CHHMA - EYE ON OUR INDUSTRY
Volume 11, Issue 24, June 29, 2011
Inside This Issue:
Walmart Buys Zellers Sites, To Open New Urban Store Format
Target Loses Injunction Over Name
Sears Canada Announces New Leadership Appointments
Another Houseware Industry Veteran and Leader Retires
CHHMA Scholarship Program Deadline July 15th
Health Canada Information Sessions on the New CCPSA
Canada Falls in Innovation Rankings
Canadians' Confidence in Economy Declines
U.S. Consumer Spending Flat in May
U.S. Home Price Index Rises in April
Industry News
Walmart Buys Zellers Sites, To Open New Urban Store Format
Last Friday, Walmart Canada announced it has bought the leasehold rights to 39 current Zellers stores from Target Canada. Specific locations will be identified later this fall. The retailer also said it will launch a new store format called "Urban 90" in east Toronto.
According to an article in the Toronto Star, Walmart Canada's President and CEO David Cheesewright revealed the new store format plan in response to a question at the Jefferies Global Consumer Conference last week. The initial urban store would be in a former used car lot in eastern Scarborough. It would be on a 4.5 acre site roughly half the size of a typical Walmart site, he told the conference. The move to acquire the Zellers sites would give Walmart locations to potentially open more "Urban 90" stores if the first one proves successful. These sites would provide Walmart with a way to fill in locations between its existing stores, which are generally in the suburbs. The company has met opposition in its efforts to locate closer to downtown cores.
Many Zellers stores are smaller than a typical Walmart store and certainly much smaller than the supercentres which can be up to 200,000 sq. ft., double a typical Zellers store. Mr. Cheesewright told the conference that Walmart Canada will continue to open up more supercentres. In January, the retailer said it planned to open 40 supercentres this year, including eight new ones and 32 renovations or conversions of existing stores. It currently operates 135. The new Zellers sites would be in addition, but would not necessarily open this year.
Target Canada bought the rights to 220 Zellers leases from Hudson's Bay Co. for $1.825 billion in January, and in May, announced the first 105 locations it plans to convert to Target stores. It will announce further sites in September and plans to have the first wave of Canadian Target store openings in early 2013.
Target Loses Injunction Over Name
Last Thursday, the Federal Court of Canada upheld the right of Fairweather Ltd. to continue to run its clothing stores under the name "Target Appeal".
"Target has not proved on balance of probabilities that it will incur irreparable harm," the court said in turning down Target's request for an injunction to stop Fairweather from using the name.
Meanwhile, Fairweather has filed its own $250 million lawsuit to prevent Target from selling clothing in Canada, arguing it infringes on its trademark rights. Fairweather Ltd. has owned the Canadian rights to the "Target Apparel" name ever since it bought the assets from now defunct Dylex Ltd. 10 years ago. Fairweather has been operating a Toronto clothing store under the name "Target Apparel" since 2005 and has ramped up the number of stores in Canada bearing that name in the last few months. The dispute is set to go to trial at the end of 2012.
Target spokeswoman Amy Reilly said the company is disappointed that the court declined to issue an order immediately requiring Fairweather to remove its Target Apparel signs before the trial. But she said the company is confident it will prevail at the trial, noting that the court agreed with Target that there is "confusion between the two ventures".
Sears Canada Announces New Leadership Appointments
Sears Canada Inc. announced last Thursday that Calvin McDonald has been named its new President and CEO effective immediately. Mr. McDonald succeeds Dene Rogers, who resigned after holding the position since 2006. Mr. McDonald arrives with 18 years of retail experience, most recently as Executive Vice-President of the conventional division at Loblaw Companies Limited, which includes 400 stores and 50,000 employees.
"The Board of Directors of Sears Canada is pleased to have attracted Mr. McDonald to lead Sears Canada and assume a position on the board," Sears Canada Chairman William Crowley said in a statement. "Calvin brings extensive retail experience, knowledge of online and customer-relationship technologies, an energetic and engaging leadership style, and an appreciation for the opportunity that Sears Canada represents."
"I am excited to join Sears Canada," McDonald said in a statement. "The executive team shares the board's and my belief that Sears Canada has the potential to significantly increase its sales and profitability by better serving customers, by improving our brand offerings, by executing at a higher level in all channels, and by capitalizing on the affinity and affection that we Canadians have for this iconic retail brand. I particularly look forward to working with our vendors to achieve profitable and sustainable growth together."
