CHHMA - EYE ON OUR INDUSTRY
Volume 15, Issue 24, July 8, 2015
Inside This Issue:
• Deadline for CHHMA Scholarship Program Applications Next Week (July 15)
• Consider Using the CHHMA Online Job Board for Your Position Searches
• Amazon Celebrating 20 Years with ‘Prime Day’ Deals
• Why Does Sears Canada Keep Losing its CEOs?
• Canadian Building Permits Fall More Than Expected in May
• Divide in Business Confidence Across Canada Amid Low Oil: Bank of Canada Survey
• Canada in Recession, Rate Cut Likely: TD Bank
• If Canada Did Slide Back into a Recession, It’s No Doubt Already Over
• U.S. Construction Spending Rises to 6-1/2-Year-High
Association News
Deadline for CHHMA Scholarship Program Applications Next Week (July 15)
The CHHMA is once again pleased to be able to offer the opportunity for children of employees of our member companies to apply for a scholarship to help offset the cost of post-secondary education. The Association recognizes the importance of education and therefore encourages children of our member companies to attend University or College. Five or six scholarships are awarded each year. Successful candidates receive $1,000 CDN per year for the first two years of study leading to a diploma or degree from an accredited community college or university.
The scholarship program is available to the dependents of any current full-time employees of the CHHMA or member companies.The program is only offered to Canadian companies or divisions of companies based in Canada which are members of the CHHMA. The member company must remain a member in good standing in order for the student to qualify for the second year of the scholarship. The student's parent or guardian must be an active full-time employee with at least one year seniority with the CHHMA or member company as of July 15th in the year of application. Applicants must be preparing to enter an accredited community college or university in the fall term, and attain a minimum average of 75% in the last year of high school (or CEGEP).The decision of the Selection Committee and the CHHMA is final and not open to appeals. The CHHMA reserves the right to withdraw a scholarship should the student's parent(s) or guardian(s) voluntarily leave the employment of the CHHMA or member company, or if employment is terminated for just cause prior to the start of the school year, or if the company terminates its membership in the Association.
Complete details, application forms and information sheets (for bulletin board postings) in English and French can be found at http://www.chhma.ca/Public/Scholarship-Program.
The CHHMA must receive applications from potential candidates no later than July 15th.
Since 2001, the CHHMA has awarded $150,000 towards scholarships and some 75 young people have benefited from the scholarship program.
Consider Using the CHHMA Online Job Board for Your Position Searches
The CHHMA Job Board available on the association website provides an opportunity for those looking for employment within the hardware and housewares industry to view job postings submitted by companies or submit their resume for potential employers to review. We post your employment request where interested companies can view it. Your submission remains anonymous until such time as an interested company replies to your posting. At that time, we send your resume to the company.
Companies can review candidates on the Job Board as well as post job opportunities through an online form.
So consider the CHHMA Job Board the next time you are looking to fill a position at your company or if you are looking for work within the industry.
Industry News
Amazon Celebrating 20 Years with ‘Prime Day’ Deals
It has officially been nearly two decades since shoppers of the world were introduced to the idea of buying books online.
Seattle-based Amazon.com’s e-commerce website turns 20 years old this month.
The company has grown from an idea hatched by founder and CEO Jeff Bezos to use the burgeoning Internet to revolutionize the book-selling business into an international “Everything Store” that has undeniably changed the way the world shops.
The company seems to be on a never-ending growth trajectory — Amazon employs more than 165,000 workers worldwide and last year brought in nearly $89 billion (U.S.) in revenue.
Amazon celebrated its 20th anniversary of incorporation a year ago, in July 2014, and now, on July 16 of this year, it’s marking the two decade-point of its website launch and first book sold. That book was no light read — Fluid Concepts & Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought, by Douglas Hofstadter.
Amazon is commemorating the anniversary with a massive sale involving one of its most successful businesses — Amazon Prime. The company is launching Prime Day on July 15, or a “global shopping event” in the U.S., Canada, U.K., Spain, Japan, Italy, Germany, France and Austria. The all-day occasion will feature thousands of deals for Amazon Prime members, more deals even than on popular shopping day Black Friday, the company boasted in a release. Deals will be introduced throughout the day beginning at midnight, sometimes as often as every 10 minutes.
