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     Volume 11, Issue 18, May 12, 2011

                                     Industry News

Canadian Tire to Acquire Forzani Group   
Canadian Tire Corporation, Limited announced on Monday that it has entered into a friendly agreement to acquire all the outstanding shares of The Forzani Group Ltd. for $26.50 per share in cash. The deal is worth $771 million, and “will establish Canadian Tire as Canada’s ultimate authority in sports, with more than 1,000 combined retail sports outlets across the country,” the company said in a statement.

The acquisition has the unanimous support of the Forzani Group board of directors.

“This transaction provides exceptional value for our shareholders and customers and positions the Forzani brands and banners for accelerated growth as part of a leading Canadian retailer that shares our culture and values,” said Forzani’s chief executive officer, Bob Sarter.

Forzani has 534 stores and 16% of the sporting goods market in Canada with annual sales of $1.4 billion. It runs chains under 12 banners including: Sport Chek, Sport Mart, Atmosphere, National Sports, Sports Expert, Athletes World, Hockey Experts, Intersport, Nevada Bob’s Golf, S3, Fitness Source and The Tech Shop.

Canadian Tire said it would finance the proposed takeover of Forzani with $500 million of cash on hand and use short-term financing for the rest. It expects to return to pre-acquisition leverage levels with 18-24 months of the deal closing. The deal is expected to close in the third quarter and add to Canadian Tire’s earnings in 2011.

The offer represents a 45% premium over the value of Forzani’s shares over the past 10 trading day sessions prior to Monday and is conditional on two-thirds of Forzani’s shareholders agreeing to the purchase in addition to approval from the federal Competition Bureau.

Canadian Tire has been under pressure to improve its results. Faced with mounting competition and the arrival in Canada of Target in 2013, the retailer has vowed to bolster its sales and return-on-investment under Stephen Wetmore, who became chief executive officer more than two years ago. Last year Mr. Wetmore said he didn’t want to rely so heavily on Canadian Tire’s financial services and Mark’s Work Wearhouse divisions for growth. During the recession, both divisions fared worse than its main retail business as consumers scaled back. The CEO said he wanted to get back to focusing more than ever on its core retailing.

It’s the first time in a decade that Canadian Tire is making a major acquisition. Mr. Wetmore said Canadian Tire is now ready for an acquisition because its balance sheet is the strongest it has been in a decade, while it’s making progress on its core retail strategies. The company said it would operate Forzani’s retail banners as a separate business unit. Forzani’s banners will also give Canadian Tire a foothold in the important 18-35 year-old customer segment.

Mr. Wetmore said there is little overlap between the businesses of Canadian Tire and Forzani, about 70% of whose sales are apparel and footwear, with the balance of sporting hard goods that compliments Canadian Tire’s assortment. “They are different shoppers, different demographics hunting for different things,” Wetmore told reporters. “Canadian Tire has always been strong in youth and adult segments, but the customer that eludes us is the younger demographic that shops in malls and urban centres. Most parents will buy their kids their first bike, maybe their second, but as kids get older their tastes change. They want more expensive bikes and the gear that goes along with that, and that’s where Forzani comes into play.” Forzani chains tend to be located in enclosed malls rather than the open-air power centres where Canadian Tires stores are more commonly based. “By acquiring Forzani we gain access to a new set of customers – people at a point in their lives that typically don’t shop our stores extensively today for sporting goods,” Wetmore added.

The acquisition can also been seen as a defensive move to prevent a U.S. based retailer, such as Dick’s Sporting Goods, from entering the Canadian marketplace by purchasing Forzani.

Canadian Tire expects to realize significant cost synergies by leveraging the strengths of both organizations, including supply chain, marketing and global sourcing. Annualized savings are expected to be about $35 million, with approximately $25 million of annualized savings realized in 2012.

John Forzani, the company’s founder and chairman, said the friendly deal was driven, in part, by a struggle shared by all retailers: implementing the technology necessary to manage inventory, and therefore get the best prices. “The single biggest reason I’m in favour personally of this deal is because technology is where it is. You have to have a lot of critical mass to be able to support stores in today’s environment. With the internet, the marketplace is the world. You’ve got to have the right price and selection for the world and the only way you can do that is to have big, big mass.” 

