the rear window defroster on many cars -- that deactivates itself after ten minutes.

    Lowe's says that the development of these new tools has taken the company two years to complete, and that is certainly believable. It is likely, though, that the strategy behind the development of these tools is three or four years old.

    That strategy has to be seen in terms of how it helps Lowe's to compete with its main rival in the US, the Home Depot. And that means, due to the close association between the two companies, how Lowe's plans to compete with Techtronic Industries (TTI), which supplies Home Depot with Ryobi, Milwaukee and Ridgid power-tools.

    One way of viewing this new strategy by Lowe's is to see it as introducing competition through additional segmentation of the market. While both Home Depot and Lowe's do compete largely in terms of an unsegmented approach (along the lines that Bunnings does in Australia), it is true that competition in the "professional" (tradie) market tends to be a little bit more segmented, due to how specialised professional work can be.

    While TTI has worked hard to build a broad, unsegmented appeal into both its DIY-oriented Ryobi brand and its professional-oriented Milwaukee brand, this move by Lowe's is designed to appeal to a very specific, relatively narrow segment of professionals. These would be builders who are working with structural framing materials, where having some extra power in a tool can make a big difference to the time it takes to complete a job.

    This is of particular importance to Lowe's at the moment, as Home Depot has taken a big step into the professional market by acquiring Interline Brands. This is a company that is well known for providing maintenance, repair and operations (MRO) products. Lowe's has, in the past, been ahead of Home Depot in this area.
    HI News Vol. 2 No. 3
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    Bunnings' store map, first half 2015-16
    Ace Hardware delivers another year of growth
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    In this issue, we take a closer look at what it means to be an independent hardware retailer today. This feature includes revisiting the recent histories of Mitre 10, Home Timber & Hardware Group as well as Bunnings. Is there an alternative to private ventue capital ownership of vital independent hardware retail assets?

    Successful US retail co-op Ace Hardware delivers annual growth again and proves that independents can be successful competing against big box retailers. Lowe's robots actually serve people in the store and there is a last minute bid for the UK's Home Retail Group.

    Local e-tailer Milan Direct enters the renovation market and we include the latest statistics on renovations from the Housing Industry Association.

    Other stories include Harvey Norman's first half results boosted by the property market and a profit plunge for Hills.

    There is a regular update on big box retailers and job opportunities from Dulux, Blackwoods and Selleys. Sony's multifunctional light for smart homes is also featured.
    HI News Vol. 2 No. 1
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    Bunnings impending takeover Homebase could represent a slow start but strong future
    Woolworths' Masters folds
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    The HNN e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out. Just use the following link to download the PDF:

    In the first edition for 2016, Bunnings' entry into the UK market and its impending acquisition of Homebase is dissected and analysed. What initially seems like a puzzling move could be a sound strategic move by the big box retailer.

    We also take a look at Woolworths exit from the home improvement market with its Masters chain and what it means for the industry. Related to this story are a summary of store developments that will be abandoned and the impact on property companies. Hills will also maintain its royalty deal for its products that were distributed through Masters and Home Timber & Hardware stores.

    Our indie store update includes news about Mt Lawley Hardware in WA, the HTH Group Conference coverage and Mitre 10 New Zealand's latest web series. Other retail stories include Home Depot's involvement with a start-up gardening company; Lowe's partnership with Google; and the growth in online DIY sales in the UK.

    Plus the latest products to hit the market including the Axis Gear, a genuinely innovative home automation product for window shades and a round-up of additional home improvement stories in hot links.

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