Amazon’s Prime Day will also feature a photo contest to pair with Prime Photo, a relatively new photo-storage service. Customers can submit photos of how Prime saves them time for the chance to win a $10,000 gift card. Amazon also commissioned artists across the world to showcase #PrimeLiving.
Amazon hasn’t said if Prime Day will become an annual event, saying it is “excited to get feedback from our Prime members.”
Prime Day is likely to bring in more lucrative Prime members for Amazon, as people sign up for a 30-day trial or to continue with the service. Prime is a subscription service where members pay $79 (Cdn.) per year to get two-day shipping on many items at no added cost, as well as a host of other services, including instant streaming of TV shows and movies.
Amazon has expanded Prime’s offerings over the years, offering same-day delivery in 14 cities, including Seattle, music streaming and some free Kindle book rentals.
The business, which Wall Street initially viewed with skepticism when it launched 10 years ago, has turned into one of the biggest successes for Amazon today.
The company frequently posts big quarterly losses, such as a $437 million loss in its third quarter last year and a $57 million loss in the first quarter this year.
But growing businesses, specifically Amazon Prime and Amazon Web Services —its market-leading data storage and services business —keep many investors confident about the future.
Amazon’s share price is now above $437, up 40% since the beginning of the year.
Prime brings Amazon roughly $4 billion annually just from subscription fees, according to analyst estimates of member spending, and about 40 million Prime members exist in the U.S. Added to that is the extra money Prime members spend, which is about 2.5 times as much as non-members, according to Consumer Intelligence Research Partners.
“It’s absolutely core to our retail business,” Amazon vice-president Greg Greeley said earlier this year.
Prime may be one of investors’ favourite services, but it’s not the only innovation Amazon has introduced. Cloud computing has taken off throughout the business world, and Amazon Web Services is at the front of the pack. It is also profitable, bringing in $5 billion per year, the company revealed this spring, which was even more than analysts and investors expected.
Still, it would be tough for any company to make quite the international splash Amazon has over two decades without some controversy. Amazon has faced harsh criticism over its lack of profitability, questions about its labour practices and corporate giving, and it had an infamous scuffle with major book publishers throughout much of 2014.
A Forbes report suggests the company is beginning to scan backyards in Seattle for its newest technology, delivery by drones.
Source: From Article by Rachel Lerman, The Seattle Times
Why Does Sears Canada Keep Losing its CEOs?
Sears Canada Inc. presents an intriguing, if difficult, proposition for an industry headhunter: How can the shrinking retailer’s board lure a talented executive to helm a business whose industry prospects look dim and which has now seen four chief executives leave in the last four years?
Indeed, the revolving door at the top of the beleaguered department store chain keeps speeding up: Ronald Boire, who announced last Thursday that he will leave at the end of the summer to run U.S. book chain Barnes & Noble, lasted barely six months in the permanent CEO role at Sears Canada after being named interim chief in October.
And like two of the three other CEOs who preceded him in the Sears job, Boire had an extensive retail background at Kmart, Toys R Us and Best Buy, and is leaving for another large retailer.
Dene Rogers, who left Sears Canada in 2011 after more than five years at the helm, went on to run Target Australia, a retailer run by Wesfarmers Ltd. group that has no affiliation with the U.S. Target Corp. Rogers’ successor Calvin McDonald, a Loblaw executive before he came to Sears, left in 2013 to run beauty giant Sephora’s U.S. operations. Chief operating officer Douglas Campbell took over at that point, but left the top job after last fall, and is now managing director at the U.S. investment firm Oaktree Capital Management.
“I see these businesses who are not very committed to innovating, and who are just so stuck in their ways,” said Mandy Gilbert, CEO of the Toronto-based recruitment firm Creative Niche, counting Sears among them.
“I wonder if (the departing CEOs) were told they would have a lot of opportunity to innovate and disrupt if they came to Sears Canada, and have autonomy in their roles to impact change, and once they got in there they realized their hands were tied, and it was a sinking ship.”