RONA Posts First Quarter Loss
On Tuesday, RONA inc. reported its first quarter results for the 13 week period ended March 27, 2011. The company lost $16.8 million, or $0.13 a share, in the first quarter, compared to a profit of $3 million, or $0.02 a share, a year ago. Compared to the first quarter of 2010, revenue decreased 4.0%, or $38.7 million, to $918.2 million, and same-store sales were down 12.6%. Operating losses of $19.6 million compared to an operating profit of $8.2 million a year earlier.

“Very unfavourable weather conditions, fragile consumer confidence, and a lack of tax-credit-driven market stimulation, items out of our control, were all factors that significantly impacted our first quarter results,” said Robert Dutton, President and CEO of RONA.

During the first quarter, RONA did see continued strong growth in their commercial and professional market division. They acquired plumbing supplies company La Boutique Plomberie Decoration 25 Inc., opened two new Reno-Depot stores, one new RONA store and one new Totem store. Two RONA stores were renovated and reopened and twenty new affiliated dealers and clients were successfully recruited to the RONA and TruServ Canada networks. TruServ Canada also launched the new TRU Hardware, TRU Building Centres and TRU Farm & Garden banners to better fit different retail formats for independent dealers.

Speaking at RONA’s annual general meeting on Tuesday, Mr. Dutton also commented that RONA grew its share of the Canadian renovation-construction market from 17.5% to 19% in 2010. He explained that Canadian consumers are demonstrating a cautious frugality around hardware and home renovation. He attributes this caution to persistent economic uncertainty, unprecedented household indebtedness and the expectation of increased interest rates along with rising energy and food costs. Dutton said he was confident, however, that the market would soon enter a phase of sustained growth, citing the fact that 75% of homes in Canada are 15 years old. “Consumers do not ask whether they should renovate or maintain their homes. They have no choice. Right now, they’re asking whether this is the right time to do it,” he said.

Mr. Dutton said the company will scale back some of its expansion plans by opening fewer new stores and cutting back on capital expenditures by $25 million. RONA will continue to look for acquisitions to further consolidate the renovation-construction market in addition to recruiting independent dealer-owners. RONA also plans to develop and consolidate the commercial and professional sector where it has seen its sales increase from $140 million in 2007 to $400 million at the end of 2010.

On Monday, RONA announced the launch of RONAMAG (, a brand new online magazine that will help guide consumers in their home renovation and décor projects. Available in both English and French, RONAMAG will offer a one-stop site where consumers can find info on the latest trends in renovation and home décor as well as useful tips, complete solutions, and plenty of inspiring ideas from RONA by Design to inspire Canadians to improve their living spaces. Included is an ECO section entirely devoted to helping consumers make eco-responsible choices when renovating. Also, a Video Zone will have a collection of short videos offering ideas and advice, along with demonstrations of RONA by Design projects. 

Canadian Home Improvement Show Moving to November
The Canadian Home Improvement Show is moving from its traditional February time slot to November 17-18, 2011. The show, owned by the Lumber and Building Materials Dealers Association of Ontario, will once again be held at the Toronto Congress Centre. The organizers decided to move the show dates to November in order to provide a better time frame for dealers wishing to place orders for commodities and LBM.

In addition, the show will have an expanded product focus including: paint and sundry; lawn and garden; window and door; decking, fencing and siding; kitchen and bath; and flooring.
For further information, contact 1-866-535-0520 or visit:
                          Stewardship News

Blue Box Fee Consultation Meeting To Take Place on May 26
Stewardship Ontario would like to invite Blue Box program stewards to participate in a consultation session to review the fee setting methodology on May 26, 2011.

More information on how to register and briefing notes etc. will be made available soon.

                          Association News

Registration Now Open for Night at the Racese
The 15th Annual CHHMA Night at the Races will take place on Wednesday, June 15th at the Woodbine Racetrack in Toronto. This year’s event will be held in the Favourites Dining Room, which offers a great view of the track and an excellent buffet dinner. The evening is always a lot of fun and is an ideal way to get to know others in the industry. The traditional in-house betting challenge presents the opportunity to
win some prizes too.

So invite your colleagues, customers and spouses and we hope to see you there!

Click here for further details or to register.

