CHHMA - EYE ON OUR INDUSTRY
Volume 14, Issue 38, October 9, 2014

Inside This Issue:

• Register Now for Information Session on Canadian Data Synchronization
• CHHMA to Conduct ‘LinkedIn for Sales’ Hands-On Workshop – November 12
• Industry Memorial Golf Classic Recap
• RCR Announces the Appointment of Christian Ladouceur as EVP Sales & Marketing
• CSSA Annual Steward Meeting – October 15
• Hardlines Conference Set for October 22-23
• Target CEO Makes Canadian Turnaround His Priority
• Costco’s Fourth Quarter Earnings Beat Estimates
• Retail Giants Walmart, Sears and Lowe’s are Suffering in Canada
• Concerns Over Sears Canada Persist
• RONA Celebrates Its 75th Anniversary
• Condos Push Canadian Housing Starts Higher in September
• Canadian Building Permits Drop in August from Record High in July
• Canada’s Real Estate Market On Pace for Hot Start to Autumn
• IMF Cuts Economic Growth but Canadian Economy Remains Solid
• Canada Losing Its Edge Online Because of Slow Digital Take-up by Firms
• Latest U.S. Economic News

Association News

Register Now for Information Session on Canadian Data Synchronization

Many vendors have been getting pressure from customers to comply with data synchronization and it will only increase in the coming years. There has been a lot of confusion and misinformation about data synchronization and the inter-operability of various networks. The CHHMA has been lobbying retailers to keep an open and competitive environment and not limit the marketplace to one exclusive service provider for data synchronization in Canada. Costs for setting up your products can be significant, so it is
important that you are aware of your various options.

Therefore, the CHHMA will be conducting an information session on Thursday, October 30, 2014, at a Toronto Airport Area location (TBA) to help clarify the situation.

What is Data Synchronization?
Data synchronization is rapidly becoming the product content solution of choice for retailers and distributors in Canada and globally. Data synchronization enables a supplier to populate their product catalogue items into a standard data structure and as they add new items and update existing items the changes are automatically transmitted into the data recipient’s environment within 24 hours – this keeps them and their trading partners on the same page.

In Canada there are two current data synchronization options:
1. GDSN (Global Data Synchronization Network):
• Global network of 28 active GDSN data pools
• 31,998 registered entities
• 789 registered data recipients
• 14,992,799 registered items

2. ECCnet (owned and operated by GS1 Canada):
• Canada-only national product registry
• Product information catalogue service
• Operates outside the GDSN
• Number of registered entities and items not disclosed

ECCnet is an older, Canada-only solution used primarily in the grocery, drug store and general merchandise channels. GDSN is broader in scope and is used globally.

This information session will be interactive and informative. Attendees will learn:
• All the benefits of data synchronization
• All the data sync acronyms
• The differences in cost and value of each system
• Which companies support each system today
• Where industry is headed in the future

Click here for further details and to register.

CHHMA to Conduct ‘LinkedIn for Sales’ Hands-On Workshop – November 12

The CHHMA will be holding a hands-on workshop (bring your laptops!) on the morning of Wednesday, November 12, 2014 on the topic of ‘LinkedIn for Sales’. The session will be presented by Monique Macarico, a Social Media and Search Engine Marketing Consultant and Strategist from eCommerce Business Solutions.

Learn how you can use the power of LinkedIn for lead generation and increased business exposure including:
- Lead mining techniques: finding and generating leads within LinkedIn and the tool to make this process effective
- Techniques on how to market your business on LinkedIn effectively
- How to leverage using LinkedIn groups to increase business exposure and leads
- Qualifying leads with content marketing and how to integrate it into LinkedIn
- Communication techniques and strategies

The workshop will be held at a Toronto airport area location (to be advised) from 8:00 a.m. to 11:30 a.m.

Cost of $125 +HST and there will be a limit of 25 persons only.

Further details and registration will be available next week – so mark your calendar now.

Industry Memorial Golf Classic Recap

The 13th Annual Industry Memorial Golf Classic took place last week at the Blue Springs Golf Club in Acton, Ontario.

It was bit of an overcast day but the beautiful scenery and casual, fun atmosphere made for a great day out on the course with industry colleagues, peers and customers.

Once again, we had great support from the management team of Home Hardware with Terry Davis, Joel Marks and John Dyksterhuis and a number of buyers attending the event.

The Memorial Golf Classic is held on behalf of the hardware and housewares industry and honours stalwarts from the industry who have recently passed away. A successful silent auction was held as well ,which in addition to hole sponsorships and event passport purchases by the golfers, raised money for the CHHMA Scholarship Program.

We would like to thank all the sponsors and numerous companies that donated items for the auction and all the individuals who bid on them.

Click here to see a full recap and photos from the day.

Member News

RCR Announces the Appointment of Christian Ladouceur as EVP Sales & Marketing

RCR is pleased to announce the appointment of Christian Ladouceur as Executive Vice President Sales & Marketing, effective October 20th, 2014.

Mr. Ladouceur joins RCR with over 20 years of professional experience in sales and marketing in the building products sector.

He was also Vice President Sales & Marketing for Retailers at Richelieu Hardware for 9 years.

His background and experience are well suited for leading the sales and marketing efforts at RCR. Christian obtained a Bachelor’s degree in Science from Université Laval.

c.ladouceur@rcrint.com
450-670-8100

Stewardship News

CSSA Annual Steward Meeting – October 15

Stewards are reminded of the change of date for the Canadian Stewardship Services Alliance (CSSA) Annual Steward Meeting where fee schedules for programs in British Columbia, Saskatchewan, Manitoba, and Ontario will be presented.

The new date for the meeting is Wednesday, October 15, 10-1 PDT/ 12-3 CDT/ 1-4 EDT.

The CSSA needed to move the meeting to mid-October from the originally scheduled September 25 date due to a number of factors, including the receipt of some late steward reports, and extra time and care being taken in verifying data to ensure accurate calculations for each program's fees.