The retailer posted a net loss of $59.1 million in the first quarter and revenue slipped 10 per cent amid store closures.
Industry experts seem to have given up hope of a merchandising turnaround at Sears Canada, even though the company has the cash resources to allow it to keep on operating at a loss.
At the end of the first quarter, Sears Canada had a cash balance of about $116 million, and the retailer received another $130 million after tax last month after selling and leasing back three of its stores to the developer Concord Pacific, continuing a years-long pattern of selling off assets to raise funds.
“With Target’s exit from the Canadian market in April, the next seven quarters are ‘make it or break it’ for Sears Canada,” Keith Howlett, analyst at Desjardins Securities, wrote in a recent note to clients.
“Given the persistent erosion of sales and sales per square foot at Sears Canada, and the potential of a future reduction to high-margin credit card-related marketing fees, our current view is that an operating turnaround is improbable. No robust sales recovery was apparent during the period in 2012 and 2013 when 180 Zellers were under renovation to Target or Walmart formats, and the residual 90 Zellers stores went dark.”
Jim Smerdon, vice-president and director of retail consulting at real estate firm Colliers International in Vancouver, believes Sears’ board of executives has been searching in the wrong sector when it comes to recruiting its top talent.
To read the full article, click here.
Source: Article by Hollie Shaw, The Financial Post
Economic News
Canadian Building Permits Fall More Than Expected in May
The value of Canadian building permits tumbled in May, giving back some of the past two months' strong gains as builders planned to construct fewer multi-family homes and institutional facilities, data from Statistics Canada showed on Wednesday.
The total value of building permits fell 14.5% to $6.7 billion during the month, far worse than economists' expectations for a decline of 5%. The drop more than erased April's upwardly revised 12.1% gain. Declines were recorded in five provinces, led by Ontario, which had posted a notable increase the previous month.
While the building permits figures can see large swings in both directions, the report was the latest to suggest the Canadian economy was struggling to recover momentum after contracting in the first quarter of the year.
In the residential sector, the value of permits declined 13.5% to $3.9 billion in May, ending a string of three consecutive monthly increases. Declines were registered in seven provinces, with Ontario and Alberta responsible for much of the decrease. British Columbia, in turn, reported the largest gain.
The value of multi-family dwelling permits fell for a second consecutive month, down 22.9% to $1.6 billion in May. The decrease stemmed from lower construction intentions in every province and territory, except British Columbia, New Brunswick and Nunavut.
Contractors took out $2.3 billion worth of building permits for single-family dwellings in May, down 5.5% from the previous month. This was the third decline in four months. Decreases were posted in five provinces, with Ontario recording the largest decline, followed by Alberta, a distant second. Quebec registered the largest gain.
Nationally, municipalities authorized the construction of 15,381 new dwellings in May, down 14.8% from April. The decrease came mainly from multi-family dwellings, down 20.6% to 9,719 units. The number of single-family dwellings declined 2.8% to 5,662 units.
Canadian municipalities issued non-residential building permits worth $2.8 billion in May, down 16.0% from April. This decline followed gains of 24.8% in March and 31.7% in April. Increases in seven provinces and one territory were not sufficiently large to offset decreases in the other provinces and territories. Ontario led the decline, followed by British Columbia and Newfoundland and Labrador.
The value of permits for institutional buildings fell 34.0% to $867 million in May, after posting gains of 83.7% in March and 88.1% in April. The decrease at the national level resulted from lower construction intentions for medical facilities, which recorded a large increase in April. Declines were registered in four provinces, with Ontario accounting for most of the drop, followed by British Columbia. Gains were posted in the six remaining provinces, led by Alberta, and were mainly the result of higher construction intentions for educational facilities.
In the industrial component, construction intentions fell 15.6% to $408 million in May, following three straight monthly advances. The decline originated from lower construction intentions for utilities buildings and transportation-related buildings. Declines were reported in six provinces, led by Ontario and Newfoundland and Labrador. Alberta and Quebec posted the largest gains.