CHHMA GO KART Night Set for September 1st in Mirabel, Quebec  
Do you have thoughts of becoming a future F1 World Champion? Here’s your chance then to put your racing skills to the test at the CHHMA Soirée Karting/Go Kart Night in Mirabel, Quebec on Thursday, September 1st.

The event will be held at the Circuit ICAR motorsports complex ( located 20 minutes north of Montreal.

The Go Kart racing will take place on an outside 1 km long track designed by 1997 F1 World Champion Jacques Villeneuve, where karts can reach speeds of up to 65 km/h. The cost to attend is $100 for CHHMA members, $120 for non-members plus taxes and will include a cold buffet served in the clubhouse (5:00 p.m.) prior to the racing competition which will start at 6:30 p.m. The event will be limited to 40 persons only.

Further details and registration will be available in the coming weeks but mark your calendars now and start making plans to build your winning foursome racing team (individuals can also register and will be assigned to teams).

Jean-Luc Meunier Breakfast Seminar on May 31, 2011
The CHHMA is pleased to be presenting Mr. Jean-Luc Meunier, Sr. Vice-President, Affiliate Dealer-Owner Network Development, RONA inc. at an upcoming breakfast seminar in Boucherville, Quebec on Tuesday, May 31.

The breakfast seminar will take place at the Hotel Mortagne, 1228 Rue Nobel, Boucherville, QC J4B 5H1 with registration starting at 7:30 a.m. followed by breakfast and the presentation from 8:00 a.m. to 10:00 a.m.

The cost to attend is $65 for CHHMA members, $85 for non-members.  Click here to register now.

Register Soon for CHHMA Golf Tournaments  
The 36th Annual CHHMA Quebec Golf Classic is set for next Tuesday, May 17, at Le Club de golf Le
Fontainebleau in Blainville, Quebec (11:30 a.m. shotgun start). The cost to attend is $300 for CHHMA
members, $350 for non-members and includes brunch, golf, cart, dinner and wine plus there will be $10,000
worth of prizes and gifts. Tickets can also be purchased for dinner only at a cost of $110. There are some
golfing spots still available but sign up soon as registration is approaching the maximum of 144 golfers.

The 42nd Annual CHHMA Ontario Golf Tournament is being held at the Angus Glen Golf Club in Markham, Ontario on Wednesday, May 25. The cost to attend is $245+HST for CHHMA members and includes breakfast, golf, followed by an executive lunch, awards and prizes. Each golfer will also receive a pair of golf shoes. The shotgun starting time is 7:45 a.m. and registration and breakfast will start at 6:30 a.m. Proceeds from the day will help support the Ontario Special Olympics.
The 15th Annual CHHMA Western Golf Tournament is taking place on Tuesday, June 7 at the Morgan Creek Golf Club in Surrey, B.C. Tee-off times will be allocated between 11:14 a.m. and 1:17 p.m., followed by dinner and award/prize presentations which will start at 6:30 p.m. The cost to attend is $230+HST for CHHMA members, $255+HST for non-members and $80+HST for dinner only.  Money raised from the tournament will go towards the CHHMA Scholarship Program which awards scholarships each year to children of CHHMA member employees.

For further details or to register for any of these golf events, go to:

Economic News

Housing Starts Unexpectedly Fall in April 
The Canada Mortgage and Housing Corporation (CMHC) reported on Monday that the seasonally adjusted annual rate of housing starts fell 3.1% to 179,000 units in April from 184,700 units in March. March starts were revised from 188,800 units. April’s decline was due primarily to deceases in multiple construction across the country, particularly in Ontario and Quebec, and in rural starts.

The seasonally adjusted annual rate of urban starts decreased by 1.9% to 160,100 units in April. Urban multiple starts were down by 5.1% in April to 96,000 units, while single urban starts increased by 3.4% to 64,100 units. In Quebec, urban construction declined 9.4% and Ontario saw an 8% drop in starts in April. However, urban starts were up 5.3% in the Prairie region, 10.4% in the Atlantic region and 23.5% in British Columbia.

Rural starts were estimated at a seasonally adjusted annual rate of 18,900 units in April, down 12.1% from March’s 21,500 level.