If you haven’t already registered ore re-registered for the meeting, you can do so by clicking on the following link, indicating whether you will attend in-person at the International Plaza Hotel & Conference Centre (formally the Double Tree Hilton), Plaza A Room, 655 Dixon Road, Toronto, Ontario, M9W 1J3, or via webinar.

http://www.snwebcastcenter.com/webcast/cssa/2014/1015/

At the meeting, stewards will learn about:

- CSSA's accomplishments over the past year including cost savings realized through harmonization;
- Year over year program performance and the factors driving costs for Stewardship Ontario and Multi-Material Stewardship Manitoba;
- Implementation status for the new MMSW program in Saskatchewan;
- 2015 Material Fee Schedules for MMBC, MMSW, MMSM, and SO;
- What's happening in other provinces that have signalled their intent to implement packaging and paper EPR programs

Whether you participate in multiple programs or in just one jurisdiction, consider attending the meeting so that you have the information you need to fulfill your 2015 stewardship obligations in British Columbia, Saskatchewan, Manitoba, and/or Ontario.

For any questions, please email: info@cssalliance.ca or call 1-888-980-9549.

Industry News

Hardlines Conference Set for October 22-23

The 19th Annual Hardlines Conference is taking place in a few weeks time (October 22-23, 2014) at the Sheraton Toronto Airport Hotel and Conference Facility, 801 Dixon Road. It is always a great event to network, learn about the latest trends and hear from top leaders within the home improvement industry.

Also consider attending the 2014 Outstanding Retailer Awards (ORAs) Gala Dinner & Awards which happens during the first evening of the conference, Wednesday, Oct. 22, 5:30 - 8:30 p.m. The ORAs are the “Academy Awards” of home improvement retailing and honour the industry’s finest retailers.

Click here for a full line-up of the speakers & topics and to register.

Target CEO Makes Canadian Turnaround His Priority
(From Articles by Hollie Shaw, Marina Strauss)

Target Corp. executives are evaluating the retailer’s Canadian locations on a store-by-store basis after an abysmal start in this country in a bid to correct “the fundamentals,” the retailer’s new CEO said Wednesday.

“Every store has to improve,” Brian Cornell said in a BNN television interview as he attended a national Canadian meeting at the company’s Mississauga headquarters with executives, corporate employees and some store leaders and staff.

“I’m not happy with our performance in Canada today. Mark [Schindele, Target Canada president], is not happy. Our leadership team is not happy.”

Target’s business in this country still needs a lot of work, with advertised items sometimes failing to show up on store shelves amid displays of seasonal products – Halloween merchandise, for example – that may not stand out enough, Mr. Cornell said.

But the former PepsiCo Inc. executive, named CEO in July after the ouster of Gregg Steinhafel, stopped short of saying that Target Canada would close a number of stores in this market if efforts to repair its patchy supply chain and improve sales fail to win over alienated customers.

“I am certainly going to spend time assessing the business,” which will have 133 stores by year’s end, Mr. Cornell said. After the exits of Mr. Steinhafel and Tony Fisher, president of the Canadian division, Target executives originally outlined a plan to hire a Canadian non-executive chair with a history in this market to help oversee and advise the Minneapolis-based company on its operations here. That plan has now been put on hiatus, a spokesman said Wednesday, because of Mr. Cornell’s extensive experience in the Canadian market as a former consumer packaged goods executive.

Mr. Cornell said that he will travel to Canada from Target’s head office in Minneapolis on a “regular” basis to oversee the turnaround efforts.

His main focus is “getting back to the basics,” most notably making sure Target has inventory in stock as it prepares for the critical fourth quarter Christmas period, a time of year when retailers typically generate the lion’s share of sales and profit.
And Target has a lot riding on this Christmas in Canada.

After revealing another set of disappointing quarterly results in an August conference call, Mr. Cornell said he would work closely with Canadian executives to improve Target’s performance here and assortment of merchandise by the holiday. The chain has plans to replenish 30,000 out of 70,000 Target Canada items with entirely new merchandise for the Christmas shopping season.

Inventory problems continue to plague the retailer, however, which is in the unenviable position of trying to get disappointed customers to give it another chance even as it continues to display bare shelves in its stores.

Inventory lapses were evident in a mid-town Toronto Target store on Wednesday. While some racks were fully stocked with neatly folded clothing, there were gaping shelf holes in the home storage, décor and shoe departments.

As it heads into the Christmas quarter, another strike against Target is its lack of a website that sells goods or shows its selection and prices in an environment where 49% of Canadian Internet users shop online monthly, according to a PwC Canada survey; 34% said they always research clothing and footwear online before they head out to shop in retail stores. Rivals including Canadian Tire, Walmart, Costco, Best Buy/Future Shop, Hudson’s Bay, Sears and all of the Gap brands including Old Navy and Banana Republic, to name but a few, offer that feature to shoppers.

Mr. Cornell did not give a timeline Wednesday for when Target Canada might have a more detailed sales website, saying the company’s prime focus is improving returns and performance at its store base and making sure inventory is in stock.

The executive noted he had spent a great deal of time in Canada during the past 20 years and he understands that Canadian consumers are different from American ones. “We also recognize we have to have local relevance,” he said.

As of the last quarter, Target reported an 11.4% dip in second-quarter sales at established stores and has lost $1.36-billion in pre-tax earnings since opening in Canada.

The retailer has, however, made some changes since Mr. Cornell took over the CEO role. After an initial outcry in Canada over too-high prices, Target has begun aggressively lowering prices on key goods in an attempt to fight Walmart. An identical basket of consumer goods cost 3.9% less at Target than at Walmart in August, according to a report from Kantar Retail.

Still, industry watchers are baffled that some products advertised in Target flyers continue to be missing from store shelves.