Rogers, whose latest employment contract with Sears was set to expire in October, was planning on returning to the U.S. with his family but wanted to stay while the company weathered the economic recession and hired a management team that could take the business forward said Mr. Crowley. "We thank Dene for his loyalty, incredible hard work, and the beneficial changes that he brought to Sears Canada."
Under Rogers, Sears updated its Attitude women's clothing brands, attracted more young-minded customers, expanded the gift registry and e-commerce, and introduced sustainability programs, including those that led to Sears Canada being named as ENERGY STAR Retailer of the Year for the past four consecutive years the company said.
The shakeup at Sears Canada comes just over a month after it reported that its first quarter loss grew to $49.5 million form $8.8 million a year earlier, while sales dropped to $992.5 million from $1,068 million. Sales at stores open a year or more fell 9.2%.
On Monday, Sears Canada also announced the appointment of Scott Silver as Executive Vice-President, Merchandising, Home & Hardlines. In a statement, the company said that Mr. Silver will be responsible for the style and trend direction, and overall merchandising activities of furniture, mattresses, major appliances, home electronics, housewares, home decor, bed and bath fashions, fitness, hardware, lawn and garden equipment and seasonal shops.
Mr. Silver was most recently CEO of Silver Lining Holdings in New York City, a consulting and business development enterprise serving U.S. based retailers and manufacturers in the home products sector. From 2000 to 2008, Mr. Silver was with Linens 'n Things at the company's corporate headquarters in Clifton, New Jersey and held positions of increasing responsibility from Divisional Merchandise Manager to Vice-President and eventually to Executive Vice President, Chief Merchandising Officer, responsible for all aspects of merchandising and product procurement for the 660-store operation across Canada and the U.S.
Prior to Linens 'n Things, Mr. Silver held a series of senior merchandising positions at Le Gourmet Chef, Bloomingdale's, and B. Altman & Co. He began his retail career at Macy's, where he was hired in the management development program after graduating from The State University of New York (Buffalo).
"On behalf of all Sears associates, I am pleased to welcome Scott to Sears Canada," said Calvin McDonald, President and Chief Executive Officer, Sears Canada Inc. "Scott is an experienced and successful retail executive who can provide leadership to improve our offerings to customers, our relationships with vendors and learning opportunities for our associates. The categories Scott will manage include some of Canada's most trusted and successful private brands, such as Kenmore, Craftsman, Sears-O-Pedic and Whole Home. With Scott's guidance, we envision a unified merchandising approach across our home and hardline businesses that will resonate positively with Canadians coast to coast."
Sears Canada, 90% owned by Sears Holdings, owns a network of 196 corporate stores, 272 hometown dealer stores, 33 home improvement showrooms, 1,800 catalogue merchandise pick-up locations, 108 Sears Travel offices and a nationwide home maintenance, repair, and installation network.
Member News
Another Houseware Industry Veteran and Leader Retires
After more than 25 years in the industry, the last six with Anchor Hocking Canada, Mary Houston has decided to retire (effective June 30th) and enjoy her other passions such as travel, the outdoors and photography.
After taking some time away from work to raise her two sons, Mary returned to the industry joining Black & Decker Housewares in 1986. After almost 9 years at B&D she then moved over to Broan Nutone as Retail Sales Manager. Stints at News Marketing Canada and Nielsen Bainbridge followed before she returned to the housewares industry with Anchor Hocking. After a restructuring of the company, Mary assumed the position of Director responsible for the Canadian operations of Anchor Hocking where she has recruited and mentored a very capable team, including Matt Carter who will take over following her retirement.
Mary always found time to give back to the industry that she enjoyed and loved. The consummate networker, she recently resigned from the Board of the CHHMA where she served for four years as director, treasurer and member of the Executive Committee for two of those years. In 1999, she co-founded the Women's Consumer Product Network (WCPN) and was heavily involved in running that organization for six years.
We at the CHHMA thank Mary for her years of service on the Board and various committees, and wish her and her husband Owen McManamon (another successful industry veteran recently retired) many years of health, happiness and safe travels.
