Retailing and real estate insiders are bracing for the arrival of Lowe's Cos. Inc., a U.S. home improvement powerhouse whose entry into Canada could further shake up an already competitive retail landscape.
Two consultants have been quietly talking to Canadian landlords over the past few weeks, discussing possible deals for superstore sites, and industry sources believe Lowe's, the second-largest U.S. home improvement merchant, is the prospective tenant.
Lowe's could make an announcement about its plans for Canada as early as next week, real estate sources said. A number have been told to expect an announcement on June 6. Lowe's said it does not comment on rumours, but confirmed it has a global growth strategy.
"We have said for a number of years that we are evaluating international opportunities. At some point we will be a global company," said Chris Ahearn, a spokeswoman for Lowe's in Mooresville, N.C.
The chain has been a rival to Home Depot Inc., the world's biggest home improvement retailer, which already operates in Canada.
Lowe's has ridden the wave of women's growing interest in tackling home improvement projects. With annual sales of about $36.5-billion (U.S.) and more than 1,100 stores in the United States, Lowe's courts women by pushing home decor and other related items.
It has designed its mega-outlets in a more inviting manner, with wide aisles and bright lights to ease the stresses of shopping.
In Canada, Rona Inc. of Boucherville, Que., has become a powerful contender to the No. 1 Home Depot also by catering to women's tastes. As well, Rona has grown rapidly in recent years by swallowing rivals.
Now, industry insiders suggest that Lowe's may eventually try to snap up Rona, if it hasn't already attempted such a move.
When Robert Nibock took over as chief executive officer in January, he told analysts that he was interested in international growth.
"Certainly there's a lot of opportunity on the international side, and it's something that we will, over the next year or two, be in the process of assessing," Mr. Nibock said.
Retail consultant John Williams of J.C. Williams Group Ltd., said it may be difficult for Lowe's to establish itself quickly in this country without eventually making a big acquisition.
He pointed to the huge head start of both Rona and Home Depot. "It's a very difficult market," Mr. Williams said. "Rona and Home Depot are so well positioned now . . . They're really duking it out."
Home Depot has 120 superstores here while Rona has 530 outlets of varying sizes.
Sylvain Morrissette, a spokesman for Rona, said he couldn't comment on rumours. But he insisted that Rona has developed a strong strategy to ensure its future.
Rona differs from Home Depot in that it has a wide array of store types, from uber-sized big boxes to small outlets. Lowe's may only be interested in Rona's superstores.
The rumours about Lowe's possible arrival in Canada have created a buzz in the industry. One retailing source said he had heard that Lowe's representatives have tied up as many as a dozen sites for its mega-outlets, and that is has set up a Canadian office. It is expected that the first stores will be in Southern Ontario by next year.
Real estate officials said Michael Goulais and Alan MacKenzie of M. Goulais Consultants in Toronto have been meeting with them to discuss locations for a U.S. retailer entering Canada. "They are producing letters of intent," one official said.
Reached this week, Mr. MacKenzie did not comment on whether he and his partner represent Lowe's and are trying to find store locations for the retailer.
One real estate source said Mr. MacKenzie expressed interest in some of his company's locations, and he is waiting to hear back about offers for the sites.
"We've been told it's an existing American organization that's looking for anywhere from 10 to 15 acres," the source said. "There's not that many, even in the States, American guys that take that size unit. Most of the ones that do take it are already here."
U.S. discounter Target Corp. has also been interested in coming to Canada. But Target CEO Bob Ulrich said last month [May]that it has no immediate plans to expand outside the United States.
Roger Plamondon, regional operations manager for Eastern Canada at Home Depot Canada, said he has heard the rumours about Lowe's but "for us, it's business as usual . . .
"We have been in Canada for 11 years. We are very proud of our performance in Canada. We know the Canadian marketplace very well," Mr. Plamondon said.
Lowdown on Lowe's
In 60 years, Lowe's has grown form a modest collection of North Carolina hardware stores to a megastore chain that rang up $36.5-billion (U.S.) in sales last year.
The big box
Employees: 160,000 (80 per cent of them full-time)
Outlets: 1,100 in 48 U.S. States
Typical store: 117,000 square feet of retail space, selling about 40,000 products
Began in the mid-1940s after H. Carl Buchan bought out his brother-in-law James Lowe and rode the postwar boom with a modest chain of hardware/lumber stores. In the 1980s with the rise of do-it-yourself, it evolved into full-fledged building centres.
Make old stores feel like new - spent $500-million (U.S.) last year to upgrade stores and plans to invest $700-million this year.
The big three
Lowe's three-pronged sales strategy:
1-Installations (such as cabinets and decks)
2-Special orders (up to 500,000 items, such as fashion plumbing)
3-Commercial business customers.
The nuts and bolts
Company went public in 1961.
Joined NYSE in 1979 (NYSE: LOW)
Reached billion-dollar-annual-sales mark in 1980.
Over the past 10 years, results have risen steadily - for fiscal 2004, profit reached $2.18-billion on sales of $36.5-billion, 18% better than 2003.
Average customer transaction $63.43 in 2004.
The rivals in Canada
Home Depot, the Atlanta-based chain that entered Canada 11 years ago, has 120 superstores.
Rona, based in Boucherville, Que., has 530 stores of varying sizes.
SOURCES: LOWE'S 2004 ANNUAL REPORT; LOWES.COM