“There are some structural problems in the organization,” said John Williams of retail consultancy J.C. Williams Group. “How could you drop a flyer and then not have the merchandise in the stores? That’s a multimillion dollar mistake. … It will be a miracle if it’s ready for the holiday.”

Mr. Cornell said Target is working through structural flaws that resulted in products getting stuck in Target’s warehouses because of overly complex distribution processes in Canada. For example, bar codes on some products failed to match those in its computer system. The retailer is accelerating delivery schedules so that stores receive merchandise more frequently, he said.

If he could do it over, “we would have entered differently,” Mr. Cornell said. “I think we should have done it at a slower pace.” Target opened 124 stores in its first year, and now has 130.

“Expect that I’ll be more engaged,” he said. ”My leadership team will be more engaged.”

Source: the Financial Post, The Globe and Mail

Costco’s Fourth Quarter Earnings Beat Estimates

Costco Wholesale Corp.’s profit topped analysts’ estimates for the first time in five quarters, helped by strong back-to-school sales and higher membership fees.

The company’s strong results are a bright spot in a retail sector that has struggled to attract customers, who have been curbing spending due to stagnant wages and higher taxes.

Costco reported on Wednesday a 7% increase in same-store sales, excluding fuel, in the quarter ending Aug. 31.

Higher discounting drove back-to-school sales in August, with the company reporting a better-than-expected 7% rise in same-store sales for the month.

In September, same-store sales rose 6%, edging past the average analyst estimate of a 5.9% growth.

September sales are expected to have been boosted by promotional activities that continued into the month to attract consumers for back-to-school shopping, according to Thomson Reuters’ analysts. Also, cooler weather arrived in late September and helped drive demand for fall merchandise.

Costco’s net income rose to $697-million, or $1.58 per share, in the quarter ended Sept. 30, from $617-million, or $1.40 per share, a year earlier.

Gross margin expanded 14 basis points to 10.7% in the quarter, according to analysts.

Revenue for membership fees rose 7.3% to $768-million in the quarter.

Revenue rose 9.3% to $35.52-billion.

Analysts on average expected a profit of $1.52 per share on revenue of $35.47-billion.

Up to Tuesday’s close, the company’s shares have risen 5.3% this year, outperforming the nearly 1% rise in the Dow Jones US Food Retail and Wholesale Index.

Costco is consistently outperforming competitors like Wal-Mart and Target

Costco has a simple strategy for winning — concentrating on driving sales.

The company believes that if sales are good, “everything else will take care of itself,” Goldman Sachs writes in a recent report.

While Wal-Mart and Target pour money into marketing, Costco has a no-frills approach and doesn’t advertise.

The company also sells a limited number of items.

Despite Costco’s large store volume, it has been known to sell a fraction of the number of toothpaste brands as Wal-Mart, according to The New York Times.

Selling fewer items increases sales volume and helps drive discounts.

Costco’s focus on driving sales also helps explain why it offers better pay and benefits than competitors.

Many retailers drive profits by paying workers less, but Costco wants to retain good employees who will motivate customers to come back.

Wal-Mart and Target have blamed current woes on the cash-strapped American consumer.

In a note earlier this year, Goldman Sachs predicted the slow decline of Wal-Mart and Target.

“Consumers appear more focused on some combination of value and convenience,” the analysts wrote.

Huge Wal-Mart and Target stores lack the convenience of smaller dollar chains and drugstores. They also can’t offer the deep discounting of warehouse clubs like Costco.

Source: Reuters, Business Insider

Retail Giants Walmart, Sears and Lowe’s are Suffering in Canada
(Article by Hollie Shaw, The Financial Post)

If U.S. retailers had any doubts about whether Canada can be a cash cow after the Target debacle, the pending impact of online sales on revenue in this country might do the job.

Walmart Canada Corp., Target Canada Corp., Sears Canada Inc. and Lowe’s Canada — all large-format retailers with origins in the U.S. — are either posting diminishing returns or operating losses, says a new state of the retail industry report from Desjardins Securities analyst Keith Howlett.

Walmart, for example, increased its square footage in Canada by 10.6% in fiscal 2013 and another 2.6% in fiscal 2014, and will add 1.5% in the current fiscal year, but “the huge infusion of capital has not yielded the returns to which Walmart is accustomed,” the analyst noted.

Operating income at the country’s biggest mass merchant has declined in three of the last seven quarters, and same-store sales at Walmart Canada have declined in six of the last seven quarters, with just a 0.2% rise in the most recent quarter.

“[Walmart’s] general merchandise sales appear to have been particularly weak, given that grocery sales have been increasing,” he added.

And even though everyone in the industry agrees that online retail sales will continue to grow, they haven’t halted the slide in many retailers’ fortunes.

A 2013 study from the Centre for the Study of Commercial Activity at Ryerson University predicted online shopping would double as a percentage of overall retail sales by 2018, but it noted average annual per capita online sales of $170 in Canada lagged the $600 spent online per capita in the U.S.

“While e-commerce is considered to be in its infancy in Canada…the damage wrought to date [on bricks-and-mortar retail] is considerable,” Mr. Howlett said, adding all retailers right now are trying to determine how much retail square footage they should operate in order to maximize their financial returns.

Sears, of course, is on a downward sales slide and it along with Target have posted significant operating losses — even though the latter operates significantly fewer stores (130) relative to the 280-store Zellers chain it replaced.

Home improvement chain Lowe’s has had strong recent same-store sales growth, but that’s been in part due to the closure and conversion of Rona’s big-box stores, and the retailer is still losing money as it heads into its eighth year of operations in Canada.

In the meantime, multiple smaller Canadian chains including Reitmans Ltd., Le Chateau Inc., Danier Leather Inc. and Bikini Village Inc. have been struggling and reducing store count as they compete with stronger players such as Gap Inc., Joe Fresh and H&M.