Association News
CHHMA Scholarship Program Deadline July 15th
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 to seven 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 high school seniors 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. 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 and application forms can be found at http://www.chhma.ca/Public/Scholarship-Program or click here for a PDF information sheet: http://www.chhma.ca/Public/Page/Files/34_CHHMAScholarshipAwardPoster_2011.pdf
The CHHMA must receive applications from potential candidates no later than July 15th.
Since 2001, the CHHMA has awarded $108,000 towards scholarships and some 54 young people have benefited from the scholarship program.
Government & Legislative News
Health Canada Information Sessions on the New CCPSA
As previously advised, the new Canada Consumer Product Safety Act (CCPSA) came into force on Monday, June 20, 2011.
Health Canada continues to offer free half-day information sessions on the requirements of this new legislation. Upcoming dates include: Toronto (July 5), Montreal (July 7), Vancouver (July 11), Winnipeg (July 14) and Ottawa (July 15). To register (at least 7 days before the date of the session), go to: http://surveys-sondages.hc-sc.gc.ca/s/ccpsa-infosession-lcspc-seanceinfo-eng/. You can also send an email to CPS-SPC@hc-sc.gc.ca to be added to a waiting list for future Health Canada information sessions including possible webinars.
Economic News
Canada Falls in Innovation Rankings
A report released on Tuesday by Canada's Science, Technology and Innovation Council (STIC) reveals that Canada is now a mid-level player in the global innovation race, passed by rising powers China and South Korea in some categories and falling behind long-term rivals such as the U.S., Germany, Norway and Sweden. The report called "State of the Nation 2010: Imagination to Innovation" says Canada's innovation performance has slumped on most key measures in the two years since the last report. The familiar conclusion is that Canada has lots of talent and resources, but isn't leveraging them effectively to consistently produce the kind of innovation necessary to make the country prosper in the long run.
Among other things in the report; Canada is spending less per capita on research & development, business R&D is down, government spending on R&D has also fallen, venture capital to GDP is down, and the ranking of Canadians in high school test scores is lower. The report found that from 2000 to 2007, Canadian companies spent 75% of what their U.S. counterparts did on machinery and equipment, per worker. And they invested in information and communications technology at half the pace of U.S. companies. Also, labour productivity in Canada has been growing at less than 1% for the past decade, which among advanced economies, places Canada 23rd out of 33 countries.
On the positive side, Canada's performance is improving in areas such as R&D spending by the provinces, research through tax credits and the percentage of the population with post graduate education.
The report says Canada's strengths are its strong talent pool (our young people continue to outperform most countries, in reading, math and science; Canada has one of the highest growth rates in university graduates in science and engineering; and Canadian universities rank well in lists of the world's top institutions) and a robust public research capacity (Canada ranks #1 in the G7 in terms of R&D performed by the higher education sector, as a percentage of GDP; and Canada has a strong international reputation and is attracting new talent).
The challenge for Canada is to deploy talent well, invest in advanced technologies, integrate innovation into corporate and country strategies and leverage our efforts to deliver prosperity for all Canadians. The report says Canada needs to do a better job of fostering clusters around its leading companies. There needs to be more collaboration between companies and researchers in our universities, colleges and government laboratories. The report concludes that "We’ll be left behind in an increasingly technological world if we continue to over-rely on our resource base to drive Canada’s economic growth."
Canadians' Confidence in Economy Declines
Canadians' confidence in the economy declined over the last three months, according to Nanos Research's latest "economic mood index" released on Tuesday. The index was at 113 based on the latest surveys taken between June 16 and 19, down from 115.7 in March.
The "pocket book" sub-index, which measures views on current job security and financial progress over the last year, fell to 104.9 from 107.5.
The "expectations" index, which assesses people's views on economic momentum and how their local property values will fare over the coming six months, was down to 112.8 from 125.6 in March. This marked the lowest score since the second quarter of 2009.
The percent of Canadians who expect a weaker economy is up. On the question of how the Canadian economy will do over the next six months; 29.2% said the economy would be better off, while 23.6% said it would be worse. 42.7% said there would be no change. These results compare to 30.3%, 19.1% and 45.6% respectively, three months earlier.
