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Tax credits help boost home renovation stores

A federal tax credit program is helping to bolster sales at Canada's major home renovation retailers, at a time when they are suffering from the toughest economic downturn in decades.

But Rona Inc. , one of the country's largest home improvement merchants, says it could have generated even more revenues from the program if Ottawa had pitched it more effectively to consumers.

"The government didn't do a great job of selling their program," Claude Bernier, executive vice-president of marketing at Rona, said Tuesday. "There are still a lot of consumers coming to the store [who]do not really understand the way it's working."

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Even so, Rona has received thousands of applications from customers for its own merchandise incentive program, which is tied to the government's tax credits, he said. They have generated "tens of millions of dollars" of revenue, he said in an interview. On average, each project is estimated to be worth more than $7,000 in product purchases, Mr. Bernier said.

But Rona is probably missing out on smaller home projects, such as fixing a deck, because many consumers don't seem aware that the program covers projects of as little as $1,000, he said.

Under the program, announced in the January budget, Canadians can receive up to $1,350 in tax relief for projects that are worth between $1,000 and $10,000 and take place between last Jan. 27 and Feb. 1, 2010.

The initiative was aimed at stimulating the construction, lumber and retail sectors and create jobs. However, analysts had warned that the tax credits wouldn't help retailers much because consumers are worried about their jobs, debt and house values dropping.

A spokeswoman for the Canada Revenue Agency said Ottawa will launch a major ad campaign about the tax credit at the end of June, including television, print and radio ads. Next fall, the CRA plans to send its officials to trade shows across the country to build awareness of the program and what is eligible, Caitlin Workman said.

The CRA's website on the program has received 500,000 independent hits, which is considered a "huge" response, while its 1-800 telephone line has received more than 3,000 inquiries about the credits, as of May 1, she said. "It's obvious that Canadians are interested and are taking up this tax credit."

Other home renovation retail industry executives said they are profiting from the federal incentive.

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"We're pleased with the results we saw," said Peg Hunter, vice-president of marketing at Home Depot Canada, the country's dominant home improvement chain. Store staff is "finding it very effective."

More than 20,000 customers signed on for Home Depot's recent promotion tied to the federal program, ringing in "millions of dollars" worth of sales for the retailer, she said.

It handed out gift cards to customers for having made purchases of between $1,000 and $10,000 from March 2 to April 12. (Rona has a similar promotion but it runs until the federal program expires.) Ms. Hunter said the projects that were eligible under its initiative were worth, on average, less than $7,000. She said Rona's results may have skewed to higher project values because it has more stores in Quebec, and that province had its own tax credit program for projects with a total budget of more than $7,500.

Lowes Cos. has run a number of marketing programs to tout the federal program, spokeswoman Maureen Rich said. Over the past several weeks, for example, it has been flagging in its flyers products and projects that are eligible for the tax credit. "We've seen a positive response."

Later this month, it will introduce a tax-credit logo for store signs to help customers identify products that are compliant with the program, she said.

Home improvement retailers have had a tough time as home sales have slid and consumers scaled back spending. Yesterday, Rona said bad weather coupled with the effects of the recession kept a lid on its first-quarter performance: It reported a loss that grew to $2.5-million from a loss of $2.4-million a year earlier, while sales fell 7.2 per cent to $846-million. Year-ago figures were revised because of a change in accounting.

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About the Author
Retailing Reporter

Marina Strauss covers retailing for The Globe and Mail's Report on Business. She follows a wide range of topics in the sector, from the fallout of foreign retailers invading Canada to how a merchant such as the Swedish Ikea gets its mojo. She has probed the rise and fall (and revival efforts) of Loblaw Cos., Hudson's Bay and others. More

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