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Another American giant is breaking its teeth in Canada

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We can’t say that Lowe’s worked miracles with Rona. Despite its long experience in the hardware sector, its success in the United States and its large resources, the giant was unable to grow this Quebec flagship.

In fact, quite the opposite happened. Over the past three years, the number of stores has increased from 600 to 450.

Lowe’s, used to operating hundreds of large identical stores, struggled to manage this complicated business.

It was an amalgam of company stores and affiliated stores, small, medium and large surfaces, and several concepts (Rona l’Entrepôt, Rona, Réno-Dépôt, Marcil, Ace, Home & Garden, Dick’s Lumber) . The target clientele of each brand was poorly defined, the product offering was not always in line. There was no transactional website yet.

Then-president Sylvain Prud’homme admitted there was “a lot of confusion for customers” and disappointment. He promised to simplify the structure, to rename the Rona l’Entrepôt in Lowe’s, to launch into online commerce, to specify the vocation of each sign. The American giant then aimed to become “rapidly number one” in Canada, a position occupied by Home Depot, and to double its level of profitability in five years.

Three years after having paid 2.3 billion US to acquire Rona, Lowe’s had not yet had the pleasure of announcing good news despite all the work accomplished.

Rather, it was a major asset write-off of nearly US$1 billion that made headlines. And Lowe’s said Thursday that another $2 billion write-off would be included in its next quarterly results. One cannot speak of a great financial success.

By selling Rona to the New York fund Sycamore Partners, Lowe’s took a big thorn out of its way. Moreover, its CEO, Marvin R. Ellison, specified that this transaction “constitutes an important step towards the simplification of Lowe’s business model”.

This suggests that even the two years of the pandemic, marked by a monster consumer craze for home renovations, failed to convince the American giant that Rona had sufficient potential to continue the work. The announced sale price of US$400 million in cash and “a performance-based amount” leaves one wondering about the presumed value of the Canadian assets.

This departure of Lowe’s from Canada is reminiscent of Target’s landmark fiasco north of 45e parallel.

The retailer had bought 189 leases from the moribund Zellers brand for 1.83 billion in 2011. This allowed it to enter the Canadian market at once and benefit from low rents. Success seemed self-evident under the circumstances. How to do worse than Zellers?

However, after one year, the operating loss reached 1 billion. A succession of errors due, in particular, to the incomprehension of the Canadian market finally caused the closing of all Target in Canada. Cost of the failed incursion: 7 billion.

It might seem easy to take a retail success in one country and export it, like IKEA does, for example. But in reality, the challenges are many more than it seems.

Moreover, it is not even necessary to cross a border to come up against a wall. We saw it when Loblaw bought Provigo. Its flagship brand, Loblaws, has never managed to win the hearts of Quebecers despite its success in the neighboring province of Ontario.

Selling Rona to an investment fund that shouldn’t be heavily involved in day-to-day operations could be good news for the head office team. This one could indeed have more elbow room than with Lowe’s, believes Richard Darveau, president and CEO of the Quebec Association of Hardware and Building Materials (AQMAT).

“It will be easier to Canadianize Rona,” he predicts.

Moreover, stores that display the name Lowe’s (there are some in all provinces except Quebec) will probably be renamed Rona. And good news for those who had a little twinge in the heart when the name Rona had been taken down from the Boucherville head office: it should, logically, reappear.

The president of Lowe’s Canada, Quebecer Tony Cioffi, will however have to explain how he was able to boast, in an interview broadcast on October 25 on YouTube1, the potential of Lowe’s Canadian operations with its corporate and affiliate stores. “Do you think this model has a future? asked Richard Darveau. “One hundred percent certain, yes. Because it’s an opportunity for us and we’re still seeing a nice growth streak with affiliate merchants. »

A week later, these optimistic words leave you speechless.



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