In the last two years, retailers including Best Buy and sister chain Future Shop, Toys R Us Canada, Staples and Indigo Books & Music have also closed some stores in favour of opening smaller locations and reducing overall square footage while they focus on building up their online sales channels.

One apparent bright spot is Canadian Tire Corp. Ltd., which has performed strongly in recent quarters, but it lags in digital commerce, Mr. Howlett noted, and must “urgently up its digital game” if it expects to keep prospering.

The retailer has thrived despite the entry of big-box giants into most of its business segments and shutting down its sales website in 2009. It restarted web sales on most of its in-store merchandise with in-store pickup for customers last year.

“Both Costco and Home Depot are leaders within their respective retail segments in developing digital channels,” the analyst said.

Source: The Financial Post

Concerns Over Sears Canada Persist

Further to last week’s announcement by parent company Sears Holdings Corp. that it plans to sell most of its stake in Sears Canada through a $380 million (U.S.) rights offering, Sears Canada Inc. announced on Tuesday that it has filed a preliminary prospectus with the Ontario Securities Commission and a registration statement with the United States Securities and Exchange Commission for the rights offering of up to 40 million common shares of the company. The company has filed a registration statement with the Securities and Exchange Commission relating to the common shares but it has not yet become effective.

In addition, Sears Canada also gave an update on its Montreal distribution centre sayings that after a comprehensive evaluation of the company's logistics network for current and future needs, and given its changing warehousing requirements, management has determined that the facility will likely be sold or otherwise disposed of. As such, management has conducted market research as well as appraisals of the facility's land and building with the assistance of independent qualified third party appraisers. As a result of completing that evaluation and likely sale of the facility, the company recorded a non-cash impairment loss of approximately $45 million on the facility during the third quarter of 2014, reducing the carrying value to approximately $44 million.

Sears Holdings Corp. wants to issue rights to buy 40 million shares of Sears Canada to shareholders of Sears Holdings, including controlling holder Edward Lampert and his hedge fund, to raise money ahead of the critical holiday period.

The move would shave the parent company’s ownership of Sears Canada to just 12% from 51% at a precarious time for the Canadian retailer.

“The odds are against Sears Canada,” said David Tawil, president of New York hedge fund Maglan Capital, which follows distressed companies.

Sears Canada has been facing mounting challenges for years, squeezed by growing competition and a U.S. parent that is known more for financial engineering than merchandising know-how.

Now Sears Holdings is signalling that it is focusing on its own troubles at home and less on its Canadian business, once a star division of the retailer.

From suppliers to landlords and retirees, various groups are concerned that Sears’ troubles will escalate as it sells off assets to raise money amid sagging sales and pressured profits.

Edward Lampert, chairman and CEO of Sears Holdings, which also owns Kmart in the United States, expects at least $168-million of the offering’s proceeds in mid- to late October, with the rest by early November. Mr. Lampert and his ESL Investments Inc. fund have told Sears they intend to exercise their option to acquire a proportional amount of the subscription rights.

Fairholme Capital Management, which controls about 24% of Sears Holdings stock, has indicated that some of its clients will also take part in the Sears Canada subscription rights offering.

Brian Sozzi, CEO of New York-based Belus Capital Advisers, said Sears may not be able to raise as much as $380-million for the offering. “If I’m an investor and looking at the financial statements of Sears Canada, I’m wondering why do I want to hold stock in this thing? ... What does the future look like for Sears Canada? In my opinion, it will probably not be around.”

Even the value of Sears’ iconic Kenmore appliances and Craftsman tools brands – which many consider to be Sears’ crown jewels – has been eroded in the past several years, he said.

“It’s just another step further to the demise of the business,” said Mark Cohen, director of retail studies at Columbia Business School in New York and a former Sears Canada CEO. He estimated that Sears Canada‘s share of the large appliance business has dropped by half from about 40 per cent a decade ago. “I think that’s irreversible.”

Sears’ difficulties have prompted some suppliers to worry about shipping products to the retailer. “We’re watching the situation closely,” said David Schachter, president of the National Apparel Bureau, a Canadian industry credit bureau. Some vendors face limits on how much inventory they can finance as creditors scale back, sources have said.

Sears Canada spokesman Vincent Power rejected suggestions the company is facing financial trouble. "Any questioning of our viability is unfounded," he said in an e-mail. "We own valuable assets, we have been reducing expenses. We have $148.1-million less in inventory than at this time last year based on comparable stores, meaning that it is an even greater reduction if you take into account the stores that we have exited. These numbers are not reflective of a company described by some who might be questioning our financial health."

Some question why Sears Holdings has chosen to raise $380-million in an offering rather than pick up healthy dividends from its Canadian counterpart, as it has done in the past. But Mr. Sozzi suggested that Sears Canada will not be able to pay hefty dividends much longer as its performance deteriorates and it has fewer valuable assets to unload.

Mr. Lampert, as the key shareholder, benefited when Sears Canada issued a special dividend of $509-million last year and $102-million in 2012. Sears Canada has raised cash by selling leases of some of its most prominent stores, such as the ones at the Toronto Eaton Centre and Vancouver’s Pacific Centre, back to its landlords. And it has slashed costs and staff while outsourcing some operations. At the end of its second fiscal quarter, Sears Canada had about $270-million of cash.

The association of Sears Canada retirees is concerned about the retailer’s future, said Andrew Hatnay, the lawyer at Koskie Minsky who represents them. “Its pension plan is underfunded and thousands of Sears pensioners will face losses to their pension benefits if the plan is wound up without Sears contributing enough money to pay the benefits it promised.” The pension plan’s liabilities, if wound up in an insolvency, would be underfunded by about of $133-million, he said.

Sears Holdings said it will have generated up to $1.4-billion in liquidity this year, including the proposed rights offering, to “enhance financial flexibility to fund transformation and support operations.”