“Overall, this is a weak report, considering starts were in the 200,000 to 250,000 range before the recession,” said CIBC World Markets economist Krishen Rangasamy. “We expect housing starts to continue to soften (i.e. a 10% or so drop in starts compared to last year) as home prices stagnate in light of forthcoming interest rate hikes and an anticipated slower second half of the year.”

CREA Updates Resale Housing Forecast   
Unexpectedly strong sales in British Columbia in the first quarter have forced the Canadian Real Estate Association (CREA) to adjust its forecast for 2011.

On Monday, CREA said national sales activity is now expected to reach 441,000 units in 2011, a decline of 1.3% from 2010, but up slightly from its previous forecast in February of a 1.6% drop. By 2012, CREA is predicting a rebound with sales climbing 2.6% to 452,500 units. This is little changed from the previous forecast, and stands roughly in line with the ten year annual average.

“Although sales activity in the first quarter of 2011 came in largely as expected, multi-million property sales in Greater Vancouver have surged unexpectedly,” said CREA, adding the surge has skewed both sales and prices on a national level. Prices in Vancouver have gained almost 30% in the last year, causing concern among many in the industry about the sustainability of such gains. Douglas Porter, deputy chief economist at BMO Nesbitt Burns, said while sales have softened across the country the risk of a sharp correction is “highly concentrated in geographical terms.”

The national average home price is now expected to climb by 4% this year across the country to $352,500 according to CREA. For 2012, prices will rise just 0.9% to $355,800. This marks an increase from the previous forecast, and reflects the impact from B.C. on the national results. If Vancouver is stripped from the figure, the average price would be $327,000.

“As expected, recent changes to mortgage regulations brought forward some sales activity into the first quarter that would have otherwise occurred later in the year, particularly in some of Canada’s more expensive housing markets,” said Gregory Klump, CREA’s chief economist. “This is likely to result in a milder version of the volatility in sales activity that we saw last year.”

“The extent to which high priced sales activity in Vancouver will pitch up the average price for British Columbia and nationally will likely diminish in the next couple of months in line with a seasonal increase in national activity,” Klump added. “That said, foreign investment in Vancouver residential real estate is showing no signs of slowing, so it seems likely to remain a prominent market feature for some time.”

CREA expects home sales activity to regain traction after dipping in the second quarter as economic recovery and hiring continues. “While interest rates are expected to rise later this year, they will still be within short reach of current levels and remain supportive for housing market activity” said Klump. “Continuing job growth will underpin housing demand, keeping the housing market in balance and stabilizing home prices.”

Building Permits Surge 17.2% in March  
Statistics Canada reported last Thursday that municipalities issued $6.8 billion in building permits in March, up 17.2% from February’s level and 9.7% higher than March 2010. Most of the increase came from the residential and non-residential sectors in Ontario.

The value of residential permits rose 33.9% in March to $4 billion (although lower 1.4% from a year ago), after two consecutive monthly decreases. The value of permits for multi-family dwellings more than doubled in March from February to $1.9 billion (+27.4% versus March 2010). The increase was mainly the results of higher construction intentions in eight provinces, led by Ontario, Quebec and Alberta. Municipalities issued $2.1 billion worth of permits for single-family dwellings in March, up 2.5% from February but down 17.5% from March 2010. Higher construction intentions, particularly in Ontario and Alberta, offset declines in other provinces.

In the non-residential sector, the value of permits edged down 0.4% to $2.8 billion in March (+30.3% versus March 2010), following a 72.7% increase in February. Lower construction intentions for industrial (-65.1% to $309 million) and commercial (-1.7% to $1.2 billion) permits more than offset a record high value for institutional (+83.1% to $1.3 billion) permits.

The total value of permits issued rose in eight provinces in March. Ontario posted the largest advance following two consecutive monthly declines. Alberta recorded the largest drop as a result of a decline in the non-residential sector, after a significant increase in February.

Nationally, municipalities approved 17,141 new dwellings in March, up 26.7% from February but 9.5% lower than March of last year. The increase came mainly from multi-family dwellings, which rose 55.5% to 10,469 units. Single-family dwellings declined 1.9% to 6,672 units. 