Commercial building permit values totalled $1.5 billion in May, edging down 0.4% from a month earlier. Lower intentions for retail complexes, hotels and restaurants, warehouses as well as other minor commercial projects more than offset increased intentions for recreational buildings, office buildings and laboratories. British Columbia registered the biggest decline, while Quebec recorded the largest increase.
The total value of building permits declined in five provinces in May, with Ontario posting the largest decrease, followed by British Columbia, Alberta, Newfoundland and Labrador and Nova Scotia.
After reporting the largest increase the previous month, Ontario posted a decline, mostly as a result of lower construction intentions for institutional buildings, multi-family dwellings and single-family houses. In British Columbia, the decrease originated from commercial structures, institutional buildings and single-family dwellings.
In Alberta, the decline was mostly attributable to multi-family dwellings, single-family houses and commercial buildings. In Newfoundland and Labrador, lower construction intentions for industrial buildings explained much of the decline, while in Nova Scotia, lower intentions for multi-family dwellings were responsible for the decline.
In contrast, Quebec and New Brunswick registered the largest increases. In Quebec, the increase came from higher construction intentions for non-residential buildings and single-family dwellings. In New Brunswick, the gain was attributable to every component, except industrial buildings.
Source: Statistics Canada, Reuters
Divide in Business Confidence Across Canada Amid Low Oil: Bank of Canada Survey
There is a divide in business confidence across the country as low oil prices weigh on the outlook for some regions more than others, according to the latest reading from the Bank of Canada.
The summer edition of the central bank's business outlook survey suggests businesses on the Prairies expect sales to slow over the next 12 months as the oil price shock spreads across other sectors.
However, the Bank of Canada says the story isn't the same across the country.
"Similar to the past two surveys, the low commodity price environment is driving the divergence in firms' outlook: on the one hand firms in the energy producing regions and those that are part of the energy supply chain continue to face tough market conditions," the report said.
"On the other hand, domestic demand is strengthening in regions that are less exposed to the energy sector."
Overall, the survey said more firms reported sales growth than sales drops over the last 12 months, but the margin shrank compared with earlier surveys. As well, the balance of opinion among companies that expect sales to grow over the next 12 months improved modestly to 40%. Many companies attributed that projection to the U.S. economy and the lower Canadian dollar.
Firms expect input and output prices to rise at a slower pace as upward pressure from the depreciation of the Canadian dollar over the past two years gradually dissipates and weak commodity prices feed through to final prices. Inflation expectations continue to be concentrated in the bottom half of the Bank’s inflation control range.
The results of the survey of senior management at about 100 companies between May 15 and June 10 were released Monday, ahead of the Bank of Canada's interest rate announcement next week.
The central bank is widely expected to cut its expectations for growth in the second quarter following a pullback by the economy in April, however its plan for interest rates is less clear.
"With rate cut speculation heating up ahead of next week's policy announcement, the modest improvement and the upbeat tone for Central Canada and manufacturing slightly lower the odds of a move," BMO senior economist Benjamin Reitzes said of the outlook survey.
"Recall that governor (Stephen) Poloz pays particular attention to this type of survey and the positives coming from non-energy sectors could stay his hand for now."
Stronger U.S. economic growth and a lower Canadian dollar should help lift the non-energy sectors.
"The bank's confidence in improvement outside the energy sector will be key to its assessment of whether or not further easing in monetary policy will be required in the second half of 2015," RBC economist Josh Nye wrote.
In terms of spending on machinery and equipment, the central bank survey points to a moderate increase in investment spending over the next year.
However, there are distinct regional differences, with plans to increase spending more prevalent in Central Canada and the manufacturing sector. Energy-related regions and sectors expect to continue to see a decrease in spending.
A lower dollar is also affecting investment decisions as some businesses suggest they plan to restrain spending as a result of higher costs for imported machinery and equipment. Others, which benefit from higher margins on U.S.-dollar denominated sales, plan to use the profits to increase investment.
The outlook compared with a survey by Statistics Canada on Monday that suggested capital spending this year on non-residential construction and machinery and equipment is expected to slip 4.9% to $251.8 billion compared with 2014.
Spending by the mining, quarrying and oil and gas extraction sector is expected to fall 18.7% to $67.9 billion.