Sears Holdings said its offering subscription rights can be used to buy Sears Canada shares at $10.60 each, a discount to the Oct. 1 closing price of $11.12.

Source: Sears Canada, The Globe and Mail

RONA Celebrates Its 75th Anniversary

On Monday, October 6, RONA inc. celebrated its 75th anniversary. Over that period, the company has seen many changes and operated under different corporate names, but one thing has remained constant: RONA has always been passionate about serving its customers.

"RONA enjoys a tremendous legacy. In honour, we want to work even harder to continue to merit the trust of our customers", said RONA President and CEO, Robert Sawyer in a press release. "In the world of retail, there is no status quo. We have to constantly reinvent ourselves to stay relevant, to improve our offering and adjust our strategies. For 75 years, RONA has been doing this successfully and today, more than ever, we are committed to offering a distinctive and complementary customer experience in all of our stores, that is, in RONA big boxes, Réno-Dépôt stores, RONA renovation centers and proximity stores as well in our specialized stores for contractors. I want to take this opportunity to thank the more than 24,000 employees who contribute to RONA's success every day."

Once upon a time . . .
In 1939, half a dozen dealer-owners created Les Marchands en Quincaillerie ltée to get around a monopoly that was threatening their supply chain. Their mission at the time is still relevant today: to combine orders to obtain the best prices. A few years later, Rolland Dansereau and Napoléon Piotte took control of the company, and in 1960 they created Ro-Na, a new entity that took its name from the first syllables of their first names. In 1988, Ro-Na merged with Dismat, another group that was working mainly in construction materials, and became Ro-Na Dismat. The 1990s was the era of big box stores, ushering in RONA L’entrepôt. The first decade of 2000 saw meteoric growth for RONA, as it made acquisitions, built new stores and recruited new dealer-owners. In 2002, RONA went public, marking an important milestone when its shares began trading on the TSX. In 2013, to improve the Corporation’s profitability, the Corporation replaced its Board of Directors and made several changes to its senior management.

This year, with the transformation of all Réno-Dépôt stores complete, a better banner positioning, and as the master licencee for the Ace Hardware brand in Canada, RONA continues to consolidate its restructuring efforts. Today, RONA has a Canada-wide network of over 500 corporate, franchise and affiliate stores of varied and complementary formats. With eight distribution centres, RONA serves its network as well as many independent dealer-owners operating under other banners. The Corporation generates consolidated annual sales of $4.2 billion and has some 24,000 employees who are motivated by the pride of working with Canada's largest distributor and retailer of hardware, building materials and home renovation products.

Throughout the month of October, special promotions and activities are planned to celebrate RONA's 75th anniversary in all its stores from coast to coast.

Over the years, RONA has been a leading partner in its sustainable development efforts. In 1997, the Corporation was the first retailer to pioneer in Quebec the first paint recovery and recycling program in Canada. In 2012, RONA became the first national retailer to recover paint nationwide by offering the service in all its corporate, franchise and affiliate stores. RONA also offers its customers over 2,000 ecoresponsible products, including those of its own private brand, RONA ÉCORONA was a partner in the development of the product life cycle approach in 2007, in collaboration with the Montréal Polytechnique's International Product Life Cycle Chair. Since 2011, RONA has been on the Maclean's Sustainalytics list, which recognizes the 50 most socially responsible companies in Canada. In 2013, RONA was again distinguished by selecting lumber suppliers using responsible forest management practices.

Source: RONA inc.

Economic News

Condos Push Canadian Housing Starts Higher in September

Canadian housing starts rose modestly in September as builders broke ground on more multiple-unit dwellings, typically condominiums, data showed on Wednesday.

The report from the Canada Mortgage and Housing Corporation (CMHC) showed housing starts climbed to a seasonally adjusted annualized rate (SAAR) of 197,343 units last month from an upwardly revised 196,283 units in August.

That topped an analysts’ forecast for 196,100 starts. August was originally reported as 192,368.

The homebuilding sector has shown resilience this year, bouncing back from weakness at the beginning of 2014 that was caused by severe winter weather, and the housing market generally has remained strong, defying expectations for a correction or crash.

Economists, however, expect homebuilding and sales to slow when mortgage rates eventually rise, but that the slowdown may happen gradually.

September’s rise in starts lifted the six-month moving average 3.5% to 197,747 from 191,095, reflecting stronger activity since April, which has been largely concentrated in multiple unit homes.

The six-month trend is running above the level consistent with demographic fundamentals, which is around 185,000, Mazen Issa, senior Canada macro strategist at TD Securities, wrote in a note.

“Unless the low interest rate backdrop changes, housing starts are unlikely to correct much in the months ahead,” he said.

With the Bank of Canada not appearing to be in a rush to tighten policy, TD sees starts only gradually easing to 192,000 by the end of the year.

The SAAR of urban starts increased 0.4% to 177,019 in September, from 176,234 in August. Multiple unit starts, most often condominiums, rose 2.4% to 114,579 units in September, offsetting a 2.9% decline in single-detached homes to 62,440 units.

In September, the seasonally adjusted annual rate of urban starts decreased in British Columbia and Atlantic Canada, and increased in Quebec, Ontario and the Prairies.

Starts in rural areas rose 1.3% to 20,324 units during the month.

The elevated level of condos under construction supports the view that ground-breaking on condos should trend lower over the coming months, CMHC chief economist Bob Dugan said.

Activity was concentrated in the provinces of Ontario and Quebec, where starts rose 5.2% and 16.6%, respectively.

Overall, starts appear to be running into resistance at the 200,000 mark, which is good news for those concerned about overbuilding, wrote Robert Kavcic, senior economist at BMO Capital Markets.

“This will let policymakers breathe easier, and suggests that overall building activity in Canada remains within the range required to satisfy demographic demand,” Kavcic said.

Source: CMHC, Reuters

Canadian Building Permits Drop in August from Record High in July

Canadian building permits plunged from a record in August, led by lower intentions for medical buildings in Quebec and multiple-unit housing in Ontario.