Canadian Economy Adds 58,300 Jobs in April 
According to Statistics Canada’s latest labour report released last Friday, the Canadian economy added a greater than expected 58,300 jobs in April, almost all in Ontario and most of them part-time, lowering the country’s unemployment rate to 7.6% from 7.7% the month previously.
The gains come after two months of little change and mean employment has risen by 283,000 positions (+1.7%) over the past year. Full-time positions are now back to pre-recession levels though the number of hours worked is still 0.6% below October 2008 levels.

Part-time positions rose by 41,100 in April compared with 17,200 new full-time jobs. Over the past year however, full-time work has grown by 1.9% compared with 0.8% for part-time. Wage growth remains moderate. Wages for permanent workers rose 2.4% from a year earlier, down from 2.6% in March.

The services sector led April’s gains. The finance, insurance, real estate and leasing (+19,000) as well as the business, building and other support services (+17,000) sectors rose while other industries were little changed.

In the past year, the fastest employment growth has been in transportation and warehousing (+7.7%), followed by health care and social assistance (+3.6%). Manufacturing and construction have seen increases in employment of 3.3% and 2.7% respectively over the past year. Employment in retail and wholesale trade was 1.9% lower than in April 2010.

Both the private and public sectors added jobs in April. Over the past 12 months, employment in the public sector has grown 2.8% while the private sector has expanded 1.6%. Self-employment has been little changed.

Older women are working more. Employment among women aged 55 and over rose by 29,000 in April. In the past year, employment among these women has soared 7.9% or 102,000 positions, the fastest growth rate of all demographic groups. Employment levels were little changed among youth, continuing a year-long trend. Their jobless rate eased to 14.3% from 14.4%.

Among provinces, Ontario employment rose by 55,000 in April, reducing the jobless rate to 7.9% from 8.1%., its lowest level since December 2008. Newfoundland and Labrador added 3,100 positions and its jobless rate fell to 11.1%, its lowest since record-keeping began in 1976. Nova Scotia lost 5,500 positions while Manitoba shed 3,300 jobs. Other provinces saw little change.

“While one can quibble with the underlying quality of the hiring, given that it was led by part-time workers, the overall picture is one of an economy moving gradually back to full employment,” said Avery Shenfeld, chief economist at CIBC World Markets. “The private sector stepped up to account for the majority of the new jobs. The election may have helped boost public sector work but the private sector gain was still impressive enough on its own.”
April Job Gains in U.S. Best in 5 Years
U.S. employment increased more than expected in April as private sector companies created jobs at the fastest pace in five years, pointing to underlying strength in the economy.

The Labour Department reported last Friday that nonfarm payrolls rose 244,000 in April, the most in 11 months. The private sector accounted for all of the job gains in April, with payrolls rising 268,000, the largest rise since February 2006. Government employment meanwhile contracted for a six straight month, shedding 24,000 positions.

Gains in April marked seven straight months of net job creation, but remained too little to make much of a dent on the pool of 13.7 million Americans out of work. The unemployment rate rose to 9% in April from a two-year low of 8.8% in March. It is derived from a separate survey of households which showed a decline in employment and a moderate rise in the size of the labour force.

The job gains were widespread. Retailers, factories, financial companies, education and health care, and even construction companies added jobs. Federal, state and local governments cut jobs.

This latest employment report suggests that businesses are confident in the U.S. economy despite weak growth earlier this year and soaring gas prices.

Upcoming CHHMA Events For 2011

Quebec Golf Tournament
Tuesday, May 17
Le Fontainebleau Golf Club, Blainville, Quebec

Ontario Golf Tournament
Wednesday, May 25
Angus Glen Golf Club, Markham, Ontario

Jean-Luc Meunier, RONA, Breakfast Seminar
Tuesday, May 31
Hotel Mortagne, Boucherville, Quebec

Western Golf Tournament
Tuesday, June 7
Morgan Creek Golf Club, Surrey, B.C.

Night at the Races
Wednesday, June 15
Woodbine Racetrack, Toronto, Ontario

Soirée 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
Location TBA, Montreal, Quebec

To register for all events visit our website at 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: or call (416) 282-0022, ext. 34.



Canadian Hardware & Housewares Manufacturers Association | 1335 Morningside Ave., Suite 101, Scarborough, ON M1B 5M4
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