Meanwhile, the Bank of Canada report also found plans to hire staff have improved in areas less affected by energy prices with the overall balance of opinion on hiring over the next 12 months improving.
The number of firms reporting labour shortages that are hurting their ability to meet demand remains low and labour shortages are generally less intense than a year ago.
The Bank of Canada's Senior Loan Officer Survey, which was also released Monday, suggested that overall business-lending conditions were broadly unchanged in the second quarter with a tightening in the oil and gas sector.
Source: The Canadian Press, The Bank of Canada
Canada in Recession, Rate Cut Likely: TD Bank
TD is the latest major bank to declare a recession in Canada, saying the “balance of probabilities” has tipped in favour of another quarter-point rate cut next week.
“It is likely the economy was in recession in the first half of the year,” thanks to the damage from a collapse in oil and commodity prices that has persisted since 2014, senior economist Randall Bartlett said in a note to investors Monday.
Echoing a report from Bank of America Merrill Lynch on July 1, Bartlett said the Bank of Canada will probably cut its 0.75% key interest rate at its July 15 meeting and maintain the historically low rate until mid-2017. That will probably keep Canada’s exchange rate below 80 U.S. cents through this year, he added.
Bartlett said GDP likely fell by about 1.0% in the first three months of 2015 and by 0.6% in the second quarter. He said the second half is likely to be weaker than expected and will moderate annual real GDP growth to around 1.2% for all of 2015.
That would mark the weakest pace of real GDP growth outside of a recession in more than 20 years.
Bartlett said growth is tracking well below the 1.9% pace expected by the Bank of Canada with the first half rate roughly 1.8 percentage points below the bank’s latest forecast.
He added that some aspects of the Canadian economy have been surprisingly resilient, with the labour market posting advances in months when GDP has contracted.
In a separate note, TD Securities’ chief Canada macro strategist David Tulk said forecasters have underestimated the impact of the oil price decline on the Canadian economy, calling the shock “longer-lived and larger” than expected.
Meanwhile, the August contract for crude plunged $4.40 to close at $52.53 (U.S.) a barrel Monday on the prospect of increased oil output from Iran and worries over Greece.
Crude oil is the country’s top export and Statistics Canada also said Monday companies intend to cut capital investment by 18.7% this year in the oil and gas, mining and quarrying category.
The Canadian dollar was down for a fifth consecutive trading day, losing 0.58 of a U.S. cent to 79.04 cents as traders anticipate a second rate cut following a surprise 25 basis point reduction in January that was intended to stimulate the economy.
TD’s forecast runs counter to the Canadian government’s view. Citing optimism from manufacturers and consumers, Finance Minister Joe Oliver said last Friday that the economy is poised for a rebound and won’t fall into recession. The latest Bloomberg Nanos Canadian Confidence Index, which last week remained close to the 2015 high, supports Oliver’s view however his office declined a request for comment Monday.
Source: The Toronto Star
If Canada Did Slide Back into a Recession, It’s No Doubt Already Over
Here’s something to [think about]: If Canada in fact slipped back into a recession, it’s very likely over by now.
There’s still an if as to whether we did. And if so, it was probably mild, unless you live in Alberta. And by all accounts, it would be over and done with, with better times ahead.
Don’t take that to mean that things are great. Unemployment remains elevated, close to 7%, and Canada will be lucky to eke out economic growth of, say, about 1.5% this year.
The R-word popped up again last week when Statistics Canada reported that the economy contracted in April by 0.1%, a worse showing than what was expected.
That means Canada has now seen four straight months of contraction. And when all is said and done, the second quarter as a whole may have been negative.
After the first quarter’s contraction of 0.6%, that would fit the definition of a recession.
But remember that the second quarter ended last week, and we’re now into a second half that the Bank of Canada and private economists believe will mark a rebound.
Derek Holt, vice-president of Scotia Economics, for one, said last week that the “worst effects” of past oil shocks have been “short-lived,” along the lines of what Bank of Canada Governor Stephen Poloz has said was a front-loaded hit.