The value of municipal permits fell 27.3% to $6.65 billion from July’s record $9.15 billion, Statistics Canada said Tuesday. The decline exceeded economists’ median estimate of a 6.5% decrease. Year-over-year, building permits are up 2.4%

After five consecutive monthly advances, the total value of permits in the residential sector declined 15.9% in August to $4.2 billion. The largest decreases were registered in Ontario, followed by British Columbia and the Atlantic provinces. Gains were recorded in four provinces, led by Alberta.

Building permits for multi-family dwellings decreased 28.6% in August to $1.8 billion, following a 42.8% increase in July. Decreases were reported in six provinces, led by Ontario, with British Columbia a distant second. Alberta and Saskatchewan registered the largest increases.

Construction intentions for single-family dwellings declined 2.4% to $2.3 billion in August, a second consecutive monthly decrease. Lower construction intentions were posted in seven provinces, with Ontario and Alberta accounting for much of the decline. In contrast, the largest gains occurred in Quebec, followed by British Columbia.

Nationally, municipalities approved the construction of 16,520 new dwellings in August, down 18.9% from July. The decline was mostly attributable to lower construction intentions for multi-family dwellings, which fell 26.3% to 10,320 dwellings. The number of single-family dwellings was also down, falling 2.7% to 6,200 units.

In the non-residential sector, the total value of building permits decreased 40.6% to $2.5 billion in August, following four consecutive monthly gains. Lower construction intentions were posted in seven provinces, with Quebec contributing most to the national decline.

Institutional building construction intentions fell 76.0% to $446 million in August, after increasing 29.6% in July and 149.3% in June. The value of institutional building permits was down in every province except Prince Edward Island. Quebec accounted for much of the national decline, the result of lower construction intentions for medical facilities. Manitoba's decrease was also a result of lower construction intentions for medical facilities. In Ontario, the decline was mostly attributable to a drop in intentions for educational institutions.

In the commercial component, the value of permits fell 12.1% to $1.6 billion in August, following a 1.2% increase the previous month. The decline originated from lower construction intentions in warehouses and office buildings at the national level. Decreases were posted in five provinces, with Ontario and British Columbia registering the largest declines. Newfoundland and Labrador posted the biggest gain.

In the industrial component, the value of permits declined 15.2% to $454 million in August, marking the second consecutive monthly decline. Decreases were posted in five provinces, with Quebec and Alberta recording the largest declines. Lower construction intentions for manufacturing plants and utility buildings were mainly responsible for the decline in Quebec, while in Alberta, the decrease came primarily from utility buildings.

The total value of permits was down in six provinces in August, with the largest declines registered in Ontario and Quebec and, to a lesser extent, British Columbia.

Ontario's decrease was mainly the result of lower construction intentions for multi-family dwellings as well as institutional buildings. In Quebec, the decline was attributable to institutional buildings, while the decline in British Columbia came mainly from multi-family dwellings as well as commercial and institutional buildings.

The largest increase occurred in Alberta, where a rise in the value of multi-family dwellings more than offset decreases in single-family dwellings and non-residential buildings. In Newfoundland and Labrador, higher construction intentions for commercial buildings accounted for the advance.

Source: Statistics Canada, Bloomberg News

Canada’s Real Estate Market On Pace for Hot Start to Autumn
(Article by Tara Perkins, The Globe and Mail)

There are early indications that September appears to have been another strong month for Canadian home sales.

That is based on data that some local real estate boards have released in recent days about how their housing markets fared last month. The number of existing homes that changed hands in Toronto was up 10.9% from a year earlier, in Calgary it was up almost 12%, and in Vancouver 17.7%. And that’s in comparison to a reasonably strong month: sales in September, 2013, were slightly above the 10-year average for that month.

A comprehensive picture won’t be available until the Canadian Real Estate Board, which represents realtors, compiles all of the local statistics and releases national September data on Oct. 15. Many cities have not released their numbers publicly yet, and the ones that have tend to be in some of the country’s stronger housing markets. Quebec and the Atlantic region, where more markets are struggling, are not represented below.

But the strength of Calgary, Toronto and Vancouver’s housing markets tends to pull up the national averages, and so the numbers here suggest that the national figures will point to a market that still has momentum.

CALGARY
-Sales were up almost 12% in September from a year ago. The local real estate board says the unexpected strength came from a surge in condo and townhouse sales.
-Condo sales so far this year are 21% higher than during the same period last year, while the number of sales of detached homes has risen by just 7%. Affordability is driving the shift. Two years ago, 44% of the detached houses that sold from January through to the end of September went for less than $400,000, according to the real estate board. So far this year only one quarter of the houses have sold for less than that.
-The average price of a detached house in the city was $567,653 in September, up 10.81% from a year earlier. The average price of a condo was $326,264, up 9.21%. For townhouses it was $352,813, up 4.21%.
-The average length of time it takes to sell a home continues to tick downwards. Year-to-date the average number of days a home is on the market before it sells (for all types of homes) is 34, down from 42 in the same period last year.

EDMONTON
-Sales were up 9.19% from a year earlier.
-The average selling price of a detached home was $435,584, up 6.92%, and the median price of a detached home was $405,000, up 6.91%. The average price of a condo was $254,494, up 4.85%, and the median price was $232,000, up 2.65%.
-The average selling price of all types of properties was $372,673, up 6.37%.
-The average number of days that homes were on the market before selling was 49, the same as in August but down from 54 days a year ago. The sales-to-listings ratio was 72%, up from 67% in August.