The national trend was steady as 24.7% of respondents said they were worse off financially compared to a year earlier, compared to 25.6% in March. On the other hand, 17.9% said they were better off, down from 20.3% who held this view in the first quarter.
Views on real estate are stable as 35.1% feel the real estate values in their neighbourhood would increase over the next six months, while 10.4% said they would decline and 51.3% said they would stay the same. These responses compare to 35.0%, 10.8% and 50.7% in March.
There was a marginal drop in the percent of Canadians who are looking to reduce personal debt in the next six months. 19.0% said their debt will increase, 27.9% said it would decrease and 48.4% said it would stay the same. Answers from the first quarter were 16.0%, 32.1% and 47.9% respectively.
Responses to job security were stable nationally, 50.5% feel their job is secure at this time with 22.0% feeling somewhat secure, 5.0% somewhat not secure and 10.2% not at all secure. This compares to 53.5%, 20.5%, 6.4% and 7.8% previously.
U.S. Consumer Spending Flat in May
The Commerce Department said on Monday that U.S. consumer spending was unchanged in May, after 10 straight months of gains. The May figure was the weakest result since September 2009 and when adjusted for inflation, spending actually dropped 0.1% as higher prices for food and especially gasoline are taking a toll on the economy.
April's consumer spending figures were revised to show a similar decline when adjusting for inflation. This marked the first two-month decline in inflation-adjusted spending since April 2009.
Incomes rose 0.3% for the second straight month but adjusted for inflation, after-tax incomes increased only 0.1% in May, after falling by the same amount in April. Slow wage growth is leaving consumers with less money to spend and they are cutting back on discretionary purchases, such as furniture and vacations.
Consumer spending in May also saw a sharp drop in motor vehicle purchases due to a shortage of auto parts that left some models out of stock.
May's weak results suggest that consumer spending in the second quarter will be much slower than the 2.2% annual rate recorded in the first three months of the year.
The U.S. economy expanded at an annual rate of 1.9% in the first quarter (revised from 1.8%). An Associated Press survey of 38 top economists predicts that growth will be only slightly higher in the second quarter at about 2.3%. Economists are optimistic for the second half of the year, saying growth should pick up to a 3.2% pace, as two of the biggest factors slowing the economy are abating. Gas prices have eased since peaking in early May and U.S factories are expected to begin producing more once Japan's factories resume normal operations. March's earthquake and tsunami has led to a parts shortage, particularly for auto and electronics manufacturers.
U.S. Home Price Index Rises in April
Home prices in a number of major U.S. cities rose for the first time in eight months in April, boosted by a flurry of spring buyers. The closely watched S&P/Case-Shiller composite index of 20 metropolitan areas dipped 0.1% on a seasonally adjusted basis in April from March, however, on a non-seasonally-adjusted basis, the index rose 0.7%, its first advance in eight months.
Prices rose in 13 of the 20 cities tracked. Washington, D.C. saw the largest price increase, followed by San Francisco, Atlanta and Seattle. Still, six of the metro areas are at their lowest levels in nearly four years: Charlotte, Chicago, Detroit, Las Vegas, Miami and Tampa.
Prices in the 20-city index fell 4% year-over-year.
"The seasonally adjusted numbers show that much of the improvement reflects the beginning of the spring-summer home buying season," David Blitzer, chairman of the index committee at Standard & Poor's, said in a statement. "It is much too early to tell if this is a turning point or simply due to warmer weather."
Other housing statistics show the same trends. Single-family housing starts were up in May, but are still well below their 2010 levels and are still very close to their 30-year low. Existing home sales rose in May, but are still about 15% below last year's pace and about 35% below their 2005 pace.
An excess amount of houses for sale, ongoing foreclosures, tight credit and weak demand continue to keep the housing market weak in most parts of the U.S. Many homeowners are unwilling to sell their homes given the widespread declines in home values.
CHHMA Events For 2011
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Soiree Karting/Go Karting Night
Thursday, September 1
Circuit ICAR, Mirabel, Quebec
Industry Memorial Golf Classic
Tuesday, September 27
Blue Springs Golf Club, Acton, Ontario
Industry Cocktail
Tuesday, November 29
Casino de Montreal, Montreal, Quebec
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To register for all events visit our website at www.chhma.ca or call Pam Winter at (416) 282-0022 ext.21.
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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