“As Governor Poloz notes, the benefits of lower oil prices and an improving global economy eventually take over,” Mr. Holt said.
“Patience is required. Fleeting doesn’t mean something that can be measured with the precision of the exact month, like why we didn’t see a rebound in April. The second of the year is likely to get better than the first half.”
Many other economists agree, and they’re not even sure at this point whether Canada indeed suffered a second-quarter contraction.
“We will need to see some big gains in May and June for the economy to just eke out a marginally positive reading in the second quarter of the year,” Diana Petramala of TD Bank said in a report.
“This raises the risk of a second consecutive small quarterly contraction in Canadian economic activity.”
Like others, Ms. Petramala, too, sees a “strong” case for a rebound in the months ahead.
Bank of America Merrill Lynch has a notably harsh view of Canada’s economy, believing it contracted again in the second quarter at a pace of 0.6%.
Still, its forecasters also see a pick-up in the current and final quarter, of 1.7% and 1.8%, respectively.
“The impact of weaker oil prices has been swift and painful,” said North America economist Emanuella Enenajor, rates strategist Ruslan Bikbov and foreign exchange strategist Ian Gordon.
However, a recent barometer on business conditions shows a recovery, modest as it is, in business conditions in June across the manufacturing sector.
“Production volumes, new business intakes and employment numbers all picked up compared to May,” RBC Capital Markets said in its Purchasing Managers’ Index, released last Thursday.
The index rose to 51.3 from 49.8 the previous month, the strongest output growth so far this year.
Many companies also noted stronger demand for exports “helped drive the upturn in business conditions, as highlighted by the fastest rise in new work from abroad since November 2014.”
Craig Wright, RBC’s chief economist, said “as we move through the summer months, we expect a trend improvement in the level of activity in the manufacturing sector.”
Meanwhile, another survey showed that 46% of Canadian respondents plan to spend more money this summer than last year – ranging from yard work and gardening products to home maintenance and vacations.
“Other categories explored were entertainment costs, home renovation costs, transportation, clothing and the heating and cooling of the home,” the Chartered Professional Accountants (CPA) of Canada survey, also released last Thursday.
About 21% of Canadians said they would likely spend at least $2,000 more than last summer.Another 77% indicated they would use their general savings on summer expenses, and 54% said they would use money specifically set aside for vacations.
Source: From Articles by Michael Babad, The Globe and Mail and Gordon Isfeld, The Financial Post
U.S. Construction Spending Rises to 6-1/2-Year-High
U.S. construction spending rose in May to its highest level in just over 6-1/2-years as outlays increased across the board, the latest sign of momentum in the economy.
Construction spending increased 0.8% to an annual rate of $1.04 trillion, the highest level since October 2008, the Commerce Department said last week.
April's outlays were revised slightly to show a 2.1% gain instead of the previously reported 2.2% rise.
Economists polled by Reuters had forecast construction spending rising 0.5% in May. The government revised construction spending data going back to January 2013.
The construction spending report added to robust data on employment, consumer spending, consumer confidence and housing, in suggesting that growth was gaining steam after U.S. GDP shrank at a 0.2% annual rate in the first quarter.
The U.S. economy was hit by bad weather, port disruptions, a strong dollar and spending cuts in the energy sector at the start of the year.
In May, construction spending was lifted by a 0.9% increase in private construction spending to the highest level since July 2008.
Outlays on private residential construction rose 0.3%, reflecting gains in home building and a slight increase in renovations.
Spending on private non-residential construction projects increased 1.5% to the highest level since December 2008.
Public construction outlays rose 0.7% to a seven-month high. Spending on state and local government projects - the largest portion of the public sector segment -gained 0.2%, also touching a seven-month high.
Federal government outlays jumped 6.3% after two straight months of declines.
Source: Reuters
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"Eye On Our Industry" is published by the CHHMA as an information resource for our members. Member input regarding content and format is welcomed. Please contact Michael Jorgenson by email: mjorgenson@chhma.ca, or call at (416) 282-0022, ext. 34. CHHMA is located at 1335 Morningside Ave., Suite 101, Scarborough, ON, M1B 5M4 www.chhma.ca
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