TORONTO
-Sales were up 10.9% from a year earlier. So far this year sales in the city are 6.9% higher than during the same period last year.
-The average selling price was $573,676, up 7.7% from a year earlier. The average selling price year-to-date is $563,813, up 8.5% from last year.
-“If the current pace of sales growth remains in place, we could be flirting with a new record for residential sales reported by (Toronto Real Estate Board) members this year,” TREB’s director of market analysis, Jason Mercer, stated in a press release.
-The average selling price of detached homes in the downtown area covered by the 416 area code was $951,792, up 11.5% from a year earlier. For condos in the same area it was $395,505, up 9.2%.

VANCOUVER
-Sales were up 17.7% from a year earlier, and 5.4% from the prior month. September’s sales level was 16.1% above the 10-year average for that month, making it the third-highest September in that period.
-The benchmark price of all types of properties in Metro Vancouver was $633,500, up 5.3% from a year earlier. For detached homes it was $990,300, up 7.3%, townhomes were $477,700, up 4.2%, and apartments or condos were $378,700, up 3.3%. Similar to the Toronto market, detached home prices are rising more quickly due to a shortage of land to build new ones on.
-Sales of detached homes were up 24.1%, sales of apartments or condos were up 16.7%, and sales of attached properties were up 5%.
-“September was an active period for our housing market when we compare it against typical activity for the month,” Ray Harris, the president of the Real Estate Board of Greater Vancouver, stated in a press release.

VICTORIA
-Sales were up 16% from a year ago. “We haven’t seen sales like this in September since 2009,” Victoria Real Estate Board president Tim Ayres stated in a press release.
-The local real estate board surmises that buyers and sellers are feeling more comfortable about doing deals because prices are more stable and predictable now.
-The benchmark price of a house (the benchmark seeks to be a more apples-to-apples gauge than the average price) in central Victoria was $556,200, up from $550,900 a year earlier. For the entire Greater Victoria area it was $492,200, up from $484,800. The benchmark price of a condo in the Greater area was $287,100, up from $283,900. For a townhouse it was $401,500, up from $400,000.

Source: The Globe and Mail

IMF Cuts Economic Growth but Canadian Economy Remains Solid

The International Monetary Fund (IMF) cut its outlook for global economic growth, an acknowledgement that there are limits to the United States’ ability to power the world economy on its own.

The U.S.’s GDP will expand 2.2% in 2014, the IMF said in a revised outlook, a remarkable achievement given U.S. GDP contracted in the first quarter. The forecast is a half percentage point higher than it was when the fund last updated its estimates in July, making a memory of the harsh winter that momentarily killed the U.S.’s economic momentum.

But the global economy no longer is a single-engine plane and the other motors are troubled. Economic growth in China remains strong, but it’s slowing, and the IMF is worried the real estate market could crash. The bigger problems are in Europe and Japan, where demand is so weak that deflation remains a serious threat in both places.

The result: too little momentum to outweigh an array of uncertainties, including Ukraine’s conflict with Russia and the international fight against the terror group Islamic State in Syria and Iraq. Investment is weak despite buoyant financial markets, suggesting executives remain unconvinced by the prospect for profit amid geopolitical tension and scattered demand. The fund dropped its outlook for world economic growth in 2014 to 3.3% from 3.4%, and reduced its estimate for 2015 to 3.8%.

“An uneven global recovery continues,” the IMF said in its latest World Economic Outlook, released Tuesday ahead of the 188-member fund’s annual meeting this weekend in Washington.

Canada is among a group of advanced economies along with Britain, Norway and some others that the IMF characterized as “solid.” The IMF raised its outlook for Canada’s GDP growth this year to 2.3% and in 2015 to 2.4%, from 2.2% and 2.3%, respectively.

The fund said Canada should benefit from the relative strength of the U.S. economy, which, combined with a weaker exchange rate, promise increased exports. Mexico’s economy also should stabilize and strengthen thanks to demand from its main partner in the North America Free Trade Agreement, the IMF said.

But the U.S. economy remains a lesser version of what it was before the Great Recession. The country’s GDP routinely advanced at rates of around 3% before the financial crisis. An aging population is robbing the country of skilled workers and salaried consumers, and U.S. productivity has slipped in recent years. The U.S. economy now can grow little faster than 2% per year without stoking inflation. The IMF reduced its expectations for global trade and cut its outlook for oil prices.

“The pace of the global recovery has disappointed in recent years,” the IMF said. “This further underscores that in most economies, raising actual and potential growth must remain a priority.”

India, which is benefiting from a revival in business confidence after the election of Prime Minister Narendra Modi earlier this year, was the only other country besides the U.S. to get a notable upward revision to its economic outlook. The IMF slashed its outlook for Brazil this year by one percentage point and now says Latin America’s biggest economy will struggle to avoid a recession. Italy and Russia face similar struggles. The IMF called on Germany’s government to loosen its purse strings and use fiscal stimulus measures to spark Europe’s stagnant economy.

The human cost notwithstanding, the prospect of a protracted conflict in the Middle East troubles the IMF because oil prices could rise. The fund also sees a threat in elevated equity prices and low volatility in financial markets, which could be out-of-step with an economic reality of subdued growth, regional violence and an outbreak of Ebola in several countries in Africa. “Downside risks from a financial market correction have increased,” the IMF said.

Canada is vulnerable. The IMF said the country’s economy would be hurt if global trade remains subdued. Elevated household debt and “a still-overvalued housing market” are “important domestic vulnerabilities.” The fund said the Bank of Canada should keep interest rates low and that authorities should keep a close eye on the housing market.

Source: The Globe and Mail

Canada Losing Its Edge Online Because of Slow Digital Take-up by Firms

Some of North America’s most influential online companies warn that Canada is losing its international edge on the Internet because businesses are slow to take up digital technology.

The Internet Association, a group that calls itself the voice of “America’s leading Internet companies” including Google and Facebook, released a paper Tuesday on Canada’s competitiveness in the digital economy.

The paper points to statistics showing Canadians are among the most enthusiastic users of the Internet in the world, taking into account the time they spend online and their social networking habits.

But small- and medium-sized businesses are another matter. Only 3% of the Canadian retail economy is online compared with 23% in the United Kingdom. The contribution Internet companies in Canada make to the economy is far below that of other G20 countries.

Such issues have been raised for years. The Council of Canadian Academies Expert Panel on Business Innovation outlined the same concerns in 2009.

The federal government finally produced a digital strategy this year, after years of discussion.

The Internet Association, while supporting the strategy, calls for faster, more aggressive action.

Its main proposal is a Digital Renovation Tax Credit to help businesses adopt digital technologies.

Colin McKay, head of public policy and government relations for Google Canada, used a recent trip to Prince Edward Island to underline the need to go digital.

McKay said tourism pamphlets were outdated for an October visitor seeking a seafood restaurant. Online sources told him who hadn’t closed for the season.

“It’s no longer tied into a book or a reference source,” McKay told an Economic Club luncheon on Tuesday.

“You have the ability as a small business to target someone who is looking for your business at that very moment and give them some specific information about what services you have available.”

The paper also takes a swipe at Canadian privacy laws, including the Personal Information Protection and Electronic Documents Act, legislation that was initially brought in to make consumers feel comfortable online.

The report notes that British Columbia and Nova Scotia require public-sector data to be stored locally and not in an computing cloud managed elsewhere.

“By forcing companies to store their data locally, it hinders their competitiveness and causes governments to waste money because online storage reduces costs and complexities,” the paper said.

Source: The Canadian Press

Latest U.S. Economic News

U.S. Home Prices Rise 6.4% in August, But Growth Slowing
U.S. home prices increased in August, yet the pace of these gains continues to slow, helping to improve affordability for would-be buyers.

Prices rose 6.4% in August compared with a year ago, real estate data provider CoreLogic said Tuesday. That marks a decline from an annual gain of 6.8 per cent in July. Home prices had been rising as much as 12% annually toward the end of last year.

Prices rose 0.3% in August from July. But CoreLogic’s monthly figures aren’t adjusted for seasonality, such as buying that occurs in warm weather.

Sales struck a plateau in the middle of last year and have remained subdued for much of 2014. As sales have slowed, so have price gains. That should eventually make it easier for would-be buyers to afford homes.

Much of any uptick in buying will depend on wage growth picking up. Wages are barely matching inflation, making it harder for families to save for making down payments and monthly mortgage payments.

Hourly wages have risen just 2.3% over the past 12 months, the Labor Department reported last week. And separately, median incomes for an entire household are 8% below their 2007 levels after adjusting for inflation, averaging just $51,939 (U.S.) in 2013, according to the Census Bureau. This has occurred as banks have tightened credit standards.

All states registered home price gains in August, except Arkansas where prices were flat. Home values in Michigan rose 11.1%, followed by gains of 9.2 per cent in both California and Nevada. The Houston area saw home values rise 11.1 per cent compared to the prior year, while Los Angeles, Atlanta, Dallas and Riverside, Calif., enjoyed similarly large gains.

Still, prices nationwide are 12.1% below their peak average in April, 2006.

As the pace of price gains has slowed, so have sales of existing homes.

Purchases fell 1.8% to a seasonally adjusted annual rate of 5.05 million in August, the National Association of Realtors said.

Sales fell from a July rate of 5.14 million, a figure that was revised slightly downward. Overall, the pace of home sales has dropped 5.3% year-over-year.

Economists associate annual sales of 5.5 million with a healthy market.

The Realtors also said that median sales price had risen 4.8% over the past 12 months to $219,800, but that average slipped slightly in August compared to prices in July and June.

Source: The Associated Press

U.S. Economy Added 248,000 Jobs in September, Jobless Rate Falls to 5.9%
U.S. employers stepped up hiring in September and the jobless rate fell to a six-year low, which could bolster bets on a Federal Reserve rate hike in mid-2015 or even earlier.

Last Friday’s report on hiring is the most significant gauge of the economy’s health ahead of Nov. 4 congressional elections.

While President Barack Obama’s message of an improving economy has been hampered by persistent drops in family incomes under his watch, the hiring data underscored the strides made in the labour market this year.

U.S. non-farm payrolls rose by 248,000 last month and the jobless rate fell to 5.9%, the lowest since July 2008, the Labor Department said. The results showed a stronger labour market than analysts had anticipated.

The government also said 69,000 more jobs had been added to payrolls in July and August than previously estimated.

“What we see is a measured confidence. The business sector is now much more likely to hire even before there is a fall in their inventories,” Patrick O’Keefe, an economist at CohnReznick and a former U.S. Labor Department official, said ahead of the report.

There were some downsides in the report. Notably, part of the decline in the unemployment rate was because workers left the labour force. The share of the population with jobs or hunting for one fell to 62.7%, its lowest level since 1978.

That rate has declined in recent years as more workers have retired and as people have given up job hunts due to a weak economy.

Still, a measure of unemployment that partially takes into account worker discouragement – which the government calls the U-6 rate – fell last month to 11.8%, its lowest since October 2008.

Most economists see the economy expanding at around a 3% annual rate in the third quarter, well above the average over the last two years of 2.2%. But solid economic growth and hiring is insufficient for the Fed to initiate an early interest rate increase.

Several officials at the U.S. central bank have expressed concern in recent weeks that inflation remains too low, a sign that a significant amount of slack remains in the economy.

“From our perspective, wages matter much more than headcount,” economists at RBC said in a note to clients ahead of the report.

Average hourly earnings increased a modest 2.0% in September from a year earlier. Before the 2007-09 recession, wages rose at a much faster rate. The length of the average workweek rose to 34.6 hours.

Factories added 4,000 jobs during the month.

Fed policymakers will scrutinize the data as they prepare for a policy meeting on Oct. 28-29. The central bank has kept benchmark lending rates near zero since December 2008 and financial markets do not foresee an increase until around the middle of next year.

Source: Reuters

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